Retail reforms blocked
Sonia Gandhi reportedly restrained the Government from going full throttle on opening up the retail sector. Newspaper reports said that the Congress party President asked Prime Minister Dr. Manmohan Singh to study the impact on mom and pop grocery stores across the country before opening up the sector to the MNC giants like Wal-Mart. "I have received suggestions from many quarters about the desirability to first study the possible impact of transnational supermarkets on livelihood security of those engaged in small-scale operations... I thought I would convey this to you so that you may consider having the relevant issues properly examined before further decisions are taken," Gandhi said in a letter to the Prime Minister. Toying the line of the party president Sonia Gandhi, the Congress Party said it wanted the Government to put in place safeguards for neighborhood grocery stores before further opening up the retail sector to foreign investors.
Disinvestment's back, but...
The Government cleared the proposal by Rural Electrification Corporation Ltd. (REC), Power Grid Corporation of India Ltd. (PGCIL) and National Hydroelectric Power Corporation Ltd. (NHPC) to sell 10% each through Initial Public Offerings (IPO). In addition, the Cabinet Committee on Economic Affairs (CCEA) gave its approval for sale of 10%, 5% and 5% of the pre-issue paid up equity of REC, PGCIL and NHPC, respectively out of the Government’s shareholding. Post IPO, the Government's stake in PGCIL and NHPC will fall to 86.3% while that in REC will come down to 81.3%, Finance Minister P. Chidambaram said after a cabinet meeting. "The Government will be piggybacking on the IPOs of REC, PGCIL and NHPC to raise Rs15bn for the National Investment Fund (NIF), which has no funds currently," he said. The three PSUs together are targeting to raise close to Rs24bn, the Finance Minister said, adding this was based on the estimated current book value of these unlisted companies. However, as usual the Left parties came out against the disinvestment, asking the Government to reverse the process. It remains to be seen if the noise raised by the communist parties against the stake in the three poser PSUs is just a bark, or will the comrades step up their protest.
Govt to sell 7% in BEML
The Government will sell a 7% stake in Bharat Earth Movers Ltd. (BEML), Finance Minister P. Chidambaram said. The Government will sell 4.9mn shares in BEML, Chidambaram told reporters after a Cabinet meeting. He said the sale price has not been decided. Presently, the Government's holding in BEML stands at 61.23% comprising 22.5mn shares of Rs10 each. Individuals and other institutions hold 38.77% equity in BEML. After the public issue, Government’s stake in BEML will come down to 54% with the balance 46% being with institutions and the public.
NELP VI...ONGC tops with 24 blocks
Oil & Natural Gas Corp Ltd. (ONGC) won 24 oil & gas exploration blocks, including 12 deep-water blocks, under the sixth round of New Exploration and Licensing Policy (NELP VI), the Government said. Reliance Industries Ltd. was awarded seven deep-sea blocks. Reliance Natural Resources Ltd. (RNRL) has bagged just one block while the Essar Group and the Adani Group won two blocks each. Santos Ltd., Australia's third-biggest oil and gas producer, secured two fields. Oil India Ltd. (IOL) and its partners bagged six blocks, while Gujarat State Petroleum Corporation (GSPC) got three. The Government approved the award of 52 oil and gas exploration blocks, Petroleum Minister Murli Deora said. India had offered 55 blocks in its latest licensing round. The Government had received 165 bids from domestic and overseas players for 52 blocks. There were no bids for three blocks.
GSM subscriber addition
India's booming telecom story just got better. The GSM mobile industry added over 5mn new subscribers in January as against the addition of 4.6mn in December, the Cellular Operators' Association of India (COAI) said. The All India GSM subscriber base increased from 105.4mn in December 2006 to 110.5mn in January 2007, recording an overall growth of 4.8% over the previous month, the COAI said. Bharti Airtel added 1.76mn new subscribers in January as against 1.71mn in December. Hutch Essar, which is at the center of a takeover saga, added 1.11mn new users in the month versus 1.03mn in December. Idea Cellular, which will launch an IPO this month, added 629,499 new users in January compared to 601,296 in December.
Core sector grows by 8.3% in December
The country's infrastructure sector grew by 8.3% in December 2006 compared to 7.5% in the corresponding period last year. The improved year on year show was largely due to higher output of Crude Oil and Electricity even as Steel, Coal and Cement sectors failed to turn on the heat. On a cumulative basis, the six key infrastructure industries expanded by 8.3% in the period April-December 2006 as against 5.5% in the same period last year, according to figures released by the Ministry of Commerce and Industry. The index of the six core sectors, which have a combined weight of 26.7% in the overall Index of Industrial Production (IIP), stood at 232.6.
Iran, Pak, India to sign gas deal by June-end
The much-delayed gas pipeline deal between Iran, Pakistan and India will be signed by the end of June after the three parties agreed on a key pricing formula for the natural gas, Petroleum Minister Murli Deora said. Iran has changed the price formula from 10% of the ruling Brent crude oil price plus US$1.2-per million British thermal unit (mbtu) fixed cost to 6.3% of the Japanese crude cocktail plus US$1.15 per mbtu. Taking a crude price of US$60 per barrel, the cost of gas at Iran-Pakistan border translates into US$4.93 per mbtu. As per the previous formulae, proposed in August 2006, gas price came to US$7.2 per mbtu at US$60 per barrel crude oil price. Besides, India would pay US$1.5 per mbtu for piping gas through Pakistan and transit fee to Islamabad.
