FIIs raise stake in auto companies

Despite exit alarms ringing off among foreign institutional investors (FIIs) in the market in India, domestic automobile manufacturers found reasons to cheer with foreign institutional investments in the companies seeing an uptick in the third quarter of the current financial year.

According to data available with the Bombay Stock Exchange (BSE), FII inflow has increased across board in passenger vehicle and two-wheeler manufacturing companies between October and December in the current financial year.

While Tata Motors saw the highest increase in FII stake in the period under review up by 2.29 percentage points to 24.53 per cent, FIIs interest in Maruti Suzuki too rose to 19.35 per cent. Homegrown utility vehicle manufacturer Mahindra & Mahindra, however, registered a marginal decline in interest with FII stake in the company dipping to 26.30 per cent from 26.39 per cent in the June-September period. M&M’s operating margins are likely to remain under pressure in the coming quarters on back of volatile input costs prices and high employee costs.

Yaresh Kothari, auto analyst, Angel Broking said, “Tata Motors has been faring well due to increasing sales of JLR products in emerging markets such as China and Russia. With labour troubles over at its Manesar unit, production is back to normal at Maruti Suzuki. The low vehicle penetration levels in India means good prospects for auto companies in India, hence the interest among FIIs.”

Data available with Business Standard Research Bureau show FIIs have taken out Rs 2199 crore between October and December last year. Though FII outflow in the first three quarters stand at a staggering Rs 13802 crore, FII stake since April has risen across automobile companies listed on BSE.

Another analyst at a Mumbai-based brokerage firm said, “Last year, the Sensex went down by six per cent, the auto index on BSE declined by 4.2 per cent. Auto stocks have been outperforming the market.” Interestingly, on February 17 2012, the auto index on BSE was at a 52-week high at 10487.55 points as compared to the low of 7894.04 points recorded on 20 December 2011.
 

Company	FII stake Oct-Dec 2011 (%)	FII stake July-Sep 2011 (%)	FII stake Apr-June 2011 (%)
Maruti Suzuki	19.35	19.24	18.71
Tata Motors	24.53	22.24	23.23
Mahindra & Mahindra	26.30 (- 0.09)	26.39	23.59
Hero MotoCorp	33.77 (- 1.03)	34.80	33.67
Bajaj Auto	16.07	15.93	15.80
TVS Motor Company	4.68	4.67	3.46

Vehicle penetration level in India currently at 12 cars per 1000 persons is among the lowest in the world. The domestic auto industry had posted scorching growth rates of over 29 per cent last fiscal, before high interest rates and fuel prices put a dampener on auto sales. However, with inflation levels and interest rates expected to moderate in the coming months, a revival is on the cards for the industry. Passenger vehicle sales, for one , are expected to grow by 11-13 per cent in 2012-13 from 2-4 per cent projected in the current year.

Among two-wheeler companies, FII stake in Bajaj Auto increased to 16.07 per cent in the Oct-Dec period as compared 15.93 per cent in the previous quarter, that in TVS Motor Company rose to 4.68 per cent as against the earlier 4.67 per cent (in June-Sep 2011). For Hero MotoCorp FII stake declined to 33.77 per cent during the quarter from the earlier 34.80 per cent.

Hero MotoCorp has indicated that growth in the two-wheeler segment is likely to temper down going ahead amid inflationary pressures and high fuel prices.