Most automakers increased vehicle prices by 1% to 5% during September-October this year. Therefore, the discounts offered in the next couple of months will not translate into significant cost savings when compared with prices in August 2013, feels India Ratings
Some public sector undertaking (PSU) banks announced around 20 basis points cut in interest rates for autos, with the rates now in the range of 10.45%-10.75% for auto loans up to three years for purchase of new vehicles. However, according to a research note by India Ratings & Research (Ind-Ra), the reduction in auto loan interest rates by certain public sector banks will not have a meaningful impact on auto sales.
With the landed cost of imported components rising significantly in the current financial year due to rupee depreciation, several auto companies have been compelled to raise prices to pass a part of the input cost increases to consumers. The cost increases announced by most auto companies during September—October have been in the range of 1%-5%. Ind-Ra said, "The discounts offered in the next couple of months will not translate into significant cost savings when compared with prices in August 2013. Hence, the limited monetary incentive in a scenario of negative consumer sentiment may also curtail sales in the festive season."
The rate cut by banks follows Indian government’s decision to increase the quantum of capital infusion over the Rs14,000 crore already allocated in the FY14 budget. The capital infusion was intended to encourage lending by banks and spur the purchases of autos and consumer durables in the following festive season.
However, the ratings agency said it believes auto sales during the October to December festive season will not be influenced by the prospect of lower interest costs. This is mainly because the overall cost of ownership is high and continues to rise steadily due to the frequent rise in fuel prices. The freeing up of petrol prices from June 2010 and the monthly increase in diesel prices permitted from January 2013 has resulted in a drag on auto sales.
The narrowing price differential between petrol and diesel has led to a slowdown in demand for diesel vehicles which were largely responsible for driving passenger vehicles (PV) sales in FY12 and FY13.
In addition, Ind-Ra said a 3% hike in excise duty to 30% on utility vehicles (UV) of over 4 metres in length and over 1,300cc engine capacity has also dampened sales. While this segment registered a 52.2% sales volumes growth in FY13, there was a 4.8% decline in volumes between April and September. A large proportion of volumes in this segment are contributed by entry level UVs, sales of which have also been adversely impacted by higher on road prices due to the excise duty hike, the report said.
According to the RBI Consumer Confidence Survey—June 2013, only 12.8% of respondents wanted to purchase a vehicle compared with 15.9% in March 2013 and 19.7% in December 2012. "This seems to suggest a steadily worsening consumer sentiment which could negatively impact sales over the next few months. The JD Power Survey, released on 29 August 2013, suggested that more price conscious, middle class buyers are considering buying a used vehicle instead of a new one. Ind-Ra believes this is due to the growth of the organised used car market in India along with the presence of major original equipment manufacturers (OEMs)," the ratings agency added.
The bank reported increase in net revenues and an impressive 27.1% increase in net profit; both driven by healthy loan portfolio growth in retail and wholesale segments. However, a slight increase in bad loans is a worry
HDFC Bank, the country’s second largest private sector lender reported a 27.1% increase in its net profit during the second quarter due to healthy loan growth in retail and wholesale segments and higher net interest income.
For the quarter to end-September, the lender said its net profit increased 27.1% to Rs1982.3 crore even as its total revenues, including interest income, rose 18.1% to Rs6320.9 crore from Rs5353.7 crore, same period last year.
HDFC Bank said its net profit was driven by increased loan portfolio, in both retail and wholesale segments. A hike in tax surcharge from 5% to 10% caused net profit to dip.
Net interest income-NII (interest earned less interest expended) of the Bank for the second quarter, which accounted for 71% of net revenues, grew 15.3% to Rs4,476.5 crore from Rs3,881.9 crore a year ago period. At the same time, HDFC Bank said its net interest margin (NIM) was at 4.3% as against 4.4% for corresponding quarter ended 30 September 2012.
This loan growth was contributed by both retail and wholesale, with retail loans growing by 16.9% and wholesale loans by 15.0% resulting in a loan mix of 53:47 respectively. Advances as of 30 September 2013 were Rs2,68,617 crore, an increase of 16.0% over 30 September 2012.
The bank’s total capital adequacy ratio (CAR) as at September 30, 2013 stood at 14.6% as against a regulatory requirement of 9%. Of this, tier-I CAR was 9.9%. However, these numbers do not take into account the audited profits for the half year ended 30 September 2013. Had the same been included, the total CAR and tier-I CAR would have been 15.6% and 10.9% respectively.
The bank’s bad debt worsened a bit and it is a worry. Its gross non-performing assets (GNPAs) were at 1.09% of gross advances as on 30 September 2013, as against 1.04% as on 30 June 30, 2013 and 0.91 % as on 30 September 2012.
During the quarter ended September 2013, the bank acquired additional 27.8% stake in its subsidiary HDFC Securities Ltd (HSL). Post this acquisition, its stake holding in HSL was 89.9% as of September 30, 2013.
As at 30 September 2013, the total number of branches (including extension counters) and ATM network stood at 3,251 branches and 11,177 ATMs respectively.
At 3.20pm, HDFC Bank was 2.28% down at Rs652 on the BSE while the benchmark Sensex was marginally down at 20,531.
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