Companies & Sectors
Weakening rupee and rising fuel prices may affect automobile sector
Recent RBI measures to tighten domestic liquidity conditions will be negative for economic growth outlook and will raise short-term interest rates, leading to poor credit growth for vehicle purchases, says Nomura Equity Research
 
The recent rise in fuel prices (along with the weakening rupee against the US dollar) will be leading to continued weakness in customer demand levels in the Indian automobiles sector. It could lead to downside risks to volume growth estimates for most industry segments, forecasts Nomura Equity Research in its Quick Note. 
 
According to Nomura, recent RBI measures taken to tighten domestic liquidity conditions will be negative for the economic growth outlook and will raise short-term interest rates. There are downside risks to India’s FY14F GDP growth estimate of 5.6%. This will be a dampener on vehicle, says Nomura, as credit will be costly.
 
As per data from the Society of Indian Auto Manufacturers (SIAM), industry volumes slowed further in June 2013, particularly in the CV (commercial vehicles) and 2W (two-wheeler) segments. The MHCV (medium and heavy commercial vehicles) industry volume declined by 21% compared with Nomura’s expectation of an 11% decline. Further, LCV (light commercial vehicles) volumes also remained weak and declined by 5%. Sales volumes in the two-wheeler segment have declined by 5%. Sales volumes in the passenger car segment seem to have stabilized at current low levels. The table below gives a snapshot of the volumes position in the automobile sector:
 
 

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Thejo Engineering announces 1:1 bonus issue and maiden dividend of 50%
The first company to get listed on the NSE’s SME platform, EMERGE, is showing promise as it announces a dividend and bonus shares in its first year of listing. The ambitious company, with decent fundamentals, is also rapidly expanding abroad
 
Thejo Engineering, the first company to get listed on the EMERGE platform of National Stock Exchange (NSE), has announced the issue of fully paid bonus shares in the ratio of 1:1 (one equity share for every one existing equity share). The company also declared a maiden dividend of 50% (Rs5 per share) in the first year of going public. 
 
Earlier, under trying circumstances, the company posted good annual results for fiscal 2012-2013. It earned an operating income of Rs133 crore for the year ended March 2013, a growth of 16% over the previous year. Net profit from operations, excluding exceptional items, showed an impressive 44% increase to Rs14.38 crore. Post-tax profit stood at Rs9.75 crore yielding earnings per share (EPS) of more than Rs65. Roughly 61% of its revenues comes from products, while remaining 39% comes from services. Between FY09 and FY12, revenues from the product division grew at a compounded annual growth rate (CAGR) of 21.2% while that of services grew at CAGR of 29.2% over the same period. 
 
In a report released on 9 November 2012, CRISIL Independent Equity Research (Crisil IER) believes Thejo to be worth Rs402 per share. It also expects revenues of the company to grow at 28% CAGR till FY14. Crisil IER has assigned a rating of 5/5 to the company, indicating that its fundamentals are excellent relative to other small & medium enterprises (SMEs) in India. 
 
Thejo Engineering is an engineering solutions provider for bulk material handling, mineral processing and corrosion protection to core sector Industries like mining, power, steel, cement, ports, fertilizers, etc. Thejo’s services include belt conveyor installation, maintenance and operations, while its product portfolio covers design, manufacture and supply of engineering products for bulk material handling, mineral processing and corrosion protection. The operations and maintenance division, which was commenced recently, has started growing at a fast pace and is expected to contribute considerable share of growth, volume and profit in the coming years.
 
In his newly appointed role as the managing director, VA George says, “We have a strong brand as a provider of comprehensive solutions to meet maintenance needs in the industry and we are making further efforts to enhance our capabilities further to meet growing needs of the industry.” 
 
Thejo is ambitious and rapidly expanding abroad, especially in the Gulf countries as well as Western Australia. It is also seeking opportunities in Africa. Thejo Hatcon Industrial Services Company LLC, Thejo’s joint venture in Saudi Arabia with Hatcon LLC of Bahrain, has become profitable. Thejo has incorporated Thejo Australia Pty Ltd, a subsidiary in Australia, to enable it to enter the services business. The Australian subsidiary will focus on offering conveyor belt-related maintenance services and rubber lining activities, initially to clients in Western Australia. The operations of both subsidiaries will contribute substantially in future towards growth. Thejo also has secured certain orders for mill liners from Ghana and is intensifying its marketing efforts to capture a larger market space in the West African region. The company is also exploring the South American market, particularly Brazil and Chile, to establish its footprint. 
 
The NSE EMERGE is a platform for SMEs like Thejo to obtain capital funding. According to NSE, it supposedly takes lower time and cost to raise funds. Only 50 allottees are required (the main market of NSE requires 1,000 allottees) to be listed on the platform, and is mostly targeted at institutional and high networth individuals. IPO grading is not mandatory. This platform targets small companies which want less stringent requirements and want to grow before attaining critical size to list itself on the main market. As of now, only three companies are listed on the EMERGE platform: Thejo Engineering, Veto Switchgears & Cables and Opal Luxury Time Products.
 

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COMMENTS

INDRAJIT GHOSH

3 years ago

i'm not sure but it seems to be a good company

Indian IT companies may not venture into new areas, says Nomura
Investments in new themes including social, mobile, analytics and cloud (SMAC) are likely to be from multinational IT companies, concludes Nomura Equity Research
 
Near-term focus in the information technology (IT) sector in Nomura’s view is likely to remain more towards traditional spend areas across Indian IT companies aimed at geographical expansion and greater depth in industry solutions, rather than emerging areas of spend where MNCs (multi-national corporations) are focusing on.
 
Emerging spend areas like digital marketing, mobile, analytics and cloud are buzzwords we hear often from Indian IT, but the focus of their acquisitions has predominantly been in traditional spend areas (75% of acquisitions in these spaces). This, in Nomura’s view, could be because of greater focus on competency building (through adding service lines or industry capabilities) or on geographical expansion in continental Europe (France/Germany). On the contrary, the focus of acquisitions for MNCs has been more towards emerging spend areas (70% of acquisitions). 
 
Investments in new themes including social, mobile, analytics and cloud (SMAC) are likely to be from multinational IT companies, concludes Nomura Equity Research.
 
The forecast for major Indian IT companies is given in the table below:
 
 
The historical data for acquisitions in the IT sector is shown in the table below: (acquisitions by Indian companies are smaller).
 
If we were to go into the nature of acquisitions by Indian IT companies, one would notice that acquisitions have been focussed on industry solutions, geography expansion or to augment consulting capabilities. This is shown in the table below:
 

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