Companies & Sectors
Cement players see sharp fall in sales in November

Cement sales in November were 19% lower month-on-month for seven cement players that make up half of the industry capacity. According to CLSA, some of the key reasons were inventory build-up, a prolonged monsoon and no major pick-up in infra projects. It expects cement prices to slip lower

The most important implication of weak month-on-month cement despatches will be on prices, says CLSA. In a report to its clients today, CLSA said, "Our interactions with industry participants indicate that cement prices, across regions, have corrected by 2-5% in the last 2-4 weeks. The drops have been higher in north/central compared to south/west. Dealer feedback indicates that in case demand growth continues to remain sluggish, there is a possibility of further pressure on prices in the next few weeks."

CLSA remains concerned about sector fundamentals and maintains an underweight rating on the sector. For individual stocks, it has a 'sell' on Ambuja Cement and 'underperformer' on ACC and UltraTech. It is relatively positive on Shree Cement, as it believes valuations are reasonable and that the company has increasing earnings from power, and Grasim for its strong viscose staple fibre (VSF) business and high holding company discount.

According to CLSA's calculations, Grasim trades at a price-to-earnings multiple (FY12) of 11 times, Ambuja and UltraTech at 17 times, and ACC at 18 times. Among mid-caps, India Cement trades at 24 times and Shree Cement trades at 11 times.

In terms of EV/tonne, CLSA estimates Grasim to be at $70, Ambuja at $165, ACC at $129, UltraTech at $135, India Cement at $80 and Shree Cement at $82.

In November, ACC reported a 5% y-o-y rise in despatches due to a low base and also because it commissioned new capacity. Ambuja reported a fall, partly because of the transporters' strike in north India that impacted its Himachal unit. Jaiprakash's volumes were up 13% y-o-y, but CLSA points out that the low base effect will no longer be there from December.

Grasim's shares fell to a low of Rs2,144 recently, but the price has moved up subsequently to Rs2,345. The Ambuja stock price fell to a low of Rs133 recently and has not recovered much since then. ACC too has not recovered much from a recent low of Rs968. UltraTech is languishing at around Rs1,100 levels. India Cements has recovered from its recent low of Rs95 and is at Rs 108. Shree Cement, too, has recovered a bit from its recent low.

(This article is based on secondary research. The report is for information only. None of the stock information, data and company information presented herein constitutes a recommendation or solicitation of any offer to buy or sell any securities. Investors must do their own research and due diligence before acting on any security. Some of the opinions expressed in this article are the author's own and may not necessarily represent those of Moneylife).

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Personal finance Friday

Birla Sun Life MF unveils 366 days Fixed Term Plan; DSP BlackRock MF floats FMP–12M–Series 10; Fidelity MF introduces 93 days plan

Birla Sun Life MF unveils 366 days Fixed Term Plan

Birla Sun Life Mutual Fund has launched Birla Sun Life Fixed Term Plan–Series CJ, a close-ended income scheme.

The plan seeks to generate income by investing in fixed income securities maturing on or before the duration of the scheme. The plan will have duration of 366 days. The plan will have dividend (payout) and growth option.

The new issue opens on 3rd December and closes on 10th December. The exit load on the plan is nil. The minimum investment amount is Rs5,000.

CRISIL Short Term Bond Fund Index is the benchmark index. Kaustubh Gupta will be the fund manager.

DSP BlackRock MF floats FMP–12M–Series 10

DSP BlackRock Mutual Fund has launched DSP BlackRock FMP–12M–Series 10, a close-ended income scheme.

The investment objective of the plan is to generate capital appreciation by investing in debt and money market securities which will mature on or before the date of maturity of the plan. The duration of the plan is 12 months. The exit load for the scheme is nil. The plan will have dividend (payout) and growth option.

The new issue closes on 10th December. The minimum investment amount is Rs10,000.

CRISIL Short Term Bond Fund Index is the benchmark index. Dhawal Dalal is the fund manager.

