BOMBAY, 12 August — This week, we take a quick look at some of the sectors of the Indian industry and how their performance has taken off in the current fiscal.
Automobiles
A significant turnaround was witnessed in the automobile industry with an overall production growth of 24 percent during April-June 2002 as compared to the negative growth of two percent last year.
While motorcycles registered a growth of 49 percent, the negative growth trend in scooters continued this year also. However, mopeds and three-wheelers, which saw negative growth last year, registered positive growths of 4.2 percent and 37 percent respectively during 2002. Besides, HCVs (38 percent) and LCVs (30 percent) registered high positive growth rates as compared to the negative growth witnessed in the previous year.
Shipping
It has been a year full of rough weather for the Indian shipping industry. The largest shipping line of the country, Shipping Corporation of India, which owns more than a hundred bottoms, saw its bottomline go under with a net loss of Rs.60 million in the first quarter of the fiscal year. During the same period last year it was riding the highs with a net profit of Rs.1,110 million. Net profit of the largest private sailor, Great Eastern Shipping Ltd., plunged 54 percent in the first quarter to about Rs.300 million from Rs.630 million for the corresponding period of the previous year. GE Shipping owns a fleet of 28 ships and 31 offshore vessels.
The other private mariner, Essar Shipping, managed to stay afloat with a meager profit of a little over Rs.30 million in the first three months. Last year, it had reported a net profit of over Rs.250 million during the first quarter. Choppy freight rates were blamed for the dismal performance and for the current fiscal, not much of a change is expected in the freight market though the tanker rates are estimated to stabilize.
Software
Though this first quarter was touted to be the benchmark for revival for the Indian software industry, going by the performance declared, this has not turned out to be quite true. The top three in the industry, Infosys, Satyam and Wipro have shown a slump in operating profit margins. The key reason for this drop in OPM is increased competition amongst suppliers to grab the nearly flat market. Moreover, pricing pressures had not come down. Also, sales and marketing expenses have increased, as was stated by Infosys for its operations.
And what about the rest of the industry? In fact, if you remove the top three from the list, it is evident that despite a fall in revenues for all others by 20 percent, the OPM for them, collectively, has remained constant at around 27 percent for the coming months, industry experts say that overall, the ratio of offshore projects would increase manifolds and thus this marginal drop in profitability is nothing to worry about.
Steel
After going through a difficult year, the steel industry is showing some signs of recovery this fiscal. Price trends in the domestic market, dictated to a large extent by international price trends, in addition to the local demand-supply scenario, has been picking up. Tata Steel witnessed a tripling of its profits for the first quarter of this fiscal. This was attributed to a mix of value-added products, higher volumes, increased sale of branded products and higher exports. In fact, the company claims that the rise in the prices of steel products only marginally contributed to topline growth and profits. With the exception of Tata Steel, which was the sole profitable steel maker, almost all the others recorded losses in the last fiscal. The recent price hikes will help mitigate last year’s losses and, if the current prices can be sustained, it is expected that loss making manufacturers such as SAIL, Essar, Ispat and Jindal Vijayanagar can turnaround this year, or at least reduce the impact of losses in other steel segments.
Steel prices were prevailing at a 20-year low and the global outlook for future price trends indicate that in the near term, the prices may continue to go up.
Consumer durables
The consumer durable sector has recorded an excellent growth in production during April-June 2002 as compared to the same period in the previous year.
Refrigerators witnessed a high growth of 10 percent this year as compared to 0.2 percent recorded last year. However, while the growth in sales of refrigerators has gone up from 0.5 percent in April-June 2001 to 10 percent in the corresponding period in 2002, exports have fallen from a positive growth of 10 percent last year to six percent this year. The air-conditioner segment also recorded an excellent growth of 22 percent in production this year as against 15 percent last year. The most impressive growth was recorded by the color television (CTV) segment which registered an excellent growth of 40 percent this year as compared to last year’s negative growth of 10 percent.
