New Delhi, July 10
India Inc will be severely impacted by the rupee’s depreciation against the dollar given the large foreign currency debt on the books and only partial hedging.

A report by Crisil Research says the rupee’s depreciation will lift input costs across many sectors amid weak demand environment as reflected in low double digit topline growth expected in 2013-14.

The report says even exporters are unlikely to benefit significantly as clients may seek to renegotiate contracts. “For companies in the CNX Nifty (excluding banking and financial services), around 40% of debt is denominated in foreign currency. In total, corporate India had forex debt outstanding of over $ 200 billion as of March 2013. Moreover, only half of their forex exposure is hedged. Persistent weakness in the rupee and heightened volatility has reduced the benefits of borrowing overseas,” says Mukesh Agarwal, president, Crisil Research.

From the growth and profitability perspective, sectors that will be negatively impacted by the rupee’s depreciation include automobiles, auto components, airlines, consumer durables, oil marketing companies and fertilisers. The increase in fuel costs will hurt demand for automobiles, especially small cars, as fuel alone accounts for nearly 25-30 per cent of the ownership cost of a small car in the year of purchase.

Airlines with a high proportion of revenues accruing from domestic operations will also be hurt as 70% of their operating costs are incurred in dollars, and their ability to pass on any cost increase is limited.

Sectors that will benefit from the rupee fall include IT, pharmaceutical and readymade garment exporters, crude oil producers and pure-play refineries.

“Demand growth and competitiveness, rather than currency movements, are more critical to determining growth and profitability. Our view is corroborated by the modest performance of export oriented industries in 2012-13, a year in which the rupee depreciated by 14% against the dollar on a year-on-year basis. Around 180 listed export-oriented companies reported a marginal 1-2% growth in revenues in dollar terms despite a weak currency,” says Prasad Koparkar, senior director, Crisil Research.

Several analysts have pointed out that the rupee depreciation remains a major concern for corporates. Motilal Oswal Securities in a report said slow growth and sharp currency depreciation are the key challenges for FY14 as this may be the second year of growth in the low range of 5-5.5%.

Chandigarh, July 10
Tiny industries in Punjab, which comprise 95 per cent of the industry in the state, have slammed the state’s new industrial policy for its failure to address their concerns and for promoting regionalism.

The Punjab Government had recently announced package of fiscal incentives for attracting new industry to the state. However, the package will be offered only to those investors who are willing to pump in over Rs 1 crore. However, since the industry having a turnover of up to Rs 25 lakh is classified as a tiny industry, the package offered under the new policy will not be available for the tiny industries.

Joginder Kumar, president, Federation of Tiny and Small Industries of India, said despite making several representations to the Punjab Government to give some incentives to the tiny industry in the new industrial policy, their representation was not considered. “It is the tiny industry of Punjab, especially in Ludhiana, that paved way for industrialisation across the country. The tiny industry had organised itself into an industrial estate in the 1950s, and this model was replicated across the country. While the tiny industry has always been promoted in rest of India, in Punjab, nothing has been done for this segment,” he rued. He said they would take up the matter with the Principal Secretary, Industries.

Rajan Gupta, president, Ludhiana Focal Point Association, Phase IV A, also criticised the Punjab government for creating regional disparity in its new policy. “Because of political considerations, the government has allowed special incentives for those who invest just Rs 1 crore in Bathinda, Muktsar and Amritsar, while similar incentives are being offered to investors in Ludhiana and Jalandhar if they invest Rs 10 crore. Why should there be any discrimination?” he questioned.

The duo said at the time when the industry was going through recession, the government’s policy was unfavourable towards them. “Despite RBI’s guidelines, we are not getting collateral-free loans and credit inflow is very poor. The tiny industry is still not getting payments within the stipulated period of 45 days. This is leading to a cash squeeze for the industry,” said AL Aggarwal, president, Chandigarh Industrial Fasteners Association.

They have demanded that there should be a separate policy for tiny industry so that they get focused attention. They have also demanded a role in policy making by getting representation in the Rajya Sabha, Economic Advisory Council of Prime Minister and the Planning Commission, besides interest subvention for the tiny industry. 

New Delhi, July 10
India Ratings has downgraded the outlook for the automobile industry for the first time in six years.

India Ratings expects margins of PVs to be under pressure due to enhanced competitive intensity, even if the demand recovers (though unlikely) FY14 onwards. The need to continuously invest in model upgrades and new model introductions in PVs also drains cash flows. This added expense is an impediment to improvement in the credit profiles of PV companies, particularly domestic original equipment manufacturers (OEMs).

Domestic passenger vehicles volumes are expected to fall by 5%-12% in FY14, led by the likely year-on-year decline in car volumes of 8%-15%. The agency believes the reduced demand for PVs is part of the overall slowdown in consumer discretionary spending. This is driven by consistently weak household finances and high cost of ownership on account of high fuel prices and interest rates.

Sales of utility vehicles (UVs), the driver of PV sales in FY13, have slowed down from April 2013, following an increase in excise duty to 30% from 27% in March 2013. Price conscious buyers opting for UVs in the sub Rs 7 lakh price range (which accounts for a significant proportion of segment volumes) appear to be deferring purchases as they are also faced with steadily increasing diesel prices.

The outlook for the auto sector is grim for the quarter ending June for which financial results will start trickling in. According to a report by Kotak Securities, weakness in volumes continued in Q1 of FY14 and companies reported volume de-growth across segments. In the M&HCV space, the volumes declined drastically for all the players. The LCV segment, which until last quarter was reporting positive growth, too started showing signs of weakness. Demand for petrol-run passenger vehicles remained sluggish.

