Auto experts see higher sales for rest of FY11

In the first month of FY11, the trend continued to be supported by the availability of retail finance and industry experts see the uptick continuing for the rest of the financial year

There has been an increase in sale of two-wheelers and four-wheelers over the past few months. In the first month of FY11, the trend continued to be supported by mainly the availability of retail finance and industry experts see the uptick continuing during the rest of the financial year.

“This trend is likely to continue in the future. If you look at annualised growth, there is an increase over pre-2007 levels. The growth will not be as strong as it is now, but it will continue,” said a research analyst from a leading brokerage who does want to be named.

The Bharat Stage-IV norms have not affected sales as most two-wheelers and
four-wheelers are already compliant with the new emission standards.

The analyst further said that due to increased availability of finance and lower interest rates, a lot of people, who had earlier postponed their plans to buy a two- or four-wheeler, have now decided go in for purchase. “Due to the economy picking up, the main growth in car sales has been in the urban sector. On the other hand, higher crop prices and the Sixth Pay Commission’s recommendations have increased income in rural areas, which has led to increase in auto sales,” he added.

During April, Tata Motors Ltd, India’s largest vehicle maker, reported a 52% increase in sales, including exports. The company sold 57,202 vehicles compared with 37,518 vehicles sold in the same month a year ago. Maruti Suzuki, the country’s largest carmaker, sold 93,058 units, including exports, up 29.7% from 71,748 units sold in April last year. Hyundai Motor’s total sales for April rose 17.24% at 52,020 units against 44,370 units in the year-ago period. Car manufacturing companies such as General Motors India and Ford India have also indicated an increase in sales.

Factors that will impact the sales growth in the future are the massive
under-penetration in Indian markets, aside from metros, and the non-availability of public transport. As the income and standard of living of people go up, so will the demand for cars increase.

Sandeep Singh, deputy managing director for marketing, Toyota Kirloskar Motors said, “I believe, if the interest rate in the case of retail finance continues at this level, and market sentiments remain positive, the pace of growth will continue, but may decline a little bit.”

Two-wheeler makers also reported higher sales during April. Hero Honda sold 3.71 lakh units of two-wheelers compared to 3.7 lakh in April 2009. Bajaj Auto Ltd, the country’s second largest two-wheeler maker, sold 2,79,095 units in April compared with 1,49,733 units in the same month last year. Also, the two-wheeler sales of TVS Motor Co in April rose 28% to 1,44,689 units from 113,119 units in the same period a year ago. Its domestic sales rose about 22% in April to 125,471 units from 102,985 units in the same period a year ago. Companies such as India Yamaha Motor and Suzuki Motorcycle India also showed an increase in sales of two-wheelers.

According to Sudhir Kukreja, an auto analyst, India is a place where the auto industry is expected to boom in the long term. But in the short term, there are some issues such interest rate and excise duty hikes—however, these will not impact the demand for automobiles. The demand is strong, but the impact of these factors is yet to be seen.

“The market moves on absolute figures, the high percentage growth rates are partly due to the fact that 2007 was a bad year,” he added. Mr Kukreja said that the sales of two-wheelers will be boosted by strong rural and semi-urban demand. The passenger car segment relies mainly on urban demand. A large number of global majors are entering this segment. The sales of commercial vehicles are impacted by manufacturing, mining and other such industrial activities. If the Index of Industrial Production (IIP) numbers continue to grow by 12% to 15% annually, then it will indirectly lead to higher sales.

“There are specific periods, where you will see peaks. Segment-wise, sales of commercial vehicles are influenced by depreciation cycles, which usually result in higher sales in the second quarter. Two-wheelers and passenger cars see increased sales in the festive season. Rural demand is also influenced by crop cycles,” Mr Kukreja said.


SEBI asks rating agencies to disclose methodology, fees

SEBI said the CRAs will have to ensure full compliance with the guidelines by 30th June and make mandatory disclosures twice annually

Market regulator Securities and Exchange Board of India (SEBI) on Monday asked credit rating agencies (CRAs) to disclose their methodologies and fees charged from the companies they rate, a move that will promote greater transparency, reports PTI.

The disclosure guidelines, issued by SEBI against the backdrop of the recent global financial meltdown, require CRAs to frame policies and a code of conduct to deal with the issues related to conflict of interest between their analysts and entities being rated.

The market watchdog said the CRAs will have to ensure full compliance with the guidelines by 30th June and make mandatory disclosures twice annually.

The role of the rating agencies was questioned during the global financial meltdown, as many companies and their issues collapsed despite enjoying high ratings.

As per SEBI norms, the CRAs will have to maintain records of the important factors underlying the credit rating and a summary of discussions with all the stakeholders involved as well as decisions of the rating committee, including voting details and notes of dissent.

"These records should be maintained till five years after maturity of the instruments and be made available to auditors and regulatory bodies when sought by them," SEBI said in a circular, adding the CRAs will also have to publish information about the historical default rates.

The four major credit rating agencies that operate in the country are CRISIL, Fitch, ICRA and CARE. These agencies, based on the creditworthiness of companies, assign them ratings (like AAA, AA, BBB and so on), which are used by investors, banks and other institutions.


Investors find Tara Foods IPO difficult to digest

The company has extended the subscription period of its offering till 5 May 2010 and has reduced the price band due to poor response from investors

Tara Health Foods Ltd, which is engaged in producing animal foods and edible oils, has extended the subscription period for its initial public offering (IPO) till 5 May 2010 from the earlier closing day of 30 April 2010 and has revised the price band from Rs180-Rs190 to Rs175-Rs185 due to poor response from investors.
Atherstone Capital Markets Ltd, the lead book-running manager of the issue, said that the subscription period has been extended on the grounds of some ‘technical reasons.’

Overall, the issue has been subscribed 0.03 times so far. Qualified Institutional Buyers (QIBs) have completely avoided the IPO which saw zero bids out of the 35 lakh shares reserved under the category. The Non Institutional Investors’ (NIIs) quota was subscribed 0.02 times while retail investors subscribed just 0.07 times on the closing day of the IPO.

The issue was priced at a price band of Rs180-Rs190 earlier. Tara Foods posted a net profit of Rs16.99 crore for the year ended March 2009. Rating agency Fitch has assigned an ‘IPO Grade 2’ to the issue.

Moneylife had earlier reported on how Tara Foods is not a good investment choice for investors and how QIBs and NIIs have been avoiding companies not having good fundamentals. Read here: ( and here

Market watchdog Securities and Exchange Board of India (SEBI) officials did not respond to Moneylife’s query on how such fundamentally poor companies were being given a go-ahead by the regulator.

The company is planning to mop up Rs175 crore-Rs185 crore by issuing 1 crore shares to the public including an anchor investor quota of 15 lakh shares.


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