Advances, deposits grew 30% in Q2 FY09: HDFC Bank

HDFC Bank's standalone Q2 FY09 net profit stood at Rs 528 crore as against Rs 368.48 crore in the same period last year.

Commenting on the quarter gone by, Paresh Sukthankar, Executive Director, HDFC Bank, said both advances and deposits grew by about 30%. "We saw some increase in retail non-performing loan, but asset quality still remains fine. Gross NPAs stood at 1.57%, while net NPAs came in at 0.57%. The bank's net interest margins stood at 4.2%."

According to Sukthankar, it may take a little longer for interest rates to come down. "We are hoping for a policy rate cut, but don't expect one in the near future.

He said the bank has no exposure to foreign investments.

Source: Moneycontrol

See good buying opportunity by year-end: ODL Sec

Sandy Jadeja, Chief Market Strategist and Head Of Global Training, ODL Securities said there is just no confidence in the market and people are just not willing to buy. He said the markets haven't seen the scary capitulation point. "That's happening right now."

He feels the markets are going to approach a very good buying opportunity for year-end. "That's going to happen within the next 1-2 weeks. If the BSE starts hitting around 10,000, we could go down towards 9,950 and may be even 9,900. That will be capitulation. On the Nifty, it could be possibly around the 2,900-3,000 mark."

Anand Tandon, Director-Equities, Brics Securities, is also bearish on markets. He feels the markets are far away from a valuation bottom. He feels we are in a strange territory right now and it is not easy to make a forecast

According to Tandon, inspite of sharp cool off in commodity price, inflation still remains in double-digits. "We are running deficits of all kinds whether it is current account or fiscal deficit. All of them are increasing. I am not sure that we have a situation where the government has too many levers to pull when it comes to the macro-economic picture."

Source: Moneycontrol

Motilal reiterates 'buy' on Axis Bank

Motilal Oswal Securities has reiterated 'buy' on Axis Bank, as the stock trades at 2.4 times FY09E BV 15 times FY09E EPS and at 2 times F
Y10E BV and 12 times FY10E EPS.

Axis Bank has demonstrated its ability to grow at a strong pace across all parameters. Motilal is impressed particularly with its CASA growth (CAGR of 50% over FY04-08) and strong traction in fee income (CAGR of 56% over FY04-08) and clean asset quality.

Post Q2FY09 results, the brokerage has increased the estimates by 11 per cent for FY09 and by 4 per cent for FY10 to factor in higher fee income and higher provisions.

Motilal expects (i) earnings CAGR of 36 per cent over FY08-10E; (ii) RoE to improve to 18 per cent by FY1 and (iii) RoA to sustain at 1.2 per cent in two years.

Motilal estimates BV to be Rs 281 in FY09 and Rs 324 in FY10 respectively. The brokerage expects EPS to be Rs 45 in FY09 and Rs 55 in FY10.

Motilal are factoring in significantly higher NPA provisions-a rise of 100 per cent in FY09 and a further rise of 40 per cent in FY10. Motilal estimates also factor in a higher delinquency rate of 1.5 per cent in FY09 and 1.7 per cent in FY10 respectively v/s 1 per cent in FY08.

Q2FY09 results came in significantly higher v/s estimates. Net interest income was up 55 per cent YoY (v/s est of 41%). Profit after tax increased 77 per cent to Rs 400 crore (v/s est Rs 340 cr) on the back of strong loan book growth (54%), NII and fee income.

CASA grew 43 per cent YoY and 17 per cent QoQ. CASA ratio was stable QoQ at 40 per cent. Asset quality was strong (net NPA at 0.43%) with a shift in favor of safer asset classes.

NIM in Q2FY09 improved 16 basis points QoQ and 23 basis points YoY to 3.51 per cent. Domestic NIM rose QoQ from 3.49 per cent to 3.67 per cent in 2QFY09. Fee income (excl. treasury/forex fees) growth continues to surprise positively-up 93 per cent YoY in Q2FY09 (v/s our est. of 50% growth).

Asset quality is robust-gross NPAs are at 0.91 per cnet (stable QoQ and YoY) and net NPAs at 0.43 per cent (down 4bp QoQ and 12bp YoY). The proportion of A and above rated large and mid-corporate loans increased from 78 per cent in Sep 07 and 81 per cent in Mar 08 to 84 per cent in Sep 08. Similarly, the proportion of SME loans in SME4-8 (lower quality buckets) rating has come down from 24 per cent in Sep 07 and 29 per cent in Mar 08 to 22 per cent in Sep08.