Meanwhile, the demand for diesel-run passenger vehicles started to taper off. Two-wheeler manufacturers found it difficult to report growth in the domestic market.

As per the report, overall weak macro-environment continued to dent the performance of auto manufacturers. Due to sluggish demand, discounts increased during the quarter. Players had to resort to production cuts in order to align their production with sales. 

Mumbai, July 10
Seeking to arrest the declining value of rupee, the RBI has imposed restriction on banks with regard to trading in currency Futures and Options (F&O) with immediate effect.

Under the new norms, banks have been barred from trading in currency futures and exchange traded currency options market on their own. They will, however, be allowed to trade on behalf of their clients.

"On a review of the evolving market conditions, it has been decided that... banks should not carry out any proprietary trading in the currency futures/exchange-traded currency options markets.

It would come into effect immediately, RBI added.

Market regulator SEBI has also tightened the exposure norms for currency derivatives to check large-scale speculations in the market.

SEBI said it is reducing the exposure that brokers and their clients can take on currency derivatives and also doubled their margins on dollar-rupee contracts.

Currency derivative trading allows investors to take forward views on various currency pairs, including rupee-dollar, and it was being felt that large-scale speculations on their future movements might be adding to the downward pressure on the Indian currency. — PTI

New Delhi, July 10
Credit Suisse and HSBC have been selected as merchant bankers to manage the sale of shares in hydel producer NHPC, which is expected to fetch over Rs 2,200 crore to the exchequer. As many as 10 merchant bankers, including ICICI Securities and SBI Cap, had evinced interest in managing the stake sale.

The government plans to sell 11.36 per cent of its stake in NHPC, or 120 crore shares, through an Offer for Sale (OFS) in the domestic market.

At the current market price of Rs 18.50 apiece, the stake is valued at about Rs 2,200 crore.

The government currently holds an 86.36 per cent stake in NHPC. The hydro-power generator listed on the bourses in 2009 after the promoter divested a 5 per cent stake and the company issued 10 per cent fresh equity. The paid-up equity capital of NHPC was Rs 12,300.74 crore as of March 31, 2012, . While the disinvestment department is eager to offload shares in NHPC, the Power Ministry has been asking for time, citing valuation issues. — PTI

New Delhi, July 10
Tightening their noose around loan defaulters, banks have decided to ‘name and shame’ the guarantors of such borrowers as well as by publishing their photographs and other details in newspapers and at notice boards of bank branches and community centres.

Banks, mostly public sector lenders, began publishing pictures of wilful loan defaulters in newspapers and at other places around the areas of residence of such borrowers earlier this year to induce them to pay up.

This exercise has now been extended to the guarantors of loan defaulters as well as part of efforts to build pressure on the borrowers to clear their dues. Interestingly, public sector banks are at the forefront of taking such measures and those already making public the photographs and other details of loan defaulters include SBI, UCO Bank, Allahabad Bank, Indian Bank and Indian Overseas Bank.

So far, the public notices issued by private banks mostly do not contain pictures of the loan defaulters or their guarantors, but they are also actively considering such 'name and shame' exercises, a senior banker said.

According to bankers, the photographs, names and addresses of the guarantors would be published in newspapers if the dues are not cleared within 15 days of the notice containing particulars of the original borrowers.

Some banks have also decided to prominently display the photographs and other details of the wilful loan defaulters at the branches in the locality of such borrowers.

Banks also expect such notices to act as a deterrent for others against any loan defaults. As per RBI's norms, wilful defaulters are those who are engaged in deliberate non-payment of the dues despite adequate cash flow and good net worth. — PTI 

BRIEFLY

Tata Starbucks outlet in Gurgaon 
New Delhi: Tata Starbucks Ltd, a 50:50 joint venture between Starbucks Coffee Company and Tata Global Beverages Ltd, opened its first outlet in Gurgaon on Wednesday, taking its total store count in the Delhi NCR region to 8. — PTI

Flipkart raises $200 million
Mumbai: E-commerce major Flipkart said on Wednesday it has raised $200 million (over Rs 1,200 crore) from its existing investors, including Naspers, Accel and Tiger Global. "This is the largest investment in an e-commerce company in India. This investment validates the belief that our investors have not only in our capabilities as a market leader, but also in the potential of e-commerce in India," Flipkart co-founder and CEO Sachin Bansal said. — PTI

Reliance Life biz up two-fold
New Delhi: Reliance Life Insurance said on Wednesday its new business premium rose two-fold to Rs 514 crore during the first quarter ended June 30 as against Rs 251 crore in the corresponding quarter a year ago. It recorded a 48 per cent growth in new business premium at Rs 267 crore in the first quarter of 2013-14 as against Rs 181 crore in the same period previous fiscal. — PTI

IndusInd Bank Q1 profit up 42%
New Delhi: IndusInd Bank on Wednesday reported nearly 42 per cent rise in net profit at Rs 334.84 crore for the first quarter ended June 30. Total income of the bank also rose to Rs 2,382.81 crore during the April-June period of 2013-14, from Rs 1,950.82 crore in the year-ago period. — PTI

Nokia launches new smartphone
Chandigarh: Nokia has launched 19 mobile handsets this year, said Ravi Kunwar, regional general manager, North, Nokia India, after launching a new smartphone here on Wednesday. The company unveiled Asha 501 in five variants. — TNS