Real Estate Intelligence Service, Thursday, July 30, 2009

FM sees revival, 6.7% growth

FM sees revival, 6.7% growth
The Economic Times, July 30, 2009, Page 11

Our Bureau NEW DELHI

FINANCE minister Pranab Mukherjee said on Wednesday he expects the economy to grow by 6.7% this fiscal as the economic downturn has been arrested and the manufacturing sector is witnessing a revival.

“Downturn has been arrested...It is possible to maintain the growth momentum ...(and) achieve the desired level of growth”, the minister said while winding up the debate on the Finance Bill in Rajya Sabha, which returned the Bill, completing the budget exercise for 2009-10.

Noting that signals of a pickup are visible in sectors like steel, cement and construction, Mr Mukherjee said, “We have ended 2008-09 at 6.7%. I do hope we will be able to maintain this level of growth (in 2009-10).”

The Reserve Bank of India on Tuesday projected a growth rate of 6% with an upward bias. Mr Mukherjee said even though the central bank’s projection was conservative, it upgraded the outlook of the economy.

Even global agencies like the International Monetary Fund (IMF) were of the opinion that the Indian economy would grow at 6%-plus, the minister said.

On concerns raised by the members on black money stashed abroad, he said the government was in the process of amending the double taxation treaties with almost 100 countries to provide for a legal framework for exchange of information on the menace. He also warned that if builders do not pass on the benefit of tax holiday to consumers, the same may not be extended in the future.

Pranab pegs growth at 6.7%

Pranab pegs growth at 6.7%
The Financial Express, July 30, 2009, Page 2

fe Bureau, New Delhi

A day after the Reserve Bank of India pegged economic growth at 6% for 2009-10, finance minister Pranab Mukherjee on Wednesday told the Rajya Sabha that he expected growth to stay at the 6.7% level recorded in 2008-09. Pointing to the positive trends in manufacturing sector output as well as core sector production in June, Mukherjee expressed hope that the trend gathered momentum ‘when the busy season comes.’

“With that momentum, it will be possible to achieve the desired level of growth. As you know, normally the RBI’s estimate is a bit conservative; I would not say very conservative, but a bit conservative. Even they have upgraded our GDP growth,” Mukherjee said. The finance minister said international rating agencies and the IMF, which had earlier thought India would grow at 5% or less this year, now agreed that India would have around 6.6% growth.

Explaining the fresh sops announced for the housing sector in the Lok Sabha as amendments to the Finance Bill, Mukherjee said housing activities were slowed down from middle of 2007 to 2008. Sending out a subtle warning to housing project developers, the minister said, “I am reiterating my expectation from developers, who will get this advantage, that it should get reflected in reduced price of houses which they will sell to buyers. Unfortunately, it happens in our country. They forget it and they do not pass it on.”

Responding to MPs’ queries on disinvestment under the UPA-II, Mukherjee said, “Disinvestment is a continuing process. There is nothing dramatic about it. From 1991 onwards, if I remember correctly, we have mobilised Rs 53,000 crore. It is an obvious and continuous process — by whatever nomenclature you may call it —disinvestment or people’s participation or strategic sale.” Dismissing the notion that the Centre was eager to push disinvestment to fix the soaring fiscal deficit, the finance minister said proceeds from stake sales would be invested in the National Investment Fund (NIF) as per the policy. “...From the corpus of the NIF, it may be used for specific social sector projects. Part of it will be utilised for meeting the public sector requirements like upgradation, modernisation and expansion. Therefore, it is not merely to meet the fiscal deficit,” he underlined.

Responding to BJP MP Ravi Shankar Prasad’s queries about Prime Minister Manmohan Singh’s commitment to initiate action on unearthing black money stashed abroad within 100 days, Mukherjee said that actions had been initiated. “Now we are going to accept the code which has been prescribed by G-8 countries by which the exchange of information will take place. The legal framework for that is the avoidance of double taxation. We have entered into such avoidance of double taxation agreements with various countries, which are nearly 100,” the minister said.

