Metal and textile sectors have highest value of NPAs in FY12

Both metals and textiles industries have large number of players and consequently their NPAs too tend to be amongst the highest

Metals, textile and the electronics sectors accounted for the highest value of non-performing asset (NPAs) properties in FY12 according to a study by NPAsource.com. The textiles sector which had a 2.7% share of total banking credit, accounted for 4.5% share of the total banking NPAs, while the iron and steel sector with a 3.8% share of credit accounted for 4.7% of total NPAs.  

Out of a total NPA properties valued at Rs6,376 crore in FY12, the metals sector had the highest amount at Rs1,188 crore or 18.6% share. It was followed by the textiles sector with Rs1,131 crore and the electronics industry with Rs734 crore, the study said.

Devendra Jain, chairman and managing director of Atishya group, the owner of NPAsource.com said, "The iron and steel segment accounts for the largest share of NPA properties in the metals sector. Both, the metals and textiles industries have large number of players and consequently their NPAs too tend to be amongst the highest."

The state-wise break-up of NPA properties in 2011-12 indicates Tamil Nadu, Gujarat, Maharashtra, Chhattisgarh and Uttar Pradesh as the top five states with the highest share of NPA properties.

The Financial Stability Report of Reserve Bank of India (RBI) released in June-end states that NPAs grew at 43.9% as at end March 2012, far outpacing credit growth of 16.3%. The micro and small enterprises segment which has a 9.8% share of the banking system credit has a disproportionately higher share in the banking system's NPAs at 17.9% as of 31 March 2012 as per the RBI report.

"Intense competition in domestic and global markets, high cost of borrowings and slowdown in economies across the world is going to lead to further rise in NPAs in the coming year too," said Mr Jain in a release.

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Low expectations from Q1 results may act as cushion, says Kotak Securities

If the markets have to sustain the current levels and move up, it will need to have more confidence in the medium-to-long term growth rates of corporate India, says the brokerage

Expectations from the quarterly results for corporate houses are not very high which may act as a cushion for the markets, according to Kotak Securities' preview of quarterly results and the possible impact on the stock market. If the markets have to sustain the current levels and move up, it will need to have more confidence in the medium-to-long term growth rates of corporate India, says the report. Also, the above-mentioned concerns have to be effectively and immediately addressed. The room for disappointment is very limited. Disappointment in earnings or on future outlook may result in corresponding specific corrections.


Among the prominent sectors, Kotak noted, automobile players reported weak set of volumes in 1QFY13 (first quarter of the financial year 2012-13). Volumes during 1QFY13 remained under pressure on account of weak macro factors. Slowing economy and interest rates have turned the sentiments negative for automobile demand. Further, events like steep hike in fuel prices and weak beginning to the monsoons added pressure on demand.

During Q1FY13, core earnings for banks and NBFCs (non-banking finance companies) are expected to grow 19.2% year-on-year (YoY), while net income is expected to register a strong growth (35.7% YoY), mainly on back of base effect (SBI reported subdued earnings during Q1FY12). The PSU banks are likely to grow faster at 47.7% (ex-SBI: 17.4%), while private sector banks are likely to grow at 28.4%. During the same period, NBFCs are likely to witness moderate growth in net income (13.2%) due to subdued YoY growth for LIC Housing (-1.1% YoY) and STFC (-6.3%). Credit growth came at 17.8% YoY (as on 15 June 2012), largely stable during Q1FY13, although it remained lower than 20.9% growth witnessed a year ago. During the same period, deposit mobilization marginally improved to 14.4% YoY (as on 15 June 2012) despite subdued performance on demand deposits (decline of 10.2% YTD). The above data are figures are from the Kotak Securities report on the quarterly results preview.

In the June-ending quarter, the BSE Capital Goods index remained flat versus a similar performance of the Sensex. While the market sentiment has improved in recent weeks (index up 9% MTD), it is yet to reflect in broad economic data points. We note that the IIP-based Capital Goods Index was down 16.3% for the month of April 2012.

Even as the government remains committed to address the issue of shortage of coal, there is no short-term solution to the problem. NTPC has awarded the supercritical boiler orders to BGR Energy for Meja and Solapur. Mahagenco has recently scrapped a gas-based power generation project for failure to secure fuel supply.

In the cement sector, demand during the beginning of Q1FY13 was impacted by the sand mining ban in states like Andhra Pradesh, Punjab and Haryana and this along with labour shortage had impacted the construction activities. However, average cement prices during Q1FY13 have witnessed an improvement on a sequential basis mainly led by strong prices seen during April and June. Though prices witnessed a decline during May 2012 led by sand and labour shortage, they subsequently improved in June 2012 due to improved availability of sand and delayed onset of the monsoons. Cost pressures continue to remain high and the full impact of hike in railway freight rates and excise duty would get reflected during Q1FY13. Along with this, rupee depreciation during the quarter would also impact companies relying on imported coal.

Thus, the corporate sector, according to the Kotak Securities report, shows weakness on several environmental and fundamental factors leading to low expectations in quarterly results. This is likely to be a dampener for investors in the stock market for much of the year 2012-13.

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HC acquits five in Best Bakery case, upholds life term to four

The Bombay HC acquitted five accused in the 2002 Best Bakery case for want of evidence but upheld the conviction of four others sentenced to life term by the trial court

Mumbai: The Bombay High Court on Monday acquitted five accused in the 2002 Best Bakery riots in Gujarat case for want of evidence but upheld the conviction of four others sentenced to life term by the trial court, reports PTI.

A division bench comprising Justices VM Kanade and PD Kode, who had on 3rd July reserved the judgement on the appeals filed by the accused against the trial court verdict, upheld the life sentence of Sanjay Thakkar, Bahadur Singh Chauhan, Sanabhai Baria and Dinesh Rajbhar.

The judges relied on the statements of four injured witnesses, all workers of the Best Bakery, who had identified the accused and said they were present at the place of the incident armed with swords and other lethal weapons during the post-Godhra communal riots.

The bench, however, overturned the trial court order and acquitted Rajubhai Baria, Pankaj Goasvi, Jagdish Rajput, Suresh, alias Lalo Devjibhai Vasava, and Shailesh Tadvi, saying there was no evidence against them. The judges said none of the witnesses had attributed any role to them during the riots.

The division bench had commenced day-to-day hearing in the appeals filed by the nine convicted accused in March this year.

On 1 March 2002, two days after the Godhra carnage, a mob had attacked Best Bakery in Vadodara, looting and burning it down and killing 14 people. The mob targeted the Muslims inside, including the Sheikh family which ran the bakery.

Three Hindu workers employed at the bakery were also killed.

Of the 17 accused, nine were convicted and sentenced to life by a special court in Mumbai in 2006. The nine had then approached the High Court challenging the order.

In a twist to the case, one of the witnesses Yasmeen Shaikh had filed a petition in the High Court stating that she was "lured and misguided" into giving false testimony against the 17 accused by social activist Teesta Setalvad. She sought her evidence to be recorded again at the stage of appeal.

The court had, however, said it would first hear and decide on the appeals filed by the convicts.

Teesta too later filed an intervening application asking the court to hear her view while deciding the appeals.

The court will pronounce its order on the applications filed by Shaikh and Seetalvad later.

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