Force Motors Shares Rally on Sharp Jump in Q2 Profit

Shares of Force Motors rallied as much as 7.5 per cent to hit intraday high of Rs 3,739 per share after the automaker reported 65 per cent jump in its second quarter net profit.

The net profit of Force Motors, which manufactures a range of tractors, sports and multi-utility vehicles, rose to Rs 42.48 crore on sales of Rs 763.24 crore.

During the second quarter of previous financial year, the company posted net profit of Rs 25.69 crore on sales of Rs 598.84 crore.

For the six months of current financial year, Force Motors showcased growth of 73.55 per cent to Rs 78.24 crore compared to Rs 45.08 crore during the same period last year.

As of 11:27 a.m., Force Motors shares traded 3.81 per cent higher at Rs 3,609 outperforming the Nifty which was down 0.2 per cent.

Godrej Consumer Products Surges 3.5% on Strong Q2

Godrej Consumer Products Limited (GCPL) gained nearly 3.5 per cent on Monday after the FMCG major reported a higher-than-expected net profit in its September quarter, aided by higher margins.

The FMCG major reported a 22.5 per cent increase in consolidated net profit to Rs 287.16 crore while total income from operations rose 9 per cent to Rs 2,244.94 crore.

Its operating income or EBITDA, grew 19 per cent to Rs 404 crore while gross margin expanded by 500 basis points to 56.9 per cent, supported by lower raw material cost. EBITDA or operating margin rose to 18 per cent in line with estimates, up 156 basis points year on year and 311 basis points sequentially.

However, domestic volume growth tapered down to 9 per cent due to sluggish demand, slowing down from 13 per cent in June quarter. Household insecticide segment recorded revenue growth of 13 per cent while hair colour at 17 per cent, backed by double-digit volume growth, whereas soaps saw deflationary pressure with volume growth of 5 per cent and value growth of 3 per cent, Religare said in a note.

Overall, GCPL's India business reported sales growth of 8.6 per cent in Q2 while its international businesses at 10.6 per cent.

Religare maintains a hold rating on the stock with a target price of Rs 1,350, citing high valuations. "With only a sluggish pick-up in demand and higher competitive intensity, we expect GCPL's growth to come under pressure. This coupled with rich valuations limits share price upsides," the brokerage said.

At 11:15 a.m., GCPL shares were up 2.6 per cent as compared to marginal decline in Nifty.

IT majors Infosys, Wipro, HCL, TCS to see challenging second half ahead

The September quarter proved that Infosys is well on track to regain its old glory while TCS slipped. Wipro had a mixed bag to report while HCL showed continued weakness. However, none of them are not shying away from making investments in technology areas such as automation, digital to keep themselves ready for the future

The big four of the Indian IT industry—Tata Consultancy Services (TCS), Infosys, Wipro and HCL Technologies —have posted contrasting results for the three month period between July and September but they do connect at one point. They all maintain that the second half of the fiscal will be more challenging and have hence kept their expectations muted.

These multi-billion dollar firms also remain focused on the opportunities like digital, which are driven by technologies like automation, use of software solutions and creating technology platforms. They believe that this is a phase of transition and are putting their faith in investments for the future.
Infosys, for second time in a row outperformed the market expectations with a 6% sequential revenue growth in US dollars and a rise in net profit of 9.1%. This performance was driven by all-round growth across verticals, geographies with  tighter controls on costs, despite the impact from cross-currency fluctuations. However, its muted outlook for the remainder of the fiscal, tempered down the momentum. TCS reported a 3% sequential rise in dollar revenue which was a shade below the market expectations but the bigger worry has been that it has not been able to meet the projections in the last four quarters. TCS is maintaining its operating profit margin level with a strong volume growth and there is an expectation that it would soon regain the old momentum of high growth.

Wipro’s performance was in line with market expectations with 2.1% sequential revenue growth in US dollars but its OPM took a hit due to wage hikes and currency fluctuations. However, its revenue guidance for the current quarter in the range of 0.5-2.5% brought down the expectations as it has traditionally put in a strong performance during this period.

