Export growth hits 10% in Aug despite GST jitters
Oil, engineering goods top contributors, but trade deficit widens to $11.64 bn
After single-digit growth in the previous three months, exports rose 10.29 per cent in August, up from 3.94 per cent in July, despite exporters’ woes over the goods and services tax (GST).
Rising global petroleum prices may have increased worries of retail customers, but it helped oil exports rise 36.4 per cent for August. Besides, engineering goods rose 19.53 per cent in the month, pushing up the overall outbound shipment that grew for the 12 straight months after contracting for more than a year.
Import growth also accelerated in August to $35.46 billion, up 21 per cent as compared to the 15.42 per cent rise in July. This pushed up the trade deficit in August to $11.64 billion from $7.7 billion in August 2016. This may push up current account deficit further.
According to the commerce department, India exported $23.81 billion worth of goods in August against $21.59 billion in the same month last year.
The first set of trade data released after Suresh Prabhu took charge as commerce and industry minister showed that export growth gathered pace in August after decelerating for four months since March, when it hit a high of 27 per cent. Exports grew 8 per cent in May and 4.39 per cent in June.
The growth came even as exporters complained over the refund mechanism under the GST, saying it was affecting outbound shipments.
The Info Edge stock was up 7.5 per cent on Friday (closing at ~1,186.60 on the BSE) adding to the 19 per cent gains since the end of August on brokerage upgrades. The bullish view on the stock, which hit its 52-week high on Friday, stems from the growth potential of Zomato, its 46 per cent-owned online restaurant classifieds business, as well as expected returns from the jobs vertical once recovery takes hold.
Analysts at Nomura have upgraded the target price of Info Edge to ~1,280 from ~1,100 on higher valuations for the company’s stake in Zomato. They believe the Street’s valuation of $1billion for Zomato is too low and the company should in fact be valued at around $1.4 billion. They say that the restaurant classifieds business is a globally scaleable one, which utilises the network effects of its restaurant discovery platform, enabling monetisation in food ordering at low customer acquisition costs. Zomato’s revenues, according to them, could grow by 6.5 times to more than $300 million over the next five years, driven by a 4.5 times uptick in the advertising business, which had revenues of $38 million in FY17 and a larger 15 times improvement in the food ordering business, which ended FY17 with revenues of $9 million. Overall, Zomato recorded ~330 crore in revenue, a year-on-year growth of 80 per cent in FY17. The higher valuations are expected to be led by expansion in the nine countries where it has traffic leadership and on-ground presence. The scalability and growth potential stems from the company’s plan to target the entire food cycle, from restaurant discovery, online ordering, table booking and back-end systems for restaurants. Analysts at Edelweiss, too, believe Zomato’s cash burn rate (operating profit including other income less interest expenses) has declined significantly and growth momentum continues to be strong. The metric is down 81 per cent year on year to $12 million in FY17.
The near-term, however, could see some headwinds for its job classifieds (Naukri) and real estate portals (99 acres). The management attributed the muted show in the June quarter for Naukri to lower collections given uncertainties around the goods and services tax (GST) and lower hirings due to a slowing economy. Implementation of the GST has had a negative impact on the non-IT business. Despite tough competition, the company has maintained traffic and market share. The company has a 75 per cent traffic share in the online job classifieds business.
The company’s realty portal, 99acres, has been impacted by the Real Estate Regulation Act, which led to uncertainty on projects and the weakness in demand in the NCR, which is the largest market for the company. The management, however, believes that competitive intensity has come down substantially and expects higher advertising revenues from digital platforms on the back of broadband penetration and firming up of the realty market. The stock is trading at 37 times its FY19 earnings estimates and most brokerages are bullish on the company’s long-term prospects.
TRADE PORTAL Trade deficit Total merchandise trade deficit from Apr 2017-Aug 2017 63.15
($ bn) Merchandise trade deficit in August 2017 11.64 Source: Ministry of Commerce & Industry