NSE revises F&O contract size of 64 scrips
As part of its periodic review of size/value of derivative contracts, the National Stock Exchange (NSE) has revised the lot size of 64 scrips. With this, once can buy a Nifty contract in the F&O segment for just Rs2 lakh, instead of the current Rs4 lakh. The exchange wants to keep the contract size between Rs2 lakh and Rs4 lakh. The size will be reduced for 52 scrips, and hiked for 12 stocks. This revision will take place over two phases, the first taking effect starting with the March series, and the second beginning with the May series. All subsequent contracts (i.e. May expiry and beyond) will have revised market lots.
PSBs asked not to hike home loan rates
Less than a week after the Reserve Bank of India (RBI) raised short-term rates to curb spiraling credit growth, Finance Minister P. Chidambaram called upon all public sector banks not to hike home loan rates and to rebalance their loan portfolios to moderate credit growth to some sectors. Chidambaram met the head honchos of state-run banks to ensure credit flow to productive sectors like infrastructure after the central bank raised the red flag last week by hiking the provisioning requirement for credit cards, loans against shares, commercial real estate and borrowings from NBFCs.
ICICI Bank ups home loan rates by 1%
Notwithstanding the Finance Minister's diktat to nationalised banks to refrain from jacking up home loan rates, the country's largest private bank, ICICI Bank hiked interest rates on housing loans by 1%. The Benchmark Advance Rate (I-BAR) and the Floating Reference Rate (FRR) for consumer loans, including home loans, have been revised by 1% from 13.75% to 14.75% and 10.75% to 11.75%, respectively. Accordingly, customer will have to pay 10.5% on the home loans with a floating rate, while the interest rate on fixed home loans will now be 12.5%. ICICI Bank also raised the deposit rates on five-year fixed deposits of under Rs1 lakh from 8.25% to 9.5%. The revised home loan rates and deposit rates would came into effect from Feb 9. Besides home loans, all other rates, including on auto loans, loans against shares and loans for corporates will see a rise of 100 basis points.
HRC prices up by Rs500 per ton
Even as investors fret over the seemingly expensive Tata Steel-Corus deal amid uncertainty about the steel sector's outlook, domestic producers have jacked up prices of Hot-Rolled Coils (HRC) in step with the international trend. A financial daily reports that domestic steel companies have increased HRC prices by an average of Rs 500 per ton, the first upward trend this year. The increase takes domestic HRC prices to about Rs 26,000 per ton. International prices are hovering around the US$600-per-ton mark. The price hike by domestic players have taken experts by surprise, as they had been expecting prices to fall with the jump in China’s exports.
Maruti inaugurates Manesar plant, engine facility
Suzuki Motor Corp. and Maruti Udyog Ltd. inaugurated a new car assembly plant (fourth for Maruti) and a diesel engine & transmission facility at Manesar in Haryana. Suzuki and Maruti plan to invest Rs90bn in India up to 2010. This includes investment in the fourth car assembly plant, the diesel engine and transmission plant, launch of new models and upgradation of existing facilities in Gurgaon. Maruti's fourth car assembly plant started with an initial capacity of 100,000 units per year. This will be scaled up to 300,000 per year. A total investment of Rs25bn will be made in this car plant by 2010. Maruti's exciting premium compact car, Swift, is being manufactured at this plant. Maruti's new export model, expected to be launched in 2008-09, will also be manufactured at this plant. The diesel engine and transmission plant has been set up under a Suzuki-Maruti joint venture called Suzuki Powertrain India Ltd. (SPIL). Suzuki holds 70% equity in SPIL while the rest is owned by Maruti. This plant would entail an investment of Rs25bn, in phases till 2010. This facility has an initial capacity to manufacture 100,000 diesel engines a year. This is being scaled up to 300,000 engines per year by 2010. The diesel engines manufactured at this plant will also be exported to Suzuki companies across the world.
FLAG claims US$406mn from VSNL
Videsh Sanchar Nigam Ltd. (VSNL) announced that FLAG Telecom Group Ltd. (FLAG) was seeking US$406mn, plus interest from the company in relation to the dispute over the FLAG Europe-Asia (FEA) cable system. FLAG, part of the Anil Dhirubhai Ambani Group (ADAG), moved the Arbitration Tribunal of the International Chamber of Commerce (ICC), seeking the monetary relief from the Tata Group owned VSNL. In May 2006, the ICC Tribunal had by a Partial Award by a 2:1 majority ordered VSNL to grant FLAG access to the Mumbai landing station of the FEA cable system. VSNL said it was studying FLAG's claim and will file its response with the ICC Tribunal in due course. In addition, the company has already filed a writ petition in the Netherlands, seeking to set aside the Partial Award to FLAG.