The big disappointment during the quarter was from HCL Technologies which recorded flattish growth in revenue and a 5.4% sequential fall in net profit. The IT major had earlier warned of a revenue dip and profit warning guidance citing certain client specific challenges and a slow transition in its key infrastructure services projects. The worrying factor for the analysts has been its inability to make a smooth transition of its significantly large order book into steady revenues.

TCS
TCS reported a sedate set of numbers with net profit up 3.2% sequentially to $926 million while revenues rose 3% to $4.16 billion. In rupee terms, the revenue stood at R27,165 crore recording a sequential growth of 5.8% while the net profit rose 6.5% to R6,085 crore.

TCS reported a strong operating margins of 27.1% and reported a volume growth of 4.9%. The IT major’s order book during the quarter had been the highest ever and 30% bigger than in the previous-highest quarter. It added three customers with revenues of $100-million-plus and six customers with revenues of $10-million-plus. TCS added 25,186 employees during the quarter and the company now employs 3.35 lakh people.

TCS MD and CEO N Chandrasekaran said, “We remain focused on partnering with clients in multiple business
dimensions to help them strategise and execute their digital roadmaps. Given the growing market adoption of Digital, we continue to take new IP-led products and platforms to market successfully as well as invest in training our talent.”

Infosys
India’s second largest IT services exporter, Infosys reported a 9.1% rise in net profit on a sequential basis in US dollar terms and a revenue growth of 6% for the second quarter of FY16. The net profit at $519 million at the end of second quarter was boosted by forex gains, lower visas charges and an overall control on costs. The revenues of Infosys during the second quarter stood at $2.39 billion, which was the highest sequential growth in the last 16 quarters.

In rupee terms, the revenue stood at Rs 15,635 crore recording a sequential growth of 8.9% while the net profit grew by 12.1% to Rs 3,398 crore. During the second quarter, the operating profit margins (OPM) of Infosys rose by 150 basis points on a sequential basis to end at 25.5% as compared to 24% in the comparable previous quarter. However, these upbeat numbers were tempered down with the IT major lowering its annual revenue guidance on a commentary of a challenging business environment in the second half of the fiscal and the resignation of the CFO.

Infosys CEO Vishal Sikka said,  “We are experiencing a once-in-a-generation opportunity for services company to help businesses maximise their potential with technology. While results in any one quarter are transitory snapshots of a long journey we do see our focused execution along our strategy starting to produce encouraging results
for our clients, shareholders and Infoscions.”

Wipro
India’s third largest IT services exporter, Wipro reported a 2.2% sequential increase in net profit for the second quarter of FY16 boosted by gains of higher productivity and better pricing power. This rise in net profit came in despite the impact of cross-currency movement and wage hikes.

Wipro’s IT services revenue increased by 4% on a sequential basis to touch R12,042.8 crore at the end of the second quarter driven largely by all round growth across verticals and the ability to win the large sized deals. The IT services revenues in dollar terms was $1831.9 million, showing a sequential growth 2.1% and it was line with its guidance of 1.5-3.5%. The operating profit margins (OPM) of Wipro stood at 20.7%, which was down by 30 basis points when

compared to the previous quarter impacted largely by cross-currency movement and wage hikes.
For the third quarter of the fiscal, Wipro has given a revenue growth guidance in the range of 0.5-2.5% in US dollar terms. Terming the second quarter performance as a period of all-round growth, Wipro CEO TK Kurien said, “As we look forward, we are seeing a stable demand environment. We continue to see strong competition around large deals and there is pressure on pricing with respect to new deals. We aspire to achieve a H2 that is better than H1.”

HCL
India’s fourth largest IT services exporter, HCL Technologies reported a 5.4% sequential decline in net profit in US dollar terms for the quarter ending September, 2015 weighed down by cross-currency volatility, client specific issue and a slowing revenue growth in certain verticals.

