Major Asian indices also closed the day mixed with China seeing some gains. India was the biggest loser in the Asian Region. Europe is currently trading weak, with all indices in the red zone. The rupee was seen trading at Rs 44.73 to the dollar at the time of writing.
The RBI's recent move to remove the priority sector status for bank loans to non-banking finance companies (NBFCs) led to a sharp fall in these stocks. The recent rate hike by 0.5% by the central bank also made matters worse. It will make funds more costly for various NBFCs causing their profit margins to see some pressure. However, Shriram Transport's believes that the removal of the priority sector status will not impact its net interest margins (NIMs) too much. This is because it's off balance sheet portfolio, consisting of securitized loans will continue to enjoy a priority sector status. This consists of around 45% of its total assets under management.
However the cost of borrowings for any new loans will see an increase on account of the rate hike. The company anticipates a slowdown in the demand for new commercial vehicles (CVs) in the next one or two quarters triggered by the steep increase in the interest rates. However, the mainstay for the bank is the financing of pre-owned trucks. Its new vehicle portfolio amounts to only around 20-30% of its total loan portfolio. The stock crashed by around 9% today following a 6% fall yesterday on growth concerns.
Plastic packaging major Essel Propack recently announced its 4QFY11 and FY11 results. Consolidated revenues for the company grew by 16.1% YoY during the quarter and by 17% for the year. Sales during the quarter came in higher on the back of strong demand from India and China. Sales from AMESA and Americas improved by 24% YoY and 22% YoY respectively. Europe however saw a tepid 5% YoY growth. The Indian operations of the company grew by a robust 23% YoY during the quarter on the back of addition of new customers and product innovation.
Operating profit (EBITDA) margins remained flat during the quarter as increases in raw material costs was offset by a reduction in staff costs. The company's net profit fell by 4% YoY. This was on the back of a forex loss (forex gain in 4QFY10) registered this quarter. For FY11, net profit grew by 130% YoY while net profit margins expanded by 1.6%. This performance comes on the back of fall in interest costs, flat depreciation expense and fall in the effective tax rate. The stock closed over 3% lower for the day.