India’s government will invest 40 billion rupees ($814 million) of capital in State Bank of India (SBIN) by March-end, Chairman Pratip Chaudhuri said.
The country’s biggest bank will need around 400 billion rupees in fresh capital over the next three years, Chaudhuri told reporters in Chennai today. State Bank also aims to raise the capital from its shareholders and own funds, he said.
Mumbai-based State Bank has been in talks with the government to raise capital since at least February 2010. Moody’s Investors Service cut State Bank’s financial strength rating on Oct. 4, citing deteriorating asset quality.
State Bank gained 1.6 percent to 1,966.15 rupees at close of trading in Mumbai yesterday. The stock has declined 30 percent this year as the fastest pace of interest rate increases among major economies and an economic slowdown trigger concerns that bad debts may mount.
India plans to invest 140 billion rupees in state-owned banks, a finance ministry official said in New Delhi on Nov. 1, declining to be identified citing government policy. The money is in addition to a 60 billion-rupee investment planned for the year to March 31 and will ensure the banks have a Tier 1 capital ratio of more than 8 percent, the official said.
To contact the reporter on this story: Anoop Agrawal in Mumbai at aagrawal8@bloomberg.net
To contact the editor responsible for this story: Paul Tighe at ptighe@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Saturday, November 5, 2011
Friday, November 4, 2011
ONGC Quarterly Profit Surges 60%, Beating Estimates, on Higher Oil Prices By Rakteem Katakey - Nov 4, 2011
Oil & Natural Gas Corp., India’s biggest energy explorer, posted a 60 percent increase in second- quarter profit that beat analysts’ estimates after selling crude at higher prices.
Net income in the three months ended Sept. 30 was 86.4 billion rupees ($1.8 billion), or 10.10 rupees a share, compared with 53.9 billion rupees, or 6.30 rupees, a year earlier, the state-owned company said in a statement yesterday. The median profit estimate of 31 analysts surveyed by Bloomberg was 64.9 billion rupees. Sales rose 24 percent to 226.2 billion rupees.
ONGC supplies crude to state refiners at a discount to help compensate them for fuels sold below costs to curb inflation. The government increased prices of diesel, kerosene and cooking gas in June for the first time in a year after global crude costs rose, allowing the New Delhi-based company to raise its selling price of crude.
“Profits are largely the result of a lower subsidy spurring a higher selling price for their oil,” Deepak Pareek, a Mumbai-based analyst with Prabhudas Lilladher Pvt., said by telephone.
Brent prices rose 46 percent to $112.09 a barrel on average in the second quarter compared with a year earlier. ONGC’s net selling price of crude to refiners, after discounts, climbed 33 percent to $83.70 a barrel, the company said.
Rupee Decline
ONGC has fallen 14 percent this year, matching the drop in the benchmark Sensitive Index. The shares fell 0.4 percent to 276.80 rupees at close in Mumbai, before the earnings announcement, giving it a market value of $48.2 billion.
ONGC also benefited from a decline in the rupee because sales of oil and gas are priced in dollars, yielding more after conversion from the U.S. currency. The rupee weakened 8.8 percent in the quarter to 48.9725 per dollar, the biggest drop since the collapse of Lehman Brothers Holdings Inc. in September 2008, according to data compiled by Bloomberg.
State oil explorers including Oil India Ltd. currently bear about 33 percent of the country’s total fuel-subsidy bill.
The government may double ONGC’s full-year subsidy payment to about 470 billion rupees to cut expenditure and reduce the fiscal deficit, two people with direct knowledge of the matter said Sept. 20. The selling price for ONGC’s crude produced in India may fall to about $42 a barrel if the subsidy bill is doubled, one of the people said.
The government deferred a 5 percent share sale in ONGC last month, without stating a reason. That was the fourth postponement, hampering Finance Minister Pranab Mukherjee’s plans to raise 400 billion rupees from asset sales in the year ending March 31.
