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Infrastructure companies line up tax-free bond issuances
After getting the approval of raising up to Rs300bn through issuance of tax-free
bonds this financial year, infrastructure finance companies, Housing and Urban
Development Corporation (HUDCO) and Power Finance Corporation (PFC), have
thrown open their subscriptions under the private placement route. However,
collections may not be that high keeping current market conditions in mind, say
market participants. While PFC aims to raise Rs1.5bn through the issue, HUDCO
has come up with a base issue size of Rs1bn for the first tranche. The Central
Board of Direct Taxes has given HUDCO and PFC the permission to raise Rs50bn
each this financial year. (Business Standard)
State-run banks may be allowed to revamp wages
State-run banks, which lag behind private sector and foreign rivals when it comes
to staff compensation and human resource (HR) policies, may soon get the
freedom to raise their standards with the government set to speed up the revamp
of personnel management at lenders controlled by it. The government has
accepted most of the recommendations made by a panel headed by former Bank
of Baroda chief A.K. Khandelwal on HR policies at public-sector banks (PSBs) last
year, according to two persons familiar with the development. (Mint)
Gilt yields touch 3-year high
Expectations of a pause in policy rate rises appear to be fading, with the yield on the
benchmark government security hitting a three-year high on concerns of a supply
glut. Yields on 10-year benchmark government bonds closed at 8.54 per cent on
Monday, highest closing level since 29 September, 2008. Bond prices fell by 59
paise on Monday, after the government announced it would increase its borrowing
by Rs530bn during the second half of the current financial year. The government is
selling bonds worth Rs150bn this week. (Business Standard)
DB RESEARCH
Axis Bank company meeting takeaways – asset quality under check
At our recent update, Axis Bank emphasized that NIM should improve and asset
quality is under check. Loan growth is healthy, driven by retail and large corporate
loans. NIM would be driven by easing pressure on cost of funds. While credit
costs should rise from the low levels of 1QFY12, the increase is unlikely to be
alarming. The stock is down 20% over the past 6M and is trading at a discount of
~43% to HDFC Bank. We maintain our Buy with a target price of INR1,425.
Sector news
Fitch pares India’s growth forecast for FY12 to 7.5%
With the global economic environment turning more adverse, Fitch Ratings has cut its
estimate for India’s economic growth from 7.7 per cent to 7.5 per cent for 2011-2012. For
2012-13, it has estimated India’s gross domestic product (GDP) growth at eight per cent,
down from previous estimate of 8.2 per cent. This is attributed to weak growth forecasts for
all major advanced economies (MAEs). India has hit a difficult part of the cycle, with growth
and inflation heading in opposite directions. Real GDP moderated for the third consecutive
quarter, rising 7.7 per cent year-on-year in the second quarter of 2010-11, down from 7.8 per
cent in the first quarter, Fitch said in a statement on Monday. (Business Standard)
Gilt yields touch 3-year high
Expectations of a pause in policy rate rises appear to be fading, with the yield on the
benchmark government security hitting a three-year high on concerns of a supply glut. Yields
on 10-year benchmark government bonds closed at 8.54 per cent on Monday, highest
closing level since 29 September, 2008. Bond prices fell by 59 paise on Monday, after the
government announced it would increase its borrowing by Rs530bn during the second half of
the current financial year. The government is selling bonds worth Rs150bn this week.
(Business Standard)
Microfinance sector shrinks by 40%, post AP crisis
The microfinance sector in the country has shrunk by about 40 per cent exactly a year after
the crisis began to unfold in Andhra Pradesh. While the drop in portfolios and operations are
quite discernible in major microfinance institutions (MFIs), many smaller ones are on the
verge of disappearing, according to industry sources. SKS Microfinance Ltd’s gross loan
portfolio decreased from Rs54.34bn in September 2010 to Rs34.50bn as on June 30, 2011. It
also posted Rs2.19bn loss due to losses in Andhra Pradesh. (The Hindu Business Line)
FDI jumps two-fold to $2.83bn
India received foreign direct investment (FDI) worth $2.83 billion in August, an over two-fold
jump compared to that in the same month last year, an official said on Monday. In August
2010, the country had attracted FDI worth $1.33 billion. Foreign inflows, in July, had declined
after a significant jump for two consecutive months in May and June. For the April-August
period, FDI went up by 95 per cent to $17.37 billion from $8.89 billion in the year-ago period
as inflows were robust in the initial months, the official said. Despite uncertainties in the
global economy, FDI may touch $35 billion in 2011-12, as against $19.4 billion in the last
fiscal, the official said. (Business Standard)
Growth in bank lending is slowing
As on 9 September, non-food credit growth, on a year-on-year (y-o-y) basis, was 20.1%. The
Reserve Bank of India’s month-end statement on the industry-wise deployment of gross bank
credit shows that outstanding loans to the “petroleum, coal products and nuclear fuel”
sector increased by Rs.84.04bn in August (between 29 July and 26 August). Over the same
period, non-food credit increased by Rs.314.90bn. In short, 26.7% of the rise in non-food
credit during August was on account of the loans to the petroleum sector. Also, while y-o-y
growth in non-food credit is more or less at the same rate as last year, the fact is that nonfood credit growth has slowed this fiscal. While growth has been 2.5% this fiscal year (till 26
August), it was 3.3% over the same period in fiscal 2011 (FY11). (Mint)
DB Research
Axis Bank Company meeting takeaways – asset quality under check
At our recent update, Axis Bank emphasized that NIM should improve and asset quality is
under check. Loan growth is healthy, driven by retail and large corporate loans. NIM would be
driven by easing pressure on cost of funds. While credit costs should rise from the low
levels of 1QFY12, the increase is unlikely to be alarming. The stock is down 20% over the
past 6M and is trading at a discount of ~43% to HDFC Bank. We maintain our Buy with a
target price of INR1,425.
