India Inc peppy about earnings growth

With the start of the new fiscal, India Inc's confidence seems up despite the ongoing Gulf war. Business Standard spoke to a cross-section of senior executives across industries who say they are upbeat about their earnings prospect and expect to see a growth of 10-20 per cent this fiscal.

The manufacturing sector is expecting a gradual rise in product prices as well, and most executives say it could be around 10 per cent in their respective sectors.

But capital expenditure is unlikely to be in capacity expansion because of a supply overhang. Most executives expect to invest in their process so as to lower costs and counter a rise in input prices.

Voltas, managing director, Ashok Soni says: "There will be a pressure on prices as that on steel, plastics has been on a rise. Certainly, the cost of production would increase which would either mean taking a cut on margins or passing on to consumers."

Anil Sureka, director-finance at Ispat Industries, said, "The last financial year has seen a steady increase in flat product prices, while hot-rolled coils prices are at their peak. We expect prices to remain steady in 2003-04. There may be a temporary dip in prices but it will recover soon."

A senior Gujarat Ambuja exeutive said, "The cement industry is expeted to grow by 9 to 10 per cent this year riding on the back of demand for housing and road construction. This was the case last year too. Cement realisations are expected to be up 5 to 10 per cent once there is a demand-supply equilibrium."

But the key to growth would be consumer spending. With input prices likely to increase, in some sectors like automobiles, and consumer goods and products, the price jump may be sharper.

Also, the introduction of value added tax is likely to see a increase in prices of products. Says, Hosedhar Press, executive director of Godrej Consumer Products, "VAT would lead to increase in prices of consumer products."

But despite the lacklustre capital markets, real estate prices are expected to remain flat too. Suvir Ahuja, managing director of real estate company Mahindra Gesco said: "Residential property prices will not change much this year, and is likely to remain flat. However, if the Gulf war lasts longer, things may begin to change."

But capital expenditure on production capacity is only happening in pockets. Ispat Industries plan to increase it HRC capacity from 1.5 million tonnes to 2.4 million tonnes.

Bajaj Auto is also planning to invest around Rs 100 crore (Rs 1 billion) in 2003-04 on capacity expansion and tooling required for future launches, according to Sanjiv Bajaj, vice-president (finance), Bajaj Auto.