Money & Banking
Retail loans and agriculture loans running strong

RBI’s sector-wise monthly loan data for December 2012 reveals that credit cards, personal loans and vehicle loans are doing well

The RBI (Reserve Bank of India), in a sector-wise analysis of credit growth, released its monthly loan data for December 2012 and a Nomura Equity Research analysis of the key trends reveals a few important observations:


(a) Loan growth for FY13 is most likely to range around 13%-14%. YTD (year-to-date) loan growth has been 7.8% (non-annualised) and assuming the same quantum of loans in 4QFY13 as disbursed during 4QFY12, Nomura arrives at FY13F loan growth of 13.5%;


(b) Retail loans and agriculture loans are tracking the strongest—retail loans growing at 16.5% year-on-year and agriculture loans growing at 21.4% year-on-year. Within retail, the segments doing well are non-collateralized loans (credit cards and personal loans) and vehicle loans;


(c) Industry loans continue to be weak and YTD, the key growth drivers within the industry have been power, iron and steel, chemicals and roads.


As of December 2012, aggregate non-food credit growth was 14.3% year-on-year with primary contributions from industry (13.7% year-on-year), agriculture (21.4% year-on-year) and retail (16.5% year-on-year).  


On an YTD basis (April-December 2012), aggregate non-food credit growth was 7.8% over the base of March 2012 compared with 17% in FY12 and 20.6% in FY11. The key contributions to YTD growth have come from retail loans at 9.8% and services at 8%. Agriculture loans grew at 7% while SME loans grew at 4%. Ex-infra industry growth was 5.5% during this period, according to the Nomura analysts’ computation. 


Within the industry sector, YTD growth for key sub-sectors was at 17.8% for power, 15.7% for iron and steel, 9.7% for engineering, 10.6% for roads, and 10.8% for chemicals. Loans to the telecom sector were flat YTD, points out Nomura. 


Within retail loans, vehicle loans had the highest YTD growth at 16.6%, followed by non-collateralised loans at 13.7% and mortgages at 9.5%. On a year-on-year basis, vehicle loans grew at 22.2%, non-collateralised loans at 26.4% and mortgages at 16.4%. 


In the services segment, loans to NBFCs (non-banking finance companies) had the highest YTD growth at 14.3%. This is weaker than the growth seen during similar periods of FY12 and FY11. Trade and commercial real estate loans had YTD growth of 13.7% and 11%, respectively. 


If it is assumed that the same quantum of loan growth for January 2013 to March 2013 as was achieved during January 2012-March 2012, then the banking sector is likely to have loan growth of 13.5% for FY13F. This is marginally lower than the Nomura estimate of 14% calculated with the data for the period ending November 2012. 


Assuming that all these major sectors add loans similar to the quantum seen in January 2013-March 2013, Nomura believes that the banking sector is looking at the following potential growth rates for FY13F: aggregate non-food credit growth of 13.5%; industry growth of 13%; agriculture growth of 18.8%; SME growth of 11%; and retail loan growth of 15.5%.


BHEL sales decline for first time in a decade; down 4%

For the first time in a decade, India’s biggest power utility manufacturer has reported bleak results prompting analysts to put a sell recommendation to their clients. However, the management remains cautiously upbeat

Bharat Heavy Electricals (BHEL) has been in a bad shape for the past two-three years. However, when it announced its third quarter results for the period ended December 2012, many pundits and market watchers were in for a rude shock. BHEL had reported its first quarterly revenue decline, the first time in a decade. Net sales, for the quarter ended December 2012 declined 4% year-on-year (y-o-y) to Rs10,219.71 crore, when compared to the same period last year. Operating profit plummeted 20% y-o-y to Rs1,634.06 crore, for the reporting quarter. And the same story followed for its net profit which crashed 17% to Rs1,185.85 crore. This is a worrying trend for one of India’s largest power utilities manufacturer. Several analysts are bearish and have already advised clients to sell the scrip.

Nomura said in its report on BHEL, “The numbers re-confirm our long-standing concerns on sales and margin decline that would lead to pressure on the balance sheet too. In fact, the third quarter (3QFY13) marks the start of revenue decline for the company, in our view.” BHEL revenues missed the brokerage’s estimate by four percentage points. Nomura expects BHEL to be worth Rs174 per share.