To contact the reporter on this story: Rakteem Katakey in New Delhi at rkatakey@bloomberg.net
To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Net income in the three months ended Sept. 30 was 86.4 billion rupees ($1.8 billion), or 10.10 rupees a share, compared with 53.9 billion rupees, or 6.30 rupees, a year earlier, the state-owned company said in a statement yesterday. The median profit estimate of 31 analysts surveyed by Bloomberg was 64.9 billion rupees. Sales rose 24 percent to 226.2 billion rupees.
ONGC supplies crude to state refiners at a discount to help compensate them for fuels sold below costs to curb inflation. The government increased prices of diesel, kerosene and cooking gas in June for the first time in a year after global crude costs rose, allowing the New Delhi-based company to raise its selling price of crude.
“Profits are largely the result of a lower subsidy spurring a higher selling price for their oil,” Deepak Pareek, a Mumbai-based analyst with Prabhudas Lilladher Pvt., said by telephone.
Brent prices rose 46 percent to $112.09 a barrel on average in the second quarter compared with a year earlier. ONGC’s net selling price of crude to refiners, after discounts, climbed 33 percent to $83.70 a barrel, the company said.
Rupee Decline
ONGC has fallen 14 percent this year, matching the drop in the benchmark Sensitive Index. The shares fell 0.4 percent to 276.80 rupees at close in Mumbai, before the earnings announcement, giving it a market value of $48.2 billion.
ONGC also benefited from a decline in the rupee because sales of oil and gas are priced in dollars, yielding more after conversion from the U.S. currency. The rupee weakened 8.8 percent in the quarter to 48.9725 per dollar, the biggest drop since the collapse of Lehman Brothers Holdings Inc. in September 2008, according to data compiled by Bloomberg.
State oil explorers including Oil India Ltd. currently bear about 33 percent of the country’s total fuel-subsidy bill.
The government may double ONGC’s full-year subsidy payment to about 470 billion rupees to cut expenditure and reduce the fiscal deficit, two people with direct knowledge of the matter said Sept. 20. The selling price for ONGC’s crude produced in India may fall to about $42 a barrel if the subsidy bill is doubled, one of the people said.
The government deferred a 5 percent share sale in ONGC last month, without stating a reason. That was the fourth postponement, hampering Finance Minister Pranab Mukherjee’s plans to raise 400 billion rupees from asset sales in the year ending March 31.
To contact the reporter on this story: Rakteem Katakey in New Delhi at rkatakey@bloomberg.net
To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Wednesday, November 2, 2011
Coal India to Quicken Search for Overseas Mines as Domestic Output Drops By Rajesh Kumar Singh - Nov 2, 2011
Coal India Ltd. (COAL), facing a drop in output for the first time in more than a decade, is accelerating its search for overseas assets after talks with Massey Energy Co. and Peabody Energy Corp. failed.
Delays in land acquisitions and environmental clearances to develop projects have hindered efforts by the world’s biggest producer of the fuel to boost production, Chairman N.C. Jha said in a phone interview. The government last month allowed state- run Coal India, which has $9.1 billion of cash, to buy unlisted overseas companies.
“The government approval allows us to move faster,” Jha said. “We have to try every possible option including acquisitions to meet supply commitments. We’re still struggling to meet our production targets.”
Production at Coal India, which mines more than 80 percent of the country’s coal, dropped 5 percent in the first six months of the year because of heavy rains and a one-day strike. Should full-year production decline, it would be the company’s first since at least 1998, Jha said.
“The kind of cash Coal India has, it makes every sense to look for acquisitions,” said Prasad Baji, an analyst at Edelweiss Capital Ltd. in Mumbai. “Although we have enough resources in the country, we still need to look outside because of some fundamental problems.”
Talks to acquire stakes in a U.S. mine of Massey Energy and an Australian mine of Peabody Energy were inconclusive because of procedural delays, Jha said.
