Expert Speak

Spotlight: Construction Sector by Teena Virmani, Research Analyst

  •  We’ll start on a positive note. With higher budgetary allocations in different segments such as roads, irrigation, urban infra, ports, airports, power etc., we expect Union Budget 2012-13 to be positive for the infrastructure sector
  •  Since the last 2 years, order inflows for the construction sector have continued to remain subdued due to issues related to policy paralysis, delays in environmental clearance and land acquisition. Steep increase in interest rates coupled with lack of fund raising by the companies, also deteriorated the balance sheet of companies
  • We thus expect budget to address issues such as order inflows across various segments, faster land acquisition and environmental clearances
  •  Going forward, we also expect infrastructure companies to benefit positively in terms of higher order inflows
  • Key beneficiaries from higher order inflows in roads, irrigation and urban infra are expected to be IRB Infra, IVRCL, NCC, Pratibha Industries and Unity Infraprojects

Spotlight: Automobile Sector by Arun Agarwal, Research Analyst

  •  Automobile sector had a relatively difficult FY12 in terms of volume growth.  After rebounding strongly post 2008 slowdown, the macro factors turned unfavorable for the sector in FY12
  •  Volumes over FY09-FY11 grew at 25% CAGR and the same slowed down to 13% in FY12. Moreover the growth in FY12 has been primarily driven by the two wheelers and light commercial vehicle (LCV) segment.
  •  Passenger car and the M&HCV segment witnessed significant slowdown in FY12. Slowdown in economic activity, rise in interest rates and increase in fuel prices were the prime reasons that impacted the M&HCV and passenger car volumes in FY12
  • In the upcoming budget, the industry is not expecting many positives for this sector. Given the increased fiscal deficit, we expect the general excise duty rate to increase by 2% and expect the auto manufacturer’s to pass on the hike as the current operating margins leave little scope for the players to absorb the same
  •  We also expect the government to levy additional excise charge on diesel passenger car/UV. This will:

-          Help the government recover the subsidy enjoyed on subsidized diesel

-          Contribute towards lowering of fiscal deficit

-          Avoid going with the idea of differential diesel pricing for personal/commercial purpose and evade issues related thereon

  •  In line with the industry, we are not very hopeful of any major positives for the auto sector. We expect 10-12% volume growth for the sector in FY13 and maintain a cautious view for the near term. However, from a long-term perspective, we are positive on the sector

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