Cement sector may witness negative growth in October

“Given last year’s higher base and the upcoming festival season (Diwali), the cement industry is expected to report negative year-on-year growth in dispatches for the month of October 2011,” Elara Securities said in a report

New Delhi: The cement sector is likely to witness negative growth in sales in October due to a slowdown in infrastructure construction activities amid the festive season, besides the higher base in the corresponding month last year, reports PTI quoting a brokerage firm.

“Given last year’s higher base and the upcoming festival season (Diwali), the cement industry is expected to report negative year-on-year growth in dispatches for the month of October 2011,” Elara Securities said in a report.

In September, the country’s cement firms reported a marginal 1.4% decline in dispatches over the same month last year. In August, cement dispatches were down by 6.6% in comparison to July.

Industry sources said the unavailability of sand has impacted cement offtake in the western region, while the monsoon and the fluid political situation hit sales in Andhra Pradesh.

“As cement demand is still subdued, cement players have cut down supply in the low price non-trade segment. Thus, cement prices during the month increased in most parts of the northern, eastern, western and central regions by Rs5-Rs30 per 50kg bag,” it said.

Cement prices in the southern region (except Andhra Pradesh) remained flat, as cement demand was weak due to festivals like Onam and Dussehra. Prices in Andhra Pradesh have inched up by Rs10 per bag due to the Telangana agitation.

“Cement dealers expect prices to inch up further by Rs5-Rs10 per bag in most regions” Elara Securities said.

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Banks’ Q2 earnings to rise by 10%: Analysts

Public sector lenders are likely to have experienced lower growth than their private sector counterparts due to the need for higher provisioning against loan defaults, analysts from Kotak Institutional Equities and Sharekhan said

Mumbai: Public and private sector banks experienced an average growth rate of 10% in earnings in the second quarter this fiscal due to a slowdown in credit demand, reports PTI quoting analysts.

However, public sector lenders are likely to have experienced lower growth than their private sector counterparts due to the need for higher provisioning against loan defaults, analysts from Kotak Institutional Equities and Sharekhan said.

As public sector banks complete the transition to system-based non-performing assets recognition, the additional provisioning will hurt their profits, they said.

“State-owned banks will report higher delinquencies as they will likely complete their stringent NPL (non-performing loans) recognition platform in the reporting quarter (especially for small-ticket loans), whereas we find limited concern for private banks on this count,” Kotak Institutional Equities said in a report.

The report said it expects earnings to grow 10% for the overall system, with PSU banks demonstrating 3% growth and smaller private banks a higher growth rate of up to 27%.

Analysts at brokerage Sharekhan peg the earnings growth of the overall banking system at 10.6%, pulled down by rising interest rates, slowing credit expansion and growing concerns over asset quality.

“In Q2, the slower credit growth, increase in NPA provisions and the mark-to-market provisions on investment book are expected to adversely affect the growth in earnings,” it said.

In spite of repeated rate hikes by the Reserve Bank of India (RBI), the lenders—who will start reporting their results for the September quarter from this week—will not show any decline in their net interest margins, the analysts from Kotak Institutional Equities said.

The Sharekhan report notes that the slowdown in credit offtake will hurt the net interest income of banks, as it will grow by only 2.9% on a sequential basis.

The chairman of country’s largest lender, State Bank of India (SBI), Pratip Chaudhuri had last week said credit grew by a muted 4.5% for the system in the second quarter, while for SBI, it stood at 5%.

The RBI, which has hiked key rates a record 12 times in the last 20 months to tame inflation, has set a credit growth target of 18%.

With respect to net interest margins (NIMs), the analysts feel banks will not be hurt.

“We should see limited pressure on margins, as banks have taken aggressive steps to pass on the rate hikes to customers in the past few quarters, while hikes in retail deposit rates have been taken only in select buckets and wholesale rates have been stable,” notes the Kotak report.

Non-interest or fee-based income will be lower, while volatility in the markets will hurt profits, as realisation from investments is low and provisioning has increased, analysts feel.

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No fresh MFI loans in AP a year after Microfinance Ordinance

AP accounted for almost 30% of microfinance lending in the country before the new Microfinance Act was implemented in the state. Now, without a visible solution for recoveries, there has been no fresh lending, a senior executive of an MFI said

Hyderabad: Microfinance institutions (MFIs) operating in Andhra Pradesh have stopped making fresh loans due to their mounting non-performing assets, given the limited scope of recovery a year after the state government promulgated an ordinance regulating their activities, reports PTI.

According to state government data, the total loan outstanding of all MFIs stood at Rs10,386 crore before the Act and as per the latest figures, their loan outstanding now stood at Rs6,381 crore.

The AP Microfinance Ordinance was implemented on 15th October last year and subsequently made into an Act in the wake of a spate of suicides by borrowers, allegedly due to the coercive recovery practices employed by MFI agents.

Rural development principal secretary Reddy Subramaniam said the state government has achieved its objective of saving people from harassment by MFIs.

While Spandana Sphoorty Financial tops the list of MFIs with outstanding bad loans, with NPAs worth Rs1,500 crore, SKS Microfinance, the country’s only listed MFI, has Rs1,135 crore worth of defunct assets in the state.

“The state government’s objective is to save people from the clutches of MFIs who use coercive methods for recoveries.

As far as their outstanding is considered, they came up with a proposal that the interest rate will be reduced, which is a welcome move,” Subramaniam told PTI.

He said the MFIs’ proposal will be referred to the state-level bankers committee soon. Mr Subramaniam, however, said the government has no role to play in the MFI loan recovery mechanism.

“There was an external political attack on microfinance that culminated into the draconian provisions of a microfinance law passed in Andhra Pradesh, the Andhra Pradesh MFI Act. The Act has resulted in a slight reduction, up to 5%, in the company’s growth,” SKS Microfinance executive chairman Vikram Akula remarked in the company's annual report.

The MFI Act mandates prior approval of every loan application by the state government authorities.

Fresh disbursals in the state have come to a standstill due to the stringent norms set by the state government. While the MFIs have proposed 73,592 new loans to borrowers, the government has rejected as many as 71,309 applications, citing non-compliance of the MFI Act.

A senior state government official said most of the applications for fresh loans were rejected as they come under the category of multiple lending.

AP accounted for almost 30% of microfinance lending in the country before the new Microfinance Act was implemented in the state. Now, without a visible solution for recoveries, there has been no fresh lending, a senior executive of an MFI said.

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