ICICI Bank Company meeting takeaways: cautiously optimistic (Manish Shukla)
In our recent meeting ICICI Bank management was cautiously optimistic. While the bank
appreciates RBI’s hawkish imperative on account of inflation, it believes that further rate
hikes could hurt loan growth -- retail loan momentum is already moderating. Fee income
growth is likely to be moderate on account of a slowdown in fresh sanctions. The bank is
confident of improving NIM in 2HFY12 and does not see any immediate risks to asset quality.
We maintain Hold rating
HDFC Company meeting takeaways: stable spreads & growth (Manish Shukla)
The key takeaway from our meeting with HDFC management is that a well diversified
liabilities mix is its core strength; this continues to differentiate HDFC from its peers. The
company is confident in growing loans at 18-20% in FY12E, with volumes in non-metro areas
partly off-setting the moderation in metro areas. HDFC carries excess provisions on its
balance sheet; hence, there will not be any material impact of the recent change in NPL
provision norms by NHB. We maintain a Buy rating with a target price of INR805
India Financials – Are asset quality concerns overdone? (Manish Shukla)
Our asset quality and sensitivity analysis shows that the current pessimism on Indian
financials is excessive. As economic growth moderates, a rise in NPL levels is inevitable, but
we do not believe the increase will be sharp and overall NPLs should remain manageable.
While global uncertainties could lead to short-term volatility in stock prices, we believe that
recent correction provides select opportunities. Our preferred picks are HDFC Bank, Axis
Bank and HDFC Ltd among large caps and Yes Bank and SHTF among mid-caps.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Infrastructure companies line up tax-free bond issuances
After getting the approval of raising up to Rs300bn through issuance of tax-free
bonds this financial year, infrastructure finance companies, Housing and Urban
Development Corporation (HUDCO) and Power Finance Corporation (PFC), have
thrown open their subscriptions under the private placement route. However,
collections may not be that high keeping current market conditions in mind, say
market participants. While PFC aims to raise Rs1.5bn through the issue, HUDCO
has come up with a base issue size of Rs1bn for the first tranche. The Central
Board of Direct Taxes has given HUDCO and PFC the permission to raise Rs50bn
each this financial year. (Business Standard)
State-run banks may be allowed to revamp wages
State-run banks, which lag behind private sector and foreign rivals when it comes
to staff compensation and human resource (HR) policies, may soon get the
freedom to raise their standards with the government set to speed up the revamp
of personnel management at lenders controlled by it. The government has
accepted most of the recommendations made by a panel headed by former Bank
of Baroda chief A.K. Khandelwal on HR policies at public-sector banks (PSBs) last
year, according to two persons familiar with the development. (Mint)
Gilt yields touch 3-year high
Expectations of a pause in policy rate rises appear to be fading, with the yield on the
benchmark government security hitting a three-year high on concerns of a supply
glut. Yields on 10-year benchmark government bonds closed at 8.54 per cent on
Monday, highest closing level since 29 September, 2008. Bond prices fell by 59
paise on Monday, after the government announced it would increase its borrowing
by Rs530bn during the second half of the current financial year. The government is
selling bonds worth Rs150bn this week. (Business Standard)
DB RESEARCH
Axis Bank company meeting takeaways – asset quality under check
At our recent update, Axis Bank emphasized that NIM should improve and asset
quality is under check. Loan growth is healthy, driven by retail and large corporate
loans. NIM would be driven by easing pressure on cost of funds. While credit
costs should rise from the low levels of 1QFY12, the increase is unlikely to be
alarming. The stock is down 20% over the past 6M and is trading at a discount of
~43% to HDFC Bank. We maintain our Buy with a target price of INR1,425.
