India Inc sniffs recovery whiff
Manufacturing looks up: Ascon
Fungibility gets a fillip

New Delhi, Aug 11: 
The feel-good factor is back for India Inc. Almost 71 per cent of the 403 respondents sampled by Ficci for its business confidence survey expect overall economic conditions to be substantially or moderately better in the next six months.

Ficci says its composite business index is at 71.1, reflecting �significant optimism�. A whopping 73 per cent of the firms reported substantial to better performance over the last six months. Almost 84 per cent see moderately to better performance in the days ahead.

Of the five enterprise-level parameters, the survey finds the industry upbeat on sales, profits and exports, and downbeat on investment and employment.

A high 75 per cent expects higher to much higher sales over the next six months; 59 per cent reckon they will rake in higher to much higher profits; and 59 per cent feel exports will be higher to much higher. Not many are planning to shovel money right now: the survey indicated that industry was being cautious with only 35 per cent planning higher investments.

But the greatest cause for worry for potential recruits and those looking to switch jobs is that only 15 per cent have forecast a higher to much higher employment; but put those concerns about pink slips and retrenchments out of your mind as 67 per cent still expect the current levels of employment to be maintained.

There are, however, four big causes for worry for industry: weak market demand, high cost of credit, geo-political instabilities and the threat from imports.

The survey says 42 per cent reckon that weak market demand is a problem, though things might mitigate if sales rise over the next six months. Cost of credit is high now� but 91 per cent sees interest rates falling over the next six months. About 28 per cent admitted geo-political uncertainties affected their performance, while 23 per cent found imports a threat.

A comparative financial analysis of the first quarter results for the current year and 2001-02 revealed that sales of 502 companies rose 13.17 per cent to Rs 61,029.87 crore in the first quarter of 2002-03 from Rs 53,925.47 crore. Net profits went up 19.24 per cent to Rs 2,809.06 crore from Rs 2,355.83 crore. An interesting fact is that tax payments rose by an astonishing 68 per cent to Rs 1,360.66 crore from Rs 810.55 crore; tax incidence was up 25 per cent to 33 per cent.

At a time when bourses have been pummelled by accounting shenanigans rocking India Inc, the good news is that corporate India expects the market to recover � which could lift drooping spirits. About 63 per cent feels BSE sensex will advance in the next six months.

About a quarter sees the sensex between 3200 to 3400 in the next three months and another 36 per cent at 3600. About 50 per cent feels it will move between 3400 and 3800. Other pointers to a recovery are a pick-up in non-food credit for Rs 45,456 crore in early May to Rs 55,189 crore in June-end, a sharp rise freight traffic of railways and traffic at major ports going up by 15.9 per cent and 15.1 per cent in April and May 2002 respectively.

The most upbeat sector is light industry with 65 per cent of respondents displaying an optimistic outlook. It is followed by heavy industry (59 per cent of respondents) and services sector (42 per cent respondents).


New Delhi, Aug. 11: 
The CII-Ascon survey for April-June 2002 shows signs of revival in the manufacturing sector. The survey covers 127 manufacturing and 12 service sectors.

In the manufacturing sector, 15 segments have recorded excellent growth, while 22 have posted high growth. Also, 22 segments have suffered a decline, with the number of segments achieving moderate growth is 68.

Power transformers, polymer products like HDP, fluid power component and soda ash showed excellent growth whereas motorcycles (49 per cent), transformers (31 per cent) and VCP/VCD (25 per cent) are termed as fastest growing.

The Confederation of Indian Industry (CII) says improvement in the production trend can be credited to a pick-up in demand, political stability, and the government�s commitment to go ahead with reforms.

It is important to note that the number of manufacturing sectors in the excellent growth category, producing more than 20 per cent, has gone up to 15 sectors in the current year from six sectors last year. There is also a decrease in the negative growth category from 29 sectors last year to 22 sectors this year.

Out of 139 sectors, 74 sectors recorded a growth of less than 10 per cent. These include six service sectors besides 68 in the manufacturing sector. The sectors growing at a moderate rate include 17 in basic goods, 16 in consumer durable, 14 in intermediate goods and 11 in consumer non-durable. Sectors such as aluminium, textile machinery, washing machines, colour televisions have moved from negative to positive growth compared with the corresponding period last year.

According to the survey, the negative growth category includes eight in capital goods, five in the consumer durable and four in the consumer non-durable segments.

Exports of items that moved into the negative growth list include steel, textile, machinery, tea, staple fibre, LCVs and scooters, while aluminium, pig iron, polyester, filament yarn earth moving and construction equipment continue to languish in the negative growth category.

Positive signs have been shown by sectors including auto components, ball and roller bearings, medium and heavy commercial vehicles, three-wheelers and cement, which recorded excellent growth in the quarter, compared with negative growth a year ago.

In services, only two sectors � cellular phones and housing finance � reported excellent growth (above 20 per cent) at 164 per cent and 35 per cent respectively.


Mumbai, Aug. 11: 
A slew of reverse fungibility deals are expected to be clinched in the coming days as local shares get converted into American Depository Receipts (ADRs) and Global Depository Receipts (GDRs).

Two-way fungibility trades made their debut last week on the stock exchanges when shares of India Cements Ltd, Reliance Industries Ltd and Ranbaxy Laboratories were converted into foreign denominations to enable them to trade on bourses abroad.

The long awaited two-way fungibility will help develop two-way business and attract international investors to the country.

Additionally, along with FIIs, this mechanism will give non-resident Indians access to local bourses. A direct fall out of two-way fungibility is that it will limit arbitrage differences in share prices of companies that are listed on international as well as Indian bourses.

Leading investment bankers DSP Merrill Lynch were brokers in all the three cases. Commenting on the landmark transactions, Shitin Desai, vice-chairman and managing director, DSP Merrill Lynch said, �This is yet another step in India�s movement towards achieving global standards in financial practices and we are very happy to have facilitated the first ever transaction in the country.�

Broking circles say that other big brokerages like Kotak Securities and J M Morgan Stanley may soon follow in the footsteps of DSP Merrill Lynch and strike deals for foreign investors.

Last week, large parcels of shares of India Cements, Reliance Industries and Ranbaxy Laboratories were mopped up from the local stock bourses and converted into GDRs/ADRs.

The biggest deal was registered in the Reliance counter when 10 lakh shares of Reliance Industries were converted into GDRs. For the record, Reliance GDRs are traded on the Luxembourg Stock Exchange. Merchant banking circles say there is scope for at least one crore more shares to be similarly converted into global depository shares in the Reliance counter.

Ranbaxy Labs saw 4 lakh shares being converted into GDRs valued at over Rs 32 crore, in a transaction spread over three days. The GDRs are listed on the London Stock Exchange.

Two-way fungibility allows conversion of ADRs/GDRs into local shares and reconversion of the same shares into depository receipts, as per the RBI guidelines issued in February last.


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