Posted in Uncategorized

Can Hexa build up on Tiago’s success and revive brand Tata in the SUV space?

senior-management-of-tata-motors-at-the-launch-of-the-much-awaited-hexaAfter years of slumber, which saw Tata Motors’ passenger vehicle market share shrink, the company became aggressive with plans to launch two new products each year to rebuild its image.

The new drive got off to a bumpy start, with the Bolt hatchback failing to attract buyers, and the Zest too after the initial euphoria, saw demand drop.

The Tiago hatchback, launched last year, with its impact design language and looks totally different from the old Indica, finally managed to give Tatas some momentum. And almost a year later, demand remains strong.

Now, enter the Hexa, Tata Motors re-entry in the premium SUV space. The company had in the past launched the Aria in the segment, but didn’t find many takers. The Hexa, with aggressive pricing and equipped with all the bells and whistles, looks to accelerate Tata Motors’ turnaround in the PV market.

The Hexa has a big task ahead, as it will be competing against two formidable players – Mahindra & Mahindra’s XUV500 and Toyota’s Innova Crysta.

The Hexa is priced in the Rs 11.99-17.50 lakh range, ex-showroom Delhi. Prices for the XUV500 range between Rs 12.50-19.50 lakh and Innova Crysta’s prices start from about Rs 14.7 lakh, going all the way up to Rs 22.2 lakh ex-showroom.

The Hexa is powered by a 2.2 litre varicor engine and comes with loads of latest features including ABS with electronic brake force distribution, electronic stability platform, six air bags, hill hold, ambient lighting, cruise control, Harman touch screen infotainment system among other things.

Initial reports suggest that Hexa has got good bookings. The demand is much more than the company had anticipated and there is already a waiting period of 8 weeks, said Mayank Pareek, president of Tata Motors’ passenger vehicle business.

Tata Motors was once a strong contender in the SUV space when it launched the Sumo almost two decades back. Then came the Safari. But, limited new launches by the company in the last few years, led to Tata Motors losing out to others, particularly Mahindra & Mahindra, which has a range of SUVs in the market. The space has also exploded in recent years, with the entry of compact SUVs like Renault Duster and Hyundai Creta.

India’s utility vehicles are growing at around 30%, far ahead of the overall passenger vehicle market. In the first nine-months of the fiscal UV sales accelerated 33% to over 556,000 units.

According to an Autocar Professional report, IHS Markit Automotive expects SUV sales in India will more than double in India by the end of this decade, with annual sales topping 1 million units.

 

Tata Motors can’t therefore ignore this segment if it aims to resurrect its passenger vehicle business. The company has plans to launch a range of SUVs over the next few years. Until then, it will have to bank on the Hexa and hope the initial enthusiasm continues for a long time.

 

 

Posted in Uncategorized

BSE, Asia’s oldest stock exchange, set to raise Rs 1,240 crore from IPO

bse

You may have traded in stocks on the Bombay Stock Exchange. Soon, you will be able to buy and sell shares of the Asia’s oldest stock exchange itself.

BSE’s much anticipated initial public offering is set to hit the capital markets later this month. The exchange has set a price band of Rs 805-806 a share for the public issue.

This will be the first  IPO of 2017 and will raise around Rs 1,241 crore at the upper end of the price band. The issue opens for sale from January 23-25 and values the exchange at around Rs 4,400 crore.

The IPO, is essentially an offer for sale, giving an exit opportunity to some of its large shareholders.

Singapore Exchange, investment firm Acacia Banyan Partners, Caldwell India Holdings and Atticus Mauritius are among those selling about 1.54 crore shares in BSE.

BSE was established in 1875 and today over 5,500 companies are listed on the stock exchange. The total market capitalisation of BSE-listed companies stands at around Rs 110.41 trillion.

Edelweiss Financial Services, Axis Capital, Jefferies and Nomura are the lead managers and global coordinators for the IPO. Motilal Oswal, SBI Capital Markets, Sparc Capital and SMC are the co-book running lead managers.

BSE’s rival National Stock Exchange too has already set the ball rolling for its initial public offering, which will also be an offer for sale giving existing shareholders an exit.

Fund raising via capital markets touched a six-year high in 2016, with over 26 companies raising more than Rs 26,000 crore via public issues.

Posted in Uncategorized

Service tax amendment to hit tour operators? 

The government this week issued an amendment on service tax applicable to tour operators, which threatens to hit their business, according to a tax expert.

From January 22, tour operators will be required to pay service tax on 60% of the total invoice they issue to customers. Until now, the tour operators paid service tax in two slabs.

