Corporates Paying More Advance Tax Than Before

Numerous major corporates have given more advance tax in the fourth quarter of 2011 financial year, when compared to the previous year, thus, indicating a positivity in their financial performances. For information sake, advance tax payment is considered as a barometer of corporate performance as such payments are made according to the profit anticipations.


Among the Indian hotshots, both Reliance Industries and Tata Steel have paid about INR1,054 crore and INR 987 crore, respectively, as advance tax this quarter. In the fourth quarter of 2010 fiscal, both the companies had paid INR770 crore and INR513 crore, respectively. An engineering and construction major, L&T, has paid about INR300 crore as advance tax in the fourth quarter this year as against INR270 crore in the last year.
In the automotive sector, Bajaj Auto paid INR250 crore as compared to INR175 crore in the previous fiscal, while M&M shelled out INR307 crore as compared to INR226 crore in the previous year.

However in the FMCG sectors, two major players Hindustan Unilever Limited and Tata Motors have paid less. While HUL shelled out INR150 crore as against INR170 crore in the last year, Tata Motors paid only INR50 crore as compared to INR115 crore in the last fiscal.
 

As far as Banking sector is concerned, the private banks like HDFC Bank and ICICI Bank also paid higher advance tax this time. While HDFC Bank paid INR540 crore as compared to the last fiscal's INR300 crore, ICICI Bank paid INR475 crore as against INR350 crore .

Even the major Public sector life insurance company, LIC, shelled out INR931 crore as compared to INR864 crore in the previous fiscal. Hindalco paid INR160 crore as against INR110 crore in the previous year, while MRPL paid INR296 crore as against INR180 crore.

What the Union Budget is Expected to Be Like?

The domestic markets bucked the trend that was being witnessed by the international markets and reacted negatively during this phase. In the last six months, market have been gyrating and experiencing extreme volatility, losing almost 15% since November after reaching a 52-weel high. This has been a conscequence of several factors. The commencement of high interest rate regime for combating inflation and buoyant commodity and crude prices acted as serious detriments. On top of this, political uncertanity spoilt the market enviroment further.


As a result of all this, the emphasis in the upcoming Union Budget is expected to be on maintenance and even acceleration of growth and employment rate. The ensuing budget is anticiapted to take note of the current scenario and announce policies and reforms for supporting and forming a suitable base for the economy to continue to grow at 8%+ levels. The budget is likely to be skewed towards investment rather than consumption. Agriculture & related activities would continue to be the focus area as inflation and food security is high on the government agenda. Government would allocate higher amounts towards infrastructure (logistics, rural infrastructure and water management), education and technology to give a multiplier effect to the economy to sustain high GDP growth in the coming years.


The Union Budget 2011-12 might be a key from a policy stand point and may provide incremental direction to markets. There is an inherent value in India economy given the growth story and favorable demographic, but catalysts are required at macro level to deleverage the underlying value.

Stock Idea- Ceat Ltd.

The investment rationale of Ceat:

• Robust auto sales outlook to boost demand for tyres
• Acquisition of global brand rights to provide huge potential for growth
• Capacity expansion would enable Ceat to focus on higher margin replacement segment

Outlook & Valuation

As said by Unicon Investment Solutions, "We have used the discounted cash flow (DCF) method to value Ceat due to its huge capex plan, the benefits of which would accrue over a longer period. We have arrived at a target price of INR 149 based on a discount rate of 10.1% and a terminal growth of 2%. The target price implies a potential upside of 37% from current levels for an investment horizon of 12 months. Thus, we recommend a Buy on the stock."

Bharti Airtel Announces Q3 Results

Bharti Airtel, a leading Telecom player, announced its third quarter results wherein it registered a decline of 40.62% in its net income, mainly due to the rise in spectrum charges as well as the costs recently incurred by the company for relaunching its brand. The net income decreased from INR2,194.9 crore in the third quarter of previous fiscal to INR1,303.3 crore.

However, the company's total revenues have increased from INR10,305.3 crore in the previous fiscal to INR15,576 crore, a 51.14% jump. Furthermore, the verage revenue per person (ARPU) of Bharti Airteldecreased from INR202 in the previous quarter to INR198 in this quarter.


In terms of QoQ (quarter on quarter), profit before tax of Bharti Airtel was majorly affected by brand relaunching costs, which was about INR340 crore. And in terms of YoY (year on year), the profit before tax plunged again due to higher spectrum charges and net interest outgo, which are INR80 crore and INR471 crore respectively, along with the forex losses and brand relaunching costs. The exchange losses, valued at INR151 crore, were due to the negative fluctutations in the foreign currencies in India and Africa.

