Small and mid caps lead losses

Tue, 8 Feb 01:30 pm

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Indian indices continued to languish in the red during the previous two hours of trade as selling pressure persisted in heavy weights. Stocks from the realty and consumer durable space are leading the losses, while stocks from the IT space are trading flat.

The BSE-Sensex is down by 154 points while NSE-Nifty is trading 44 points below the dotted line. BSE Midcap index is down by 1.8% while BSE Small cap index is trading 2.2% below yesterday’s closing. The rupee is trading at 45.31 to the US dollar.

Engineering stocks are currently trading weak led by BEML, Punj Lloyd, Jyoti Structures and Praj Industries. The stock of engineering and construction major (E&C), Punj Lloyd is trading weak on the back of the company’s poor financial performance during the quarter ended December 2010. The company’s consolidated revenues dropped by 28% YoY during the quarter. However, as operating expenses reduced by a slower pace as compared to the decline in revenues, the company’s operating profits declined by 65% YoY. Operating margins stood at 3.4% during the quarter as compared to 7% during 3QFY10. While the company managed to remain in the green at the operating level, it slipped into the red at the profit before tax level with a loss of Rs 484 m. During the corresponding period last year, Punj Lloyd’s PBT stood at Rs 867 m. While other income increased by about 35% YoY, it was not enough to cover the increase in depreciation charges (up 26% YoY). Punj Lloyd recorded a loss of Rs 621 m during 3QFY11 as compared to a net profit of Rs 125 m during 3QFY10.

During the nine month period ended December 2010, the company’s consolidated revenues declined by 35% YoY, while the net loss figure stood at Rs 688 m as compared to the 9mFY10 profit of Rs 1.9 bn. At the end of December 2010, the company’s order backlog stood at Rs 278 bn, up around 19% YoY. The order book is almost 4 times FY10 sales. Order inflows for 9mFY11 stood at Rs 9.2 bn.

Construction stocks are currently facing substantial selling pressure with GMR Infra, Nagarjuna Construction and Sobha Developers leading the losses. Hindustan Construction Company (HCC) has been awarded a contract worth Rs 2.32 bn by Kanti Bijlee Utpadan Nigam Limited, a joint venture company of NTPC and Bihar State Electricity Board (BSEB). According to the contract, HCC will construct 2 X 195 MW Muzaffarpur Thermal Power Project, Stage II in Bihar. The contract involves earthwork, reinforced cement concrete (RCC), structural steel fabrication and erection. The estimated time for the completion of the project is 34 months. HCC has so far been associated with 18 thermal power projects (diesel and coal-based) and three gas-based power projects.