FMC exempt hedgers from paying risk margin from February

While commodity bourses will not apply initial, additional and special margins on hedgers or sellers who give delivery, the Exchanges would continue to collect MTM margins

Commodities market regulator Forwards Markets Commission (FMC) has exempted hedgers from paying risk margin in agricultural commodities from 1st February in order to help boost participation in the commodity futures market.


In a directive, FMC has asked MCX, NCDEX, NMCE, ICEX, UCX and ACE not to apply initial, additional and special margins on hedgers or sellers who give delivery on bourses.


Market participants, including hedgers, are required to deposit margin, a type of collateral, with the exchanges to lower the risk exposure. It is collected in the form of initial, additional and special margins depending on the risk.


Hedgers are generally commercial producers and consumers of the traded commodities. They participate in the futures market to manage their spot market price risk.


However, the exchanges have been asked to continue with the collection of mark-to-market margins from such market participants. MTM margin is collected to offset losses (if any) that have already been incurred on the positions held by a trader.


This decision has been taken following a recommendation by the FMC’s newly constituted Risk Management Group (RMG).


The regulator said RMG has recommended that if a hedger has made early payment of commodity, then he may be exempted from paying the risk margins.


ITC Q3 net profit up 16% on healthy growth in agri, tobacco businesses

ITC’s December quarter net profit stood at Rs2,385 crore on 19% growth in its agriculture and tobacco business

ITC Ltd reported a 16% growth in its net profit at Rs2,385 crore during the third quarter from Rs2,052 crore in a same period a year ago. During the December quarter, ITC’s net revenues increased 13% at Rs 8,727 crore compared with Rs7,712 crore a year ago period.

According to Moneylife analysis, ITC net sales growth rate for the December quarter stood at 13%, which is slightly higher than its three-quarter year-on-year growth rate of 11%.
However, ITC operating profit growth rate stood at 15%, which is slightly less than its three-quarter year-on-year growth rate of 17%. Needless to say, the company commands a high premium, with its return on networth at 38% while its market capitalisation stood at 19 times its operating profit.

During the December quarter, ITC net revenues were contributed mainly by tobacco segment (43%) and FMCG segment (22%) and agriculture (19%). ITC Hotels contributed just 3%  to net revenues, due to a slack domestic economy. However ITC’s tobacco business alone contributes to nearly 84% of the net profit before tax.

Tobacco segment

The major contribution in the ITC’s revenues is from tobacco products. Despite higher tax implications its profitability from cigarette business increased 19% at Rs2,653 and net revenues grew 13% at Rs4,116 crore.

Agriculture business

Agriculture business profits grew 19% at Rs205 crore driven by higher realisation and superior mix. Net revenues from agriculture business grew 10% at Rs1,786 crore.

FMCG segment

FMCG segment profits of Rs10 crore was driven by enhanced scale and improvement in operating leverage. FMCG businesses register net revenue growth of 16% at Rs2,078 crore.

From the staples, spices and ready‐to‐eat foods business, ‘Aashirvaad’ atta sustained its high growth trajectory and consolidated its leadership position across markets.

The snack foods business recorded strong growth during the quarter due to its instant noodles ‘Sunfeast Yippee!' and newly launched 'tricolour pasta' format in two exciting variants.

The education & stationery products business consolidated its position as the leading player in the Indian stationery market driven by its flagship brand 'Classmate' and recently crossed Rs1,000 crore mark by consumer spends.

Hotel business segment

The hospitality sector continued to be adversely impacted by the weak economic conditions and high levels of room inventory in key Indian cities leading to a relatively weak pricing scenario. Consequently, growth in Segment revenues remained muted and net revenues grew only 2% at Rs315 crore. However, Hotels business records 12% improvement in profitability at Rs62 crore aided by superior performance of ITC Grand Chola.

Paperboards, Paper & Packaging

Paperboards, Paper & Packaging Segment profitability grew marginally at 1% comparead with a year ago period, but the revenues grew 18% at 2,157 crore driven by recent capacity additions in paperboards and packaging. Price and cost control actions partially mitigate the impact of steep hike in input prices.

ITC closed Friday marginally down at Rs324.85 on the BSE, while the benchmark Sensex closed 201 points down at 21,063.

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HDFC Bank Q3 net profit up 25.1% to Rs2,325.7 crore

HDFC Bank reported healthy December quarter figures, with both net profit and net sales rising. However, its capital adequacy ration has worsened substantially

HDFC Bank results for the quarter ended December 2013 saw net revenues grow 14.7% to Rs6,783.1 crore as against Rs5,909 crore for the same period last year. During the same period, HDFC Bank earned net profit of Rs2,325.7 crore, 25.1% higher than the net profit earned during the December 2012 quarter.

According to Moneylife analysis, both net revenues and net profit of the lender grew at the same pace as their respective three-quarter year-on-year average growth rates; net revenues grew at 18% which is on par to its three-quarter average year on year. This was mostly helped by Reserve Bank of India (RBI) window for foreign currency non-resident (FCNR) deposits. HDFC Bank market capitalisation stood at roughly 25 times the operating profit while its return on networth equalled 22%.

HDFC Bank total deposits as of 31 December 2013 stood at Rs3.49 lakh crore, which is 22.9% higher than the deposits it had on 31 December 2012. Part of this included the $3.4 billion raised under RBI window for attracting FCNR deposits.

HDFC Bank advances stood at Rs2,96,742 crore for the quarter ended December 2013, also 22.9% higher than the advances on 31 December 2012. The loan growth was driven by both retail and wholesale segments, with retail loans growing by 13.6% and wholesale loans growing by 22.1%. The domestic and retail loan ratio stood at 54:46.

HDFC Bank’s net interest margin for the December 2013 quarter stood at 4.2%, marginally down from the 4.3% for the same period in 2012.

The Bank’s capital adequacy ratio (CAR) as on 31 December 2013 stood at 14.7%, which is worse than the 17% it was on 31 December 2012.

As on 31 December 2013, the HDFC Bank gross non-performing assets stood at 1% of the gross advances, which is the same as last year, while at the same time its net non-performing assets were at 0.3% of the net advances. HDFC Bank restructured loans constituted roughly 0.2% of the gross advances, which is marginally lower than 0.3% during the same time last quarter.

During the quarter, HDFC Bank added 274 branches, of which 179 banks were in unbanked areas. The total number of branches stood at 3,336, with 11,473 ATMs, as on 31 December  2013.

At 3.34pm Friday, HDFC Bank was marginally down at Rs672.6 on the BSE, while the 30-share Sensex was also marginally down at 21,077.

For more information on earnings results covered by Moneylife, check out the stocks page.


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