IndusInd Bank
Aims to treble microfinance loan book to Rs 10000 crore in three years
* Bankers has posted strong loan book growth of 30% end June 2016, which is driven by both corporate and consumer finance book and their sub-segments.
* The net interest margin (NIMs) of the bank has continued to improve in Q1FY2017. The bank has exhibited 3 basis points improvement in NIMs to 3.97% in Q1FY2017 driven by higher consumer finance loan book growth.
* Excluding the short term corporate loan of Rs 1300 crore extended in Q1FY2017, which were subsequently repaid in early Q2FY2017, the corporate loan growth was lower than the consumer loan book in Q1FY2017.
* The bank has exhibited marginal moderation in the Casa deposit ratio, which is mainly impacted by strong growth in term deposits. The higher term deposits growth has also caused the decline in CD ratio of the bank in Q1FY2017. However, the bank proposes to improve Casa deposit ratio to 40% with the next 3 years.
* The bank has maintained the asset quality stable in the quarter ended June 2016. Two small account from the restructured advance book slipped contributing to fresh slippages of advances in Q1FY2017.
* The credit coast of the bank has declined to 15 bps in the quarter ended June 2016 from 16 bps in the previous quarter.
* However, an increase in the overall provisions was mainly on account of standard asset provisions for Food Corporation of India (FCI) account in the quarter ended June 2016. The normal standard asset provisioning for the bank stands at Rs 30 to 35 crore per quarter, while bank has made incremental standard provisions of Rs 35 crore for the FCI account in the quarter ended June 2016 at the rate of 15%, although the account is standard.
* The bank has conducted asset sale of Rs 17 crore to the asset reconstruction companies (ARCs) in the quarter ended June 2016, while also recorded ARC sales recoveries of Rs 23 crore. Accordingly, the securities receipts book of the bank has declined to Rs 221 crore at end June 2016 from Rs 235 crore at end March 2016.
* The loan mix of the bank between corporate and retail book stood at 57:43 at end June 2016. However, normalising for acquisition of diamond portfolio and short term loans of Rs 1300 crore, the loan mix between corporate and retail stood at 55:45. The bank expects to balance loan mix between Retail and corporate at 50:50 within next 12 months.
* The restructured advance book of the bank has declined to 49 bps at end June 2016 from 53 bps at end March 2016.
* As regard to SMA category loans, where interest payment is overdue by 30-60 days, the bank position stands among top three better banks.
* The bank has witnessed decline in the cost of deposits with the CD rate declining and improvement in systemic liquidity. The bank is expecting further decline in the cost of deposits, going forward.
* The sale down of loans stood at Rs 1600 crore in the quarter ended June 2006 coming from corporate loans segment.
* The microfinance loan book of the bank has increased 8% on sequential basis to Rs 3100 crore at end June 2016. The bank expects to grow its microfinance loan book to Rs 10000 crore within next 3 years.
* The cost to Income ratio of the bank has improved marginally to 47% in the quarter ended June 2016. The bank proposes to further improve cost to Income ratio to early 40’s.
* Aspirationally, the bank proposes to improve RoA to above 2% and margins above 4%.
* The book size of the Offshore banking unit of the bank stood at Rs 500 crore.
D B Corp
Management expects double digit sales growth in FY’17
Ad revenue growth has revived in June’16 quarter. Strong volume pick up across sectors like education, auto, consumer durables, realty etc. States in which the revival is seen is MP, Chattisgarh, Rajasthan, Gujarat and Bihar.
Bihar government completed 1st year in July’16. Ad budgets are high from the State.
The company will also benefit from the cover price hikes taken earlier. Also management expects to hike further as the year FY’17 progresses.
Newsprint prices are higher by around 3-4% YoY.
Company expects operating leverage to kick in and thus, margins to be better in FY’17.
Radio also did well in June’16 quarter and 3 more channels will be operational in FY’17.
Management expects around 13% ad revenue growth in FY’17
Receivable and inventory days to improve further from around 68 and 40 days currently to under 50 and 35 days respectively in next 2 years.
Overall, management expects a double digit sales growth in FY’17 and in FY’18 as well.
