Rohit Joshi & Siddharth Tak/Zee Research Group/Delhi
As experts spar over the deficiency level of monsoon so far, a section of India Inc has reason to celebrate that many less rain drops.
In the joy mood are businesses spanning air conditioners, cement, infra, mining, and sugar since these are widely expected to cash in on a prolonged dry summer.
Paras Bothra, Head of Research, Ashika Stock Broking, opined, “It would be too early to comment that this monsoon is poor as July is an important month to judge the overall performance of monsoon.
However, scanty rains augur well for companies involved in businesses like cement, infra, mining as they can carry on with the industrial activity during this phase and this would finally help the turnover to increase. Apart from this, it is also a boon for AC manufacturers.”
Bothra’s optimism and business sense is shared by Pradeep Bakshi , COO, Voltas India(Unitary Cooling Products business group) as well. He shared, “Although the summers started late this time yet by end of May there was severe heat and some parts of North India experienced temperature above 40 degree celsius. The scorching heat and delayed monsoon gave a fillip to the Air conditioner (AC) industry and it has performed much higher than our expectations. During March – May time period AC sales growth was hovering around 5 -15 per cent but the month of June witnessed a stupendous growth of 94 per cent.”
“As per AC Nielsen estimates, the growth in AC industry was expected to decline in double digits but Voltas has registered a growth of 20 per cent in first quarter of the current fiscal, “he added.
In the last one year ,rupee has depreciated by 25 per cent which has led to rise in input costs of AC manufacturers therefore Voltas is again planning to hike product prices by 3 – 5 per cent by the end of this month. Earlier, the company hiked products prices in January 2012.
Less rainfall may also prove beneficial to cement producers as construction activities can carry on uninterrupted. This reduces the risk for cement companies to slash cement prices as the demand momentum would sustain.
Moreover, this can be confirmed by the dispatch numbers for June 2012 wherein both ACC and Ambuja Cement, the largest cement producing companies in India, have shown decent upticks in dispatches which have grown by 2.62 per cent and 7.8 per cent on a yearly basis respectively.
Commenting on the impact of delayed monsoon on sugar companies, RK Gupta,Chief General Manger, Dwarikesh Industries, said, “Growth of sugarcane crop will be stunted that would consequently reduce the recovery. However, it would be too early to gauge the impact of deficient monsoons on sugarcane crop and a clear picture would emerge out by the end of July.”
Uttar Pradesh (UP) and Maharashtra are the two largest sugarcane producing states in the country. “This time in UP, crop is higher by 5 – 7 per cent but ultimate production is expected to be lower due to scanty rains while the situation in Maharashtra is not worrisome as monsoon there is delay by just one week, “he added.
Bothra at Ashika Stock Broking explained the gain for the sugar industry arguing, “Poor rains would pose a threat of lower sugar production in the country which in turn would lead to jump in sugar realizations and ultimately the companies in this business would get fatter.”
Gupta at Dwarikesh, averred, “Sugar prices are not expected to rise as carry over stock is available in the industry. Furthermore, prices in international market are also sluggish which deters sugar companies to exploit the price differential opportunity.”