Worst performing sectors & companies - Aug'09

We bring to you the sectors and companies, which saw their performance meter dipping. To put it in few words, they were the worst performing players of India Inc. Investors better be watchful, as the chances of recovery for these sectors are slim.

Real estate:


The change in product mix from high margin luxury apartments to low mid housing segments affected sector’s performance. Though, the residential segment has seen recovery, retail and commercial segment continue to languish.

The sector has to reduce its dependence on borrowed funds. Developers have realized increasing volumes will now drive growth and profitability. Hence, they have launched the products in mid market/affordable segment and have also cut down the prices of existing projects. This might revive demand a bit, but margins will remain muted.

Hospitality:


Double whammy in terms of terror attacks and global economic downturn resulted in 15-20 % drop in occupancy.

Coming quarters would be tough for companies. Occupancy rates continue to be low and most hotels have nearly halved their room rates in a bid to boost sales. EIH, Asian Hotels, Indian Hotels performance took a hit during the quarter.

Shipping:


Shipping companies continue to grapple with sluggish global trade volumes. Moreover, spot freights have also fallen on y-o-y basis. In tanker segment, spot average freight rates declined by as much as 88% y-o-y .

Indian companies have a majority of fleet capacity in this segment. Though, the companies have long-term contacts with customers, but that could help offset the impact of weak freight rates only partially.

In short term spot freight rates are expected to remain weak. GE Shipping and Shipping Corporation of India were worst affected companies in the June’ 09 quarter.