Fidelity MF introduces 93 days plan

Fidelity Mutual Fund has launched Fidelity Fixed Maturity Plan Series IV–Plan C, a close-ended income scheme.

The investment objective of the plan is to generate reasonable returns and reduce interest rate volatility primarily through investment in money market and short to mid term debt instruments having maturity, on or before the date of maturity of a plan.

The tenure of the plan is 93 days. The exit load on the plan is nil. The plan offers growth and dividend option. The new issue opens on 3rd December and closes on 6th December. The minimum investment amount is Rs5,000.
The plan will be benchmarked against CRISIL Liquid Fund Index. The plan will be managed by Shriram Ramanathan and Mahesh Chhabria.

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Some banking regulations need streamlining: Subbarao

Mumbai: Reserve Bank of India (RBI) governor D Subbarao today pitched for streamlining banking regulations, saying some were “confusing” even though they served the banking system well, reports PTI.

On the existing arrays of laws in the banking sector, he favoured a single legislation to remove inconsistencies.

Mr Subbarao also asserted that the proposed financial sector reforms should be driven more by the sectoral regulator RBI than by a legislative panel.

“Policy direction should drive the work of the proposed financial sector legislative reforms commission and not the other way around,” Mr Subbarao said.

The RBI governor was delivering the inaugural address at the two-day Bancon 2010, one of the premier annual bankers meets.

He said there is an urgent need to streamline the plethora of regulations governing the banking system in the country.

“There is a whole lot confusing laws out there. But it has served the system well by helping maintain an orderly banking system.

The Banking Regulation Act has not only stood the test of time, but several of its provisions have all helped the Reserve Bank in preventing crises and maintaining financial stability,” he said.

“But the recent global financial crisis has taught us that our regulations have to change according to the need of the time..,” Mr Subbarao said.

Arguing that there is an urgent need for streamlining and fine-tuning the existing array of laws, the governor said, “We need to do so to level the playing field as the existing laws are uneven.

“A single legislation will bring about clarity and do away with the inconsistencies currently governing the banking system.

“The prime motivation for rewriting the laws should be to integrate the various statutes, reflect the lessons from the (recent global financial) crisis and aid inclusive growth,” Mr Subbarao said.

He said the global financial crisis threw up a number of areas requiring significant legislative action either because there is no legislation or because the prevailing legislation is inadequate.

Mr Subbarao said the decision to set up a financial sector legislative reforms commission to rewrite and clean up the financial sector laws, to bring them in line with the requirements of the sector, was very timely and vital.

However, the governor was quick to add, “But I have one caveat. It is important to recognise that bringing about policy changes or regulatory architecture cannot be the remit of a legislative reforms commission.”

“Such changes have to be debated as a prelude to the work of a commission so that the commission has a clear policy direction,” the RBI governor said.

“In short policy direction should drive the work of the proposed legislative commission and not the other way around,” Mr Subbarao said.

The country’s 81 banks—out of which 24 are state-run, 21 private and rest 34 are foreign banks, are governed by a number of laws.

“The current statutory arrangement we have is a baffling plethora of laws governing different segments of the banking industry,” Mr Subbarao said.

He explained that while the nationalised banks are governed by the Banking Companies (Acquisition and Transfer of Undertaking) Acts of 1970 and 1980, State Bank of India and its subsidiaries are governed by their respective statutes.

When it comes to private sector banks, he said they come under the purview of the Companies Act of 1956 and the Banking Regulation Act of 1949.

He said foreign banks which have registered their documents with the registrar under Section 592 of the Companies Act are also banking companies under the Banking Regulation Act.

The governor said, “Even certain provisions of the Banking Regulation Act have been made applicable to public sector banks.

“Similarly, some provisions of the RBI Act too are applicable to nationalised banks, SBI and its subsidiaries, private sector banks and foreign bank,” he told the meeting.

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