“We have taken up amending the provisions of those Acts so that exchange of information is possible. Certain countries have their own secrecy banking rules. Switzerland is well known for it,” Mukherjee said, in reference to a particular recent case where information was shared with India on the condition that it could not be made public.

“But in the context of the financial crisis, now they have agreed to share this information, provided there is a legal framework and it is required only for the purpose of tax collection, not for any other purpose. Keeping that in view, we are proceeding. Therefore, action to bring back the money, which has been stashed away, is also being taken,” the FM said.

Domestic market to lead IT growth

Domestic market to lead IT growth
The Hindu Business Line, July 30, 2009, Page 4

Nasscom projects 15-18% rise; core export markets stabilising.

Our Bureau, Chennai

The domestic market seems to be coming to the aid of the IT-BPO industry, because it is projected to grow 15-18 per cent, even as the export market is likely to grow a mere 4-7 per cent.

For sure, the export market is about thrice as much as the domestic market, but in a slowdown, anything helps.

Export revenues

The National Association of Software and Services Companies (Nasscom) on Wednesday said that the industry’s exports are expected to grow to between $48 billion and $50 billion, compared with $46.3 billion last year.

Last year, the industry’s export revenues grew 16.3 per cent, says Nasscom, but calculations show only a 14.6 per cent growth, from $40.4 billion in the previous year.

The root of the discrepancy lies in reckoning of Satyam Computer’s accounts, which are yet to be restated.

Disclosing Nasscom’s projections at the body’s annual meet here, the Chairman, Mr Pramod Bhasin, stressed that even a 4-7 per cent growth is good, given the economic environment.

He noted that core markets such as North America and verticals such as the banking and financial services industry “have started to stabilise”.

The domestic IT-BPO market is projected to grow at a higher rate — between 15 and 18 per cent — to reach around Rs 67,000 crore, compared with Rs 57,000 crore last year.

In dollar terms, domestic revenues were $12.5 billion in FY-09, Nasscom said.

Fiscal 2009 figures grew 21 per cent over Rs 47,000 crore in fiscal 2008.

The domestic market witnessed enhanced focus in the year ended March 2009 with “large transformational deals in telecom and e-governance, with contract value of outsourcing deals growing by 32 per cent, Mr Bhasin told newspersons after releasing the Nasscom outlook for the industry in 2009-10.

Growth break-up

Within the export segment, IT services have grown in FY-09 by 14.7 per cent to $26.5 billion; BPO exports are up by 16.5 per cent to $12.7 billion; engineering services and product exports up 11 per cent to $7.1 billion.

The industry employed nearly 2.2 million in 2009 fiscal, adding about 200,000 jobs in the fiscal year ended March 2009 (FY09).

In the previous year, the industry added between 250,000 and 300,000, according to Mr Som Mittal, President, Nasscom. In February 2009, Nasscom had said that the industry might add, aided by job offers at campuses, a net of one lakh jobs in FY10. TCS, for instance, has made 24,500 campus offers for this year.

Mr Pramod Bhasin, Chairman of Nasscom and CEO, Genpact said, “The demand will be there for people, but the focus would be on quality. The industry has spent a lot over the years in training, and this trend may not continue over time."

"It is time that the government and educational institutions spend more time on training and education,” he said.

IT exports to grow 4-7% in FY10: Nasscom

IT exports to grow 4-7% in FY10: Nasscom
The Economic Times, July 30, 2009, Page 12

Our Bureau CHENNAI

THE IT industry, despite being optimistic on recovery by mid-2010, has projected a single-digit growth of 4-7% for its software and services export during 2009-10. Its projections for the domestic IT and BPO sector growth were pegged higher at 15-18% for the same time period. Nasscom released the annual report at its HR summit held in Chennai on Wednesday.

IT software exports stood at $46.3 billion for FY09, a 14% growth from $40.4 billion in FY08. Domestic services and BPO revenues amounted to Rs 57,000 crore, a 21% growth from Rs 47,000 crore in FY08. Nasscom had projected a growth of 22% in mid-2008 and subsequently scaled it down to 16%.