South Indian Bank
Corporate slippages fell from 4.42% to 0.00% q-o-q
Highlights of the call:
South Indian Bank registered a 5% rise in Interest income to Rs 1447.23 crore in the quarter ended June 2016.
4% rise in interest expenses to Rs 1076.60 crore saw net interest income (NII) rising 10% to Rs 373.63 crore.
Other income jumped 67% to Rs 173.44 crore, which took net total income up 23% to Rs 547.07 crore.
Operating expenses grew 9% to Rs 287.59 crore, after which OP rose 43% to Rs 259.48 crore.
Provision and contingencies rose 44% to Rs 114.11 crore after which PBT rose 43% to Rs 145.37 crore.
As tax expenses grew 39% to Rs 50.31 crore, net profit increased 46% to Rs 95.06 crore.
Slippages in June 2016 quarter was only from the retail side. The total amount of fresh slippage is Rs 122 crore and there is Rs 7 crore additions in the existing accounts. Therefore, Rs 129 crore is the total increase in the non-performing asset (NPA). That compares with Rs 845 crore that it saw in the previous quarter.
The recoveries were Rs 29 crore and there was an upgrade of Rs 10 crore, so there was a reduction of a total of Rs 39 crore. Therefore, the bank had a net-net increase of Rs 90 crore and this is all in the retail side including micro, small and medium enterprises (MSMEs), agri kind of sector and not from the corporate book.
The sectors involved are food processing, trading, contractors and metals, textiles are the areas.
Slippages in non-performing assets are expected to be around 20-25% of the standard restructured books over the whole year.
20-25% of the standard restructured book would be about Rs 200-250 crore for the full year. The bank also hopes to do recoveries of Rs 200-300 crore.
In fact the bank’s problem (which the management has been explaining earlier also) is confined to the large corporate book. In the large corporate book the management does not expect any more slippages from the standard asset book but there is a restructured standard advance portfolio which is around Rs 945 crore which is restructured standard at the moment and one cannot rule out any slippages in that. So there could be some but that is about all. The management does not expect any major slippages in the corporate book coming from the standard asset book.
The projected loan book growth is around 17%. The major retail segments of agri, MSME, home loan, loan against property (LAP) and gold would all grow by 20% but the large corporate book will see a small degrowth and therefore net-net the bank expects 17% growth during this year.
Net interest margin (NIM) for the bank was 2.74% in the June 2016 quarter, which was 20 basis points more on a year-on-year basis.
The management expects to maintain at least 2.74% NIM but its target is 2.80% to 2.85% NIM for full year.
Gross NPA ratio, in worst case scenario, would be more or less at same level – that is the recoveries are same as the additions that can come in.
In the corporate book no stress is foreseen. From the standard asset book, the bank does expect any NPAs to happen. There could be some restructuring by way of strategic debt restructuring (SDR) etc. There are some cases which are now in progress.
The bank does not have S4A case at the moment but SDR has been invoked in about two-three accounts and that number is coming to around Rs 540 crore or so – that’s the number in which the total SDRs have been invoked in about three companies and that is more in the cement, engineering, procurement and construction (EPC) space and also in steel to one or two accounts.
The bank does not have much exposure in the metal space.
The bank is granulizing loan portfolio to spread out risk
It is currently having cautious approach on large corporate lending
Other income grew 67% to Rs 173 crore. To improve share of other income the bank is planning to focus on increasing banking services for SME, Retail & NRI clients, enhance treasury capabilities & increase bench strength and expand PoS & ATM Network.
CASA improved 96 bps to 23.24%.
To improve CASA the bank plans to have strategy & Road map in place to increase CASA funds. It also plans to have a centralized process allowing branches to focus on garnering low cost funds.
Restructured book fell 36% to Rs 1387 crore.
Retail Business (Ex cl. Gold) grew 20% to Rs 24609 crore during the quarter.
To increase its housing loan business the bank has started a retail hub in Cochin to increase focus on housing finance. Two more hubs will be set up, one in South India and one in North India.
In June 2016 quarter the bank had sanctioned 826 housing loan applications worth Rs 165 crore.