Espirito Santo Securities (ESS) echoed similar concerns. It said, “BHEL’s third quarter (Q3FY13) disappointed us on all fronts,” and further said, “We expect further margin compression in FY14E and expect return ratios to decline from 31% in FY12 to 17.7% in FY14E.” It is bearish on the scrip and have recommended to its clients to sell the stock, believing BHEL is worth only Rs190 per share.

A preliminary Moneylife analysis shows a similar story. If we look at the net sales figures, the sales decline comes after several quarters of anemic single digit growth. The 4% decline in net sales is also below the company’s three-quarter y-o-y growth average of just 5%. More pertinently, its operating profit growth average has now touched zero percent when it crashed 20% during the December 2012 quarter. This puts pressure on the management to perform. Having said this, its valuation is somewhat ‘cheap’ given that its return on networth is high, at an impressive 27%. Its market capitalisation is quoting at over eight times its operating profits—not exactly cheap for a company that has been under-performing for the several past quarters.

BHEL’s performance is often considered to be the barometer of the power industry in India. It is one of the largest power equipment manufacturers and has a near monopoly. When you see poor results from BHEL, it tells you the state of affairs of the power industry in India – a giant stinking mess.

However, despite all this, it seems that the management is somewhat upbeat about the future, like most managers. One of the bright spots has been its focus on railways given that a lot of investment is being poured into the railway infrastructure. It hopes to win some orders along with Hitachi, one of its joint venture partners. Other positives included an order for a large boiler package for NTPC worth Rs6,300 crore for the latter’s Nabingar plant as well as for a hydroelectric power plant in Bhutan. The management hopes to close the 2013 fiscal with Rs30,000 crore worth of orders.

On the other hand, analysts are worried, most particularly about the lack of reforms in the power sector which would otherwise have been the catalysts for BHEL. Some of the issues faced by BHEL include a delay in receiving payments, lack of visibility from the defence sector and renewable energy segments. It has already stopped supplying equipment to Visa Power and Indiabull’s Amravati and Nasik projects. The networking capital has risen to alarming levels, highlighting the issue of cash flow that the company is facing. Networking capital is 36% of sales, which is massive figure. Most worrying of all is the amount of provisions that the company took for doubtful debts and contractual obligations—a total of Rs900 crore.

The management has stated that orders inflow has ‘bottomed’ and is witnessing a somewhat visible pipeline in the medium-term. The order book stood at Rs10,700 crore, far less than what most analysts believed to be. Will the company finally turn a new page?


Baby food for thought

Let mothers feed their babies for as long as they could. Efforts to feed every new-born baby with a ‘scientific’ formula instead of the God-given mother’s milk should stop for the common good. When governments are in cahoots with the industry mankind suffers

“Successful people are always looking for opportunities to help others. 

Unsuccessful people are always asking, “What's in it for me?”—Brian Tracy

I understand that there are efforts to feed every new-born baby with a ‘scientific’ formula instead of the God-given mother’s milk. In the unholy nexus between the greedy industry and the corrupt government agencies to try and sell this new idea to the gullible public, the real unsuspecting victims are the yet to be born future generations. When something is advertised in the name of the holy ‘science’ especially of the western variety that we, Indians, venerate as gospel truth, truth and reality take a back seat. Let us, for a change, examine the reality behind the new-born babies and their natural food. Let us not fall a prey to this heavy industrial advertisement. Advertisement is the bane of mankind’s present misery. There have been thinkers even in the west who had warned us against falling prey to advertisement from time to time. John Kenneth Galbraith was one such giant in the field who had warned us as far back as 1958 in his book, The Affluent Society thus:

Galbraith argued that in our societies’ wants and desires are created by the very process through which they are satisfied. Galbraith feels that corporations do not advertise to inform us about products that might satisfy our own pre-determined desires. Rather, they use advertising and marketing “to bring into being wants that previously did not exist.” Galbraith describes this “the dependence effect,” and argues that this is an indictment of the entire system of capitalistic production, which is “no more defensible than a town doctor routinely running over pedestrians in order to keep the hospital beds full”.

Poor Galbraith, may his soul rest in peace, did not know that disease mongering by various cunning methods is what the medical business does these days to fill their hospital beds and their coffers. In a full issue of the famous medical science journal, PLOSmedicine, the editor Ray Moynihan, had published eleven articles on this art of disease mongering. The above-mentioned efforts to sell infant formulae for baby feeding are another one of that disease mongering efforts right from the time of birth! Makes very good business sense. Every new born will, per force, become a patient. What better method could be there to fill the hospital beds and our coffers than this novel idea?