“We predicted double-digit growth, albeit scaled down, in the middle of the slowdown, because we were still delivering for contracts made in previous years,” said Nasscom chairman Pramod Bhasin. “But, now we are projecting slower growth, thanks to the dwindling contracts during the slowdown last year.”

He also said that MNCs and large companies had contributed significantly to the figures. Case in point is that adjusting for Satyam’s revenues, export growth in 2009 comes to 16.3%. Cross currency impact accounted for a further 2.4% suppression in growth.

Among exports, services accounted for 57% of revenues, BPO for 27.5% and products & engineering software for 15.5%. In the domestic sector, the split between the three segments was 66.6%, 15.6% and 17.7%, respectively.

“Industry outlook is definitely on the domestic segment and unexplored markets like South America, West Asia, and blocks of Europe,” said Nasscom president Som Mittal. In the domestic segment, BPO grew by 40%, services by 20% and overall outsourcing deals by 32%. “So, recovery will be driven by the BPO sector mainly,” Mr Bhasin said.

Nasscom projects single digit export earnings for IT, ITeS

Nasscom projects single digit export earnings for IT, ITeS
The Financial Express, July 30, 2009, Page 12

fe Bureaus, Chennai, New Delhi

For the first time in the history of the Indian software exports, the sector will grow at a single digit rate.

According to figures released by the IT industry body Nasscom, the IT-BPO export revenues are expected to grow between 4-7% to stand between $48-50 billion in the financial year 2009-2010. In the last financial year, the IT export revenues grew by 16.3% to clock revenues of $46.3 billion. On Wednesday, Nasscom released industry figures for the financial year 2008-09 along with the outlook for the current fiscal.

Som Mittal, president, Nasscom told FE that the growth projections have been arrived at considering the fact that the economic downturn has led to severe cuts in the IT budgets across the globe, especially in discretionary spending. “There are other factors as well like there has been a shift from onsite to offshore, which has brought down the revenues though the effort continues. Moreover, in some sectors the transactional volume has come down like in the BPO industry. There have also been cases where companies have started in-sourcing the work instead of outsourcing it as they had more employees to do it in-house,” he said. .

The total revenues of the IT and BPO industry, which includes exports and the domestic market was at $58.8 billion for the financial year 2008-09, a growth of around 13% year-on-year. However, the growth in the domestic market exceeded the export market growth rate at 21% with revenues of Rs 570 billion in FY08-09. Even in the current fiscal, IT-BPO Domestic revenues are expected to grow at a healthy rate of 15-18%, to reach Rs 650-670 billion. Within the export segment, IT services have grown by 14.7% to clock revenues of $26.5 billion and BPO exports are up by 16.5% registering revenues of $2.7 billion.

Mittal said that there are huge opportunities in the domestic space especially in the government vertical along with sectors like retail, manufacturing and utilities among others which remain highly under penetrated in terms of IT investment.

He added that the SMB market which accounts for roughly 50% to 60% of the potential market in India continues to be largely unaddressed. They are also expected to increase their IT spends to increase efficiency in these tough times.

Moreover, there are emerging verticals with significant growth potential for the BPO industry like aviation, hospitality and retail.

“Social infrastructure like schools, colleges and hospitals needs to be developed to increase the IT business penetration in tier-II cities,” he said.

R Chandrasekaran, president and MD, Cognizant said that migration of more onshore work to offshore would open up the possibility of adding more jobs in India. Nasscom is also working on a curriculum for the finishing school model to impart skill upgradation to passing out graduates aspiring for jobs in IT, he added.

The reason behind the move is that the industry will not be hiring at the same rate this year and students passing out this year can engage themselves in these skill upgradation courses to be better prepared for the job market.

While the IT and BPO industry, added a total of 22 lakh people in the last financial year, up 10% from the year-ago period, this year, “the hiring will be tens of thousands compared to hundreds of thousands like in the last many years,” warned Mittal.