Shares of Coal India fell 1.1 percent to 325.90 rupees in Mumbai yesterday. The shares have risen 3.5 percent this year, compared with a 15 percent drop in the key Sensitive Index.
Higher Production
The company, which mined 431.3 million metric tons of coal in the year ended March 31, plans to increase production by about 5 percent this year to meet demand. Daily output rebounded almost 60 percent from the rainy months of August and September to 1.2 million metric tons and is expected to go up to 1.5 million tons by the end of this month, Jha said.
Coal India should focus on its domestic business, where the return on investment is higher, Oscar Veldhuijzen, a partner at The Children’s Investment Fund Management UK LLP in London, said in August. The fund is the biggest owner of Coal India after the Indian government, with a holding of 1.04 percent as of Sept. 30, according to data compiled by Bloomberg.
India’s estimated coal resource is 267.2 billion tons, of which 105.8 billion tons are proven, according to the coal ministry’s website.
To contact the reporter on this story: Rajesh Kumar Singh in New Delhi at rsingh133@bloomberg.net
To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Delays in land acquisitions and environmental clearances to develop projects have hindered efforts by the world’s biggest producer of the fuel to boost production, Chairman N.C. Jha said in a phone interview. The government last month allowed state- run Coal India, which has $9.1 billion of cash, to buy unlisted overseas companies.
“The government approval allows us to move faster,” Jha said. “We have to try every possible option including acquisitions to meet supply commitments. We’re still struggling to meet our production targets.”
Production at Coal India, which mines more than 80 percent of the country’s coal, dropped 5 percent in the first six months of the year because of heavy rains and a one-day strike. Should full-year production decline, it would be the company’s first since at least 1998, Jha said.
“The kind of cash Coal India has, it makes every sense to look for acquisitions,” said Prasad Baji, an analyst at Edelweiss Capital Ltd. in Mumbai. “Although we have enough resources in the country, we still need to look outside because of some fundamental problems.”
Talks to acquire stakes in a U.S. mine of Massey Energy and an Australian mine of Peabody Energy were inconclusive because of procedural delays, Jha said.
Shares of Coal India fell 1.1 percent to 325.90 rupees in Mumbai yesterday. The shares have risen 3.5 percent this year, compared with a 15 percent drop in the key Sensitive Index.
Higher Production
The company, which mined 431.3 million metric tons of coal in the year ended March 31, plans to increase production by about 5 percent this year to meet demand. Daily output rebounded almost 60 percent from the rainy months of August and September to 1.2 million metric tons and is expected to go up to 1.5 million tons by the end of this month, Jha said.
Coal India should focus on its domestic business, where the return on investment is higher, Oscar Veldhuijzen, a partner at The Children’s Investment Fund Management UK LLP in London, said in August. The fund is the biggest owner of Coal India after the Indian government, with a holding of 1.04 percent as of Sept. 30, according to data compiled by Bloomberg.
India’s estimated coal resource is 267.2 billion tons, of which 105.8 billion tons are proven, according to the coal ministry’s website.
To contact the reporter on this story: Rajesh Kumar Singh in New Delhi at rsingh133@bloomberg.net
To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Tuesday, November 1, 2011
Asia Stocks Drop, Euro Weakens on EU Concern By Bloomberg News - Nov 1, 2011
Asia stocks declined and the euro weakened for a fourth day against the dollar on concern a Greek referendum will threaten Europe’s rescue plan and amid signs global economic growth is slowing.
The MSCI Asia Pacific Index slid 1.5 percent as of 9:15 a.m. in Tokyo, extending its three-day loss to 5.9 percent. Standard & Poor’s 500 Index futures retreated 0.4 percent after the U.S. benchmark plunged 2.8 in New York trading yesterday. The 17-nation euro dropped 0.3 percent to $1.3668 and declined 0.4 percent to 106.97 yen. Oil fell 1.1 percent to $91.14 a barrel in New York.
