- Indian Auto Industry ended FY21 on a strong note, but what is in store for the next few Quarters?
Indian Auto Industry was facing a slowdown in FY20 amidst transitioning to Bharat VI norms and an economic slowdown in the country. Fears of a complete slump suddenly became real with the onset of the Covid-19 pandemic. Lockdown in the entire country meant that manufacturing came to a grinding halt. Demand for passenger and commercial vehicles fell drastically. All these factors adding up led to the Nifty Auto index to fall to levels close to 4700 points from about 8000 points at the beginning of Jan2020, almost a 40% drop. It was almost October before the index could recapture the 8000 points level. With the demand picking up in the festive season, ease in the lockdown restrictions and RBI providing liquidity relief to the manufacturing sector, the sector saw a positive momentum in the 3rd and the 4th quarters of FY 21. In PV segment, for 4 wheelers, companies like Tata motors and Maruti posted 106% and 32% revenue growth YOY, respectively. Hero MotoCorp shined bright in the 2-wheeler segment with a YOY revenue growth of nearly 39%. Strong comeback in the rural economy meant that Tractor sales were robust and escort motors posted a mammoth 60.7% revenue growth YOY for FY 21.
The second wave of surge in the Covid-19 cases in India has led to country-wide lockdown restrictions and the Auto industry is faced with a similar challenge faced a year ago in the same duration. Demand seems to be tapering in the PV segment and CV segment alike. However, this time the carmakers are predicting their estimated forecasts to be more accurate on the back of last year’s experience. Cost-cutting measures implemented last year will also help them navigate these turbulent times in a safer manner. With the Covid curve flattening in the last few weeks we can be hopeful of a faster recovery.
- The government has ordered a 31.4% cut in the Sugar Export subsidy for the season-ending 30 Sept 2021
The Ministry Of Consumer Affairs, Food And Public Distribution on 20th May announced a cut in the export subsidy in the Sugar industry to Rs.4000 per tonnes down from Rs.5833 per tonne. This cut comes after the fact that India may achieve its target of exporting 6 million tonnes of the sweetener by the end of June, three months before September. When the subsidy of Rs.5833 per tonne was announced late last year there was a flurry of export deals from overseas. With the increased export demand and deals for 5.7 million tonnes export already locked in, the industry has regained momentum which can be observed in the stock market prices of the sugar companies as well. There has been no reason cited by the ministry for this cut and the only rationale that can be inferred is the cut is imposed to avoid inflation in domestic sugar prices due to export.
- BPCL likely to announce a large dividend payout; trade volumes up by 27% on expectation
BPCL share rose 2.1% as close to 99 lakh shares were traded on both the bourses on 20th May 2021. The company is expected to announce the decision on the final dividend on 26th May. BPCL recently sold the Numaligarh Refinery(NRL) in Assam for Rs.9876 cr. In two more deals, BPCL sold treasury shares worth Rs.5500 cr. and later acquired a stake in Bina refinery worth Rs.2400 cr. with estimated net cash of around Rs.13100 cr. after the three deals, if distributed entirely the dividend would work out to be Rs.55 per share.
- SFBs bid for Rs.400 cr during the RBI’s liquidity window
Out of the Rs.10,000 cr. allocated to help Small Finance Banks(SFBs) with liquidity, only Rs.400 cr. was bid on by the SFBs. RBI has mandated that the deployment of the Special Three-Year Long-Term Repo Operation (STLRO) funds within 30 day of raising which is hard due to the lockdowns and the low demand for the Loans. Moreover, SFBs have enough liquidity as the loan demands are muted. RBI will conduct the STLRO operation once every month till October with the unused portion of the Rs.10000 cr. from previous auctions.