Institutional Equities - Online Share Trading
Institutional Equities - Online Share Trading
Institutional Equities - Online Share Trading
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Dec-04<br />
Mar-05<br />
Jun-05<br />
Sep-05<br />
Dec-05<br />
Mar-06<br />
<strong>Institutional</strong> <strong>Equities</strong><br />
Jun-06<br />
Sep-06<br />
Dec-06<br />
Mar-07<br />
Jun-07<br />
Sep-07<br />
Dec-07<br />
Mar-08<br />
Jun-08<br />
Sep-08<br />
Dec-08<br />
Mar-09<br />
Jun-09<br />
Sep-09<br />
Dec-09<br />
Mar-10<br />
Jun-10<br />
Sep-10<br />
Dec-10<br />
Mar-11<br />
Jun-11<br />
Sep-11<br />
Exhibit 25: IIP vs repo rate<br />
(%)<br />
16<br />
14<br />
12<br />
10<br />
8<br />
6<br />
4<br />
2<br />
0<br />
Source: Reserve Bank of India, MOSPI<br />
Short-term hiccups in order inflow, but long-term growth intact<br />
During FY10-11, concerns over the global macro environment (EU sovereign debt crisis) decelerated the<br />
corporate capex cycle, while domestic factors like corruption-related investigations, high fiscal deficit, state<br />
assembly elections, rising interest rates and environmental clearance issues postponed the infrastructure<br />
investment plans of the government. Infrastructure spending so far has played catch up with the rise in GDP –<br />
going up from around 5% of GDP in 2002 to 8.5% in FY10. GDP growth is now seen slowing by nearly 100<br />
bps to around 7.5% in FY12 from 8.5% in FY11. The impact of slowing growth on construction companies is<br />
already visible, while on the other hand, effective interest rates have gone up by over 350 bps, thereby<br />
impacting the profitability of the sector. This has led to slower growth in incremental order book of<br />
infrastructure companies in the past one year. We believe that in the short term, the pressure on incremental<br />
order inflow will continue.<br />
Jan-10 May-10 Aug-10 Nov-10 Feb-11 May-11 Aug-11<br />
IIP<br />
Repo rate<br />
12th Plan (FY12-17) infrastructure target of US$1trn<br />
Exhibit 26: Order inflow trend<br />
Source: Company, Nirmal Bang <strong>Institutional</strong> <strong>Equities</strong> Research<br />
Based on initial estimates of the Planning Commission, under the 12th Plan, total investment on infrastructure<br />
is estimated at US$1,000bn. Even if we consider a slippage of 25%, it is still 100% higher investment<br />
opportunity for infrastructure companies over the 11th Plan. Based on our sectoral analysis for expected<br />
investment under the 12th Plan, road and power segments would account for around 45% of total investment,<br />
showing some improvement in order inflow, but these segments are currently facing a lot of problems.<br />
Exhibit 27: 12th Plan infrastructure investment and GDP growth<br />
Year 2012-13 2013-14 2014-15 2015-16 2016-17 12th Plan<br />
GDP at market prices($bn) 1,720.6 1,875.5 2,044.3 2,228.3 2,428.8 10,297.5<br />
Rate of GDP growth (%) 9.0 9.0 9.0 9.0 9.0 9.0<br />
Infrastructure investment as a % of GDP 9.0 9.5 9.9 10.3 10.7 10.0<br />
Infrastructure investment ($bn)@Rs40/$ 154.9 178.2 202.4 229.5 259.9 1,024.8<br />
Source: Planning Commission<br />
(%)<br />
60<br />
50<br />
40<br />
30<br />
20<br />
10<br />
0<br />
Impact of credit crisis<br />
Corruption-related investigations and rise in interest<br />
rates<br />
EU sovereign debt concern<br />
Pick-up in NHAI<br />
orders<br />
Exhibit 28: Segmental investment allocation<br />
(Rsbn)<br />
16,000<br />
14,000<br />
12,000<br />
10,000<br />
8,000<br />
6,000<br />
4,000<br />
2,000<br />
-<br />
Electricity<br />
Roads<br />
&Bridges<br />
Telecom Railways Irrigation Water<br />
supply &<br />
12th Five Year Plan<br />
sanitation<br />
11th Five Year Plan<br />
Others<br />
Source: Planning Commission, Nirmal Bang <strong>Institutional</strong> <strong>Equities</strong> Research<br />
Exhibit 29: Infrastructure investment to surge higher<br />
(%) (US$bn)<br />
12<br />
1,200<br />
9.5<br />
9.9<br />
10.3 10.7<br />
10.0<br />
10<br />
9.0<br />
1,000<br />
8.4<br />
8<br />
800<br />
6<br />
600<br />
4<br />
400<br />
2<br />
200<br />
0<br />
0<br />
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 12th Plan<br />
Infrastructure investment as % of GDP Infrastructure Investment<br />
Source: Nirmal Bang <strong>Institutional</strong> <strong>Equities</strong> Research<br />
13 Infrastructure Sector