The net profit at the end of the quarter stood at $264 million, after taking into account the provision for a one-time payment of $15 million. The revenue at the end of the quarter stood at $1.54 billion which was almost flattish sequential growth of 0.5%. The operating profit margins (OPM) improved by 60 basis points to 21.9%. The net profit in rupee terms stood at R1,726 crore which was a decline of 3.2% on a sequential basis while revenue grew 3.3% to reach Rs 10,097 crore.

HCL Technologies president & CEO Anant Gupta said, “We have started FY16 on a strong footing with LTM revenue growth of 15% YoY in constant currency. Our investments in BEYONDigital, Next-Gen ITO and IoT offerings is reflected in our healthy bookings and deal pipeline and continues to demonstrate our ability to incubate blue ocean ideas and build them to be market leaders.”
Driven by great execution on the ground, our broad-based performance has been led by strong sequential growth in BFS, retail and life sciences verticals with UK and North America leading the markets” – N CHANDRASEKARAN,
CEO & MD, TCS

As we look forward, we are seeing a stable demand environment. We continue to see strong competition around large deals and there is pressure on pricing with respect to new deals. We aspire to achieve a H2 that is better than H1.” – TK KURIEN, Member of the Board & CEO, Wipro
Our investments in BEYONDigital, Next-Gen ITO and IoT offerings is reflected in our healthy bookings and deal pipeline and continues to demonstrate our ability to incubate blue ocean ideas and build them to be market leaders” – ANANT GUPTA, President & CEO, HCL Technologies

While results in any one quarter are transitory snapshots of a long journey, we do see our focused execution along our strategy starting to produce encouraging results for our clients, shareholders and Infoscions” – VISHAL SIKKA,
CEO & MD, Infosys

Asian Paints Shares Slump 5% on Weak Q2

Asian Paints was the top loser in the 50-share Nifty on Monday, falling 5 per cent in a positive market. India's largest paint company on Friday missed volume growth and margins estimates, disappointing analysts.

Asian Paints reported a consolidated net profit of Rs 399 crore on sales of Rs 3,730 crore in Q2, which was below estimates. Volume growth during the quarter was 7-8 per cent (versus estimates of over 10 per cent), while gross margins came in at 45.5 per cent, slightly below estimates.

Domestic paints business, which contributes nearly 80 per cent to Asian Paints' topline, saw sluggish growth impacting operational numbers, analysts said.

Asian Paints' management said overall demand environment remained weak, adding that deficient monsoons and a delayed Diwali impacted volume growth.

Motilal Oswal noted Asian Paints' volume growth in domestic decorative paints at 7-8 per cent was healthy, but added that a combination of down-trading (higher growth in putty and lower end distempers) and higher discounts impacted overall revenue growth.

Kotak Securities said that Asian Paints' continues to underperform despite a sharp fall in raw material prices. The brokerage cut its target price on the stock from Rs 800 to Rs 750 post Q2 earnings announcement.

"We note that the sharp raw material (price) decline has failed to prop up trailing twelve months earnings per share (EPS) growth trajectory for Asian Paints - the same stood at 17 per cent for 2QFY16 and has been in a tight 10-20 per cent range for the past many quarters," the brokerage said.

Kotak held on to its "reduce" rating on Asian Paints, but Motilal Oswal downgraded Asian paints to "neutral" citing absence of pick-up in demand. Near-term risk reward is unfavourable, the brokerage added.

Nomura, which has a positive view on Asian Paints, said that weak international business and domestic home improvement business pulled down earnings.

"We believe the upcoming Diwali festival and lower base effect should help volume growth to accelerate. We continue to believe that the long-term growth drivers remain in place," said Nomura, which has a "buy" rating with a target price of Rs 870.

G Chokkalingam of Equinomics Research & Advisory told NDTV that investors should hold Asian Paints as long as Brent stays around $50 per barrel. However, he advised against fresh buying in the counter.

As of 10.28 a.m., Asian Paints shares traded 5 per cent lower at Rs 815.50 as compared to 0.2 per cent gain in the broader Nifty.        

RBI rejects plan for 100% FDI in banks

The Reserve Bank of India (RBI) has turned down a proposal from the government to allow up to 100% foreign direct investment (FDI) in banks, a move that may come as a damper for several private sector lenders such as ICICI Bank and HDFC Bank.

