Indian markets while having recovered from the day's lows are still showing signs of weakness. At present, the markets are trading close to the break even. Companies in the metals and consumer goods space are attracting investor interest while profit booking is being witnessed in the bank and oil and gas space.
BSE-Sensex having recovered from the day's lows was trading positive by 11 points while NSE-Nifty was lower by 8 points. BSE-Midcap Index is trading higher by 40 points while the BSE-Smallcap index is higher by 116 points. The rupee is trading at 46.21 to the US dollar.
Havells India Limited released its quarterly results and took the market by surprise with an impressive 5 fold increase in its bottom-line. While the top-line for the company grew by 22% YoY, the company benefited from low costs of plastics and metals as compared to last year. This helped boost segmental margins across all its business resulting in operating income growth of 264% YoY. However, during 3QFY09, there was a significant loss due to inventory correction. When adjusted for this one time provision, the operating income is seen to grow by only 33% YoY. With the company's focus on growing its top-line along with profitability and the restructuring of its overseas subsidiaries, lead us to believe that Havells has good potential for growth going forward.
Suzlon is looking to liquidate its 26% stake in Hansen. The company had acquired a 100% stake in Hansen for Rs 25.11 bn in 2006. The rationale behind this investment was to ease input supplies. Hansen is a manufacturer of gear box which is a vital component in wind turbine. However, recently the supply of this component has eased with companies in Europe and US expanding their outputs. Suzlon expects to receive about US$ 400 - 500 m from this sale and plans to repay its debt from the money received. The company currently has Rs 105 bn debt on its books. Suzlon still has a very high operating as well as financial leverage which in our opinion makes the company a risky proposition for investment.