Human beings do not have milk digesting enzymes after weaning from mother’s milk. Mother’s milk is specially designed for the new born babies with special qualities. It is the only method that the mother transfers her own immune bodies to her baby to keep it safe during infancy. An infant does not have pancreatic lipase enzyme to digest fat. So mother’s milk is one of those fats that could be digested by salivary enzymes in the mouth. As the infant sucks the breast the milk gets digested in the mouth and then gets absorbed. The ONLY other fat that can be digested by salivary enzymes in the mouth is the fat in cocoanut oil. Mother’s milk and cocoanut oil contain the same fatty acids—sodium mono-laureates. Mono-lauric acid is the fatty acid that goes to make immune bodies to protect us against diseases. Any infant feed should and can only have cocoanut as the fat base. Other fats, if used, might damage the baby’s system. Moral of this story is that mother’s milk is the only sane and healthy food for an infant. No food, however scientifically prepared by our industry, can ever replace mother’s milk. The best alternative would be to create breast milk banks to collect excess milk from those that have too much milk to feed babies who either have lost their mothers or whose mothers do not make enough milk. Ideally the baby could be fed breast milk for as long as possible. If a baby gets mother’s milk for more than two years it should remain healthy all through its life.

Milk from other animals is not good food and is threatening to be a time-bomb, provoking powerful anti-bodies against many of our organs, especially the pancreas. One of the important causes of excess diabetes in society could be traced to drinking milk from other species. Our village cows, without the hump on their back, are less antigenic compared the large Jersey cows. Milk needs to be curdled before being consumed to reduce the antigenicity in denatured protein in curds and butter milk. If we learn to observe nature we will soon realize that no animal drinks the milk of another species in nature. How could man alone drink other animal milk with impunity? From altruistic sense also it looks bad. We are robbing the calf of its share of its mother’s milk. For the lay readers one fact could make lots of sense in this area.

Observe a calf as soon as it is born. It jumps out and runs. Human baby needs almost a year and more to do that. If we give our infants the milk with such powerful enzymes that make the calf walk away almost after birth the long-term results could be dangerous. In addition, today one does not get natural cow’s milk in the market, thanks to the new white revolution. The greedy industry encourages dairy farmers to use powerful hormones to boost milk out put. Most of the former are growth hormones which will have disastrous consequences in human youngsters! In addition, mastitis is a common disease in dairies. On an average 10% of the cows get mastitis every day. The present algorithm for treatment is to put ciprofloxacin, a powerful antibiotic worth nearly Rs8,000, into the cow’s udder to contain the germs there. The milk of that cow shall not be used for at least a week after the cow gets better. How many farmers would do that with their greed for more money? So our milk could be full of antibiotics and growth hormones! It is not surprising that we generate dangerous superbugs in society which are now posing a great threat to human life.

If one treats nature as mother, nature feeds and protects us; if we, on the contrary, use nature as our mistress, she will kick us in the teeth. That is what she is doing now, thanks to man’s proclivity for comfort and his greed! Let mothers feed their babies for as long as they could. Their shape does not go bad. In fact, they get better health by breast feeding. Breast cancer incidence does go down. More babies one feeds better would be one’s health and longer will be the life. Let us bring forth a healthy generation with natural resources. Science can never win over nature and make better products any day.
Western science shall not be our master; rather let us use it for our good only. Industry could still make money ethically. Let them not gang up with the governments to harm the populace. When governments are in cahoots with the industry mankind suffers. Formula feeding should stop for the common good.

 “He who is not contented with what he has, would not be contented with what he would like to have” Socrates

More from Dr BM Hegde

(Professor Dr BM Hegde, a Padma Bhushan awardee in 2010, is an MD, PhD, FRCP (London, Edinburgh, Glasgow & Dublin), FACC and FAMS. He is also Editor-in-Chief of the Journal of the Science of Healing Outcomes, Chairman of the State Health Society's Expert Committee, Govt of Bihar, Patna. He is former Vice Chancellor of Manipal University at Mangalore and former professor for Cardiology of the Middlesex Hospital Medical School, University of London.)



basant gupta

4 years ago

My humble request to Prof Dr BM Hegde to give me evidence of any advertisement regarding baby food published in any form in India made by anyone.The provisions of The Food Safety & Standard Act,2006 are very harsh .I myself assure you that action will be taken by me immediately.

chandra shekhar

4 years ago

* there isn't any REASON ... why i should Disagree ...!



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