The Indian market opened in the green mirroring positive start to the SGX Nifty. The US markets ended Friday's trading mostly higher after showing a lack of direction for much of the session. The markets benefited from the late-day buying partly due to a positive reaction to the latest news about the impending showdown over the U.S. debt limit. The House Republican leaders indicated they will hold a vote to authorize a three month temporary debt limit increase to give lawmakers time to pass a budget that reduces spending. The choppy trading seen earlier in the day reflected a mixed reaction to the latest earnings news, with upbeat results from Morgan Stanley and General Electric offset by disappointing results from Intel. Indian markets fell sharply on Friday, with a correction in rate-sensitives including auto, banking and realty. Going ahead investors would be watchful of the earnings data coupled with economic reports on weekly jobless claims, leading economic indicators, and new and existing home sales.
Excise duty on diesel SUV’s likely to increase
The SUV
market is dominated by Mahindra & Mahindra. Some other players areToyota
Kirloskar, Maruti Suzuki, Tata Motors and General
Motors. After allowing oil companies to raise diesel prices by 45 paise a
month, the government, exploring ways to cut subsidies on the fuel, might
impose a higher excise duty or a surcharge on diesel sports utility vehicles
(SUVs) in Budget 2013-14. The hike, however, might not be on all diesel
cars. A finance ministry official told Business Standard the idea of a
higher excise duty on diesel cars was being explored for some time but could
not be implemented due to opposition from automobile companies. In
pre-Budget consultations with Finance Minister P Chidambaram, Mahindra and
Mahindra CMD Anand Mahindra had said: “The auto industry should not
be treated as a golden goose which can be taxed.” The finance ministry
official said, “The peak duty rate on cars is already high. Increasing it
further on all diesel cars might not be possible but a higher tax
on SUVs could perhaps be looked at. Most SUVs today run on diesel and
are fuel guzzlers,” adding those who could afford to buy SUVs should not mind
paying higher taxes. SUVs could be made dearer in various ways — through
creation of a new rate slab, addition of a fixed duty above the ad valorem
rates, or levy of a surcharge. The Kirit Parikh panel on pricing of
petroleum products, which had given its report in 2010, had proposed an
additional duty of Rs 80,000 on diesel SUVs. It had also proposed an annual
road tax of up to Rs 50,000 a year on diesel cars. About 16 per cent of
subsidised diesel sold in the country is consumed by cars and SUVs. The
government wants to discourage the use of the fuel by passenger cars, as that
gives unintended benefit to owners of diesel cars, leading to a surge in the
sale of such vehicles. The difference between diesel and petrol prices stands
at more than Rs 20 a litre in Delhi
During the
October-December quarter, RIL reported Ebit margin of Rs 3,615 crore from
refining and marketing against Rs 1,685 crore during the corresponding previous
quarter, an increase of 115 per cent. Ebit margins are measures of a company's
operating profitability. Over the quarters, a sharp decline in production
from its flagship Krishna-Godavari basin, off the Andhra coast, has
changed the business mix for the Mukesh Ambani-led company, with refining
and marketing now contributing 78.2 per cent of the revenue base and 58 per
cent of Ebit (earnings before interest, tax) margins. The Ebit margin from
oil and gas, on the other hand, is down more than half at 54 per cent to Rs 590
crore against Rs 1,294 crore in the corresponding previous quarter. The
petrochemicals segment contributed 31 per cent of Ebit margins and 20 per cent
of revenues at Rs 1,937 crore against Rs 2,157 crore a year ago. Chairman
Mukesh Ambani last week said RIL was investing over Rs 1 lakh crore by
expanding its petrochemical capacities and adding value to its refining
business. “These investments will secure a significant change in RIL's earning
capacity on commissioning of these projects," he said. Riding on high
refining margins, last week, RIL reported its third straight quarterly net
profit increase, at Rs 5,502 crore. Its gross refining margin (GRM), at $9.6
per barrel, jumped 41 per cent compared with the third quarter of 2011-12. GRM
is the difference between crude oil price and total value of petroleum products
produced by a refinery. “After spending billions on exploration and
production, RIL has gone back to the days when refining was pretty much its
forte. And, for the next few quarters to come, we see refining and
petrochemicals driving its business,” said the assistant vice-president of a
