Readings: Business inflation, Margins mean revert, US realty
- Financial Express: Inflation up to 5 times more for corporates
Corporate India could be a much bigger victim to rising prices than the common man with cost of doing business soaring up to 35 per cent or about five times the wholesale price index levels.
It is the inflation faced by businesses in setting up and expanding manufacturing capacities, distribution and franchises, or simply investing in India and the concept becomes meaningful given the country is primarily investment led.
Not good for profit margins.
- Business Standard: Q4 FY08: Margins crimped
A Business Standard study of 1292 companies (ex financials) shows that the opm has stayed flat at 18.33 per cent for the March 2008 quarter compared with 18.72 per cent in the March 2007 quarter, while net sales have risen 25 per cent.
60 per cent of stocks have reported earnings below the brokerage’s expectations and margins have come off by about 150 basis points( ex-energy). The falls have been sharper in the energy and materials sectors.
The risk to margins, the study notes, is fairly evident given that they are at high levels and combined with slowing growth, could mean weaker earnings in the months ahead.
India’s real estate party may be cooling down rapidly. Global private equity firms say that they would rather invest in the US realty market than in the Indian one because US property prices have fallen so sharply that yields on investments there will be more attractive—without the hassle.
“Last year, Japan was a more attractive market to put money in. If you look at the US, we can now get an internal rate of return of 25% there, so why would anyone want to come to India?”
There are around 125 private equity funds for real estate in the country, out of which 60% are global funds.
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