India: ICICI Bank eyes growth after strong Q4

ICICI Bank, India’s No. 2 lender, posted on Friday a larger-than-expected 31 percent rise in quarterly profit and forecast a higher growth rate for domestic loans and stable asset quality for the coming year.

Loan demand in India is expected to pick up after the central bank last week cut its benchmark lending rate for the first time in three years to help revive sagging economic growth. The Reserve Bank of India has projected loan growth for Indian banks for fiscal year 2013 at 17 percent against 16 percent in the previous year.

ICICI expects its domestic loans to grow 20 percent in the year that began in April from 17 percent last year, driven by demand from companies for working capital, home and car loans, Chief Executive Chanda Kochhar told reporters.

“These numbers may give us comfort to keep what we have (but) we don’t have any particular plans to increase our stakes. We have concerns about the India story in general,” said Olsson Jan-Olov, portfolio manager of Carnegie Emerging Markets at Sweden, which owns ICICI shares.

“We have been a little hesitant towards increasing positions in India due to the overriding political and macro economic situation.” Earlier this week, Standard & Poor’s cut India’s credit rating outlook to negative from stable on hefty fiscal and current account deficits and political paralysis in Asia’s third-largest economy.

The negative outlook jeopardises India’s long-term rating of BBB-, the lowest investment grade rating. Indian banks are actively easing terms on loans for companies, as high interest rates and an economic slowdown has hurt the ability of some to repay loans on time. Power, textile, aviation, construction and real estate are the hardest hit sectors.

ICICI, which is also listed in New York and competes with State Bank of India and HDFC Bank, sees a “very small” and “minimal” pipeline for corporate debt restructurings, Kochhar said.

2 acre plot for sale in Navi Mumbai

India Steel Works plan to sell its 2 acre plot in Navi Mumbai. Firm has thought of this step in order to unlock value from its real estate. Also, in order to use the proceeds to reduce its debt by half.
The Executive Chairman of India Steel Works’, Mr. Ashwin Gupta informed media that they plan to reduce a debt of Rs 70 cr. through the sale of this land. They are eyeing over Rs 35 cr. from the sale.
He added that once the firm achieves its agenda of becoming a debt-free, the motive behind selling off the Navi Mumbai land, they will raise working capital and drive up turnover. The firm expects to make profit in the financial year 2012.
The firm wants to complete this sale deal as soon as possible.

Realty Promises a more Cautious 2010

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Indian developers are looking forward to more feasible studies of any project before actually launching them so that they can avoid the excesses that resulted in the real estate downturn in 2009.

They are sending out a message that antagonism in the market will not be accepted any more and gigantic projects will be replaced by developments that buyers want rather than speculators.

Some fairly new measures will be taken in such a sector dominated by family-run businesses. According to property consultants they are entering into strategic alliance for labour and raw material, appointing project management consultants, and outsourcing construction work for faster delivery.

Aditi Vijaykar, executive director (residential) at Cushman and Wakefield India said,‘Builders are back with a bang but not an aggressive one. They want to try out new locations for projects and are trying to test a product before launching it’.

India’s largest developer by market value, DLF, will not buy land in current year and the next neither it will launch any new projects until and unless it has regulatory approvals. Presently the working capital model of DLF will depend on cash flow from pre-sales, customer advances and bank debt. Though it is not that easy to stop abstract buying, but a system like one home per family is required.

The realty sector is now conducting feasibility studies on the sizes and pricing of homes to ensure the right profile for its projects which was rarely done in previous years. Developers are also looking at special purpose vehicles or joint ventures instead of purchasing land outright. The real estate firms are also raising money though initial public offerings are aiming to use the funds for ongoing and proposed projects or to retire debt. This is extremely different from what it was done in 2006 and 2007 when everybody was interested in making money.

Parsvnath Developers wants to construct around 45 million square feet of space in the next 24 months and build around 1.25 million square feet in the last quarter. There is a need for the developers to ensure a rational profile for their projects.
Ramesh Jogani, managing director and chief executive of Indiareit Fund Advisors recommended that there is no need to build a 30 to 40 storey tower but just offer a mid-range quality product.