Profit from stake sale can't hide Suzlon's deeper problems

Hansen stake divestment helped Suzlon retire debt, leading to an overall debt reduction of 15%, but operating profits were down 65% for the December quarter

Suzlon Energy, the wind turbine supplier which has been reporting losses since December 2008, has unexpectedly reported a small profit of Rs14 crore for the December 2009 quarter. The profit came from its stake sale in Hansen. Suzlon sold 35.22% stake, through its subsidiary AE Rotor Holding BV, in Hansen Transmissions International NV on 24 November 2009, which mopped up $370 million.

Suzlon sold its stake in Hansen due to the volatility and challenges impacting the near-term wind power market. It currently holds a 26% stake in Hansen.

Hansen’s revenue in the December 2009 quarter fell 14% to €136.6 million in 2009 from €155.4 million in the corresponding year-ago period. The company is on a cost-cutting drive.

The group’s net  debt  has reduced   by Rs3,200 crore—from Rs13,762 crore  in  September  2009  to  Rs10,488  crore in  December  2009. Yet, the interest cost has gone up 24% to Rs289.51 crore from Rs233.85 crore in the year-ago quarter. This means that the debt reduction has happened at the fag end of the period. Debt will probably go down further. “Our rupee refinancing exercise has reached an advanced stage and we expect to achieve full closure by end-February 2010,” said Sumant Sinha , COO of Suzlon  Energy  Limited.

Despite reporting a small profit, big problems at Suzlon persist. It reported a 65% fall in operating profit to Rs276.64 crore for the December 2009 quarter. .

According to the company, the financial turmoil last year inflicted a foreign exchange loss of Rs123.97 crore. Suzlon claims to have an order book of 314.30MW as on 30 January 2010. The company registered a total income of Rs5,625.90 crore for the quarter ended December 31, 2009.

Suzlon raised Rs522.97crore on 24 July 2009 through global depository receipts (GDR) which are listed on the Luxemborg Stock Exchange. Choking under huge debts, Suzlon has desperately tried to raise funds, improve liquidity and undertake refinancing measures.
 

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What does a depressed January mean for the stock markets?

The market fell in January. Based on past patterns, what should we expect? Here is a study of the historical behaviour of the markets over the past 25 years

The year has not at all begun well for the stock markets. The Sensex ended the month of January with a 6% decline over December of last year. How does this performance augur for the rest of the year?

Moneylife took a look down the historical data, searching for some clues in the market patterns. We started from the year 1986 when the Sensex had completed one year of operations. Over these 25 years, the Sensex has ended the month of January in negative territory 12 times (including this year).

How did the Sensex perform by the end of the first quarter on these 11 previous occasions? Our study finds that of these 11 years (excluding this year), the Sensex has ended the month of March down six times (compared to January closing).

More interestingly, the fall in the Sensex at such times has been more pronounced than the drop in the month of January (except in 2008). However, out of the 24 years (excluding this year), this March monthly trend of a fall in the index has been witnessed 14 times.

If we are to study the yearly performance of the Sensex over these 24 years, the conclusions are quite interesting. Only eight times in this period has the Sensex closed the year in negative territory compared to the previous year. In all the other years, the Sensex has turned in a positive performance. That translates into only a 33% probability of the market slipping below its previous year’s closing.

Interestingly, only twice in these 24 years has the market gone on a sliding spree throughout the year. This happened in the years 1995 and 2008, when the Sensex ended negative at all the three points of our study. What was common between these two years? These were the two years when the Sensex had opened at very high valuations. In 1995, the markets woke up to a P/E multiple of 45, making it the most expensive start to a new trading year ever. In 2008 too, the Sensex had to contend with a P/E of 22, which was higher than the preceding six years. The index proceeded to lose 21% and 52% respectively in those two years.

In valuation terms, the year 2010 does not have much going for it. Last year’s dramatic rally, when the Sensex surged 81% over the previous year’s closing, has left the index trading at a relatively high P/E of 19 at the start of the year. This leaves very little scope for the index to make any sort of headway going into the rest of the year—unless there is a dramatic surge in liquidity.

Indeed, based on this data, the January jitters for the markets do not bode well for the upcoming period. It remains to be seen whether the Sensex gets weighed down by the valuation or proceeds to script a sturdy performance in 2010. 
 

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COMMENTS

meihull mehta

7 years ago

sir, if u check charts of india or us markets its a uniqe thing that years ending decades ie 0's 2000,1990,1980 ect are always worst performing year, hope 2010 dosnt go same way..

Cement workers demand 8-fold hike in basic wages

The cement workers' federation (INCWF) has said that the minimum basic salary at the lowest level should be at least Rs18,200 per month, up from Rs2,125 per month currently

Over 1.35 lakh workers in the cement industry are demanding an over 8-fold hike in their minimum basic wages from the coming fiscal year, reports PTI.

In a memorandum of demands submitted to the Cement Manufacturers Association (CMA) on Monday, the Indian National Cement Workers' Federation (INCWF) said that the minimum basic salary at the lowest level should be at least Rs18,200 per month, up from Rs2,125 per month currently.

The demand by the workers comes ahead of the expiry of a wage settlement agreement signed by workers and manufacturers in 2005. The pact is to lapse on 31 March 2010.

The workers have also demanded that the existing number of grades of workers should be brought down to four from 13 presently, INCWF general secretary N Nanjappan said in the memorandum.

Among the demands is an interim relief of Rs10,000 per month to the workers if the new wage settlement is not agreed to by June 2010.

INCWF also asked the CMA to commence wage negotiations at the earliest to cover “the entire 1.35 lakh cement workers of India working in the 142 functioning cement units”.

As per the requirements of the Industrial Disputes Act 1947, the Federation has already served the notice for the termination of the existing wage settlement.

When contacted, a senior CMA official said, "The charter of demands will go to the CMA president and then a committee will look into it. We will decide only after that."
 

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COMMENTS

neeraj tripathi

6 years ago

sir
please compare the salary of govt. workers and employee of private cement factories ,you will find a huge difference;i want to know that why it is this

balkishan pareta

6 years ago

Its the time when CMA is not paying any honor regarding to workers demands, a hard step should be taken.
most of workers wants strike, so preparation of strike should be started.

Neeraj

7 years ago


Why there is delay on decision ?
We are aspecting for improvement in our wages in considering the inflation currently and also considering the difference between sixth pay commission and our wages.
We are hoping for reply earlier.

r s more

7 years ago

Dear sir,
compare to other employee of govt.deptt our income is very low
what happen wage board after meeting

G Sawian

7 years ago

Compare to other employee of Govt. Deptt. our income is very low

mittu

7 years ago

what happen wage board demand after aug met

dakeswar gardia

7 years ago

what happen wage board demand

7 years ago

ravi

7 years ago

related news of cement wage board meeting about revision of wages for workers

r s more

7 years ago

what happen wage board demand

dauleshwar verma

7 years ago

Feedback required Cement Wage Board Salary Revision on Jun-2010.

sumit mukherjee

7 years ago

i am working a cement unit durgapur.it is a grinding unit. its yearly production 12-14 lac metric ton.

kindly told me we are in cma demand?

REPLY

binod

In Reply to sumit mukherjee 7 years ago

offcourse

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