Kerala accounted for 44% of loan book, south India excluding Kerala accounted for 33% and rest of India accounted for 23% of the total loan book.
The bank has 838 branch network out of which 453 stood in Kerala, 256 in South India excluding Kerala and 140 in rest of India.
Core deposits grew 13% to Rs 48634 crore and non core deposits grew 1% to Rs 9255 crore.
Total deposits grew 11% to Rs 57889 crore.
Current deposits grew 8% to Rs 2187 crore and savings deposits grew 17% to Rs 11267 crore.
Total CASA grew 15% to Rs 13454 crore.
Term deposit grew 12% to Rs 35230 crore.
Retail Loans (Excl. Gold), Agriculture & SME has grown by 20%.
15% of the Agriculture & SME Loans are backed by Additional Security by way of GOLD.
Cost to income ratio fell from 56.62% to 52.57% q-o-q and from 59.28% y-o-y.
Growth in other income was led by transaction fees + technology and profit on sale of investments, forex & others.
Investment book stands at Rs 15137 crore.
Gross NPA had opening balance of Rs 1562 crore. There were additions of Rs 125 crore and deductions of Rs 36 crore. Thus gross NPS closing balance stood at Rs 1651 crore.
Net NPA had opening balance of Rs 1185 crore. There were additions of Rs 105 crore and deductions of Rs 98 crore. Thus net NPA closing balance stood at Rs 1192 crore.
Government’s Uday Scheme targeted towards power Discoms benefiting SIB.
Benefits of Uday are getting reflected in restructured book.
Movement in Restructured Accounts shows shift of focus from large corporate to SMEs. It is also defocusing from Power & Infra Sectors.
The company had small reduction in employee also due to retirement of around 170 employees. The company had added 1000 employees for the past 4 years. So now employee recruitment is less.
Reserves and Surplus stood at Rs 3916 crore in June 2016 against Rs 3520 in June 2015 and 3707 crore as on March 2016.
Provisioning Coverage Ratio stood at 42.55%.
Retail slippages fell from 0.86% to 0.55% q-o-q and it grew from from 0.19% y-o-y.
Corporate slippages fell from 4.42% to 0.00% q-o-q and from 0.60% y-o-y.
Tax rate will continue to be 34.6%.
Everest Industries
Upon implementation of GST and with better monsoon, more and more value added and eco friendly roofing solutions will be sold which has higher realization and margins
Management is satisfied with the progress of overall monsoon and rural economy. The June deficit is narrowing day by day. The rainfall is progressing as per the IMD projections. Most of the farmers and most of the industry players have already planned accordingly. This should help in overall rural economy and hence the company in FY’17.
GST will not have any major impact on the company’s sales. As most of the market is divided among the organized players.
Overall volumes in building product segment were flat in FY’16 due to lower demand, lower Middle East sales and lower monsoon and related uncertainties. For FY’17, management expects a double digit growth in building product segment through a combination of both higher volumes and better realizations. Some price increase was also made in June’16 quarter due to better demand and off take.
Steel prices are up by around 10-12% in June’16 quarter on QoQ basis. Roofing solutions is more or less now competitive compared to steel segment. Management expects overall roofing segment to be more or less to remain competitive compared to steel segment for entire FY’17, given that steel prices have bottomed out and have fallen so much in FY’16.
No major capex planned for FY’17. The company has sufficient capacity for a double digit volume growth in FY’17. It would require to do capex for H2 FY 18 production growth if the demand continues to remain strong.
Due to uncertain crude and Middle East economy, management is going slow on its green field facility in UAE for panels and boards.
The company continues to see strong traction for steel building segment with order book of around Rs 200 crore translating a visibility of around 5-6 months. Increase in steel prices can have some marginal impact on margins, but with good volumes, management expects to retain the overall margin in this segment in FY’17.
Due to lower crysolite prices in FY’16 which is further lower in FY’17, overall working capital requirement has come down for the company. Management expects working capital requirement for FY’17 to be more or less similar to FY’16.
The inventory of higher cost crysolite raw material is over and the company already received the benefit of lower raw material prices from June’16 month onwards.