Sources said the RBI has not provided a clear reason to turn down the proposal from the department of industrial policy and promotion (DIPP) that deals with FDI policy. But in the past the regulator has seen banking as a sensitive sector and opposed allowing significant shareholding by foreign institutional investors, who are seen as short-term investors and can enter or exit a stock for short durations, largely to book profits.

Private banks are particularly keen on a higher ceiling and investors are also hoping for a relaxation. In fact, HDFC Bank recently got permission for 74% foreign investment and was also found to be in breach of the norms for a short period.

A few years ago, in the draft norms for new banks, the RBI had suggested limiting FDI to 49%, against the 74% cap. The finance ministry, however, saw it as a retrograde step and got the regulator to stick to the prescribed ceiling. In fact, a few years before that, during UPAI's tenure, there had been a major battle between the finance ministry and the RBI on how the FDI norms should be applied, with North Block finally saying that setting the foreign investment rules was in its domain.

Currently, the government permits 74% FDI in private banks, with up to 49% allowed under the automatic route. Foreign holdings beyond 49% need to be cleared by the Foreign Investment Promotion Board (FIPB). Portfolio investment in the sector is capped at 49% and banking is one of the segments where the composite caps, which allow fungibility between FDI and FII flows, have not been applied as the government argued that it is a "sensitive sector".

The DIPP has moved the proposal to allow 100% FDI in the sector at a time when several new players are entering the market with the RBI offering payments and small bank licences. Easier rules for overseas investment were seen to have helped some of the new players.

In any case, there are sublimits on ownership by a group in a bank and even promoters are expected to cut their stake over a period of time to encourage wider public participation and reduce concentration of risk.

Reliance Industries Q2 results: RIL proves street pundits wrong

Flexibility in its crude and product slate and risk management make for higher-than-expected refining margins

RIL (Reliance Industries) reported consolidated net profit of Rs 67.5 bn (up 8% q-o-q; up 13% y-o-y), ahead of street estimates. Consolidated Ebitda (earnings before interest taxes depreciation and amortisation) was Rs 107 bn (up 5% q-o-q; up 9% y-o-y) The company delivered higher-than-expected refining margins ($10.6/bbl – at multi-year highs), taking advantage of flexibility in its crude and product slate, while also benefitting from risk management.

The company continues to build towards the roll-out of Jio’s services, with the imminent launch of a range of 4G smartphones under the ‘Lyf’ brand aimed at helping build an ecosystem of handsets compatible with the full range of Jio’s services.

Refining margins surprise on the upside: RIL reported GRMs (gross refining margins) of $10.6/bbl (at six-year highs), that were higher q-o-q (quarter on quarter) despite lower regional benchmark margins (RIL GRMs $4.3/bbl higher than Singapore benchmarks), with advantaged crude sourcing, a flexible product slate allowing maximising of gasoline production, and weaker fuel oil cracks and robust risk management. Refining Ebit (consol) was at R54.6 bn (up 4% q-o-q; up 42% y-o-y).

Product slate flexibility sees gasoline output rise: RIL maximised gasoline output, highlighting the flexibility of the refinery’s product slate. RIL produced c.4MMT of gasoline and alkylates during the quarter, to take advantage of elevated gasoline cracks. RIL stated that demand in the US was the highest since 2007, with unplanned refinery outages and low prices. The company was also able to export additional volumes (particularly alkylates) to the US as a result. The company also switched seamlessly to producing larger quantities of ULSD (ultra low sulphur diesel), with the market for 500ppm diesel more muted.

Advantaged crude sourcing, falling fuel oil cracks aid margins and premiums vs benchmarks: RIL continues to retain flexibility on the crude diet as well, becoming the first major refiner to utilise Basra Heavy crude. As a result, RIL was able to take advantage of significant discounts to OSPs. In addition, with the Brent-Dubai spread compressing during the quarter, RIL sourced additional Brent linked crudes, allowing for a higher premium vs Singapore benchmarks (Singapore benchmarks are calculated vs Dubai crude).

