Companies & Sectors
May 2013 auto sales: Cars and MHCVs disappoint; tractors strong

Strong growth in tractor volumes are driven by improved customer sentiment on expectations of a good monsoon this year and improved Rabi crop realizations, says Nomura Equity Research in its Quick Note on the automobile industry

Most of the auto companies have reported May 2013 sales volumes. Overall, volumes were below expectations for cars and MHCVs, while tractor volumes surprised positively. “Mahindra & Mahindra’s (M&M) volumes were up by 24% y-o-y as compared to our estimate of 8% growth. As well, tractor volumes for Escorts were strong and increased by 18% y-o-y. We believe that strong growth in tractor volumes are driven by improved customer sentiment on expectations of a good monsoon this year and improved Rabi crop realizations,” said Nomura Equity Research in its Quick Note on the industry. The brokerage prefers to watch for volume growth over the next 1-2 months to see if FY14F could see a strong turnaround in the sector.


As per Nomura’s calculations, domestic volumes for the car industry fell by 12% y-o-y as against its estimate of a 7% decline. Maruti Suzuki’s (MSIL) domestic volumes fell by 13% while Nomura was expecting a 4% decline. As per its discussions with the management MSIL’s retail volumes were flat y-o-y in May 2013 and wholesale volumes were impacted by inventory reductions to some extent. “MSIL is confident of achieving its full-year volume growth target of 6% (versus our estimate of 6.5% growth),” said Nomura.


Amongst unlisted companies, Toyota and Ford have seen 30%+ declines. Honda’s volumes were up 10% led by the launch of Amaze. GM volumes increased by 40% y-o-y led by launch of new MPV Enjoy and continued good customer response for its Sail sedan, according to Nomura.


Nomura estimates that volumes in the MHCV industry declined by around 17% y-o-y as compared to its estimate of 9% decline. Both Tata Motors’ (TTMT) and Ashok Leyland’s (AL) volumes were weaker than the brokerage’s expectations. TTMT reported a 19% fall in volumes while AL’s volumes were down 22% y-o-y. Eicher’s total CV volumes increased by 2% y-o-y.


Domestic two-wheeler industry volumes were up 2% y-o-y in May-13, which was in line with Nomura’s estimates. Hero MotoCorp’s (HMCL) volumes were flat y-o-y; above the brokerage’s forecast of 5% decline. Honda Motorcycle & Scooter’s (HMSI) volumes were up only 3% y-o-y at around 230,000 units (around 260,000 units in April 2013); bike volumes fell by 4% y-o-y. Bajaj Auto’s domestic bike volumes increased by 3%, while TVS’ volumes were down 8% y-o-y.

Nomura adds that production from HMSI’s new plant (1.2mn annual capacity) will begin from June 2013; thus, volumes over the next 2-3 months will be critical as incumbents (HMCL and Bajaj Auto) might face further market share pressures.


Strong improvement in tractor volumes is quite positive for M&M, says Nomura. If the current trend continues we can see strong double-digit growth in FY14F. The brokerage is currently looking at 8% volume growth for tractors in FY14F. In terms of sensitivity, 5% higher tractor volumes can increase its core EPS estimates (M&M + MVML) by around 3%. For M&M, volume growth in passenger vehicles was 5% in May 2013 and LCV volumes were up 12% which is marginally ahead of Nomura’s estimates. Further, strong growth in Ssangyong volumes (up 25% in May) also augurs well for M&M, says Nomura.


For Maruti, Nomura expects earnings growth to remain strong over the next two years driven by margin improvement and recovery in car industry volumes in FY15F. Therefore, any decline in stock price should be used as a buying opportunity, opines Nomura.


PMI data dash hopes of a recovery, says Nomura

The PMI data suggests domestic demand will likely remain weak and that inflationary pressures will remain contained, which should open up space for rate cuts, says Nomura in its “Asia Insights” report

India’s manufacturing PMI fell to 50.1 in May from 51 in April, due to a sharp fall in the output and new order sub-indices. Much of this moderation is due to continued weakness in domestic demand, while export orders rose in May, said Nomura in its “Asia Insights” report.

Price pressures eased further as the input prices index fell on lower commodity prices. The output prices index fell below the 50 threshold mark on weak demand and lower input costs, suggesting core inflation is likely to fall in the coming months.


Overall, the PMI data suggests domestic demand will likely remain weak and that inflationary pressures will remain contained, which should open up space for rate cuts. The brokerage expects the Reserve Bank of India to implement a 50 basis point repo rate cut in H2 2013.


According to Nomura, the new orders sub-index fell sharply to 50.5 in May from 52.3 in April, even as the new export orders index rose to 54.0 from 51.1. This suggests that domestic demand weakened in May.


The output sub-index fell below the 50 threshold for the first time since June 2009 (to 48.6 from 50.2), indicating that weak demand, increased competition and persistent supply-side pressures are forcing manufacturers to cut production. The finished goods inventory sub-index was barely changed (50.6 from 50.7) despite weak output. The new orders/inventory ratio fell for a seventh straight month, to 1.00 from 1.03—an indication of weak future demand.


