V Vaidyanathan, Retail Head Of ICICI Bank says that they do not see interest rates coming down in the near-term as the RBI is still signalling a tight monetary policy. But he also added that they will not move up either and will most likely stay steady. They also do not see any impact on bank margins going ahead. They see 20% growth in advances for FY08 vs 28% last year. Overall the demand has been sluggish he says.
"There is no doubt that across the board there is reduction in consumer demand. The auto market is growing at 20% last year, its now growing at maybe 12-13%; the two-wheeler market has growing at 15% now its growing negative 13%, the heavy commercial market was growing at maybe 30% last year now its negative 13% this year so there is no doubt that the interest rates have had a role to play in the reduction of consumer demand," he said.
The IIP numbers may not trigger a rate cut, and the RBI is still concerned about inflation, Vaidyanathan says. The higher interest rates have affected the lower range of 2-wheelers, and cars more. The upper-end consumer durables are not impacted much, while the lower-end will be. Vaidyanathan feels that the growth of balance sheets for banks may get affeced due to loan de-growth. He expects 20% loan growth for banks in FY08.
The bank is also seeing good growth in deposits. "The deposit growth is coming along well, the interest rates for about 390 days is about 9.5%, for 590 days is again 9.5% and 890 days is 9.5%, it’s a flat curve across. But since the interest rates are high the deposits is growing much faster in fact the current account and the saving account for the banking system as a whole and for ICICI Bank is growing well."
"There is no doubt that across the board there is reduction in consumer demand. The auto market is growing at 20% last year, its now growing at maybe 12-13%; the two-wheeler market has growing at 15% now its growing negative 13%, the heavy commercial market was growing at maybe 30% last year now its negative 13% this year so there is no doubt that the interest rates have had a role to play in the reduction of consumer demand," he said.
The IIP numbers may not trigger a rate cut, and the RBI is still concerned about inflation, Vaidyanathan says. The higher interest rates have affected the lower range of 2-wheelers, and cars more. The upper-end consumer durables are not impacted much, while the lower-end will be. Vaidyanathan feels that the growth of balance sheets for banks may get affeced due to loan de-growth. He expects 20% loan growth for banks in FY08.
The bank is also seeing good growth in deposits. "The deposit growth is coming along well, the interest rates for about 390 days is about 9.5%, for 590 days is again 9.5% and 890 days is 9.5%, it’s a flat curve across. But since the interest rates are high the deposits is growing much faster in fact the current account and the saving account for the banking system as a whole and for ICICI Bank is growing well."
Cess on fuel, cars in offing to fund urban transport systems
Driving is likely to get more taxing in the coming days with urban development ministry proposing a fresh cess on automobile fuels to fund urban transport systems on the lines of the cess on petrol and diesel to finance highway construction reports Times of India.
The latest proposal seeks to raise petrol prices by Re 1 per litre. And unlike the highway cess, the move will deliver a twin blow to vehicle owners. A note being finalised by the ministry also seeks to levy 8% cess on the cost of a car and 4% on two-wheelers.
If the move goes through, a Maruti 800 will cost Rs 15,000 more, while the impact on more expensive vehicles will be much higher. There is, however, some ambiguity on how the cess will be levied since the cost of the vehicle has not been defined clearly by the ministry.
Irrespective of whether the government allows oil companies to raise petrol prices to soften the impact of rising international crude prices, the urban development ministry’s plan, if accepted, will lead to a rise in the cost of auto fuel.
The resources generated through the cess will be transferred to the proposed Dedicated Urban Transport Fund and used to exclusively support transport projects like Metro networks in cities. The idea is to meet two long-term objectives: reducing the use of private vehicles to control congestion and popularising public transport, said sources.
In the absence of efficient public transport systems, commuters have been purchasing vehicles to beat the rush in buses and city rail networks leading to a situation where many urban households have two cars.
Tatas to hike stake in Tata Investment firm; Make an open offer to buy 29.29% stake
TATA Sons — the holding company of the Tata group — has decided to make an open offer to buy 29.29% of the retail shareholding in group company, Tata Investment Corporation, in a Rs 600-crore deal. The move will consolidate the group’s shareholding in all companies in its fold.
The unlisted Tata Sons, which currently owns about 40.44% in Tata Investment, has made the offer to buy from retail shareholders who own 39.39% of Tata Investments. The move won’t result in delisting, Tata Investment said in a statement to BSE.
The principal business of Tata Investment — one of the first publicly-held investment companies on BSE — includes investing in shares, debentures, securities in India and overseas and in underwriting new businesses and in taking over the management and control of companies. In its statement to BSE, Tata Investment said that Tata Sons will make the offer at Rs 600 per share, which is a premium of 33.33% over Friday’s closing price of Rs 450.10.
“This price is also well in excess of the minimum price of Rs 439 per share, computed on the basis of the relevant Sebi pricing formula,” the statement added. It didn’t give further details and also didn’t specify the offer schedule.
Tata Sons didn’t make any statement while senior executives of the holding company weren’t available for comment. Group sources, however, said the move is in line with the Tatas intention to shore up holding in group companies “as a second line of defence.” While about 60.6% of its shareholding is held by Tata Sons and group companies, Tata Investment also owns varying stakes in other group companies.
