As per the revised Bill, the proposes to give legal right to over 5 kg of foodgrain at Rs1-Rs3 per kg per month to about 70% of the population
The government has revised the Food Bill and now proposes to give legal right to over 5 kg of foodgrain at Rs1-Rs3 per kg per month to about 70% of the population, as suggested by the Parliamentary panel, food minister KV Thomas said.
A revised bill has been sent to the law ministry for approval, after which it will be moved to the Cabinet, he added.
In the original bill which was introduced in December 2011 in the Lok Sabha, the government had proposed giving 7 kg of wheat (Rs2/kg) and rice (Rs3/kg) per month per person to “priority households”, while at least 3 kg of foodgrain at half of the government fixed support price was proposed for the ‘general’ households.
“We have accepted most of the recommendations of the Parliamentary panel. The revised bill has been sent to the law ministry for vetting. After we receive its comments, we will place the Bill before the Cabinet,” Mr Thomas said.
The minister said the government would not withdraw the existing bill and rather move amendments to incorporate changes as suggested by the panel and some states.
“We have accepted panel’s recommendation to do away with priority and general classifications of beneficiaries and provide uniform allocation of 5 kg foodgrain (per person) at fixed rates to 67%-70% of the country’s population,” Mr Thomas said.
The minister said that 2.43 crore poorest of poor families under the Antyodaya Anna Yojana (AAY) would continue to get supply of 35 kg foodgrain per month per family.
According to sources, the food ministry has revised the bill after consultation with UPA chairperson Sonia Gandhi, who has strongly favoured higher allocation for AAY people.
The food ministry is working closely with the Planning Commission to finalise the criteria for excluding 30%-33% of population from the benefits of the Bill, he added.
“The Planning Commission’s formula for exclusion of population will be given to the states. On that basis, states will be allowed to include or exclude beneficiaries,” the minister said, adding the Centre has taken into account the state governments' views in the revised Bill.
According to Credit Suisse, earnings estimates are coming down again. Its January consensus estimate for FY14 EPS ticked upwards but this seems like a head fake and there would be another 8%-10% downside in coming quarters.
During the third quarter (Q3) that ended in December 2012, sales growth of Nifty companies slowed to 10%, a new post-crisis low, which also affected the stock markets. Most stocks are now trading close to where they were in September 2012 and there is no turnaround from here, says Credit Suisse in a research report.
According to the financial services provider, the Indian stock market was very discerning during the third quarter as companies that beat estimates did exceptionally well after results while companies reporting in-line or weak results were beaten down. However, many of the bad results seemed to have been well flagged.
Of the 113 stocks that Credit Suisse India covers, formal quarterly previews were published for 78. For these 78 companies, combined reported net profit was 3% below estimates. Only oil & gas companies like Reliance Industries, GAIL and ONGC and IT services and financials, mainly private banks, and some public sector banks (PSBs) that had dropped non-performing loans (NPL) coverage had results better than estimates. There were large disappointments in most other sectors, it said.
The minor recovery in the year-on-year (YoY) growth trend of operating profit was short-lived. It turned downward again, as the number of companies seeing outright operating profit decline increased sharply. “With Nifty operating margins still below March 2009 levels, we note that although consumer discretionary, healthcare and consumer staples are much above March 2009 levels, industrials, energy and telecom are much below,” the research note said.
Credit Suisse said that the stock markets have reacted accordingly to the December quarter earnings. Gains from the sharp rally in investment-driven stocks that started on 6 September 2012—around the time that the government action on economic reforms grabbed headlines—have already disappeared. Metal stocks had also rallied, in line with a global rally in risk, but have now given up most of those gains, it added.
While the slowdown in investment activity has been prolonged and well-flagged, Credit Suisse said, commentary from companies did not suggest any bottoming out or inflection. It said, “In fact, results showed that construction activity, steel and cement demand, and even order books slowed during the quarter. BHEL, the bellwether power equipment manufacturing company saw its first YoY revenues declined in a decade. Even Larsen & Toubro (L&T), which surprised positively on the growth in its order book, had to rely on gaining market share in the middle-east and in real-estate construction orders and its own assessment of the investment environment was not positive,” the note said.