Overall, despite higher base of June’15 quarter, management expects traction and strong growth to continue in June’16 quarter as well.
Also upon implementation of GST and with better monsoon, more and more value added and eco friendly roofing solutions will be sold which has higher realization and margins. As per the management the higher realisation asbestos market is a huge market and has wide scope. Almost all the industry players have started to tap this segment and given the wide market potential, there is a scope for every player.
Supreme Industries
During FY’17, company plans to go global for its furniture business
Demand for packaging and piping continues to remain strong from agriculture, housing, storage, drinking water segments. Management expects the industrial product segment to show good traction compared to last year. Already enquiries are high and execution is also happening in some industries.
Around 200 new varieties of plastic pipes and fittings will be launched in FY’17. Water tanks and Septic tanks will be produced in a month’s time. Other material handling and piping products will also be launched very soon.
During FY’17, company plans to go global for its furniture business. It will participate in global exhibitions and fares and expects good exports in FY’17. The company will introduce new products in furniture category of business and a green field manufacturing unit in West Bengal will commence its operations in Sep’16 quarter to manufacture these new products.
Monsoon has picked up well in the 2nd half of June’16 and will help in gaining confidence for the rural economy. Management expects good demand from rural and agri segment in FY’17.
The company had incurred a capex of around Rs 235 crore during last year and plans to spend around R 250 crore in FY’17.
As per the management, there is a further scope for increase in the value added product sales which is currently around 36.7% of total sales.
Management expects its borrowings to go down further from around Rs 400 crore as on Mar’16 to around Rs 300 crore by Mar’17. Any sale proceeds from the sale of around 64000 sq feet ready construction area will be bonus.
Management continues to remain optimistic about a volume growth of around 12-15% in FY’17. New products, higher exports, higher sale of value added products and newer geographies will drive the volume growth. There will be quarterly variance but overall, the company will be able to achieve the volume growth.
Management expects quarterly variation to get reduced going forward and expects more or less even quarters going forward gradually.
For Supreme Petro, management expects another strong year with a double digit volume growth largely due to strong demand and lower inventory levels across the industry.
Implementation of GST will lead to some benefits in form of higher sale of value added products. The company is already in process of increasing its higher value added product sale and GST will help in the process.
Clariant Chemicals (India)
Aims to grow at CAGR of around 20% for next 5 years from the continuing business
The continuing business of the company comprises of pigments, colors, dye chems, master batches and other specialty chemicals. These products are a mix of specialty chemicals and generics
The user industry of the company now comprises of textiles, construction, packaging, healthcare, pharmaceuticals, cosmetics and others. Most of these industries are doing well for the company.
The new carbon black facility will be coming up on stream in FY’17. Management aims to sell activated carbon black which has higher sales realization compared to normal carbon black. The activated carbon has a huge demand in pharmaceutical industry.
Exports contribute around 27% of total sales and have been growing in double digits for past couple of years now. Parent has identified Indian subsidiary for its sourcing requirements and is open for further outsourcing. Management expects the exports to stabilize around 30% of total sales of the company unlike around 18-20%, some 5 years back.
The company has reached the first mile stone of reaching operating profit margin of around 8-9%. Gradually in the next 5 years, management aims to reach its normal operating margin level of around 13-14%. Through a mix of high value added product sales, higher and diversified user industry base, higher exports, higher realization and better economies of scale, the margin improvement should take place.
The company now is not looking for any more inorganic growth opportunities. The 2 new businesses master batches and carbon black should start contributing in a huge way to sales and profitability going forward and will help the company in higher margins.
While there is not much capex required by the company, it would require some capex to be done for the 2 new businesses in terms of their capacity augmentation which will be less than Rs 100 crore going forward in next 5 years.
On Brexit, the management does not expect any major changes on the business activities and exports to the Parent. The Parent has already shut down some of the global manufacturing capacities and shifted the manufacturing base to India. However there can be some forex impacts due to currency movements, as company exports both in EU and in US currency, with more in EU currency.
The management continued to be optimistic and expects the company to grow net sales by 20% CAGR in next 5 years.
