Thursday, November 6, 2008


Light at the end of the tunnel

* PWC’s Sivarama Krishnan’s take on the economy is that ,there is enough liquidity with individuals and banks and that given the cautious sentiment , there is none being put to use, either as loans or as investments.

*The argument is that this “meltdown” and “crunch” for India is just a short run phenomenon, since most companies are focused on shoring up bottom lines by addressing costs. ( 71% of companies surveyed by PWC).

*Given that the fundamentals of the economy are robust (agriculture, industry), the industry belief is that the GDP growth rates would be at least 6% by the next fiscal. In the medium term therefore, there would be revival of demand for project finance. (50% of companies are looking at cheaper sources of funds for the medium term).

*Innovative methods like public deposits as also forming JV’s(40%) are being considered. Acquiring of competitors is likely to happen as the “consolidation’ phase happens and the “shakeouts” throw up the weak players.

*This seems to be true. While Foreign Institutional Investors have pulled out $12 billion from the Indian bourses this year, Foreign Direct Investment to India surged to $2.56 billion in September. FDI has come in from Mauritius ($5.27 bln, Singapore $1.72 bln, US $1.15 bln, Netherlands $580 mln. This reflects a growth of 259% over last year. “The target FDI of $35 billion will be met”, feels Kamal Nath, the Union Minister for Commerce.

* The Oman State General Reserve Government Fund has picked up 24.5% in the 2500 acre Ansal Township called Megapolis . The Value of the project is is Rs26,500 crores. The total investment made is reported at Rs 13000 crores . Warburg Pincus, a PE firm along with CitiGroup is eyeing a substantial investment in this.

The land acquisition price was reported to be Rs 40 lakh an acre.

*Struggling US auto major has not scaled back its investment of us$500 mln in India to increase capacity and manufacture a ’small car’ (read -low cost car).

*Toyota has doubled its investment in India by pumping in Rs 1553 crores into its Bangalore plant. Again this is for a “strategic small car”.

*However Tata Motors shut down its plants for 3 days to reduce build up of inventories and while blue collar workers ended up with a reduced pay for the period, white collar was not paid at all.

* Production has been reduced in all auto plants and this includes Ashok Leyland (26% reduction), Eicher (38%, in response to a slide in sales of 55%), Mahindra‘s figures are not available.

Consumer Durables have had a good season it seems. The season (sept –oct)

Accounts for 25% of annual sales. Apparently the growth was 50% over the same period last year. This could partly be because last year, Diwali was in November and this year it has come to be counted with the October sales.

The disbursements to Government employees was made prior to Diwali and with the revisions and arrears, there was sufficient liquidity to drive off take this year.

LG claims a 50% growth with LCD TV’s leading the pack. Samsung has had a 35% growth trajectory, here too LCD TVs is the driver. Refridgerators and Washing Machines are next in row. For Godrej, it was washing machines.

*Incidentally these Durable Mfrs have not used any discount schemes and most schemes offered were at the retail level. This probably explains why the primary sales to retailers is being slowed down this quarter. There is likely to be an inventory pile up with the retailer in the next two months!!!



*Swaminathan Aiyar’s column this Sunday in TOI is a worthwhile read as also Shashi Tharoor’s take on Obama’s chances. To complete the list , add Shoba De on “Fashion” the movie, very incisive, intelligent and insightful.

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