The Tatas had recently raised their stake in Tata Steel, Tata Tea and other key group companies to ward off hostile threats. After the LN Mittal-controlled Mittal Steel acquired Arcelor in a hostile, high-profile acquisition drama last year, the Tatas responded by hiking their stake in Tata Steel, now fifth-largest in the global pecking order. Other Indian family-run business enterprises, including the Aditya Birla group, also followed suit, with promoters increasing their stakes in group companies.
Tata Investment has been vital in the group’s move to consolidate its financial activities. Just recently, the group formed Tata Capital, a new financial services that will operate in large growing segments within the finance sector that also includes businesses that Tata Finance earlier operated in.
Kotak Mahindra Bank among 10 bidders for IFCI 26% stake sale
India's IFCI Ltd said 10 strategic investors have expressed interest for 26 pct of the company, and also announced the resignation of chairman N Balasubramanium.
In a filing with the Bombay Stock Exchange, the financial institution said it has received applications from General Electric Capital Corp, Kotak Mahindra Bank Ltd, Infrastructure Development Finance Co Ltd, Newbridge Asia IV LP, Cargill Financial Services Corp, Natixis and the Blackstone Group LP.
It has also received expressions of interest from a consortium comprising WL Ross & Co LLC, GS Capital Partners VI Fund, Standard Chartered Bank and Housing Development Finance Corp Ltd; a consortium comprising Shinsei Bank Ltd, Punjab National Bank and JC Flowers & Co LLC; and a consortium comprising Sterlite Industries (India) Ltd and Morgan Stanley & Co.
Balasubramanian resigned after controversy about his alleged 'dual role' both as the company's chairman and an advisor to one of the bidders, the Hindustan Times reported, citing unnamed sources within IFCI.
Consolidated Construction Consortium - IPO Note
Founded by four former Larsen & Toubro (L&T) professionals, Consolidated Construction Consortium (CCC) is a Chennai-based turnkey construction services provider of integrated turnkey construction in the industrial, commercial, infrastructure and residential sectors of the construction industry.
The latest proposal seeks to raise petrol prices by Re 1 per litre. And unlike the highway cess, the move will deliver a twin blow to vehicle owners. A note being finalised by the ministry also seeks to levy 8% cess on the cost of a car and 4% on two-wheelers.
If the move goes through, a Maruti 800 will cost Rs 15,000 more, while the impact on more expensive vehicles will be much higher. There is, however, some ambiguity on how the cess will be levied since the cost of the vehicle has not been defined clearly by the ministry.
Irrespective of whether the government allows oil companies to raise petrol prices to soften the impact of rising international crude prices, the urban development ministry’s plan, if accepted, will lead to a rise in the cost of auto fuel.
The resources generated through the cess will be transferred to the proposed Dedicated Urban Transport Fund and used to exclusively support transport projects like Metro networks in cities. The idea is to meet two long-term objectives: reducing the use of private vehicles to control congestion and popularising public transport, said sources.
In the absence of efficient public transport systems, commuters have been purchasing vehicles to beat the rush in buses and city rail networks leading to a situation where many urban households have two cars.
Tatas to hike stake in Tata Investment firm; Make an open offer to buy 29.29% stake
TATA Sons — the holding company of the Tata group — has decided to make an open offer to buy 29.29% of the retail shareholding in group company, Tata Investment Corporation, in a Rs 600-crore deal. The move will consolidate the group’s shareholding in all companies in its fold.
The unlisted Tata Sons, which currently owns about 40.44% in Tata Investment, has made the offer to buy from retail shareholders who own 39.39% of Tata Investments. The move won’t result in delisting, Tata Investment said in a statement to BSE.
The principal business of Tata Investment — one of the first publicly-held investment companies on BSE — includes investing in shares, debentures, securities in India and overseas and in underwriting new businesses and in taking over the management and control of companies. In its statement to BSE, Tata Investment said that Tata Sons will make the offer at Rs 600 per share, which is a premium of 33.33% over Friday’s closing price of Rs 450.10.
“This price is also well in excess of the minimum price of Rs 439 per share, computed on the basis of the relevant Sebi pricing formula,” the statement added. It didn’t give further details and also didn’t specify the offer schedule.
Tata Sons didn’t make any statement while senior executives of the holding company weren’t available for comment. Group sources, however, said the move is in line with the Tatas intention to shore up holding in group companies “as a second line of defence.” While about 60.6% of its shareholding is held by Tata Sons and group companies, Tata Investment also owns varying stakes in other group companies.
The Tatas had recently raised their stake in Tata Steel, Tata Tea and other key group companies to ward off hostile threats. After the LN Mittal-controlled Mittal Steel acquired Arcelor in a hostile, high-profile acquisition drama last year, the Tatas responded by hiking their stake in Tata Steel, now fifth-largest in the global pecking order. Other Indian family-run business enterprises, including the Aditya Birla group, also followed suit, with promoters increasing their stakes in group companies.