Source: EconomicTimes

Hindalco issue subscribed 56%

Hindalco Industries’ closely watched Rs 5,050-crore rights issue, aimed at repaying expensive bridge loans taken for the Novelis acquisiti
on, saw subscriptions of about 56%, according to final data submitted on Thursday.

The Aditya Birla flagship company received subscriptions for over 29.42 crore shares, representing 55.97% of the total quantity on offer. The issue was among the first to hit the equity markets even as the financial turmoil was unfolding. The timing of the issue had led to a major fall in the stock price, which was lower than the rights offer price.

Under the rights offer, Hindalco issued 52.58 crore shares at a price of Rs 96, including a premium of Rs 95 each, in the ratio of three shares for every seven equity shares held.

On Thursday, the stock of Hindalco plunged by 12.1% to Rs 69.75 as it is a part of the 30-share sensex and is thus not regulated by daily trading limits. The shares have fallen by 38% in the past month. According to the underwriting agreement, ABN Amro, Citigroup, Deutsche Equities, DSP Merrill Lynch and SBI Capital Markets will subscribe to 17.89 lakh shares, totalling about Rs 1,717.88 crore.

The promoters and associated companies bought 39% of the rights offer and may buy an additional 10%. ABN Amro, Citigroup Global, Deutsche Equities, DSP Merrill Lynch and SBI subscribed to 3,57,89,202 shares each, according to the data issued by Hindalco.

Hindalco had taken a $3.03 billion bridge loan to acquire Novelis and the proceeds from the rights issue were aimed at partly repaying the amount.

Hindalco’s rights issue is expected to have a close bearing on similar offerings. Tata Motors is scheduled to close its ongoing rights issue on October 20. The shares of Tata Motors, India’s largest automobile company, plunged sharply by 11.1% to Rs 250.55 on the BSE on Thursday, compared to the differential and ordinary rights offer prices of Rs 305 and Rs 340 respectively.

The auto company is planning to raise Rs 4,145-crore through the rights issue to part finance its acquisition of the Jaguar Land Rover brands.

The weak markets and tight liquidity conditions have eroded investor sentiment, forcing many companies to reconsider and rework their fund-raising plans. Even in the case of foreign currency convertible bonds, companies are being compelled to reset the conversion prices or reach a settlement with the bond holders, according to sources close to the development.

Source: EconomicTimes

Gold falls under $800 as traders cash in holdings

Gold prices briefly plunged below $800 an ounce Thursday as investors continued to sell off commodities on concerns that the economic sl
owdown will dramatically reduce demand for energy and raw materials.

Gold for December delivery fell $34.90 to settle at $804.50 an ounce on the New York Mercantile Exchange after earlier falling to $786.70.

Other precious metals also fell. December silver fell 54.5 cents to settle at $9.635 an ounce on the Nymex, while December copper lost 12.5 cents to settle at $2.0855 a pound.

Jon Nadler, analyst with Kitco Bullion Dealers Montreal, blamed the pullback on investor expectations of a substantial drop in worldwide demand for commodities.

``If the global economy will have to go through what apparently lies ahead of it, hopes for demand for 'stuff' will have to be sharply revised _ and not upward,'' Nadler said in a note.

In energy trading, crude oil fell below $70 after the government reported sharp increases in U.S. crude and gasoline supplies, a sign investors took as more evidence that the slumping economy is curbing demand.

Light, sweet crude for November delivery dropped $4.69, or 6.2 percent, to settle at $69.85 a barrel on the Nymex, the lowest settlement prices since Aug. 23, 2007. Earlier prices dipped to $68.57, a level not seen since June 27, 2007.

Crude has now fallen 52.5 percent since surging to a record $147.27 on July 11.

In other Nymex trading, heating oil fell 10.62 cents to settle at $2.1108 a gallon, while gasoline futures lost 16.02 cents to settle at $1.622 a gallon.

Meanwhile, agriculture futures traded mixed on the Chicago Board of Trade.

Wheat for December delivery fell 0.5 cent to settle at $5.5525 a bushel, while December corn lost 3.5 cents to settle at $3.845 a bushel. November soybeans rose 9 cents to settle at $8.670 a bushel.

