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Maruti plans motor insurance venture 
(Fri, 30 Jul 11:30 am) 
 
After starting today's session on a weak note Indian indices continue to trade in the negative territory. Other key Asian markets too are trading in the red. Stocks from consumer durables and banking space are witnessing some buying interest while stocks from IT and real estate space are trading in the red.

The BSE-Sensex is trading down by around 33 points, while the NSE-Nifty is down by about 12 points. However, buying interest is visible amongst the mid and small cap stocks as the BSE-Midcap and BSE-Smallcap indices are trading higher by 0.8% and 0.7% respectively. The rupee is trading at 46.44 to the US dollar

Auto stocks are trading mixed with Tata Motors and Hero Honda leading the pack of losers. However, M&M and Maruti are trading in the green. As per a leading news daily, Maruti, the country's largest passenger car maker, is planning to float a general insurance company with along with another local partner. The company has been selling motor insurance under its brand, Maruti Insurance, since 2002. However, the company won't be able to sell more policies as the regulator cancelled its agency licence, recently. The move came after insurance companies alleging that Maruti service stations used to inflate bills pushing them into losses. It should be noted that in FY10 Maruti sold 2.5 m policies. Now Maruti is planning to float new insurance company in JV with an Indian counterpart. Globally there have been instances where car makers have entered into the motor insurance business to cater to their customers. And Maruti has followed that global tradition. Considering the scale of Maruti's operations, the move is likely to benefit both Maruti and its customers.

Real estate stocks are trading in the red with Phoenix Mills and India Bulls real estate leading the pack of losers. However, Sobha Developers and HDIL are trading in the green. DLF, a real estate major, announced its 1QFY11 results recently. Its top line grew by around 23% YoY while the bottom line registered a flattish growth during the quarter. Top line growth was aided by strong sales bookings and a good jump in realizations, particularly in the residential segment. The company booked nearly 1.9 m sq ft of area in its developmental business. Under the annuity business, DLF booked 0.98 m sq ft, significantly higher than the previous quarter. While realizations in the residential segment showed dramatic improvement, the same in the commercial space declined 32% YoY during the quarter. As for the annuity business, the average lease rates in the office segment increased by 60% YoY. However, the average lease rates in the retail segment witnessed a drop.

Margins in the residential business stood at 56% while margins in the commercial space stood at 75% during the quarter. During 1Q FY11 DLF's operating profits increased 32% YoY. Despite the strong growth in operating profits, net profits increased by meager 4% YoY mainly due to burgeoning interest and depreciation expenses. Interest and depreciation cost rose 35% YoY and 104% YoY, respectively.

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