While IT services exports added around 9.22 lakh people, the BPO exports industry was a close second with addition of 7.86 people.

Emphasising the need to rework on the model that the IT industry used to operate on, Mittal said that US is the biggest market for the industry and will continue to remain so despite other emerging geographies fast catching up.

“The industry can look for newer geographies like Middle East or look for new verticals within the existing geographies of US and Europe,” he said.

Mittal added that healthcare, utilities and energy are the sectors where growth will be coming in the future. Moreover, the industry needs to focus on a newer customer base.

“So far we have mainly focussed on the Fortune 500 companies. But the spend outside the Fortune 500 is the same as of the Fortune 500. So, we need to address that market,” he said.

FDI continues to drop, May sees 43% fall

FDI continues to drop, May sees 43% fall
The Economic Times, July 30, 2009, Page 11

FOREIGN INVESTORS KEEP AWAY AS INFLOWS DECLINE SHARPLY TO $2.2 BILLION

Our Bureau, NEW DELHI

FOREIGN direct investments (FDI) in May dropped 43% to $2.2 billion compared to the $3.9 billion received in the same month of the previous year, department of industrial policy & promotion (DIPP) secretary Ajay Shankar said.

Despite the sharp decline, the government was confident of the flow of foreign capital into the country improving. Speaking on the sidelines of a Confederation of Indian Industry (CII) seminar, Mr Shankar cited the country’s “promising” industrial output in June for a better FDI show in the months to come. “We think, with liquidity improving and confidence in the economy rising, these (FDI) numbers should pick up,” he said.

But the FDI numbers since January have been anything, but promising. In April, FDI inflows fell 38% to $2.34 billion from $3.74 billion a year ago. And in the calendar year 2009 up to April, FDI inflows slipped by nearly 46% from the year-ago period to $8.5 billion, as per the latest figures released by DIPP.

Not surprisingly, the government had scaled down the FDI target by $5 billion from $35 billion last fiscal.

The reason for the depleted overseas capital inflows is the reluctance of foreign investors to put their money in risky emerging markets. But some experts see India’s 6.7% growth in 2008-09, when developed countries struggled with recession, bringing back foreign investors.

In the first six months of 2008-09, FDI inflow was $27.3 billion compared to $24.5 billion in 2007-08. Cumulative FDI inflow from April 2000 to March 2009 was about $90 billion, as per DIPP data.

The department collects data on foreign investment from RBI and releases monthly updates. Mauritius, with which India has a double taxation avoidance agreement, is the largest contributor of FDI into India, followed by Singapore and the US.

Cement to grow 9%: Scindia

Cement to grow 9%: Scindia
The Economic Times, July 30, 2009, Page 11

NEW DELHI: The country’s cement industry is likely to grow about 9% during the current financial year on account of the government’s emphasis on infrastructure development. In a written reply to the Rajya Sabha, the minister of state for commerce and industry Jyotiraditya M Scindia said, “With thrust being given by the government for development of infrastructure, housing and rural connectivity, the cement industry is likely to witness growth of around 9% during the year 2009-10.”

NHB looks for partner for its JV Mortgage Guarantee Co

NHB looks for partner for its JV Mortgage Guarantee Co
The Financial Express, July 30, 2009, Page 13

fe Bureaus, kolkata

The proposed Indian Mortgage Guarantee Company, in which National Housing Bank (NHB) will have a majority stake, is scouting for a partner after AIG subsidiary United Guarantee Corporation shed its stake. While other partners will remain in the joint venture, there may be a restructuring in the shareholding pattern.

“We have already done a fair amount of work towards that and talked to a few potential partners,” NHB chairman and managing director S Sridhar said. While he did not mention any time frame, he said, “It will depend on how soon we complete an agreement with the partner,” he said.

The mortgage guarantee firm, which is likely to start with a capital of Rs 120 crore, and has been in the works since 2002, aims to provide an efficient platform for Indian banks to transfer their loan risks. Sridhar, talking at the banking conclave organised by Ficci said the National Housing Bank will remain the majority stakeholder since it will drive the joint venture.

