PFC eyes infra space, stock down

Fri, 23 Jul 11:30 am

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After starting today's session on a positive note Indian indices have shed some of the early gains. Other key Asian markets are, however, trading strong. Stocks from consumer durables and FMCG sectors are trading flat while stocks from realty and metals space are marginally in the red.

The BSE-Sensex is trading up by around 14 points, while the NSE-Nifty is up by about 7 points. Buying interest amongst the mid and small cap stocks is muted as the BSE-Midcap and BSE-Smallcap indices are trading higher by 0.05% and 0.02% respectively. The rupee is trading at 47.05 to the US dollar.

As per a leading news daily, Power Finance Corporation (PFC) is planning to foray into infrastructure financing in a bid to increase its loan portfolio. The move, if approved by RBI, will allow PFC to increase its exposure in the power and infrastructure projects. The company plans to achieve the status of infrastructure financing company (IFC). The current status of PFC limits its capacity to fund projects. If the company is granted the IFC status not only can it issue tax free bonds but also increase its exposure limit to individual borrowers by 5% and to consortium of borrowers by 10%. Once the IFC status is granted PFC will have to raise capital by issuing fresh equity or by divesting the government stake in order to comply with the capital adequacy requirements. In addition, PFC is also looking to float a subsidiary to finance consortium lending and renewable energy projects in the near term.

Auto stocks are trading firm with Tata Motors and Exide leading the gains. Bajaj Auto recently announced its 1QFY11 results. The company has reported a 66% YoY growth in sales, led by a volume growth of 70% YoY. The company sold over 928,000 units during the quarter. Domestic motorcycles sales volumes increased by 72% YoY, while that of exports increased to 262,270 units as compared to 152,555 units last year. This is a strong growth as compared to the overall industry growth of 24%. As per the company, the company's two motorcycle brands - Pulsar and Discover - contribute nearly 80% of its domestic volume sales. Domestic three-wheeler sales volumes increased at a slow pace of 1.7% YoY to 38,289 units. Bajaj Auto's overall market share in the motorcycle segment rose to 33% as compared to 30% during the FY10.

In terms of profitability, operating margins expanded by 0.5% YoY, this was despite a 79% increase in raw material costs. However, the company did well to constrain its other cost heads - employee costs and other expenditure - as a result of which, operating margins on the whole expanded. Net profits doubled (101% increase) during the quarter led by a strong operating performance coupled with higher other income and lower interest and depreciation charges. The company's board also recommended an issue of bonus shares in the proportion of 1:1, subject to approval of shareholders.