Credit Suisse said, below the operating profit line, the pressure from interest costs continued to rise (up 40% YoY in the December quarter), because projects are now starting to get commissioned, and capitalised interest is now appearing on the profit and loss (P&L). Worryingly, interest coverage continues to get worse.
Overall, FY14 earnings fell 2.3% during the earnings season. Credit Suisse said its analysts cut estimates across the board for FY14, though continuing with past trends the cuts in FY15 were more muted except for a few sectors. Earnings for Technology, Utilities and Private sector banks were upgraded. Interestingly, earnings estimates for consumer staples as well as consumer discretionary stocks were downgraded quite meaningfully: in case of the former, it was primarily the royalty impact on HUL, it added.
More than 90% of sales for Balkrishna come from exports, making it vulnerable to the imposition of anti-dumping duty by any target market, says broking firm Espirito Santo Securities. We in our Antelope Stockletter had recommended Balkrishna Industries in the weekly issue date 11 July 2011 from which we exited with a gain of 42% on 20 February 2012
Balakrishna Industries reported a 15% y-o-y (year-on-year) decline in sales volumes in the third quarter of FY13, resulting in a 10% y-o-y revenue drop. While the fall in volumes was worse than expectation, Espirito Santo Securities’ view is that it is primarily due to an inventory cut-off and quarter-specific demand issues. The brokerage’s market update report expects volumes to pick up from Q1FY14.
According to the brokerage, primary channel checks in America and Europe, and commentary of Titan International (well known for its Titan and Goodyear brands of farm tyres) reinforce the confidence in revival of demand in CY2013. Espirito Santo Securities leaves its estimates unchanged and reiterates a BUY recommendation with 38% upside for the shares of Balkrishna.
Balakrishna Industries is a Siyaram-Poddar group company in which the promoters hold a 54% stake. It specialises in the development and manufacturing of a wide range of off-highway specialty tyres (OHT). The specialty tyres are meant for agricultural, industrial, material handling, construction, earthmoving, forestry, lawn and garden equipment and all-terrain vehicles. Balkrishna derives about 90% of revenue from exports, with Europe the larger share (46% of sales). Balkrishna’s portfolio is skewed towards the replacement market (80% of sales) and the agriculture sector (62% of sales). It has a strong distribution network of over 200 distributors spread across 120 countries.
The slowdown in demand coupled with destocking by distributors was responsible for the volume decline. However, the company benefited from declining rubber prices, which helped EBITDA margins expand by 393 basis points (bps) to 22.1% in Q3FY13. The company’s management cited an increase in the monthly production run-rate of tyres to 11,000-12,000 from 9,000-10,000 seen in Q3FY13 and it expects demand to revive from hereon. Furthermore, upbeat guidance on the demand outlook for CY13 by Titan and Michelin enhances Espirito Santo Securities’ confidence in its FY14E estimates.
According to the market update report of the brokerage, key risks for the company include:
(a) Euro depreciation: Balkrishna derives over 40% of its sales from Europe; hence,
any significant depreciation of the euro against the rupee will have an adverse financial impact on the company.
(b) Imposition of anti-dumping duty: More than 90% of sales for Balkrishna come from exports making it vulnerable to the imposition of anti-dumping duty by any target market.
(c) Strong rubber prices: Rubber forms 50% of the raw material consumed for Balkrishna. Significant rises in the prices of rubber can dent profitability.
(d) Goodyear’s manufacturing facility in France, which manufactures Agri-OHT
tyres catering to Europe, Africa and several other countries, is about to shut down, which means 10%-15% of the European Agri OHT market is up for grabs.
(e) Lower market share in India: Titan’s management has acknowledged losing market share to low-cost Indian manufacturers, especially in the smaller tyre segment.
Increase in capacity and ability to price product at 20%-25% below competitors will help increase market share in the global OHT market. Opportunities to increase market share by entering newer geographies, increasing penetration in existing geographies by widening product offering. Lower presence in the US gives an opportunity to grow further in a big OHT market.
Balkrishna is a value stock which we had recommended in our stockletter in July 2011 and suggested an exit with a 42% gain about seven months later, earlier this month. If you are interested in our stockletters, click here to subscribe.