“NHB needs to have some supplementary expertise from the people who have done mortgages. Even RBI guidelines require that one of the partners must be experienced in that. We are looking for partners in the developed country markets,” he said.

In the earlier structure, NHB held a 43% stake, AIG 41%, International Finance Corporation and Asian Development Bank held 8% each in the JV. But the AIG subsidiary quit the JV last year.

Sobha Q1 net nosedives to Rs 12.7 crore

Sobha Q1 net nosedives to Rs 12.7 crore
The Economic Times, July 30, 2009, Page 4

Our Bureau BANGALORE

REALTY major Sobha Developers has seen its net profit nosedive for the first quarter ended June 30, 2009 at Rs 12.7 crore against Rs 50.5 crore for the same period in FY09. Income from operations stood at Rs 177.1 crore (Rs 346.8 crore in the comparable quarter).

Sobha, which bore the after-shocks of the global economic slowdown, has seen a revival in fortunes in Q1 compared to the fourth quarter (Q4) ended March 31, 2009. Net profit in Q1 at Rs 12.7 crore is up 76.39% from Q4 while total income at Rs 178.6 crore was up sequentially 15.6%. “The real estate industry has seen clear signals of revival in demand during the first quarter. With the Indian economy growing at a rate of 6-7% and expected to achieve a higher growth rate in the next couple of years, real estate infrastructure industries are poised to play a more significant role. It will be a domestic driven industry growing at a much faster pace,” a company filing made with the bourses added. On its part, Sobha Developers has realigned debt, brought on board a private equity partner besides successfully completing a QIP raising Rs 500 crore.

According to the filing, these steps have added the much-needed comfort in operations and have helped the company focus on progress in various projects across key cities including Bangalore. The company intends to focus on debt reduction and cost optimisation and believes it is wellequipped to capitalise on the early revival in the Indian economy.

As of June 30, 2009, the company has completed 50 residential/commercial in-house projects and 146 contractual projects covering 31.9 million square feet of built-up space. At present, it has 31 residential/commercial ongoing projects totalling 9.2 million square feet. The company has contractual projects in Karnataka, Kerala, Andhra Pradesh, Orissa, Tamil Nadu, Punjab, Haryana, NCR besides Maharashtra. Sobha’s projects span various segments including plotted development, multi-storey buildings, row houses, villas and integrated townships. On the bourses, the Sobha scrip was down 1.2% at Rs 219 with 3.5 lakh shares changing hands on the BSE.

Sobha Developers net down 75%

Sobha Developers net down 75%
The Hindu Business Line, July 30, 2009, Page 14

Our Bureau, Bangalore

Sobha Developers recorded a net profit of Rs 12.7 crore for the quarter ended June 30, 2009, down 75 per cent from Rs 50.5 crore recorded during the corresponding quarter of last year. The turnover was down 49 per cent at Rs 178.6 crore (Rs 348.1 crore).

Mr J.C. Sharma, Managing Director, Sobha Developers, said that downsizing staff and restructuring employee benefits have resulted in reduced employee costs. Last year, during the corresponding quarter, the company had over 3,000 employees, which has now come down by about 1,000 employees. Besides, the company had also effected a 15 per cent cut in employee salaries. Costs were down 44 per cent to Rs 143 crore (Rs 254.1 crore).

Residential projects

He added that there has been a 45 per cent sequential growth in sales for the company, and “the process of this improvement is expected to continue in the coming months.” The company plans to launch residential projects in the National Capital Region, Mysore, Coimbatore, Bangalore and Thrissur this financial year. “We will not be competing in the Rs 20-lakh segment, but wish to compete in the 1,000-sq-ft-plus segment,” he said. The residential units would be priced about Rs 35 lakh (all inclusive), he added.

The company plans to raise about Rs 150-200 crore more during this year, in addition to the Rs 750 crore it had raised through private placements and qualified institutional placements. “We are confident of achieving our targets,” Mr Sharma said, of the Rs 900 crore, the company planned to raise in all.