Sector news
Fitch pares India’s growth forecast for FY12 to 7.5%
With the global economic environment turning more adverse, Fitch Ratings has cut its
estimate for India’s economic growth from 7.7 per cent to 7.5 per cent for 2011-2012. For
2012-13, it has estimated India’s gross domestic product (GDP) growth at eight per cent,
down from previous estimate of 8.2 per cent. This is attributed to weak growth forecasts for
all major advanced economies (MAEs). India has hit a difficult part of the cycle, with growth
and inflation heading in opposite directions. Real GDP moderated for the third consecutive
quarter, rising 7.7 per cent year-on-year in the second quarter of 2010-11, down from 7.8 per
cent in the first quarter, Fitch said in a statement on Monday. (Business Standard)
Gilt yields touch 3-year high
Expectations of a pause in policy rate rises appear to be fading, with the yield on the
benchmark government security hitting a three-year high on concerns of a supply glut. Yields
on 10-year benchmark government bonds closed at 8.54 per cent on Monday, highest
closing level since 29 September, 2008. Bond prices fell by 59 paise on Monday, after the
government announced it would increase its borrowing by Rs530bn during the second half of
the current financial year. The government is selling bonds worth Rs150bn this week.
(Business Standard)
Microfinance sector shrinks by 40%, post AP crisis
The microfinance sector in the country has shrunk by about 40 per cent exactly a year after
the crisis began to unfold in Andhra Pradesh. While the drop in portfolios and operations are
quite discernible in major microfinance institutions (MFIs), many smaller ones are on the
verge of disappearing, according to industry sources. SKS Microfinance Ltd’s gross loan
portfolio decreased from Rs54.34bn in September 2010 to Rs34.50bn as on June 30, 2011. It
also posted Rs2.19bn loss due to losses in Andhra Pradesh. (The Hindu Business Line)
FDI jumps two-fold to $2.83bn
India received foreign direct investment (FDI) worth $2.83 billion in August, an over two-fold
jump compared to that in the same month last year, an official said on Monday. In August
2010, the country had attracted FDI worth $1.33 billion. Foreign inflows, in July, had declined
after a significant jump for two consecutive months in May and June. For the April-August
period, FDI went up by 95 per cent to $17.37 billion from $8.89 billion in the year-ago period
as inflows were robust in the initial months, the official said. Despite uncertainties in the
global economy, FDI may touch $35 billion in 2011-12, as against $19.4 billion in the last
fiscal, the official said. (Business Standard)
Growth in bank lending is slowing
As on 9 September, non-food credit growth, on a year-on-year (y-o-y) basis, was 20.1%. The
Reserve Bank of India’s month-end statement on the industry-wise deployment of gross bank
credit shows that outstanding loans to the “petroleum, coal products and nuclear fuel”
sector increased by Rs.84.04bn in August (between 29 July and 26 August). Over the same
period, non-food credit increased by Rs.314.90bn. In short, 26.7% of the rise in non-food
credit during August was on account of the loans to the petroleum sector. Also, while y-o-y
growth in non-food credit is more or less at the same rate as last year, the fact is that nonfood credit growth has slowed this fiscal. While growth has been 2.5% this fiscal year (till 26
August), it was 3.3% over the same period in fiscal 2011 (FY11). (Mint)
DB Research
Axis Bank Company meeting takeaways – asset quality under check
At our recent update, Axis Bank emphasized that NIM should improve and asset quality is
under check. Loan growth is healthy, driven by retail and large corporate loans. NIM would be
driven by easing pressure on cost of funds. While credit costs should rise from the low
levels of 1QFY12, the increase is unlikely to be alarming. The stock is down 20% over the
past 6M and is trading at a discount of ~43% to HDFC Bank. We maintain our Buy with a
target price of INR1,425.
ICICI Bank Company meeting takeaways: cautiously optimistic (Manish Shukla)
In our recent meeting ICICI Bank management was cautiously optimistic. While the bank
appreciates RBI’s hawkish imperative on account of inflation, it believes that further rate
hikes could hurt loan growth -- retail loan momentum is already moderating. Fee income
growth is likely to be moderate on account of a slowdown in fresh sanctions. The bank is
confident of improving NIM in 2HFY12 and does not see any immediate risks to asset quality.
We maintain Hold rating
HDFC Company meeting takeaways: stable spreads & growth (Manish Shukla)
The key takeaway from our meeting with HDFC management is that a well diversified
liabilities mix is its core strength; this continues to differentiate HDFC from its peers. The
company is confident in growing loans at 18-20% in FY12E, with volumes in non-metro areas
partly off-setting the moderation in metro areas. HDFC carries excess provisions on its
balance sheet; hence, there will not be any material impact of the recent change in NPL
provision norms by NHB. We maintain a Buy rating with a target price of INR805
India Financials – Are asset quality concerns overdone? (Manish Shukla)
Our asset quality and sensitivity analysis shows that the current pessimism on Indian
financials is excessive. As economic growth moderates, a rise in NPL levels is inevitable, but
we do not believe the increase will be sharp and overall NPLs should remain manageable.
While global uncertainties could lead to short-term volatility in stock prices, we believe that
recent correction provides select opportunities. Our preferred picks are HDFC Bank, Axis
Bank and HDFC Ltd among large caps and Yes Bank and SHTF among mid-caps.
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