Greek Prime Minister George Papandreou said a referendum on the European financial accord would send a clear message on his nation’s membership in the currency region. The poll will hinder the next installment of aid funds by the International Monetary Fund and the European Union, Dutch Finance Minister Jan Kees de Jager said. The Federal Reserve will release a policy statement and economic projections today, after data yesterday showed manufacturing almost stalled in the U.S. last month.
“The Greek bailout plan may go back to where it started and U.S. ISM manufacturing was weaker than market estimates,” said Hiroichi Nishi, an equities manager in Tokyo at SMBC Nikko Securities Inc. “The market environment is deteriorating fast.”
About 21 shares declined for every one that gained on the MSCI Asia Pacific Index. Japan’s Nikkei 225 Stock Average and Australia’s S&P/ASX 200 Index lost 1.8 percent, and South Korea’s Kospi Index dropped 2.3 percent.
OneSteel Ltd. (OST) tumbled 15 percent in Sydney after the steelmaker said earnings for the first half of its 2012 financial year will probably be hurt by a decline in iron ore prices and an increase in the Australian dollar. Toyota Motor Corp. and Honda Motor Co. slipped at least 1.6 percent after the automakers posted U.S. sales declines for October.
U.S. Economy
Futures on the S&P 500 signal the U.S. stocks gauge may extend a two-day, 5.2 percent drop. The Institute for Supply Management’s factory index dropped to 50.8 in October from 51.6 in September. A reading of 52 was the median forecast in a Bloomberg News survey of economists.
German Chancellor Angela Merkel and French President Nicolas Sarkozy held emergency talks on Greece yesterday and in a joint statement called on Europe to implement the package of measures. Sarkozy told reporters the plan is the “only way” to fix Greece. Group of 20 leaders meet in Cannes, France, starting tomorrow to discuss the debt crisis.
To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
The MSCI Asia Pacific Index slid 1.5 percent as of 9:15 a.m. in Tokyo, extending its three-day loss to 5.9 percent. Standard & Poor’s 500 Index futures retreated 0.4 percent after the U.S. benchmark plunged 2.8 in New York trading yesterday. The 17-nation euro dropped 0.3 percent to $1.3668 and declined 0.4 percent to 106.97 yen. Oil fell 1.1 percent to $91.14 a barrel in New York.
Greek Prime Minister George Papandreou said a referendum on the European financial accord would send a clear message on his nation’s membership in the currency region. The poll will hinder the next installment of aid funds by the International Monetary Fund and the European Union, Dutch Finance Minister Jan Kees de Jager said. The Federal Reserve will release a policy statement and economic projections today, after data yesterday showed manufacturing almost stalled in the U.S. last month.
“The Greek bailout plan may go back to where it started and U.S. ISM manufacturing was weaker than market estimates,” said Hiroichi Nishi, an equities manager in Tokyo at SMBC Nikko Securities Inc. “The market environment is deteriorating fast.”
About 21 shares declined for every one that gained on the MSCI Asia Pacific Index. Japan’s Nikkei 225 Stock Average and Australia’s S&P/ASX 200 Index lost 1.8 percent, and South Korea’s Kospi Index dropped 2.3 percent.
OneSteel Ltd. (OST) tumbled 15 percent in Sydney after the steelmaker said earnings for the first half of its 2012 financial year will probably be hurt by a decline in iron ore prices and an increase in the Australian dollar. Toyota Motor Corp. and Honda Motor Co. slipped at least 1.6 percent after the automakers posted U.S. sales declines for October.
U.S. Economy
Futures on the S&P 500 signal the U.S. stocks gauge may extend a two-day, 5.2 percent drop. The Institute for Supply Management’s factory index dropped to 50.8 in October from 51.6 in September. A reading of 52 was the median forecast in a Bloomberg News survey of economists.
