Indian share markets have slipped into red during the previous two hours of trade. The most noticeable upward movements have been witnessed in IT and consumer durables' shares whereas metals and power sector shares are facing the maximum selling pressures.
PSU banks shares are trading on a mixed note with State Bank of India (SBI) and UCO Bank leading the gains and Bank of Baroda and United Bank of India leading the losses. According to a leading financial news medium, Bank of Baroda (BoB) has reported flat profit growth YoY at 2.5% for the quarter ended June 2013. The profitability growth was driven by the healthy non-interest income that grew by 60% YoY during the quarter. Treasury gains both from equities and bond markets have boosted the income. The bank's net interest income has grown by 3% YoY on the back of 12% YoY growth in advances. The net interest margins have dipped for the quarter to 2.8% levels against 2.9% the previous quarter. The bank's cautious approach to refrain from lending to high yielding sectors has resulted in lower yields, consequently impacting the margins. Deposits have recorded healthy 22% YoY growth for the quarter. Provisions have stood higher on account of increased provisions against standard assets. However, the NPAs for the quarter have moved up. The Net NPA ratio has increased to 1.69% from 0.65% the same quarter a year ago.
The asset quality woes in terms of slippages and restructuring continue to linger for BoB. The past few quarters have been particularly challenging for the bank. The earnings performance for most of the PSU banks for the first quarter of this fiscal has been weak. And this is reflective of the difficult macro-economic conditions.
Engineering shares are trading on a mixed note with Sanghvi Movers and KSB Pumps leading the gains and Everest Kanto Cylinder and Elecon Engineering leading the losses. According to a leading financial news daily, Engineering major Larsen & Toubro (L&T) has been exploring business trust model for its infrastructure development arm L&T IDPL's road portfolio to raise Rs 25 bn. This model is particularly popular amongst the global financial investors who have been scouting for high quality operational yield assets in infrastructure, real estate and renewable energy. Currently, L&T IDPL has a portfolio of 18 roads, 10 of which are operational. The total project outlay for the road projects amounts to Rs 216 bn. L&T is among the top two road developers in the country. The trust proposal comes at the opportune time when L&T IDPL is in advanced negotiations with sovereign wealth funds, pension funds and long only investors to raise $500 m by diluting 15-20% at an initial equity valuation in excess of $2 bn.
The move is aimed at raising funds for the roads to meet ongoing and future capital requirements and to bring down the existing debt of parent L&T. L&T group has a debt of Rs 290 bn as at the end of 31st March 2013. Major part of the debt comes from L&T IDPL.
The latest quarterly earnings performance for 1QFY14 has been quite disappointing for the markets. Both top-line and bottom-line have been particularly weak. That said, management has maintained its guidance of 15% YoY growth in sales and 20% YoY growth in order inflows for the current year. L&T share is up by 0.3%.