Demonetization Impact : Industry Comments Part 3 : FMCG Still Jittery, Real Estate Could Drop

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We record what companies have said about the impact of the demonetization of Rs. 500/1000 notes to their business. This is a live post – more reactions will come as we see them.

Part 1: What Listed Companies Are Saying About The Demonetization Impact

Part 2: Demonetization Industry Comments: Cements See Contraction, Automobile Slowdown, Low Impact on NBFCs

Today we cover a few more companies from other varied Industries such as Apparel Manufacturing, Beverages – Wineries & Distilleries, Drug Manufacturers – Major, Household & Personal Products, Packaged Foods, and more.

demonetization-part-3

5-Dec

Household & Personal Products: Dabur India

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A.K. Jain – VP Finance said in a press release:

Demonetization of high currency note initiated by the government on 8th November, 2916 is a positive move for the economy and industry and will lead to better transparency and compliance in the medium to long run. This will be beneficial for organized FMCG players creating a level playing field. However, on account of scarcity of cash available with customers and traders, we foresee some near term pressures on the company’s business. The impact varies across channels and geographies, and stress is highest for wholesalers and small town grocery shops who are facing a severe liquidity crisis and are destocking.
The impact is likely to be positive on modern trade outlets and plastic money enabled retailers who are likely to benefit from this change. On account of continuity of current uncertain situation it is difficult to quantify the impact for Q3 FY16-17 at this point of time, however it is temporary in nature and situation will improve with increase in availability of new currency. In the meanwhile, we are focusing more on modern retail, e-commerce and institutional sales and also encouraging our general trade (GT) retailers to adopt cashless payment systems. This will help in mitigating the overall impact of demonetization and pave the way for normalization in the next few months.
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Credit Services: Ujjivan Financial Services

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In a press release:

  • Recorded robust collection rate of 91% in November 2016, even when the cash dominated microfinance sector was reeling under the stress of demonetization.
  • Ujjivan disbursed loans worth Rs 553 crore in November out of which 65% was in cash and
    35% was cashless.

2-Dec

Apparel Manufacturing: Indian Terrain Fashions

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In a presentation submitted:

  • Recent demonetisation scheme is expected to impact business in short term more in
    particular on the Wholesale business and to a limited extent to Modern Retailing.

24-Nov

Real Estate – General: Peninsula Land

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In a concall with Investors:

  • Impact of demonetization definitely would be felt across industry players
  • Impact on the micro markets and the players within that would be different from place to place

23-Nov

IDFC Paper on Demonetization

Presentation

22-Nov

Drug Manufacturers – Major: Piramal Enterprises

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Vijay Shah – Executive Director, Piramal Enterprises said:

  • Demonetisation is indeed a black swan event
  • Extremely difficult to predict the future

Khushru Jijina – Managing Director, Piramal Fund Management added:

  • Consolidation happening in real estate sector
  • If one ignores the sentiment for the short-term which is three months to six months, our house view is that obviously, these people (Tier-1 developers) are going to thrive as they always deal in cheque and not in cash
  • Indore, Jaipur, Ahmedabad are the regions where the cash element is pretty high and sales their are going to be affected
  • Developers who are in the parlance were using unauthorized construction means their entire project is cash, are going to be in severe trouble
  • Tier-II cities will see prices coming down and under pressure
  • RERA clubbed with demonetization is accelerating the death of the non-organized sector
  • Tier-II cities where we do not operate at all, I do see prices coming under pressure
  • Definitely do not see prices crashing because the margins have been reduced in the last few years
  • Approvals will get affected in the short-term. Long term approvals would continue. Because at the end of the day you cannot have a system where the approvals are not given at all, it has to, it will get escalated at some point or the other.
  • Wide expectation of taxes coming down in the budget
  • Lodha is our client who does Rs. 200 crores per week, have just finished last two weeks of Rs. 100 crores each so, it is no mayhem as people think, the mayhem is in Tier-II please.

Real Estate: Arihant Superstructures

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Mr. Ashok Chhajer — Chairman and Managing Director, Arihant Superstructures said:

  • De-monetization will completely remove the cash component which was involved in the
    high value transaction properties and that was what was existing more in two tier cities as well as properties around Metros
  • No impact on the service class and the middle-income group people
  • De-monetization will help the real estate industry to groom up and to come in a format where it would be more easily understandable to people and the myth about that each and every transaction has and had a lot of cash component would be eliminated to a larger extent
  • After effects of de-monetization undoubtedly would be that land prices will have to drop down
  • Temporary inconvenience to the public which is happening there would be lay back for one and half month – two months. So, we see no more large price reduction would happen – a bit of correction, may be to an extent of 2% to 5% depending upon the prices and its location and the competition
  • The enquiries from the customer’s side have completely dropped down to zero as our call centers also are not ringing
  • De-monetization has led to temporary parking of money in real estate which would stop post January 1st – luxury segment

17-Nov

Beverages – Wineries & Distilleries: Globus Spirits

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Mr. Ajay Kumar Swarup – Managing Director; Mr. Shekhar Swarup – Executive Director; Dr. Bhaskar Roy – Executive Director & COO and Mr. Ajay Goyal – CFO in a concall:

  • In the near term we anticipate slowdown in demand owing to the liquidity crises faced by the end consumer due to demonetization of old currency notes
  • On the consumption side, demonetization has not had too much of an impact right now
  • There has been initial few days of concern but considering the fact that IMIL is quite a low priced product and I do not think our consumers are using the old high denomination notes to pay for our products
  • This is the time of year when the consumption is picking up. So in fact, if you look at the data, there is not a decline in consumption in the last few days
  • High consumption period is yet to come and we will see that towards the end of
    November and possibly full December and January
  • Spoken to a few dealers yesterday also, they are saying that the supply is going on and they somehow anticipate that there will not be much problem
  • There is no problem in raw material, there has been no impact on raw material, there has been no impact on transportation of products.

Credit Services: L&T Financial Holdings

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Presentation submitted to the exchange.

15-Nov

Real Estate – General: The Phoenix Mills

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Mr. Shishir Shrivastava – Joint Managing Director and Mr. Pradumna Kanodia – Director – Finance said:

  • Noticed a reduction in the footfalls at the mall on Wednesday (9-Nov) and Thursday (10-Nov)
  • Over the weekend we have seen full recovery
  • Food and beverage across the malls saw good consumption, during the weekend that was visible with all restaurants showing high occupancy.
  • The consumption data is yet to flow in, so it will take at least a couple of weeks to collect that information.
  • Cash transactions account to anywhere between 20% to 25% of the total sales at
    our malls
  • Hypermarkets are performing slightly better after the demonetization
  • Too early to envisage impact on residential market

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