domestic broking firm, requesting anonymity. RIL owns and operates two
state-of-the-art refineries at Jamnagar Gujarat . These refineries can together process around 1.24 million barrels of
crude oil every day, giving RIL the advantage of processing heavier grades of
crude, which come cheaper. “RIL has realised it needs to focus on refining and petchem,
given production from its KG block continues to decline. It was only two years
ago when RIL reached its peak in gas production from the KG-D6 block, with Ebit
margins from oil and gas at its best 32 per cent,” said a senior analyst from a
domestic broking firm, who also did not want to be named. Analysts said it would take another two-three years for RIL to stem the
production decline from KG-D6 and an upside could not be expected before
2016-17. “Even if there is optimism about gas price increase, only an increase
in production can bring in the real change for RIL,” said an
analyst. During the first quarter of 2010-11, RIL’s average gas production
from KG-D6 was 60 million standard cubic metres (mscmd) per day. RIL produced a
total of 22.04 mscmd of gas from the Dhirubhai-1 and 3 gas fields and MA oil
and gas field in the KG-D6 block in the week ended December 30, 2012 . Petchem, which has been giving away its share in revenue to refining
for the past three years, will see an uptake in the coming quarters, with RIL
investing over $12 billion (Rs 64,500 crore today) over the next four-to-five
years in refining and petrochemical business. An unimpressive performance on its exploration and production front has brought the refining and petrochemicals business back in the reckoning for Reliance Industries Ltd. (RIL), India's highest valued company. Source: Business Standard
Early birds catch the worm, results season starts with a bang
It’s not just Infosys. There are many companies that
have surprised the Street by posting better-than-expected results for the
quarter ended December. Of the 166 that have declared results so far, positive
surprises have come from those in the IT, banking, oil & gas and consumer
space (Infosys, HCL Tech, Reliance Industries, YES Bank and Bajaj Auto among
key ones). Interestingly, the aggregate numbers suggest an improvement in the
operational performance of these companies. With 18.5 per cent growth in
aggregate revenue, the average profit before interest, depreciation and tax of
the 166 jumped 25.1 per cent over that in the year-ago quarter. This is even as
other income (largely non-core) rose only five per cent. Even if we exclude
Essar Oil, which reported a net profit of Rs 32 crore against a loss of Rs
3,986 crore in the year-ago quarter, aggregate revenue, PBIDT (profit before
interest, depreciation & taxes) and net profit are up 14 per cent, 15 per
cent and 16.6 per cent, respectively, on a year-on-year basis. The
breadth of results, too, is impressive. Almost 80 per cent of the firms have
reported growth in profits, with six reporting turnaround. Among prominent firms,
Sintex, NIIT Tech, Mahindra Life and Hero MotoCorp saw
their profits fall 10 per cent year-on-year, while NIIT and JP Power Ventures
slipped into the red. The numbers suggest companies
were able to control their cost and, as a result, their operating profit was
ahead of sales growth. Though the list is small (these 166 companies account
for about 25 per cent of the total market cap) to establish any trend, sectorally
IT has done well. Nine IT firms have notched an average revenue growth of 17.3
per cent, with a strong 42 per cent average net profit jump. A pick-up in
discretionary spends was the key growth driver for these companies. Most saw a
sequential rise in realisations which aided revenue growth. Banks and financial
firms, too, particularly the private sector banks, performed well. Fourteen
banks and financial institutions have declared results so far. A majority of
these reported double-digit net income growth. The growth in net profit was
strong, at 38 per cent — with Non-bank financial companies (NBFCs) clocking 71
per cent. “I think NBFCs have done well because, unlike earlier, there wasn’t
much restriction on credit and the liquidity wasn’t very low in the December
quarter,” says Sonam
Udasi, head of research, IDBI Capital.In the oil & gas space,
both Reliance Industries and Essar Oil did well, with the former beating the
Street by a wide gap. In the auto space, Bajaj Auto’s result did not excite,
while Hero’s was disappointing and far below estimates. The start has been
good, but analysts say next few weeks would be crucial for a trend to be
established, since many companies are yet to announce their results. Source: Business Standard
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