Source: EconomicTimes

Small and mid-tier ITES in big trouble

The gloomy global economic outlook and reduced demand for technology services in the US and Europe is likely to result in an increased
ITES in trouble
More Pictures
pace of consolidation among small and mid-tier IT services companies in India, analysts say.

Export-oriented small and mid-tier IT companies were able to weather the storm of rapid appreciation in the rupee against the US dollar in 2007 and early 2008, but now they are faced with the stark reality of dwindling orders.


Sudin Apte of Forrester Research says that consolidation in the Indian IT industry was on the way anyway, but the pace may pick up in the next 18 months. He is of the view that a large number of smaller firms are in “denial mode,” thinking they will be able to ride out the bad times, but reality will sink in after they start seeing negative cash flows.

It is estimated that around 60-70% of the country’s IT services exports are contributed by the top 20 players, with the rest coming in from small and mid-tier entities. T R Madan Mohan of Browne & Mohan, a consultancy firm, says that the pace of consolidation will be high because of pressure from private equity investors. PE firms, which invested in software companies expecting an IPO in 2009, are either encouraging the companies to merge or bring in a strategic partner to reduce risk.

Analysts said this kind of consolidation is already happening for firms with a topline of around Rs 50 crore, but the major worry would be for entities which have an annual revenue of less than Rs 5 crore and servicing the BFSI market in the US or the UK.

For example, of the around 1,550 units registered with STPI Bangalore, only 28% of them have gross revenue of more than Rs 100 crore. The expectation is that through consolidation and mergers, a fifth of them will exit the system. Avinash Vashistha, CEO of offshore advisory Tholons, agrees that it would be a tough road ahead for the small and medium-sized firms. However, he also thinks that there is considerable interest among investors in these firms as their valuations are particularly low and there is greater interest in outsourcing and offshoring.

“The worry is that if there is a recession and downward trend till the last quarter of 2008, which is what seems to
be imminent, then many of them have to look at drastically different business models,” says Mr Mohan of Browne & Mohan.

Source: EconomicTimes

PSUs barred from pulling out MF investments

Public sector companies, which had been allowed to invest in the equity markets through mutual funds, are now under pressure from the g
overnment to stay invested in the crumbling stock market. According to government sources, several public sector undertakings (PSUs) have been directed not to press redemptions from public sector mutual funds as it could lead to further panic in the market.

The move comes at a time when the Reserve Bank of India (RBI) has provided a Rs 20,000 crore liquidity facility to mutual funds to help them overcome redemption pressures in the wake of the financial crisis. The government’s move comes close on the heels of power major NTPC withdrawing Rs 1,000-crore worth of investment in mutual funds fearing further market crash.

“Though there has been no formal communication, the PSUs have been directed not to exit from their investments. The government had also recently ordered PSUs not to invite competitive bids for bulk deposits and keep at least 60% of funds with public sector banks. This decision is also on the same line,” a government official said.

Being major investors in MFs (a substantial portion of Rs 2 lakh crore cash surplus with PSUs could be invested in MFs), the government feels that PSUs should remain invested in funds to counter excessive selling pressure in the market. Already, state run financial institutions have tried to balance selling pressure at the bourses by being active buyers of stock. While in the last two days FIIs have sold shares worth Rs 2,191 crore (net sales), domestic institutional investors have actually bought stocks worth Rs 1,407 crore.

The government had allowed navratna and miniratna companies to invest their cash surpluses in Sebi-regulated public sector mutual funds to enhance treasury returns. According to a Crisil study, blue-chip PSUs, which include both navratnas and miniratnas, have over Rs 2 lakh crore of surplus cash, out of which 30% could be invested in public sector mutual funds.

The government permission to PSUs even included investment in equity-linked funds on the condition that such investments should not exceed 30% of the available surplus of the concerned PSU. The government relaxed the norms after various PSUs requested that allowing them to invest in the booming stock market will provide them a level playing field with the private sector in terms of investment options. Earlier, public sector companies had only exposure in fixed deposits, treasury bills and RBI bonds.

Chief investment officer of a public sector mutual fund welcomed the government move and said this should benefit in the long run as it will give faith to other institutional investors. “I think it’s the right step given that some of the private mutual funds have put a cap on the redemption temporarily given the acute liquidity crunch in the market,” the officer said.

Source: EconomicTimes