 On this Wednesday, the company's share prices increased by 3.52% to reach INR325.70 on Bombay Stock Exchange.

Egypt Crisis Hits Indian Stock Market Badly

The ongoing unrest in Egypt is raising concerns all over the world. Here in India, the crisis is prompting the retail investors and fund managers to surrender to selling pressure consecutively for the fourth session. As a result, Sensex, the benchmark index of Bombay Stock Exchange, dipped by more than 300 points on Monday's opening trade.


The 30-share index, which had already lost 755 points in the earlier three sessions, plummeted by 1.68%, or 301.70 points, to reach 18,094.27 points during the initial few minutes of Monday's trade. Nevertheless, the Sensex then picked up some pace and is presently at more than 18,200 points.


Likewise, National Stock Exchange's benchmark index, Nifty, plunged by 1.44%, or 79.55 points, to reach 5,432.60 on the opening trade. The wide-based index has currently gained some momentum.


According to market experts and brokers, the dampened trading sentiment in Indian Stock markets is being mainly driven by not only the ongoing protest in Egypt but also by the blue-chip companies' dissapointing results. Other reasons behind dismal performance of Indian stock markets can be the continued positions offloading by retail and other investors, and weakening trend in other Asian markets, induced by the US market losses which is again due to the Egypt unrest.

Among various Asian markets, Hang Seng index of Hong Kong declined by 1.20% and Nikkei index of Japan dipped by 1.63%.

SBI Asks for 250 Billion, But May Get Only 150 Billion via Rights Issue

State bank of India (SBI), India's largest lender, reportedly required about INR250 billion as capital infusion from the GoI (Government of India). However, the government decided to fullfill such requirements partially and voiced plans of infusing $3.3 billion or INR150 billion into the bank. The fund infusion would be made in the next fiscal year by way of a rights issue.

According to the experts at Unicon and other brokerage companies, the reasons behind SBI's high fund requirements are mainly the intention of expanding their presence and operations, and for maintaining a healthy capital adequacy ratio. However, the bank's intention of carrying out acquisition activities can also be another reason behind it.

SBI, which posted about 14% rise in net profit for quarter ended December, fears the dampening of its earnings growth due to the increasing interest rates.

The government had also expressed intentions of infusing another INR88 billion into various other state-run banks to help then in meeting their capital adequacy ratios.

Corporate and Market News Highlights

• Food Inflation-Induced Rate Hike Possible- Dearer vegetables pushed up the food inflation marginally to 15.57% for the week ended January 15, prompting experts to say that RBI may go for yet another round of rate hike in its mid-quarterly policy review in March. Food inflation was 15.52 per cent for the week ended January 8. It was 20.07 per cent a year ago. Based on price movement in the wholesale market food inflation rose by 0.05 percentage points for the week ended January 15 after declining for two consecutive weeks.

• PFC Likely to Announce FPO- The government today said that the Rs 7,000-crore follow-on public offer of the state-owned Power Finance Corporation (PFC) is likely to come around April or May this year.

• Oil India to Give Up on Libya Exploration Blocks- India's state-run explorer Oil India will relinquish two exploration blocks in Libya, its chairman N M Borah told reporters on Thursday, as their operations were not viable.

• RVL and IL&FS to Collaborate for Haryana's Economic Township Development- Reliance Ventures (RVL), a wholly-owned subsidiary of Reliance Industries (RIL), and Infrastructure Leasing and Financial Services (IL&FS) will jointly develop a model economic township and other infrastructure facilities at Jhajjar in Haryana. IL&FS will acquire a 45% equity interest in the new company. RVL and Haryana government will hold 45% and 10%, respectively.

• 3i Acquires Stake in BVG India Ltd.- 3i, an international investor in private equity, infrastructure and debt management, have acquired a minority stake in BVG India Limited.

• Marico Products to be Costlier- Hair oil major Marico said it will increase the prices of its products by up to nine per cent in a bid to offset high input costs. The company is also planning to invest about Rs 60 crore during 2011-12 financial year in its capital assets.

• L&T Likely to Sell Infotech Subsidiary- Larsen & Toubro may sell stake in its infotech subsidiary after failing to turn it into a bigger business. The firm is talking to merchant bankers about a sale mandate and has also held discussions with a bank representing a potential bidder last week.