Consumer electronics sales up on festive sentiments
The festival season is bringing good fortune for consumer electronics, especially the white goods business. Visible recovery signs, like momentum in the stock markets, late recovery in monsoon and the second instalment under the Sixth Pay Commission to government employees are proving to be a catalyst for markets.
 
“We have witnessed 25%-30% growth on a same-store basis than last festive season. There are lot of combo offers that we are giving this season like, if you are shopping for Rs1,00,000, we are offering an LG LCD television free. For those shopping above Rs15,000, we are offering different free goodies or slab offers,” says Manoj Kumar, chief executive officer, e-zone, part of the Future group. 
 
"During the festive season, we are expecting a 30%-35% growth in sales," said Vishal Mevani, director, Kohinoor Sales. Last year, during the festive season, Kohinoor witnessed sales of about Rs20 crore, which it expects to go up to Rs25 crore on good response from consumers to its various promotional offers.
 
"With the Diwali season and the flow of funds from government employees, we expect our sales to go up by 8%-10%," said Nilesh Gupta, managing partner, Vijay Sales, a consumer electronics and durables retail chain in Mumbai. 
 
According to official estimates, the total arrears payable under the Sixth Pay Commission are estimated to cost Rs293.70 billion to the government kitty.
 
Videocon, the consumer electronics giant, has launched some new interesting combo products, which the company claims to be "world's first" LCD TV with build in DTH set top box (STB) and a Satellite DVD, which is a DVD player with in-built DTH STB. With both these products the company is offering 2-3 months free subscription to its newly launched DTH services and free installation of dish antenna.

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That sinking feeling
One of the best performing sectors in India’s growth revival is the cement sector. However, the industry is headed for overcapacity and prices are likely to come down. One immediate indication of this has surfaced in Andhra Pradesh (AP). Cement prices continue to remain low in AP since August 2009. Lack of demand and over-capacity has been responsible for this. While cement industry players expect demand to improve, analysts fear it may worsen over the long run.
 
Cement prices fell to Rs170 per bag in August 2009 from a peak of Rs235 per bag in April 2009 in AP. Cement prices continue to remain low at Rs170 per bag since August 2009. A cement industry official confirms that the cement prices for the present day are at a low of Rs170 per bag.
 
While industry sources believe the scenario is the result of low demand due to the floods in AP, it may well be the first indicators of oversupply.
 
In the next three months, analysts believe that prices may fall further in the other regions of India. “Prices are expected to fall not particularly in this region, but also in the remaining regions of India. The prices may fall steadily in the next three to six months,” said Amit Srivastava, research analyst, Karvy Stock Broking Ltd. “There could be a further correction in cement prices,” said R Gurumoorthy, executive director, corporate communications, Dalmia Cement (Bharat) Ltd.
 
In spite of low cement prices, the units in AP have been able to maintain profits due to low operating costs, analysts believe this might prove difficult for the remaining regions in India.“ Other regions are not in a position to reduce operating costs in a similar way as AP,” said Mr Srivastava.
 
Analysts believe the worst affected would be south India, as the fall in prices would be soon witnessed in the neighbouring states of  AP. “The excess supply from AP will be diverted to other regions like Tamil Nadu, Maharashtra, and Karnataka and later to the eastern parts. Thus, an excess supply is expected to occur in these regions.”
While the spokesperson for Dalmia Cement cites low demand and not over-capacity as the main reason for fall in prices, analysts look at it as a combined effect of both lack of demand and over-capacity.
 
“The reason for the fall in prices is not merely a lack in demand but also the overcapacity happening in that region. The prices will not fall so low only due to lack of demand, it is more due to the over-capacity. Even if they operate at 50% to 60% capacity utilisation there is an excess supply in the market,” added Mr Srivastava.
 
“Cement capacity in expected to grow by 8% to 10%. These capacities were planned on an expectation that demand will also grow. Current demand for cement has been driven by spending on IT projects and residential projects. For the capacity addition planned for 2010, the industry needs incremental demand over the existing construction activities in order that total cement demand grows at an expected 10% rate,” added the analyst.
 
Delayed public spending in the form of planned government infrastructure projects has also adversely affected the expected cement demand. “The main factor in the current fall in cement prices has been a delay in the offtake of public spending,” said Mr Gurumoorthy.
 
“There has not been sufficient demand in AP due to delay in expected government housing projects and IT projects. Later, the floods also acted as a spoilsport,” added Mr Srivastava.
 
All over India, 47.5 million tonnes (MT) of cement capacity is expected to be added in 2010 and 19.2MT by 2011. Out of this, the southern region is expected to add around 20MT in the year 2010. For the year 2011, the highest capacity addition of 7.8MT will happen in the eastern region
 

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