Risk management helps refining earnings: RIL highlighted that robust and proactive risk management aided margin performance—we see a likely usage of forward selling, particularly on middle distillates which could have aided margins.

Domestic marketing aid margins, while inventories are a drag: In addition, domestic marketing margins also contributed (albeit a small quantum) to GRMs, with RIL also capturing market share in the bulk diesel sales segment. Bulk and own marketing sales stood at 3.3MMT (own marketing at c1.6MMT). The company stated that inventory losses (due to a fall in commodity prices during the quarter) were a drag on margins.

Petcoke gasification project operational by end CY16, profitability remains attractive: The company stated that it would begin a phased start-up of the gasification units in early CY16, and while the company did not specify firm timelines, the company expects the project to be fully operational towards the end of CY16.

‘Lyf’ 4G smartphones to be launched shortly, aim to create handset ecosystem for Jio: RIL will shortly launch a range of 4G smartphones under the ‘Lyf’ brand. The price will range from entry level for 4G (R400-6000) to c.R20,000+. The smartphones will be VoLTE and VoWiFi enabled, and are part of RIL’s attempt to create a handset ecosystem that is fully compatible with Jio services .

Jio network tests continue, launch dates still to be announced: Network tests on Jio continue, with initial results positive. The company and RCOM have filed intimation with the DoT for sharing of 800MHz spectrum in seven cities. The company reiterated that it intends to launch services, without elaborating an exact timeframe.

Petrochemicals performance improves q-o-q with strength in polymers: Polymer demand remains strong, as per the company, with PE deltas remaining above five-year averages due to robust buying (Indian demand has been higher than anticipated as well). PP spreads remain elevated due to soft feedstock prices. With low commodity prices, the company expects CTO/MTO projects in Asia to potentially see delays. Polyester remains softer, with volatile prices driving cautious downstream buying. RIL stated that it sees inventories at Asian polyester producers being at low levels, with Chinese demand remaining weak.

D6 production remains muted, with additional testing underway; CBM start up by end Q3FY16: D6 production for the quarter was subdued, at 11.4mmscmd (flat q-o-q). Two workovers/sidetracks in the D1-D3 area were put on production in July, and are now yielding c.1mmscmd. The DSTs on the D29 and D30 discoveries have been completed, with appraisal activities also under way in the MJ-1 discovery. The company expects first gas from the CBM project by end 3QFY16, with the Shahdol-Phulpur evacuation pipeline almost complete as well.

Cost management a key focus in shale: With falling commodity prices impacting shale earnings adversely, the company reiterated that it is looking to aggressively manage costs, while taking advantage of falling services costs as well. Production has been curtailed in the Carrizo JV to preserve value, while the company has increased rig efficiency in the Pioneer venture, thereby reducing costs.

Balance sheet items: The company incurred capex of c.Rs 200 bn during the quarter, with Rs 80 bn spent on Jio, and a similar amount on the downstream businesses. Consolidated net debt rose to Rs 870 bn, from Rs 834 bn last quarter.

Stocks in focus today: Bharti Airtel, Tata Motors and more

Asian Paints stocks will be in focus after the company reported a consolidated net profit of Rs 399 crore for the second quarter ended September 30, on account of increase in net sales.

 The BSE Sensex and NSE Nifty opened higher on Monday tracking strong global cues. At 9.29 am, Sensex was up 84.97 points at 27,555.78. Similarly, Nifty was up 21.85 points at 8,317.30 during the same time.

Below are the stocks that are likely to be in focus today

Asian Paints: The company on Friday (after market hours) reported a consolidated net profit of Rs 399 crore for the second quarter ended September 30, on account of increase in net sales.

Bharti Airtel: Bharti Airtel on Monday reported a rise of 10 per cent in consolidated net profit (year-on-year) to Rs 1,522.7 cr  for the second quarter as against Rs 1,383.2 cr in the corresponding quarter a year ago. The stocks of the company were trading 1.11 per cent up at Rs 362.75 at 9.27 am.

L&T Finance Holdings: The company’s consolidated net profit rose by 18.6 per cent year-on-year to Rs 215.41 crore during the second quarter ended September 2015.

