In its latest report, Espirito Santo Securities has observed that revenue growth has slowed down considerably, leading to the question of whether a turnaround has happened. Has it?
In a new report dated 19 November 2012, Espirito Santo Securities (ESS) is uncertain when the recovery will pick up as aggregate quarterly earnings of over 400 companies grew only by 4.9% year-on-year (y-o-y), the slowest pace in the last three years. The report said, “Adjusting for inflation, the growth rates look even more anaemic and show how hard volume-led growth is to come by.” The economy has been affected because the global economy has been volatile and uncertain, with Europe and America going through difficult times. Moreover, the Reserve Bank of India (RBI) has taken a firm stance and kept interest rates unchanged (repo rate at 8%), in order to moderate inflation. The sectors which have got affected by the slowdown are industrials (revenues down 8% y-o-y), real estate (revenues down 9% y-o-y), telecom and healthcare. The sector which has performed very well is energy, revenues which grew at an impressive 8.2% y-o-y.
However, the good news is that, according to ESS, margins have improved even though revenue growth declined. This was due to lower commodity prices which translated to lower input costs. EBITDA grew by 13.7% y-o-y while margins expanded by 130 basis percentage points (bps) y-o-y. All the sectors, except consumer discretionary, saw their margin expand including those whose revenues were affected. Real estate, healthcare and energy saw margins expand by 706 bps, 764 bps and 865 bps respectively.
Even though margins expanded, it is not a cause for celebration. Why? Because, according to ESS, demand has still not picked up. The basis of higher margins would not just be lower cost but also higher revenues. As revenues increase, companies will invest more in capital expenses (capex) which is an indication of economy expansion and also creates more jobs. The report said, “A sustainable turn needs a demand recovery, which with the consumer stretched and government under fiscal pressure, needs a turn in the investment cycle, which we still don’t see in the lead indicators that we monitor.” In other words, there’s no sign of the bottom of the investment cycle. Most companies are cautious in putting their capital to work as demand is slack. The fundamental underlying of the economy—demand—must pick up. The report further says, “This hardly lends confidence in sustainability. Meaningful upgrades need a demand revival, led by turn in investment cycle, of which there is yet no sign.”
Check our earnings reports of various companies here. We will be putting up our own earnings analysis shortly. Stay tuned.
Expanding the ambit of judicial scrutiny of the alleged irregularities, the apex court also issued notice to the CBI on a plea for appointment of a SIT and the cancellation of allocation of 194 coal blocks to various companies
New Delhi: The Supreme Court on Monday issued notice to the Centre and the Central Bureau of Investigation (CBI) on a plea for a probe by a special investigation team (SIT) into the alleged irregularities in the coal block allocations, reports PTI.
A bench of justices RM Lodha and AR Dave also sought response from them on a public interest litigation (PIL) petition seeking cancellation of the licenses granted by the government for coal blocks to various private companies.
The bench, however, refused to stay the licenses, which were allegedly granted in violation the of law.
The court asked the government and the agency to file its comprehensive reply on the alleged irregularities in the coal block allocation within eight weeks and posted the matter for further hearing on 24th January.
The bench was hearing a PIL filed by various members of civil society including former CEC N Gopalaswami, ex-Navy chief L Ramdas and former Cabinet Secretary TSR Subramanian, seeking a SIT probe into the alleged scam.
They have alleged the ongoing CBI investigation into the alleged coal block scam is not sufficient and only SIT can conduct an impartial probe in the case, in which names of many ministers and their kith and kin have cropped up.
The alleged coal block allocation scam came under judicial scrutiny on 14th September when the apex court, on a PIL by advocate ML Sharma, had directed the Centre to explain if the guidelines on allotting natural resources to private companies were being strictly followed.
Expanding the ambit of judicial scrutiny of the alleged irregularities, the bench today also issued notice to the CBI on a plea for appointment of a SIT and the cancellation of allocation of 194 coal blocks to various companies.
In the fresh PIL filed by members of civil society and NGO Common Cause, the petitioners sought quashing of the entire allocation of coal blocks to private companies, made by the Centre from 1993 onwards.
"The involvement of senior ministers, public servants, different departments of Centre and state governments concerned in the alleged corruption and bribery by beneficiary companies need to be investigated.
"Considering the magnitude of investigation and possibility of involvement of high public offices, including the PMO, and the fact that CBI functions under the same very government it is supposed to investigate, a court-monitored investigation by an SIT is required to ensure proper investigation in the matter," the petition said.
The petitioners alleged that allotment of coal blocks was non-transparent and conducted in an unfair manner in violation of various rules and procedures.
"That investigation of CBI at the instance of CVC is partial and does not cover the full magnitude of the coal scam. The alleged conspiracy in blocking the policy of competitive bidding and the manner in which the screening committee functioned need to be investigated thoroughly, which involves senior ministers including the highest executive office of the country," the petition said.
SEBI will not get power to directly tap the phone calls, however, it would get call data records through agencies, says the Finance Minister
New Delhi: The government is making an arrangement for market regulator Securities and Exchange Board of India (SEBI) getting access to call data records of people being probed by it in specific cases, but it will not get power to directly tap the phone calls, Finance Minister P Chidambaram has said, reports PTI.
"... Some arrangement is being made that the call data records will be supplied through the agencies entitled to get them to SEBI," Chidambaram told PTI in an interview.
"They (SEBI) won't have the power to directly tap into the phone calls. Records can be made available to them by the authorities concerned. Some progress is being made," he said.
He was replying to queries about SEBI seeking access to call data records of people being investigated by it in cases related to the stock markets.
Asked about intelligence reports of some terror groups pumping in money in the stock market, Chidambaram said he was sure that SEBI would look into the matter if tainted money was flowing into the stock market.
Observing that the matter falls into the jurisdiction of the Home Ministry, Chidambaram said: "I can't conduct an enquiry into terror groups putting money into the stock market. If tainted money is flowing into the stock market, I'm sure SEBI will look into it. Intelligence reports are shared with SEBI also. I've no machinery to look into it, except SEBI."
On SEBI's demand for access to call data records, Chidambaram said: "I think some progress was made to make available to SEBI the call data records in specific cases, where an investigation is being done and they want call data records (for their investigation), I think some progress is being made, some arrangement is being made..."