India tops losers in Asia

Tue, 11 Jan Closing

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With very little reprieve from the selling activity in the closing hours, the Indian indices failed to make inroads into the positive territory. Although the indices closed marginally in the negative, they were amongst the few losers in the Asian region. The BSE-Sensex lost in the region of around 28 points (down 0.1%) whereas NSE-Nifty lost around 9 points. The BSE Midcap index and BSE Small cap index shed around 0.7% and 0.9% 3% respectively today.

While majority of the Asian indices closed higher today, European indices are trading in the positive. This is despite renewed concerns of sovereign debt crisis in the European region. The rupee was pegged at Rs 45.18 to the dollar at the time of writing.

As per a business daily Tata Steel is expected to have a follow-on public offer to raise Rs 50 bn in the coming fiscal. This follows the company’s failed attempt to have a DVR (differential voting right issue). The company is expanding its Jamshedpur steel plant to 10 m tonnes annual capacity from the current 6.8 m tonnes and is expected to complete the plan by September 2011. The project size is Rs 130 bn and Tata Steel has finalised the debt component. The project is based on a 1.5:1 debt to equity ratio. The company has also planned a 6 m tonnes plant at Kalinganagar, Orissa. In addition a 5 m tonnes plant in Chhattisgarh is also on the anvil. However, no timeline is indicated, as the land acquisition process is slow. Part of the FPO funds may also be used in paying off debt and de-leveraging the balance sheet.

As per the management of Bharat Forge, India’s largest auto component exporter, the company may see all of its overseas subsidiaries, including its joint venture in China, turn around and start contributing to the bottom line in FY11 itself. This will be a year ahead of the 2012 target. It may be recalled that in FY10 the units suffered an operating loss resulting in 46% dip in revenue contribution. With the signs of economic revival in the West the company has been gaining market share.

Bharat Forge's prospects remain strong on the back of the strong growth in the Indian CV segment. Factors such as the entry of global OEMS in India, coupled with BFRG aiming at increasing its market share will only aid the company maintain its growth momentum. As per the management, BFRG is aiming at increasing its focus on the passenger car segment in order to increase market share. As for the recovery in international market is concerned, there are high expectations from the US markets. The company believes that since demand is nowhere close to what it was in 2006, when the market had peaked, recovery from the same will drive growth in times to come.

Meanwhile domestic passenger car sales showed buoyant numbers this month as well. Car sales grew by jumped by 28.9% YoY in December 2010.According to the figures, released by the Society of Indian Automobile Manufacturers (SIAM), motorcycle sales in the country grew by 27% YoY during December 2010. At the same time, commercial vehicle sales showed a sterling growth of 27% YoY. Going forward however the current rate of growth seems unsustainable given the price hikes and rise in interest costs in the offing.