Fairval

Notes on Indian equities, sectors and economy

Archive for the ‘Data’ Category

VC/PE deal space continues to see slowdown

Posted by fairval on December 14, 2016

Amount of investment in Indian VC/PE (and angel) space continues to see slowdown. This is from data for Jan-Nov’16 (Source: http://www.indiabusinessreports.com)

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YTD amount is just over USD8B, down 38% over last year, while deal count is down as well.

The decline is sharpest in internet based businesses, where investment is this year is just about a third of last year.

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IPOs in 2013

Posted by fairval on February 13, 2014

There were 1046 IPOs in major exchanges around the world in 2013, it seems. US accounted for 22% of these, London half of that. While BSE it seems did have 33 IPOs, most of these must have the SME IPOs, since NSE has only 7 to show. Ranks 4 to 8 are all Asia Pacific countries. So Mumbai’s dream of becoming an Asian financial hub are far from reality.

There were 96 new foreign IPOs on these exchanges. India is yet to see one.

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Impossibility of predicting earnings

Posted by fairval on January 2, 2014

The interesting thing to note in this chart below is how earnings estimate change over time. For FY14, for example, the EPS estimate (for msci india index) started at 435 and seems set to end at 395, down by almost 10%. FY13 was even worse, with estimates coming down by 16% over time.

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Actual earnings growth was 6-8% FY13 and likely to be less than 10% in FY14 again. While FY15 estimates seem to suggest 17% growth over FY14, these numbers should come down over time. As this blog has written earlier, earnings estimates a year ahead mean nothing, and tend to be in the 18-20% bracket by default. They may eventually turn out vastly different, going up in bull markets and coming down in bear markets. Seems to suggest estimating earnings is an almost impossible task.

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2013 Recap: A tough year for investors

Posted by fairval on January 1, 2014

2013 was once again a bear market for Indian investors. This may not be quite apparent from the headline index: Sensex was up 9%. However, BSE500 was up only 3%. We calculated returns for traded stocks (over 2500). Equal weighted returns come to 4%. These aren’t good returns.

More than Indices, the number we prefer to look at is: Annual Advance Decline. This is what gives the true picture for a retail investor. Only 1 in 3 scrips gave positive returns. Only about 1 in 5 scrips gave a return of more than 15%. Those are very tough odds to make money on. So if you did not make money on your picks last year, now you know the reason: the odds were against you. There was quite a rally in the last 3-4 months of 2013, otherwise the numbers would have looked a lot worse than this.

The markets seem to be following a yo-yo pattern atleast for the last 4 years for which we have data. 2014 could depend a lot on election results. A 3rd front, propped by Congress, cant be ruled out. Modi just may have peaked too early. While there is value in some sectors, rampant inflation, screwed government finance remain dampeners. Interest rates will remain high for sometime. Hope we don’t have taxes going up to reduce fiscal deficits.

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Sep’13 profits down at overall level

Posted by fairval on November 9, 2013

About half the results are now in for the Sep’13 quarter, and the picture is not good. The following table has data for about 1555 companies which have declared results so far.

While there is still double digit sales growth, EBITDA margins are down, and net profit for the whole lot is down 14%. That the indices hit an all time high seems to suggest that market has figured the worst is over.Valuations were certainly cheap by the end of Aug, so some rebound was justified. But with inflation still out of control, RBI stance still aggressive, too early to presume a recovery. Lets see how do the rest of the  results pan out, we will know in another one week,

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Corporate EBITDA’s at 2 decade lows, it seems!

Posted by fairval on October 13, 2013

A recent broker report throws up an interesting insight – the so called increase in ROE’s of Indian companies over the last decade was powered by easy money,  not by EBITDA improvement.

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The 3 lines above may confuse: they are different sample sizes. The black line, which is the oldest data, is ~650 companies. The blue line, is 10 year data and around 1100 companies, grey line has even more companies

If we just focus on the black line, EBITDA margins are the least since 1994! (tho ROE is still higher)

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IIP slowdown now 17 months, largest by far in 2 decades

Posted by fairval on July 15, 2013

The Index for Industrial Production (IIP) came in at -1.6%. This extends the IIP slowdown to 17 months – that is the number of months IIP has remain below 4% on a rolling 12 month basis (this is admitted an arbitrary definition).

