Industry credit still shows resilience: Emkay

FY12 non-food credit growth at 17% yoy; 10% m-o-m increase in credit to agri segment was a surprise: Non-food credit for Mar’12 (ie FY12) came in at 17% yoy, marginally ahead of our / RBI estimates of 16% yoy. The higher than expected credit growth was largely due 10% month-on-month (m-o-m) increase in credit to segment of agriculture and allied activities vs 5.0% m-o-m increase in Mar’11. On m-o-m overall credit growth grew by 4.8% for Mar’ 12 (3.3% in Mar’11) with growth in other segments at: Industries (+4.5% in Mar’12 vs +2.6% in Mar’11), services (+4.3% in Mar’12 vs 4.8% in Mar’11) and personal loans (+2.6% in Mar’12 vs 2.0% in Mar’11). The slow down in non-food credit is pervasive as 13 of 24 sectors have reported credit growth at less than 70% of growth for Mar-11. Also, just about five sectors viz a) Large industries (24% yoy), Trade (19% yoy), wholesale trade (24% yoy), NBFC (26% yoy) and vehicle loans (+20% yoy) have reported growth faster than the overall credit growth rate.

… sectoral credit composition still in favor of Industries: While agriculture and allied activities segments reported higher 10% m-o-m credit growth for Mar’12 vs Industries (4.5%), Services (4.3%) and Personal loans (2.6%), the overall sectoral credit composition for FY12 continues to remain in favor of Industries (45.8% vs 44.2% in FY11).

Industry credit still showing resilience: Industry-wise credit deployment data for FY12 denotes slowdown in credit to segments of textiles (+10% yoy vs +19% yoy), Basic metals (+22% yoy vs 29% yoy), Infrastructure (+18% yoy vs 39% yoy) which cumulative form 53% of total industries. Amongst infrastructure : exposure to segments of Power (+22% in FY12 vs 43% yoy in FY11), telecom (-7% yoy in FY12 vs 69% yoy in FY11) have dragged the overall exposure. 42% of the industries have grown significantly lower than last year. On the flip side, credit to segments of a) Petro-chemicals (+23% m-o-m in Mar’ 12 vs -10%m-o-m in Mar’11) b) Cement (+2% m-o-m vs -9% m-o-m in Mar’11) and c) Other industries (+13% m-o-m) d) fertilizer have shown increase in the proportion of more than 10% of the same month last year.

Overall breakup remains largely stable: On a y-o-y basis, the overall industry-wise credit composition for FY12 has remained largely stable with share of Infrastructure (31.5%), Basic metals (13%) and textiles (8%) accounting for 52% (54% in FY11).

Outlook: Lower investment and consumption demand coupled with longer than expected timeframe towards easing monetary policy stance are likely to act as barrier for growth. While RBI in its annual monetary policy review has provided sops in form of 50bps reduction in its key policy rates (repo / reverse repo rate), the 17% yoy credit growth target for FY13 seems a difficult task. Also, with muted demand / term deposit growth, overall deposit growth target at 16% for FY13 too appears on the higher end. Q1is characterized as quarter with lean credit demand and flat / marginally higher deposit growth.

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