German Chancellor Angela Merkel and French President Nicolas Sarkozy held emergency talks on Greece yesterday and in a joint statement called on Europe to implement the package of measures. Sarkozy told reporters the plan is the “only way” to fix Greece. Group of 20 leaders meet in Cannes, France, starting tomorrow to discuss the debt crisis.
To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Monday, October 31, 2011
ICICI Bank’s Net Income Jumps to Record on Lending as Provisions Decline By Anto Antony and Ruth David - Oct 31, 2011
ICICI Bank Ltd. (ICICIBC), India’s second- largest lender by assets, said second-quarter profit rose 22 percent to a record as loans increased and it reduced provisions for bad debt.
Net income climbed to 15.03 billion rupees ($309 million), or 13 rupees a share, for the three months ended Sept. 30, from 12.4 billion rupees, or 10.86 rupees, a year earlier, the Mumbai-based bank said in a statement to the Bombay Stock Exchange today. That compares with the 14.5 billion-rupee median estimate in a Bloomberg survey.
Chief Executive Officer Chanda Kochhar, 49, increased ICICI’s loans to companies and home and car buyers, while boosting fee income from distributing insurance and mutual-fund products. Shares of the bank posted their worst quarter in 2 1/2 years on concern that the steepest increases in borrowing costs among Asian economies may lead to defaults.
“The year-on-year fall in provisions shows the bank’s success in dealing with some of its legacy problems in retail lending and was a major driver” of profit growth, Brian Hunsaker, a banking analyst at Keefe Bruyette & Woods Inc., said by telephone from Hong Kong.
ICICI Bank’s net interest income, or the difference between revenue from loans and interest paid on deposits, rose 14 percent to 25.1 billion rupees in the quarter. The net interest margin, a measure of lending profitability, was 2.6 percent, unchanged from a year earlier.
Provisions Fall
Net new provisions fell to 3.18 billion rupees from 6.41 billion rupees a year earlier, ICICI said in the statement today. The provision coverage ratio expanded to 78.2 percent of non- performing loans from 69 percent as the ratio of net bad debt to total credits narrowed to 0.8 percent from 1.37 percent.
“The asset quality of the bank is expected to remain stable and no big increase in provisioning requirements is expected in the coming quarters,” Kochhar said.
The bank is keeping its credit growth target of 18 percent for the current financial year and expects interest margins to remain stable, Kochhar said.
ICICI shares fell 0.2 percent to 931.15 rupees in Mumbai today, compared with a 0.7 percent increase in the Bankex index, which tracks 14 Indian lenders. The stock lost 20 percent in the three months ended Sept. 30, its worst performance in 10 quarters.
ICICI Bank’s income from fees for distribution of mutual funds and investments rose 6.9 percent to 17 billion rupees, according to the statement.
The bank restructured 7.43 billion rupees of loans to microfinance institutions in the quarter. Net restructured loans on Sept. 30 stood at 25 billion rupees.
Deposits rose to 2.45 trillion rupees from 2.2 trillion rupees a year earlier. ICICI reported a capital adequacy ratio of 19 percent and a core capital ratio of 13 percent.
-- --With assistance from George Smith Alexander in Mumbai. Editors: Chitra Somayaji, Nathaniel Espino
To contact the reporters on this story: Ruth David in Mumbai at rdavid9@bloomberg.net; Anto Antony in New Delhi at aantony1@@bloomberg.net
To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Net income climbed to 15.03 billion rupees ($309 million), or 13 rupees a share, for the three months ended Sept. 30, from 12.4 billion rupees, or 10.86 rupees, a year earlier, the Mumbai-based bank said in a statement to the Bombay Stock Exchange today. That compares with the 14.5 billion-rupee median estimate in a Bloomberg survey.
