Hiring in Indian private sector flat in September

New Delhi: The pace of recruitment by Indian private sector companies in September, 2010, remained more or less at the same level as the previous month, reports PTI.

According to private sector lender HSBC's Purchasing Managers' Index, which provides a monthly snapshot of economic trends, there was an increase in services sector hiring, but job cuts by manufacturers left the employment rate unchanged in September, 2010, vis-à-vis the previous month.

Commenting on the report, HSBC Asian economics research co-head Frederic Neumann said: "... India's service industry is stepping off the throttle. Along with the manufacturing sector, growth is slowing, although the expansion continues."

"All this suggests a mild easing of demand growth since the red-hot pace earlier this year," Mr Neumann added.

The report, which was compiled by leading global financial information services company Markit, said that manufacturing data showed a slowdown in output gains. However, companies in the service sector in the country reported a solid rise in new work during September.

The report said many analysts anticipated that improved marketing initiatives and high quality services will boost orders over the coming year.

However, an even bigger rise in input costs within the manufacturing industry meant that overall input price inflation was broadly unchanged since August, the report said.

"Price pressures, however, have not eased meaningfully, which represents a challenge for the central bank," Mr Neumann said.

Mr Neumann further said that mild easing of demand growth is hardly enough to relax the guard against inflation. RBI officials may need to tighten the monetary policy further to avert price pressure from becoming entrenched, he said.


SCI keen to enter into a JV with Coal India

Kolkata: The state-owned Shipping Corporation of India (SCI) today said that it is keen to forge an alliance with Coal India Ltd (CIL) for transporting coal, reports PTI.

"We hope to have the joint venture (JV) unit with Coal India. It is likely to be 50:50," SCI chairman and managing director S Hajara told reporters on the sidelines of CII national council meeting here.

SCI had already inked a JV with SAIL for acquisition of Panamax bulk carriers.

The government yesterday approved selling its 10% stake in the Navratna company and allowed it to raise 10% fresh equity, paving the way for Rs1,300 crore public issue that is likely to hit markets by December.

After the issue government holding in SCI would come down from 80.12% to 63.75%.

Commenting on it, Mr Hajara said that the move would boost internal resource generation of SCI for acquisition of fleet.

Under the 11th Plan period, SCI needs to place orders for 30 more vessels. "We already have a strong cash reserve of Rs2,500 crore," he said.

SCI would file the draft red herring prospectus (DRHP) in the current quarter, he said.


Cement prices hiked, but demand remains depressed

Cement prices in the north and south of India are still under pressure due to heavy flooding and excess supply

As the monsoons ended last month, cement companies have increased prices. Last month cement companies hiked prices in the rage of Rs25- Rs40 for a 50-kg bag. According to media reports, Indian cement producers are likely to increase prices of cement by about 12% to Rs20 per 50-kg bag in Gujarat as construction activity is picking up. Companies are also planning to raise prices in Maharashtra. Over the past two to three months, cement prices in Andhra Pradesh were up by Rs60-70; Rs40 in Kerala, while Tamil Nadu and Karnataka saw an increase of Rs50 per 50-kg bag.

"The recent price hike has not been done due to an increase in demand. It is a complete understanding between cement companies," an analyst from Centrum Broking Pvt Ltd told Moneylife.
Even prices in the southern part of the country have been increased; cement prices in the north and south are still under pressure due to heavy flooding and excess supply.
Major cement companies have registered some growth in sales and production in September. UltraTech Cement, a subsidiary of the Aditya Birla Group, posted a 2.71% increase in sales, while production was 2.85 million tonnes (MT) in September. Ambuja Cement's sales were up 9% to 1.48MT, while production increased to 14.84 lakh tonnes during the month from 13.82 lakh tonnes in September 2009.

ACC posted sales of 1.58 MT, a decline of 3.07%; however, Jaypee's sales surged 61% to 1.17MT in September compared with the same period of 2009.

Sales growth has been showing a marginal fall in the period of April-July 2010; however, the industry registered a meagre growth in August following moderation in demand in southern India.
According to Nomura's report, published today, since the last two months, ACC, UltraTech and Grasim Industries are broadly coming back on track, while Ambuja Cement has been the standout performer during this period.

Shree Cement and India Cement were underperformers during the period. Heavy monsoons, mainly in north and east India, have hampered the construction activity during the last two-three months. Nomura expects some pick up in demand after the monsoons, but is doubtful over double-digit growth in demand for FY11. The firm has reduced its demand growth estimation by 1% in FY11 to 9.5%

The report says that currently SAAR (seasonally adjusted annual run-rate) is indicating total demand of 212.8MT for FY11 which would mean growth of just 6.9% y-o-y in FY11 on 10.7% y-o-y growth in FY10.
Since the past one-and-an-half years, the industry has seen a significant increase in capacity. It added 51MT of new capacity in FY10 and anther 41MT and 20MT increase in capacity is expected in FY11 and FY12 respectively, adds the report. However, only 10MT addition in capacity is expected in FY13, says the report.

The capacity utilisation for the industry will remain low at about 81% even in FY13, says Nomura. The report further adds that the future capacity addition will far exceed incremental demand till FY11. In FY12, utilisation and demand is expected to be roughly the same. It is only in FY13 that incremental capacity addition starts trailing demand, thereby leading to some improvement in capacity utilisation rates.

 Region wise, demand in southern India could remain depressed for some time. The region's current capacity utilisation is merely 58%, with some capacity increment still to be commissioned. Demand in the region, particularly in Andhra Pradesh, is still sluggish, says the report. 

After seeing volatility in the first quarter of this year, prices started correcting from May and by June in some regions. Prices were down till August. Cement companies started rising prices in September. During September, there were multiple price hikes in the south which helped companies recover at least part of their realisations lost during the previous three months. The impact of price hikes in the south has also been seen in regions like the west, where prices have bounced back from August lows, noted the report. Nomura predicts a 5.7% price decline in FY11 followed by a 2%-3% increase in FY12.

 The report adds that the top five Indian cement producers, such as UltraTech, Jaiprakash and ACC will hold around 45% of the installed capacity base by the end of FY11, while the top ten will produce about 65%. However, more than 40 companies control 35% of total production. However, such a long tail will make it difficult to achieve any sort of understanding on pricing, says the report.
Input costs may bring some relief for cement companies as international coal prices have been stable over the past few months. Diesel prices have increased by 15% in the past one year and a further hike will bring changes in prices.


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