For booking hotel accommodation, the tax was payable on 10% value and for other tours, the tax was payable on 30%.

“This amendment would be prejudicial to tour operators and may significantly impact the financial models of their business engaged in tour and travel booking,” said Rajeev Dimri, leader, indirect tax, BMR & Associates.

In the recent past, the travel industry was hit with intense inquiries and investigations from service tax authorities on services related to booking hotel accommodation.

“The recent amendment, instead of clarifying the issue, creates more doubts for the industry, specially related to taxability of the standalone hotel booking transaction in the hands of tour operators,” added Dimri.

 

Posted in Uncategorized

From being CEO, MD of TCS to becoming the new chairman of Tata Sons, the rise of N Chandrasekaran

This could be a story straight out of a movie. A boy born into a agricultural family in a small village dreams of making it big one day, moves to the big city to work in a top company and one day becomes the boss.

This is the real life story of Natarajan Chandrasekaran. Until today, he was the CEO and MD of Tata Consultancy Services, India’s largest software services exporter. Now, he will be the chairman of Tata Sons, the holding company of the Tata Group, which has over 100 firms in its fold, from salt to software, auto to aviation.

Chandrasekaran, may not carry a Tata surname, nor he may have any family relations, but he is an out and out Tata man. Chandra, as he is fondly called, joined TCS as a trainee in 1987 after completing his Masters in Computer Applications from Regional Engineering College, Trichy. He has been with TCS since.

Chandra was promoted to MD and CEO of TCS in 2009. He was appointed as a director on the board of Tata Sons on October 25, 2016 and his name had been doing the rounds as one of the prospective candidates to lead the Tata Group since.

And rightfully so. Since he was named CEO and MD, TCS’ revenue and profits have seen over a three-fold jump. In 2015-16, the company reported a consolidated revenue of over $16.54 billion on net profit of $3.69 billion.

As a chairman of Tata Sons he will have a quite a few challenges ahead of him, restructuring and returning to good health Tata Steel’s European operations, turning around Tata Motors’ domestic passenger vehicle business and making luxury hotel company Indian Hotels profitable again at a consolidated level, just to name a few key issues.

Outside of work, Chandra loves to run long distance marathons. His career so far too has been like a marathon and not a short sprint. Now as he takes charge as Tata Sons chairman, he will need all that stamina and energy for the many miles that lie ahead.

Posted in Uncategorized

India residential real estate demand slumps amid demonetisation; outlook remains uncertain


Post the government decision to ban Rs 500, 1,000 currency notes, there were expectations that residential real estate demand will come down. But the extent is huge.

In Mumbai Metropolitan Region,  sales have plunged to the lowest in seven years in the October-December quarter, according to consultancy Knight Frank.

While sales halved to 8,617 units, new launches slumped by 77% to 2,617 units.

The picture was not much different in the other top cities in India. The premium end of the market, particularly, has been worst hit in most cities.

Demonetisation has clearly hit buyer sentiments, with many postponing big decisions like buying new homes till clarity emerges on the currency front. Also, many are waiting and watching if banks cut home loan rates further.

But, there is also no denying that lot of deals, at least partially, happened via cash transactions in the sector. Like, paying for parking, for instance, in cash. Many developers, particularly the smaller ones, were up until recently even offering discounts, if a buyer paid partly by cash. Some are learnt to be still doing such cash deals.

With a major portion of the available cash in the economy sucked out by the government, such deals have declined significantly.

The demonetisation move came when the sector was starting to look up a bit after a two year downturn.

There is an expectation that the recent sharp interest rate cuts by banks would help revive end-user demand. But that alone may not be enough.

As long as there is economic uncertainty, consumer sentiments will remain weak. Also, there are other factors, local and global.

RERA comes into effect this year. Once this act is in place, builders won’t be able to pre-sell apartments unless they have all the requisite approvals. That will hurt cash flows at a time balance sheets of developers are already stretched.

Globally too, new US President Donald Trump’s policies will have global political and economic repercussions.

UK voted to leave the European Union last year, but the formal process will only begin this year and that outcome will also impact software exporters and other companies that have a sizeable presence in the UK. This will have direct and indirect impact in India too.

So all in all things don’t look too bright for the realty sector, at least in the first half of 2017.

Prices in the secondary market have already started falling. This will impact primary market deals too.

The developers will only be wishing that prospective buyers fall for the low interest rate bait and help turnaround the market.

Posted in Uncategorized

Wockhardt: From Hero to Zero?