HDIL net dips 66% to Rs 101cr

HDIL net dips 66% to Rs 101cr
The Economic Times, July 30, 2009, Page 4

Our Bureau MUMBAI

MUMBAI-BASED real estate company, Housing Development Infrastructure (HDIL) on Wednesday reported a 66% decline in its net profit at Rs 101.47 for the first quarter ended June 30, 2009. The company’s net profit for the same period in the last fiscal was Rs 317.94 crore. This is attributed to the slowdown that the real estate sector had been passing through since late 2008.

The company’s net profit however increased on a quarter-on-quarter basis from Rs 61.9 crore in last quarter to Rs 101.47 crore this quarter reflecting a revival in the sector. The total sales of the company stood at Rs 318.62 crore during the quarter compared to Rs 601.13 crore in the corresponding period last year. Sarang Wadhawan, managing director, HDIL said: “We expect to see significant positive changes over the next two quarters.” The real estate sector throughout the country had been going through a difficult period in the light of the slowdown.

The company also said it would issue securities worth $450 million and the EBITDA margins have improved by 9.39% compared to the fourth quarter last year. The company also declared that the debt equity ratio improved and stood at less than 0.5, post the qualified institutional placement (QIP). Earlier this month, the company had raised Rs 1,688.40 crore through QIP. The company’s stock fell by Rs 20.55 or 7.13% at Rs 267.85 on Wednesday.

On Monday, the company in an announcement to BSE informed that resignations of Dheeraj and Kapil Wadhawan, the former directors of the company, have been accepted. This was part of the company’s succession plans, the company officials maintain. Dheeraj and Kapil Wadhawan are also on the board of DHFL.

HDIL’s numbers reflect stabilisation in realty

HDIL’s numbers reflect stabilisation in realty
The Hindu Business Line, July 30, 2009, Page 15

Improved transferable development rights realisation.

Vidya Bala

BL Research Bureau Housing Development and Infrastructure’s (HDIL) financials for the quarter-ended June 2009 are a reflection of the stabilisation being witnessed in the Mumbai realty market.

While the 48 per cent decline in sales and the 66 per cent drop in net profit for the latest quarter over the June 2008 numbers is sufficient indication that the company is far from its peak performance, the sequential improvement (over the March 2009 quarter) suggests that profitability could be back on track.

HDIL’s revenues declined 18 per cent to Rs 295 crore compared with the March quarter; operating profits, nevertheless jumped 87 per cent to Rs 180 crore as a result of better prices from Transferable Development Rights (TDRs) as well as a decline in construction costs. The company has stated that it has sold about 1.8 million sq. ft. at an average price of Rs 1,500 per sq. ft.

Clearly, TDRs accounted for a chunk of the revenues for the June quarter. The average price of TDRs now is also a significant improvement from the Rs 1,000-1,200 per sq. ft. rate at which the company sold in the March quarter.

Operating profit margins at 60 per cent have not only improved over the March quarter, but also exceeded the 44 per cent clocked a year ago, probably reflecting lower material costs. However, the current OPMs do not appear sustainable, as the company had launched residential projects at massive discounts in the June quarter. The effect of this would be felt in its profit margins only after a few quarters. A 40-45 per cent OPM appears more sustainable.

Net profits at Rs 107 crore were a good 73 per cent higher than the March quarter. Pressure from interest costs appears to have abated with a 44 per cent decline in interest cost on a sequential basis. HDIL may see further relief in the coming quarters as a good Rs 1,400 crore of the Rs 1,689 crore raised through qualified institutional placement went to repay loans. With this, the company would not have any principal repayment commitments until October 2010.

HDIL has deployed the rest of the QIP proceeds towards its key project — airport land rehabilitation. The project is expected to gather pace as a result of the infusion.

Going forward, the sustainability of the revived TDR sales/prices (peak rate for the quarter was Rs 2,070 per sq. ft.) and residential sales could hold the key to reviving volumes. In this regard, a marginal improvement in property prices is already visible in the Mumbai market.