Tata Investment has been vital in the group’s move to consolidate its financial activities. Just recently, the group formed Tata Capital, a new financial services that will operate in large growing segments within the finance sector that also includes businesses that Tata Finance earlier operated in.
Kotak Mahindra Bank among 10 bidders for IFCI 26% stake sale
India's IFCI Ltd said 10 strategic investors have expressed interest for 26 pct of the company, and also announced the resignation of chairman N Balasubramanium.
In a filing with the Bombay Stock Exchange, the financial institution said it has received applications from General Electric Capital Corp, Kotak Mahindra Bank Ltd, Infrastructure Development Finance Co Ltd, Newbridge Asia IV LP, Cargill Financial Services Corp, Natixis and the Blackstone Group LP.
It has also received expressions of interest from a consortium comprising WL Ross & Co LLC, GS Capital Partners VI Fund, Standard Chartered Bank and Housing Development Finance Corp Ltd; a consortium comprising Shinsei Bank Ltd, Punjab National Bank and JC Flowers & Co LLC; and a consortium comprising Sterlite Industries (India) Ltd and Morgan Stanley & Co.
Balasubramanian resigned after controversy about his alleged 'dual role' both as the company's chairman and an advisor to one of the bidders, the Hindustan Times reported, citing unnamed sources within IFCI.
Consolidated Construction Consortium - IPO Note
Founded by four former Larsen & Toubro (L&T) professionals, Consolidated Construction Consortium (CCC) is a Chennai-based turnkey construction services provider of integrated turnkey construction in the industrial, commercial, infrastructure and residential sectors of the construction industry.
CCC has executed 334 projects comprising of 104 industrial, 172 commercial, 14 infrastructure, and 44 residential projects across 14 states and Union territories in India. The built-up area of the projects aggregates approximately 19 million square feet (sq ft) comprise 3.84 million sq ft in the industrial sector, 12.68 million sq ft in the commercial sector, and 2.48 million sq ft in the residential sector. The projects include factories, residential and commercial buildings, hospitals, hotels, power plants and structures in the infrastructure sector such as water tanks, water supply schemes and bridges.
The private and public sector clients of CCC include Infosys Technologies, Ascendas IT Park (Chennai), Khivraj Technology Park, Manipal University, Airport Authority of India, and Hi-Tech Carbon (a unit of Aditya Birla Nuvo).
The IPO of CCC is to fund acquisition of construction infrastructure, investment in subsidiaries, expenditure on skill and management development centres and repayment of loans. The issue will open on 18 September and will close on 21 September. The issue has been graded by ICRA as IPO Grade 3 indicating average fundamentals.
Strengths
- End July 2007, the pending order book stood at Rs 2049.57 crore. This is about 2.4 times reported FY 2007 revenue. The execution period for the order book is 12-15 months. Since July 2007, received 10 more orders aggregating a contract value of Rs 182.1 crore. Of the 14 top contracts aggregating Rs 1291.5 crore for which the expected date of completion has been given, about five contracts aggregating about Rs 389 crore are scheduled to be completed in the year ending March 2008 (FY 2008).
- Of the pending order book end July 2007, only 15.49% of the orders were fixed-price contracts. Thus, the margin is to a great extent cushioned against variations in input costs.
- More than 95% of the orders have been completed on time. Of the total order inflow in FY 2007, about 50% of the orders by value were by previous clients, indicating customer satisfaction.
- A subsidiary Noble Consolidated was incorporated in May 2007 for carrying out glazing and aluminium fabrication services. Ideally this business has a higher margin and accounts for about 25-28% of the total project work.
- In the recent past, many real-estate companies have tapped the capital market to fund the development of their land bank. This includes south-based players and some players with land bank higher than the cumulative development in the past. Thus good scope for outsourcing of the construction exits. Has construction capabilities of three million sq ft per month.
Weaknesses
- About 92.5% of the pending order book end July 2007 and 92.2% of FY 2007 revenue are from south. Besides, about 38% of FY 2007 revenue was from the IT/IT enabled services (ITES) sector. Thus, a slowdown in construction activities is south or in the IT/ITES sector could have an adverse impact.
- Does not own its trademark. The use of the trademark and logo has been licensed by Samruddhi Holdings, a promoter group entity. Has to pay 4% of audited profit before tax (PBT) at the end of every year subjected to a maximum of Rs 2 crore to Samruddhi Holdings as a consideration for the trademark.
Valuation
Between FY 2004 – FY 2007, net profit has shot up from Rs 4.12 crore to Rs 47.68 crore. The improvement in financials has been much sharper in the last two years due to increase in construction activity in south resulting into improvement in volumes and change in revenue mix. The share of low margin residential projects has declined in total revenue from 18.26% to 3.21%, while high-margin industrial projects have increased from 19.25% to 33.48% in the same period.
FY 2007 consolidated EPS on post-issue equity works out to Rs 12.9. At the offer price band of Rs 460-Rs 510, the P/E range is 35.7-39.5, respectively. The nearest comparable listed company is B. L. Kashyap & Sons, trading at a P/E 34.2 times its FY 2007 consolidated earning.
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