INDIA INTELLIGENCE REPORT

 

Economy & Business   

Q1 results positive, corporates
look forward to good year

What is India News Service, July 19, 2004, 1700 hrs IST

The net profit of 105 firms went up by 34 per cent in the first quarter, and corporates have also recorded an impressive increase in sales.

The aggregate sales of the 105 companies that have announced their results so far jumped 56 per cent year on year, and the net profit increased 34.16 per cent in the first quarter of 2004-05. 

In the corresponding quarter of 2003-04, the same companies reported stagnant sales and a 34 per cent rise in net profit. 

As expected, lower interest rates and higher sales growth were the main drivers for the growth in the net profit of the companies. The interest burden also declined 17 per cent.

LIC emerges as bulwark: Domestic institutions and foreign institutional investors (FIIs) are swapping roles on the Indian bourses, with the benchmark indices now playing the Life Insurance Corporation of India (LIC) tune. 

Far from being the bulk buyers in the markets, FIIs are now bulk sellers. Moreover, their sales are no longer moving the markets. 

A reading of the shareholding pattern of the Bombay Stock Exchange (BSE) Sensex stocks for the April-June 2004 quarter indicates that FIIs are no longer calling the shots. 
 
Progress on Dabhol: The United Progressive Alliance (UPA) government is trying to speed up the restart of the Dabhol Power Company and has constituted an inter-ministerial group to take stock of litigation and arbitration. 

Besides, the finance ministry will soon approach the cabinet to seek directions on the designated minister, since Finance Minister P Chidambaram has sought to excuse himself from being the reporting minister. 

\93The Cabinet\92s direction is being sought on whether the financial sops and other licences granted originally to Dabhol Power Company should be extended to the prospective owners,\94 an official said. 

Officials said the newly formed inter-ministerial group would comprise officials from the finance, power and law ministries and would work out a possible course of action for tackling the numerous arbitration and legal proceedings. The committee might include a representative from the petroleum ministry also, the officials said. 


MNCs in good shape: IF the cash churned out by a business is a sign of its health, then the multinationals operating in India seem to be in pretty good shape. 

The free cash flows of the Indian arms of 70 multinationals have more than doubled in the just-concluded financial year, from Rs 1,830 crore to Rs 4,450 crore. 

In the preceding year, their free cash flows had dipped by 25 per cent. Free cash flow is the cash churned out by a company's operations, after funding its asset purchases. A larger cash chest can be used either to pay out higher dividends or to fund expansion, aiding growth. 

MNCs have also pumped up cash at a much higher rate than their profits. Free cash flows for the MNCs grew by a whopping 143 per cent in 2003, but their aggregate profits edged up by a mere 20 per cent. Pruned-down working capital requirements appear to have helped many of these companies increase their cash flows, even as profits rose more sedately. 

Telecom companies unhappy with formula: PRIVATE telecom operators and Bharat Sanchar Nigam Ltd have opposed the Telecom Regulatory Authority's idea of imposing a deficit charge. 

While the former has objected to the entire concept of imposing deficit charges, BSNL has expressed reservations on TRAI's new formula to collect the charge as part of the annual revenue, instead of the current method of loading it on the airtime tariff. The controversial issue will be taken up by the telecom regulator in an open house discussion with the industry on Tuesday. 

Since BSNL does most of this social obligation, a significant chunk of the Rs 5,000 crore collected through deficit charges accrues to the state-owned company. 

Private op in power transmission: Power Grid Corporation of India (PGCIL), the public sector transmission entity, has sought private sector participation in setting up new transmission facilities for evacuation from new power projects. This included setting up transmission facilities from the proposed 2,000 MW IB Valley thermal power station. 

Briefing reporters on Sunday, R P Singh, chairman and managing director of PGCIL, said in Bangalore, "We are prepared to concede management control to the private sector. We are also prepared to assume some risks associated in such ventures." 

The investments estimated for setting up a high voltage direct current (HVDC) transmission facility from IB Valley is estimated to be upwards of Rs 2,500 crore. 

SBI ready with agri loans
:
State Bank of India expects its agricultural loans to be Rs 6,000 crore (gross disbursements) in the current financial year, around 30 per cent more than last year.

Overall:

Sales improved in Q1: The corporates are smiling, and looking forward to a good year. 

LIC led the market: Recent trends indicate foreign investors not steering the markets as they used to. 

Private sector invited to transmit power: The Power Grid Corporation of India is keen on private participation in the power transmission sector.

SBI allocated more for farming:
The premier bank is looking at a 30 per cent increase in disbursements for agriculture.