Maruti Suzuki has decided to stop production at its main factory in Gurgaon today and tomorrow on account of a severe shortage of engines and transmissions due to the strike at Suzuki Powertrain India. Workers at Suzuki Motorcycle India Pvt Ltd (SMIPL) have also resorted to a strike to press their colleagues’ demands
New Delhi: Defying the Punjab and Haryana High Court orders, workers continued their sit-in strike on the premises of Maruti Suzuki India’s (MSI) Manesar plant for the eighth consecutive day today, with production activities at a complete standstill, reports PTI.
The strike by workers at Suzuki Powertrain India (SPIL) in support of their colleagues at the Manesar plant has made the situation even more precarious for the Maruti Suzuki India management.
The company has decided to stop production at its main factory in Gurgaon today and tomorrow on account of a severe shortage of engines and transmissions due to the strike at SPIL. Workers at Suzuki Motorcycle India Pvt Ltd (SMIPL) have also resorted to a strike to press their colleagues’ demands.
“The Manesar plant is still under workers’ control. No production is taking place there today,’ a Maruti Suzuki India (MSI) spokesperson told PTI.
Yesterday, the Punjab and Haryana High Court had directed that there would be no sit-in strike within 100 metres of the premises of MSI’s factory at Manesar. Justice Surya Kant of the high court issued further directions that striking workers on dharna (sit-in protest) in the plant should be taken out.
He had also directed that willing workers should be allowed to join duty and those on strike should not be allowed to stop them.
The court also asked the police authorities to ensure that workers who wish to join the dharna are not stopped.
Workers at MSI’s Manesar plant went on a stay-in strike on 7th October afternoon, completely affecting production at the unit. They were demanding the reinstatement of over 1,000 casual staff that were not allowed to rejoin work after an earlier 33-day stand-off that started on 29th August, besides 44 suspended permanent employees.
Shares of the company were trading 2.22% down at Rs1,033 apiece on the Bombay Stock Exchange in late morning trade today.
Slow decision-making in the government and stretched payment cycles in the construction industry expected to pull down earnings
Construction industry players have indicated that sluggishness in on-ground execution will continue, according to a recent IDFC Securities report. The key bottlenecks include slow decision-making in the government and stretched payment cycles.
Working-capital levels have been stubbornly high, leading to a continued rise in debt levels in Q2FY12. There has been a visible slowdown in order flows from the power sector even as ongoing projects face the risk of an execution slowdown. A rise in debt levels and borrowing rates would drive interest provisioning higher than earlier estimates. Lowered earnings of L&T by about 4% each for FY12 and FY13 have been indicated in the report. The earnings estimate for HCC will factor in incremental concerns on execution, and the company may suffer a net loss of Rs15.80 crore for the quarter (from break-even earlier).
A likely peaking of interest rates and fund-raising through divestment of infrastructure assets are the key potential triggers for stocks in the near term. The outperformers in the industry include L&T, IVRCL, HCC and NCC, and Simplex is expected to be above average due to its relatively rich valuations.
Order inflows have been muted across construction companies, due to slower order intake from the industrial & power segments. Orders from Central/state government authorities in areas like urban infrastructure, water, etc, have been hit by slow decision-making in the government. Also, power-sector orders have decelerated due to uncertainty over availability/pricing of fuel and higher borrowing costs. Orders from the building (mainly government & institutional) and road segments have been relatively robust.
Overall, announced orders flows for EPC players (including BTG) have grown by 7% y-o-y (year-on-year) in H1FY12. Excluding orders flows from NTPC’s bulk tenders (9x800MW), order flows have declined by 12% y-o-y to Rs86,800 crore.
Uncertainty on availability/pricing of fuel has already led to a visible slowdown in power sector orders. Orders from the power sector (generation + T&D, or transmission & distribution) declined by 31% y-o-y to Rs331 billion YTD (year-to-date), but were up 9% y-o-y to Rs5,250 crore, including NTPC bulk tenders. With these uncertainties likely to persist in the near term, execution of under-construction projects (especially projects in early stages) may get stretched due to deferrals by clients, says the report. Further, difficulty in raising equity-funding for under-construction projects may also decelerate the execution of these projects.
Working capital levels remain stubbornly high. There has been no tangible improvement in the previous quarter. The payment cycle of government and PSU (Public Sector Unit) contracts remains stretched due to slow decision-making.
Borrowings rates for sub-contractors and suppliers have increased to about 15% due to the continued rise in interest rates, rendering market borrowings unviable. Construction companies have also had to increase support to their sub-contractors and suppliers to ensure continuity of execution. As a result, there has been a further rise in debt levels of most construction companies. Borrowing rates have risen further and are now at 11.5%-12% for most players in the segment.
“We had 12 rounds of rate revisions since March 2010 to control inflation. But inflation is still above comfort level. Though it has affected the production adversely,” RBI governor D Subbarao told reporters after the RBI’s Central Board meeting in Jaipur
Jaipur: Admitting that a series of rate hike has affected the industrial activities, the Reserve Bank of India (RBI) on Thursday said inflation continues to remain above comfort level, reports PTI.
“We had 12 rounds of rate revisions since March 2010 to control inflation. But inflation is still above comfort level. Though it has affected the production adversely,” RBI governor D Subbarao told reporters after the RBI’s Central Board meet here.
RBI has increased interest rate by 350 basis points since March, 2010 in its bid to tame inflation. The central bank is due to review the monetary policy on 25th October.
“We have to weigh growth, inflation and factors affecting the economy of our country,” Mr Subbarao said.
Headline inflation was 9.78% in August, which is much above the comfort level of the RBI of 5%-6%.
Pace of industrial output in the country has remained subdued in July and August, which may impact the country’s GDP growth of the second quarter.
Industry has been asking the central bank to pause rate hikes saying high cost of credit was affecting economic activities.
On depreciation of rupee against dollar, Mr Subbarao said weakening of the Indian currency was making imports costlier.
“Recently the global prices of crude have come down, but due to depreciation rupee price of crude oil on net basis has gone up by 3%,” the Governor said. India imports about 80% of its crude oil requirements.
Oil imports during April-August this fiscal were valued at $52.251 billion, 27.09% higher than $41.114 billion in the corresponding period last year.