Chief Executive Officer Chanda Kochhar, 49, increased ICICI’s loans to companies and home and car buyers, while boosting fee income from distributing insurance and mutual-fund products. Shares of the bank posted their worst quarter in 2 1/2 years on concern that the steepest increases in borrowing costs among Asian economies may lead to defaults.
“The year-on-year fall in provisions shows the bank’s success in dealing with some of its legacy problems in retail lending and was a major driver” of profit growth, Brian Hunsaker, a banking analyst at Keefe Bruyette & Woods Inc., said by telephone from Hong Kong.
ICICI Bank’s net interest income, or the difference between revenue from loans and interest paid on deposits, rose 14 percent to 25.1 billion rupees in the quarter. The net interest margin, a measure of lending profitability, was 2.6 percent, unchanged from a year earlier.
Provisions Fall
Net new provisions fell to 3.18 billion rupees from 6.41 billion rupees a year earlier, ICICI said in the statement today. The provision coverage ratio expanded to 78.2 percent of non- performing loans from 69 percent as the ratio of net bad debt to total credits narrowed to 0.8 percent from 1.37 percent.
“The asset quality of the bank is expected to remain stable and no big increase in provisioning requirements is expected in the coming quarters,” Kochhar said.
The bank is keeping its credit growth target of 18 percent for the current financial year and expects interest margins to remain stable, Kochhar said.
ICICI shares fell 0.2 percent to 931.15 rupees in Mumbai today, compared with a 0.7 percent increase in the Bankex index, which tracks 14 Indian lenders. The stock lost 20 percent in the three months ended Sept. 30, its worst performance in 10 quarters.
ICICI Bank’s income from fees for distribution of mutual funds and investments rose 6.9 percent to 17 billion rupees, according to the statement.
The bank restructured 7.43 billion rupees of loans to microfinance institutions in the quarter. Net restructured loans on Sept. 30 stood at 25 billion rupees.
Deposits rose to 2.45 trillion rupees from 2.2 trillion rupees a year earlier. ICICI reported a capital adequacy ratio of 19 percent and a core capital ratio of 13 percent.
-- --With assistance from George Smith Alexander in Mumbai. Editors: Chitra Somayaji, Nathaniel Espino
To contact the reporters on this story: Ruth David in Mumbai at rdavid9@bloomberg.net; Anto Antony in New Delhi at aantony1@@bloomberg.net
To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Sunday, October 30, 2011
Suzuki’s India Unit Quarterly Profit Slumps Most Since 2008 After Strike By Siddharth Philip - Oct 29, 2011
Suzuki Motor Corp. (7269)’s Indian unit, which sells almost half the cars in the country, said second- quarter profit dropped the most since December 2008 as a workers strike at a factory disrupted production.
Maruti Suzuki India Ltd. (MSIL)’s net income fell 60 percent to 2.4 billion rupees ($49 million) in the three months ended Sept. 30 from 5.98 billion rupees a year earlier, the New Delhi-based company said in a statement today. That is the smallest profit since the quarter ended December, 2008, missing the 4.1 billion- rupee median of 24 analyst estimates compiled by Bloomberg. Sales fell 16 percent to 75.4 billion rupees.
A 33-day strike at the company’s Manesar factory near New Delhi halted output of Swift compact cars, while Chairman R.C. Bhargava said on Oct. 19 that each day of the protests resulted in a production loss of about 570 million rupees. Higher interest rates and fuel prices have increased the cost of ownership by as much as 4 percent, damping demand for automobiles, he told reporters in New Delhi today.
“This has not been a good quarter for Maruti,” Bhargava said. The increase in costs “is a substantial burden on our customers. The labor dispute also caused a loss of production,” he said.
Looking Elsewhere
The board of directors today approved buying as much as 1,400 acres of land for future expansion in the western state of Gujarat, where General Motors Co. (GM), Tata Motors Ltd. (TTMT) and Ford Motor Co. have plants, according to the statement. Vehicle sales at the company fell 21 percent in September.