Rallis India
Happy with the progress of monsoon so far
The management is happy with the progress of monsoon so far. It is going as per the IMD projections.
Monsoon deficit for June ’16 has come down from around 24% to around 16% now. After 2 years of below normal monsoon, management believes that the chances of normal monsoon is very high.
Metahelix reported a turnover of around Rs 340 crore in FY’16 which management expects to go to around Rs 500 crore in FY’17.
As per the management, while there is a huge scope for margin improvement both at Standalone Rallis and in seeds business, monsoon and general sentiment will play a significant role in doing this.
Inventory still remains among the agro chemical industry however it’s reduced on YoY basis.
Phase-1 of Dahej has already commenced and management expects commercial production to start in H2 FY’17.
Kansai Nerolac Paints
The company’s thrust in the Auto Refinish segment for the past few years is giving good results
KNPL is the market leader in industrial coatings.
It has managed to retain its leadership position over the years owing to innovative product and service offerings to industrial customers.
It has worked closely with the Auto Industry.
It has introduced more enhanced products like a superior Mar and Scratch Resistant Clear Coat and High Solid Base Coats.
KNPL has successfully improved its leadership position in the Automotive and Industrial Coatings segments.
The company has also enhanced its range of colors for Car Interior Coatings, which are eco-friendly, free of Hazardous Air Pollutants
The company’s thrust in the Auto Refinish segment for the past few years is giving good results. This year also saw a surge in market share in the ARF segment.
The company is now gaining strong acceptability in ARF segment.
The company is giving increased focus on the Oil and Gas, Offshore, Energy and Railways segment in Performance Coatings.
KNPL has a majority market share in the Powder Coating Segment and this year too, it has further strengthened its share in segments like Auto Ancillaries and Electricals.
Going forward, with the Indian economy being the fastest growing world economy, there will be ample demand for paints and coatings (in FY 2017).
India’s young population will have higher disposable income available.
Infrastructure sector reforms and Smart City initiatives which are the top priority of the current government, demand for coatings from the infrastructure sector is going to see healthy growth.
Fast growing economy and improved manufacturing growth will result in fast growth in both commercial as well as passenger vehicle segments. This will increase demand for automotive paints.
However, another year of deficient monsoon can have negative impact on the company.
FY 16-17 is expected to see a higher trend in input costs, which might impact profitability in the longer run. This can impact both top line as well as bottom line growth.
The company has been continuously investing in expanding its manufacturing footprint to serve customer demand.
The company has started setting up of a paint manufacturing unit at Saykha Industrial Estate in Gujarat with capacity of 42000 MT per year at an estimated cost of Rs 350 crore. This plant will be expandable in phases.
In order to cater to increasing demand in the Northern part of the country, the company has initiated a project at Goindwal Sahib near Amritsar in Punjab with a capacity of 38000 MT per year for Rs 180 crore.
To boost its R&D capabilities, the company plans to set up Global R & D Centre at Vashi, Navi Mumbai at a cost of around Rs 40 crore to develop innovative product offerings.
The Directors recommend a dividend of Rs 3.05 (305%) per equity share (fv Re 1) for FY 2016. This dividend includes special dividend of Rs 1.25 (125%). Compared to this, the total dividend paid last year was Rs 1.40 (140%) (FV Re 1).
The company has four manufacturing facilities strategically located at Lote in Maharashtra, Bawal in Haryana, Jainpur in U.P. and Hosur in Tamil Nadu. It also has around hundred strategically located depots.
In the process of shifting of its manufacturing operations from Chennai to Gujarat, the company has sold its factory land and building in Chennai for a total consideration of Rs 537.86 crore. The money will be used for setting up plant at Gujarat.
The company’s two new state-of-the-art facilities in Gujarat and Punjab will be a shot in the arm for product delivery and order fulfillment capabilities.
The industry benefitted from lower crude oil prices. However the derivative prices did not go down by the same proportion and therefore raw material prices did not come down significantly.
Policy decisions like GST, Infrastructure, and Power Sector Reforms is expected to be implemented in the near term. If these reforms are implemented it will provide a great impetus to the economy as well as to the paint industry.
Concall 