Jet Airways: A British judge has dismissed Indian private carrier Jet Airways’ appeal against a 15,000 euro fine for failure to comply with the European Union’s emissions targets.

Tata Motors: Fitch has reaffirmed the long-term foreign currency issuer default rating and senior unsecured ratings of Tata Motors-owned Jaguar Land Rover at ‘BB-‘ with positive outlook.

Force Motors: Force Motors on Saturday posted a 65.35 per cent rise in its net profit at Rs 42.48 crore for the second quarter ended September 30, 2015.

Arvind Ltd: The textile firm on Sunday said that workers at its Santej plant have unconditionally called off strike and the plant is now working normally.

Asian Stocks Advance on China Rate Cut, US Tech Earnings

Asian stocks on Monday were close to wiping out all their losses since China's shock currency devaluation in August, as global equities rallied after the Chinese central bank cut rates to shore up faltering growth in the world's second-largest economy.

Japan's Nikkei rose 1.0 percent to a two-month high while South Korea's Kospi gained 0.4 percent and the Australian shares edged up 0.3 percent.

MSCI's dollar-denominated index of Asia-Pacific shares outside Japan dipped 0.1 percent due to the dollar's strength but stood near 2-1/2-month highs touched on Friday.

The MSCI's index of the world's share markets shot up to its highest level in more than two months on Friday, having risen more than 10 percent from its two-year low hit less than a month ago.

It has recovered most of the losses since Aug. 11, when China's sudden devaluation of the yuan sparked worries its economy may be in deeper trouble than many had thought.

On Wall Street, S&P 500 Index rose 1.1 percent to turn positive on the year, while the tech-heavy Nasdaq jumped 2.3 percent.

Technology shares led the way, thanks to gains in Alphabet, Amazon and Microsoft, after the three companies reported earnings results. The former two hit record highs, while Microsoft rose to a 15-year high.

China had set the tone late on Friday when its central bank cut the benchmark one-year lending rate by 25 basis points to 4.35 percent and lowered big banks' reserve requirement ratio by 50 basis points to 17.5 percent.

The surprise move lifted risk assets that had been already boosted by Thursday's message from European Central Bank chief Mario Draghi that the central bank stood ready to enhance quantitative easing and cut interest rates into even deeper negative levels.

That saw the Italian and Spanish two-year government bond yields both turn negative for the first time, meaning investors effectively pay to hold them rather than get paid.

The benchmark German two-year yield fell further to minus 0.345 percent.

As negative yields undermine the attraction of holding the euro, traders pushed it to a 2 1/2-month low of $1.0989.

The yen dipped to 121.60 to the dollar, its lowest since late August as traders speculated the Bank of Japan might unleash additional easing on Friday, following the lead from the ECB and China.

"Japanese economy is weaker than in August and there's no sign of a rebound. Markets are now expecting easing from the BOJ," said Takeru Ogihara, chief strategist at Mizuho Trust Bank.

The offshore yuan traded at 6.3908 to the dollar, near one-month low of 6.3990 hit on Friday after China's rate cut.

Markets are looking to Chinese Communist party's central committee meeting from Monday to Thursday to set out a five-year plan.

Ahead of the meeting, Premier Li Keqiang said that China has never stated the economy must grow seven percent this year, coinciding with remarks by a top central bank official on Saturday that China would be able to keep annual economic growth at around 6-7 percent over that period.

Oil prices fell, however, still pressured by concerns of over-supplies.

Brent futures stood at $44.62, little changed so far this week after having fallen 5.6 percent last week.

Sensex Rises 100 Points, Nifty Above 8,300

The Sensex and Nifty opened higher on Monday, tracking higher Asian markets. BSE Sensex moved over 100 points higher while Nifty jumped above 8300.

Bharti Airtel edged higher after its Q2 net beat estimates. The stock moved over 1 per cent higher before paring gains.

Asian stocks were broader higher, as global equities rallied after the Chinese central bank cut rates and US tech giants provided upbeat earnings guidance.