Companies & Sectors
Car sales skid in December, auto industry seeks cut in excise duty

To boost the industry sentiment and growth, SIAM demanded a reduction in excise duty and continuation of all benefits of the Auto Mission Plan (AMP) for another 10 years till 2026

New Delhi: Passenger car sales in the country declined by 12.5% in December last year, the steepest fall in the last four months, due to high interest rates, rising fuel prices and overall slowdown in economic growth, reports PTI.


According to the Society of Indian Automobile Manufacturers (SIAM), domestic car sales in December last year was 1,41,083 units, 12.5% lower that 1,61,247 units sold in the same month in 2011.


This is the biggest drop since August, 2012 when sales had declined by 18.5%.


“Sentiments have not been improved. Interest rates are still high. Even fuel prices remain on higher side and the economy is down,” SIAM president S Sandilya said.


To boost the industry sentiment and growth, SIAM demanded a reduction in excise duty and continuation of all benefits of the Auto Mission Plan (AMP) for another 10 years till 2026.


“Going by the current trends, we do not think industry will be able to recover in the fourth quarter unless the government provides support,” he said.


He said the excise duty on automobiles, which was increased in the last year’s Budget, needs to be reduced, particularly on commercial vehicles.


Sandilya asked for early implementation of GSA as the move would help in boost the sector’s growth.


“Early introduction of CST will help in boosting the industry's growth. SIAM also requests to look into the possibility of extending AMP till 2026 to further nurture the sector,” he told reporters.


The total vehicles sales across categories, however, registered an increase of 2.77% at 14,51,517 units last month as against 14,12,372 units in December 2011.


The industry body has revised its sales forecast for passenger cars this fiscal to 0%-1% as against an earlier forecast of 1%-3%.


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Infosys likely to disappoint in FY14: Espirito Santo

With Infosys due to announce its December quarter results on 11th January, Espirito Santo Securities has revised down its estimates of EPS by 3% and 6% for FY13 and FY14 respectively. The stock is still rated as a buy

In a recent research report released by Espirito Santo Securities (ESS), the brokerage has pegged the Indian information technology (IT) bellwether as a BUY despite factoring in near-term negatives. ESS has cut Infosys’ estimates by 3% and 6% for FY13 and FY14, respectively. The numbers may not seem much, but for a stature like Infosys, it sends negative vibes not just for the company but for the IT industry, as well. One of the chief reasons for the downgrade is “ramp-downs” (i.e. cost cutting) from existing clients and expected economic difficulty in FY14. The ESS reported said, “While Infosys has been winning large deals, it is also witnessing ramp-downs in the existing business which is the key risk to our call.” Infosys will be announcing its third quarterly results on 11 January 2013. The outcome of this is likely to set the tone for the rest of the quarter. However, if ESS prognosis is to be believed, it doesn’t look too good.

For a quite a while, in the last few quarters, the company has disappointed on nearly every front and caused the company to cautionary forecasts in its investor meets. Even though the company has won deals, these are not Infosys’ focus. According to ESS, Infosys has won as many as 10 “large deals” with total contract value (TCV) of over $1.4 billion, with most of these infrastructure-led deals. However, infrastructure isn’t the best place to be, as far as the near-term is concerned as government impasse on infrastructure execution continues and is likely to continue well into the general elections next year. This could put pressure on this vertical. However, to counter this it is reported, according to ESS, that “strong license sales for SAP and Oracle could drive services growth for Infosys”. This is expected to drive sales for the next two quarters.

Read previous reports on Infosys here.

According to ESS, the company has also been trying to move up the value chain but with no benefits as economic growth continues to be a challenge. This has forced the company to be on the back-foot and revise contract terms and adopt a more flexible approach to pricing in order to retain its existing clientele. According to the report, relative market share in remote infrastructure management (RIM) has increased from 2% to 11% in Q2FY13 and as much as 68% of incremental revenues accrue from this vertical. There could be potential demand as the world increasingly adopts the internet as the de facto standard for communication and management and blur the lines between physical-on-location infrastructure management and doing the same thing online, including virtualization which is a much sought after technology.

However, ESS has also mentioned that two of Infosys’s key verticals—BFSI and Telecom—will continue to face pressure. It said, “These verticals may not grow in FY14 as it is facing client specific issues”. As much as 44% of the business arises from these two key verticals. With the way the global economy is headed, things don’t look too rosy for the global financial sector despite several reassuring steps taken by Central Banks and governments world over.

Infosys will now have a leadership problem to ponder over when SD Shibulal retires in March 2015. Why? Because it will be the first time in Infosys history that a non-Infocion will take over the helm. This will make investors cautious at first although Infosys does have a reputed leadership team.

ESS has opined that Infosys is worth Rs2,650 per share, which was revised down from Rs2,800. Despite significant headwinds, it has pegged the stock as a BUY from a valuation perspective.




4 years ago

Law of averages says Infosys has surely underperfomred during last several quarters and prices are extremely attractive.
No one is expecting anything positive again from Infosyss in this quarter also. That is when surprises happen when you are caught unaware.
One thing is sure those who are shorting Infy , god save those who have not kept the stop losses this time .
US$ to rupee is no more at rs 46 or 47 , it is at rs 55 !!!

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