Last year, Wockhardt was being touted as one of the biggest success stories in Indian corporate world. It had defaulted on USD 110 million in overseas bonds in 2009 and had to restructure Rs 1,300 crore in loans. But the pharmaceutical company turned around and came out trumps. Its debt to equity ratio during last year fell below 1, from as high as 5.5 in March 2010, according to a Reuters report. Not surprisingly the stock soared, rising more than three fold in financial year 2012.

But as they say, what goes up also comes down. And Wockhardt, hit by regulatory issues in the UK and US, has really had a hard landing.

On Tuesday, the Mumbai-based company informed stock exchanges that Medicines and Healthcare Products Regulatory Agency, Britain’s drug regulator, revoked a quality compliance certificate for one of its manufacturing plants and will instead issue a restricted certificate, which will allow Wockhardt to only ship critical medicines from that plant, in Kadaiya, Nani Daman.

This is Wockhardt’s third plant to be hit by export regulations so far in 2013. The company, led by Habil Khorakiwala, has 7 plants in India.

Earlier this month, the British drug regulator had revoked a good manufacturing practice certificate issued to the company’s Chikalthana plant and its plant at Waluj, Aurangabad, has already been under the scanner of MHRA and the US Food and Drug Administration (it has banned drug shipments from that plant), for months.

Hit by the regulatory hurdles, investors, who were quick to lap up the stock last year, have been equally swift in dumping it this year. Year-to-date since March-end, Wockhardt shares are down 77 percent.

Another Indian pharma major, Ranbaxy has faced similar regulatory hurdles in recent past. Earlier this year, the company owned by Japan’s Daiichi Sankyo, pleaded guilty to felony charges in the US, related to good manufacturing practises at its Dewas and Paonta Sahib plants in India.

In my personal opinion, its the “chalta hain” attitude of us Indians and the general low standards of cleanliness and facility maintenance that are probably the key reasons why Indian pharma firms have been found wanting by the regulators in UK and US.

“While valuations are supportive, we feel multiples could be under pressure in the near to medium term, driven by uncertainty around remediation timelines, future approvals and US FDA regulatory risk on L1,” Macquarie Equities Research said last week after the incident related to the Chikalthana plant.

It believes that early resolution of the regulatory issues is key, but doesn’t expect it before FY2015-16.  It cut its target price to Rs 480 as it expects the stock to trade at a discount to fair value set at Rs 800.

According to BSE data, most mutual funds, except LIC of India and HDFC MF, have sold their investments in Wockhardt. Clearly, the darling of Dalal Street only a year ago, seems to be wanted no more, at least till the medium-term regulatory picture gets clearer.

 

Posted in Uncategorized

Firing on all cylinders Tata Consultancy Services outperforms again

Will Tata Consultancy Services be crowned the undisputed king of the IT industry, questioned a leading financial newspaper earlier on Tuesday. If the software services exporters second quarter performance was to be considered then it could very well be.

TCS beat street expectations on Tuesday evening,  a similar story repeated quarter after quarter in recent years. Its net profit rose 34 percent year-on-year to Rs 4,702 crore and revenue gained 34 percent to Rs 20,977 crore.

In US Dollar terms, its profit was up 16 percent to USD 748 million, while revenue rose 17 percent to USD 3.34 billion.

The Mumbai-based firm is India’s largest IT company and has continued to march way ahead of its Bangalore-based rival Infosys and the rest of the pack that follows.

Infosys, once the bellwether, lost ground to TCS in the last couple of years, amid a management rejig and its continued focus on protecting margins, even as rivals offered more flexibility in pricing. Last week, Infosys too reported better-than-expected results for the July-September quarter, but TCS’ performance once again shows Infy has a lot of catching up to do.

TCS’ stellar performance was no doubt helped by the sharp depreciation in the Rupee last quarter, but new deals have also continued to flow in and across geographies its seeing a good momentum. 

“It has been another great quarter. We have demonstrated all-round strong growth across markets and industries, highlighted by efficient and rigorous execution…“We continue to see a robust demand pipeline across markets,” said N Chandrasekaran, MD and CEO.

TCS’ volumes rose a little over 7 percent in Q2, a nine quarter high. Its operating margin rose to 30.1 percent.

“Strong volumes, currency tailwinds and firm execution helped us post industry-leading operating margins in this quarter,” said Rajesh Gopinathan, CFO.

With the strong growth momentum continuing, TCS has now plans to increase its headcount too.

Chandrasekaran told reporters in Mumbai that the pipeline was looking good and they needed to look at scaling in Europe.