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

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