The Manesar factory resumed production this month. Separately, workers at Suzuki Powertrain India Ltd., which supplies engines and transmissions to Maruti Suzuki walked off their jobs in September at a plant in Gurgaon, near New Delhi, for two days.
The strike at Maruti came as Indian carmakers in Asia’s third-largest automobile market cut their sales forecasts for a second time this year. The Reserve Bank of India has raised rates 13 times since mid-March 2010 in a country where about 80 percent of purchases are funded by loans. Sales of Maruti’s best-selling Alto small car dropped 20 percent in the quarter.
“Until interest rates are high, new buyers will be averse to spending money on cars,” said Umesh Karne, an analyst with Brics Securities Ltd. in Mumbai. “When rates start coming down, we will see demand picking up.”
The Society of Indian Automobile Manufacturers lowered its growth forecast to as low as 2 percent in the year ending March 31, S. Sandilya, president of the industry group, said in New Delhi on Oct. 10. In July, the Society said it expected sales to rise 10 percent to 12 percent.
Shares of Maruti fell 2 percent to 1,126 rupees in Mumbai yesterday. They have declined 21 percent this year, compared with a 13 percent drop in the BSE’s benchmark Sensitive Index.
To contact the reporter on this story: Siddharth Philip in Mumbai at sphilip3@bloomberg.net
To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Maruti Suzuki India Ltd. (MSIL)’s net income fell 60 percent to 2.4 billion rupees ($49 million) in the three months ended Sept. 30 from 5.98 billion rupees a year earlier, the New Delhi-based company said in a statement today. That is the smallest profit since the quarter ended December, 2008, missing the 4.1 billion- rupee median of 24 analyst estimates compiled by Bloomberg. Sales fell 16 percent to 75.4 billion rupees.
A 33-day strike at the company’s Manesar factory near New Delhi halted output of Swift compact cars, while Chairman R.C. Bhargava said on Oct. 19 that each day of the protests resulted in a production loss of about 570 million rupees. Higher interest rates and fuel prices have increased the cost of ownership by as much as 4 percent, damping demand for automobiles, he told reporters in New Delhi today.
“This has not been a good quarter for Maruti,” Bhargava said. The increase in costs “is a substantial burden on our customers. The labor dispute also caused a loss of production,” he said.
Looking Elsewhere
The board of directors today approved buying as much as 1,400 acres of land for future expansion in the western state of Gujarat, where General Motors Co. (GM), Tata Motors Ltd. (TTMT) and Ford Motor Co. have plants, according to the statement. Vehicle sales at the company fell 21 percent in September.
The Manesar factory resumed production this month. Separately, workers at Suzuki Powertrain India Ltd., which supplies engines and transmissions to Maruti Suzuki walked off their jobs in September at a plant in Gurgaon, near New Delhi, for two days.
The strike at Maruti came as Indian carmakers in Asia’s third-largest automobile market cut their sales forecasts for a second time this year. The Reserve Bank of India has raised rates 13 times since mid-March 2010 in a country where about 80 percent of purchases are funded by loans. Sales of Maruti’s best-selling Alto small car dropped 20 percent in the quarter.
“Until interest rates are high, new buyers will be averse to spending money on cars,” said Umesh Karne, an analyst with Brics Securities Ltd. in Mumbai. “When rates start coming down, we will see demand picking up.”
The Society of Indian Automobile Manufacturers lowered its growth forecast to as low as 2 percent in the year ending March 31, S. Sandilya, president of the industry group, said in New Delhi on Oct. 10. In July, the Society said it expected sales to rise 10 percent to 12 percent.
Shares of Maruti fell 2 percent to 1,126 rupees in Mumbai yesterday. They have declined 21 percent this year, compared with a 13 percent drop in the BSE’s benchmark Sensitive Index.
To contact the reporter on this story: Siddharth Philip in Mumbai at sphilip3@bloomberg.net
To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
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