Rolling 12 month IIP went below 4% in Jan’12, and is still far away from emerging from the hole.

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In an earlier post IIP – Is this India’s worst slowdown since 1991?  written in Nov’12. Well, now the answer to the above Q is unequivocal – this is by far the longest slowdown in 2 decades. Note the Sensex PE – it is way too high this time, presumably due to easy money conditions globally.

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Financial savings lowest in some 20 years!

Posted by fairval on March 21, 2013

A recent MS note points out that financial savings have hit perhaps their lowest level since liberalisation. Couple of charts from the note:

Equity market proxy, shows markets are again close to historical lows. In absolute terms, indices have been flat since 2007. So investors have moved away from equities

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Negative real interest rates are the other reason, why areas like gold have gained acceptance

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Did real GDP grow only 2-3% in FY13?

Posted by fairval on March 3, 2013

There is a certain calculation we can do from the data the government gives out on its budget day as shown in the table below (an extract from the larger budget table posted in the earlier post).

See row 21 and 22 – that is data reported by the government in its budget. If we divide 21/22 – the number we get should be the nominal GDP (row 25). Row 26 gives the growth rate in this derived nominal GDP. Note that in FY13, nominal GDP growth has dipped sharply to 10.7%. This is dramatically lower than earlier years.

Next we know reported real GDP growth rate from the data Mospi – or Ministry of Statistics and Plan Implementation –  reveals from time to time (row 27). If we substract row 27 from row 26 (not straight arithmatic deduction but compound subtraction), we get a rough estimate of the GDP deflator. For FY13, the deflator comes to 5%, again vastly lower than earlier years. Now i am no economist, and I am told that GDP deflator is not the same was WPI inflation (WPI largely ignore services sector, for ex), but still, a deflator of 5% makes no sense – in an year where inflation has been raging. Also note, in the previous 4 years, the deflator has been more than WPI in 3 of the 4 years (caveat: this is a derived deflator, not what is reported by Mospi).

So the point is this – We have to assume the data in row 21 and 22 is correct, the finance minister declared it. So the rows 25 and 26 have to be correct (even though they are derived numbers – data in shaded rows is derived data). So nominal GDP did grow only 10.7% in FY13. The issue is – what rate did real GDP grow? (to the best of my knowledge, real GDP is derived from nominal by this magic figure – deflator, so it is a very important number). What if the deflator was more than 5%, which it should be. So maybe real GDP grew just 2-3% in FY13.

Derived nominal GDP, and GDP deflator, from Budget data

Derived nominal GDP, and GDP deflator, from Budget data

Such a low GDP growth rate is not outside the realms of possibility. See data for FY14. The government has projected nominal GDP growth of 12.8%, and if we take expected real GDP growth of 6.5% for FY14, then we get a deflator of around 6% as well. Given that inflation is expected to moderate in FY14, shouldn’t the deflator for FY14 be less than the deflator for FY13? This means FY13 deflator has been understated.

In other words, the real GDP growth in FY13 of 5.4% seems overstated

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This was the most inconsequential budget

Posted by fairval on March 3, 2013

The last Union Budget of the UPA government did what the last few one have done – focus on welfare spending; and other than lip service little regard for reviving the private sector.

For the 6th year in a row (FY09, FY10, FY11, FY12, FY13, and now FY14e), fiscal deficit will be around 5% or more. Given that, at one point fiscal deficit was supposed to come down 3% by 2007, this is totally criminal. The latest road map now targets 2017 as the year by which deficit would come to 3%. Of course, no one need believe this anymore that the 2007 target.

The projected fiscal deficit number for FY14 is 4.8%. But I dont think the UPA government gives two hoots about this now. If they lose the elections, then the next government cleans up. If the win, then they have 5 more years to loot the country.

Anyway, here are the budget numbers. In terms of likely outcomes: tax revenue projection looks reasonable. Non-tax revenue could once again undershoot, like in FY13. In FY13,  the government cut spends to control deficit, paying some heed to the threat of rating downgrade. In FY14, I suspect, it is unlikely to cut spends, whatever happens to revenue

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