The input prices sub-index eased to a 50-month low of 51.3 from 54.1, reflecting the moderation in commodity prices. More importantly, the output prices sub-index, which has a lagged correlation with core WPI inflation, fell below 50 (to 49.8 from 51.9) on a combination of weaker demand and lower input costs, which indicates that core inflation is likely to trend down further in the months ahead, and likely at a faster pace.


Recent GDP data indicated that domestic demand considerably weakened in Q1 2013. The fall in PMI (to 50.6 for Apr-May versus 53.1 in Q1) indicates that domestic demand weakened further in early Q2 as well, dashing hopes of a quick recovery and in line with Nomura’s view that a recovery is likely to be gradual at best.


Nonetheless, weak demand and lower input costs have also helped reduce inflationary pressures. According to Nomura, weak domestic demand and lower inflation should give policymakers much needed space to lower interest rates, though a weakening currency is complicating their task. The brokerage continues to expect a 50bp repo rate cut in H2 2013. In the June meeting of the RBI, it expects repo rate to be unchanged, alongside a 25bp cut of the cash reserve ratio.


RTI Judgement Series: Display, update information on website as mandated under Section 4

The PIO of the Revenue Department at the Delhi government gave a vague reply when asked about publishing information under Section 4. The CIC then directed the PIO to publish and update information on the department's portal. This is the 106th in a series of important judgements given by former Central Information Commissioner Shailesh Gandhi that can be used or quoted in an RTI application

The Central Information Commission (CIC), while allowing an appeal, directed the Public Information Officer (PIO) of the Revenue Department at the Government of the National Capital Territory of Delhi (GNCTD), to display information on its website as mandated under Section 4 of the Right to Information (RTI) Act.


While giving this judgement on 29 June 2011, Shailesh Gandhi, the then Central Information Commissioner said, “The PIO has given slightly vague replies because there does not appear to be a systematic effort to ensure that Section 4 is complied with. The PIO is directed to ensure that information as directed above is displayed on the website and updated as per the directions.”


New Delhi resident Rambir Singh, on 1 November 2010 sought information regarding implementation of Section 4, from the PIO of the Revenues Department. Here is the information he sought under the RTI Act and the reply provided by the PIO...


1. Whether any action has been initiated/ proposed to be taken against officers/ Public Authority for not initializing action as per Sections 4(1)(a), 4(1)(b), 4(2), 4(3)& 4(4) of the RTI, Act within 120 days from the enactment of the Act    

PIO's Reply: If it is found that no action has been initiated within 120 days of enactment of the Act under Sections 4(1)(a), 4(1)(b), 4(2), 4(3)& 4(4) then action shall be taken


2. Information regarding the status/action taken under Section 4 of the RTI Act        

PIO's Reply: The Question is not clear


3. Information regarding the proposed time to be taken in obeying the directions under Section 4 of the RTI Act       

PIO's Reply: The information Under Section 4 of the act is available with the PIO of this district and the same can be obtained


Singh, citing the information provided by the PIO as unsatisfying and vague filed his first appeal. In his order on 28 January 2011, the First Appellate Authority (FAA) said, “The appellant is required to provide/comply with the provision of section 4 of the RTI Act. Let the PIO/ ADM (South West) give a factual reply in details on the issue i.e. Section 4 of the RTI Act about Dist. South West. The appeal was thereafter disposed of.”


Singh then approached the CIC. In his second appeal, he stated that “(the) PIO has not provided true and complete information as per direction of the FAA. Neither the PIO nor the FAA mentioned the address of the second appellate authority in their reply which, appellant claims, amounts to denial of information.”


During the hearing before the Commission, Mr Gandhi noted that the PIO had given slightly vague replies due to lack of systematic efforts for complying with Section 4 of the RTI Act.


After discussing the matter with both Singh and the PIO, the CIC directed the PIO to ensure that the following information regarding the public authority is displayed on the website of the department:

1 Information every month on the number defaults in meeting the SLA (Service Level Agreements) and amount of penalty recovered form officers for default.

2 Orders passed under Section 81 of Delhi Land Reform Act 1954. 


While allowing the appeal, Mr Gandhi said, “The order is being given by the Commission under its powers under Section 19(8) (a) of the RTI Act. This is a requirement of Section 4 of the RTI Act. It would ensure that both the above information is updated every month before the 10th of the following month.”


He also directed the PIO to send a compliance report along with the URL address (web address) where the information has been uploaded to Singh and the Commission before 25 July 2011.




Decision No. CIC/SG/A/2011/001225/13156

Appeal No. CIC/SG/A/2011/001225


Appellant                                            : Rambir Singh,    

                                                            New Delhi - 110037


Respondent                                        : BS Jaglan

                                                            PIO & ADM (SW)

                                                            Revenue Department, GNCTD

                                                            Old Terminal Tax Building,

                                                            Kapashera, New Delhi - 110037


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