Gammon India appeals against SEBI ban
Gammon India Ltd. said it had moved the Securities Appellate Tribunal (SAT) against a SEBI order, barring it from launching the IPO of its subsidiary Gammon Infrastructure Projects Ltd. (GIPL) for one year. The capital market regulator, on Feb. 2, advised the merchant bankers that the proposed IPO of GIPL cannot be permitted for a period of one year from the SEBI order dated Dec. 21, 2006. It may be recalled that on Dec. 21, 2006, SEBI barred Gammon India, its chairman Abhijit Rajan, and two others from accessing the capital market for one year due to alleged irregularities in the company's 2001 Rights Issue. The capital market watchdog also barred them from selling or transferring their shareholding in GIPL, a company promoted by Gammon India.
Rain Calcining and Rain Commodities to merge
Rain Calcining Ltd. and Rain Commodities Ltd. announced that the two companies will be merged with effect from April 1, 2007. The Boards of the two companies approved the proposal. The merger will create the world's largest calcining company with assets in India, Kuwait, USA and Argentina and a combined market share of about 28% of the total CPC sales in the western world. As per the plan, the Calcined Petroleum Coke (CPC) business of Rain Calcining will be integrated with the CPC business of GLC Carbon USA Inc., proposed to be acquired by Rain Commodities (USA) Inc., a wholly owned subsidiary of Rain Commodities. Rain Calcining and Rain Commodities will jointly develop the proposed Greenfield CPC plant with co-generation facility at Vishakhapatnam in Andhra Pradesh. As part of the merger, Rain Commodities will transfer the cement business of Rain Industries as a going concern. Also, the CPC and Power Generation businesses of Rain Calcining will be transferred to Rain Industries. The Board of Rain Commodities also decided to rescind its earlier decision to merge Rain Industries with the company.
Indiabulls to demerge broking outfit
Indiabulls Financial Services Ltd. announced that it had decided to spin-off the broking business into a separate company besides taking full control of two other subsidiaries. Indiabulls Financial Services will demerge 100% subsidiary, Indiabulls Securities Ltd. and give shares to existing investors. The new broking company will be listed on the stock exchanges. As part of the restructuring, Indiabulls Financial Services will also merge Indiabulls Credit Services Ltd. with itself and buy Farallon Capital's 33% stake in Indiabulls Housing Finance Ltd.
Orders galore for India Inc
Tata Consultancy Services Ltd. (TCS) agreed to provide IT consultancy services to Mumbai International Airport Pvt Ltd (MIAL), for the Chhatrapati Shivaji International Airport in Mumbai. MIAL, the joint venture led by the GVK Group, and TCS signed a MoU for a period of five years. The size of the contract was not disclosed. IBM and TCS bagged a contract estimated to be worth US$100mn to upgrade computer systems for Bank of China Ltd. The two companies will upgrade the main banking system for China's second-biggest bank, IBM said in a statement. ABB India said that it had been awarded orders worth Rs3.11bn to provide Grasim Industries Ltd.’ cement division and Ultratech Cement Ltd. power and automation products and systems for their cement capacity expansion. The project is expected to be completed by the end of 2007. Bharat Heavy Electricals Ltd. (BHEL) said it had secured a contract worth Rs4bn for setting up a 520 MW (4x130 MW) Hydro Electric Project in Himachal Pradesh. The order for Parbati Hydro Electric Project, Stage-III, has been placed on BHEL by National Hydroelectric Power Corp Ltd. (NHPC). BHEL also secured orders worth over Rs39bn for the supply and installation of the Main Plant Package at two power stations in Maharashtra, involving three units of 500 MW each. With this, BHEL’s Power Sector order booking crossed Rs200bn in a single year, for the first time in history.
Buzz from M&A Street
Suzlon Energy Ltd., a maker of wind-turbine generators, and Portuguese builder Mota-Engil SGPS SA offered to buy German windmill maker Repower Systems AG for 1.02bn euros (US$1.33bn), topping a bid from Areva SA. Suzlon offered 126 euros a share for Repower, it's German unit said in a statement. Areva offered 105 euros a share on Feb. 5 for the 70% of Repower it doesn't already own. Martifer, a unit of Oporto-based Mota- Engil, already owns 25% in Repower and said that today it's a 25% partner in Suzlon's offer. Suzlon's bid doesn't require any minimum percentage of Repower shares. The offer by French state-owned Areva depends on it gaining a stake of more than 50%.
Mahindra & Mahindra Ltd. (M&M), India's largest tractor maker, has submitted a non-binding bid to acquire about 44% in smaller rival Punjab Tractors Ltd., its Chairman Keshub Mahindra said. A financial daily reported today that the Burmans, founder promoters of FMCG major Dabur India Ltd., are likely to sell their 14.5% stake in Punjab Tractors to the buyer of Actis' 29% stake. Apart from M&M, other suitors also in the race for Punjab Tractors include Tata Motors Ltd., TAFE, John Deere and Escorts. Tata Motors denied that it was bidding for Punjab Tractors, but a financial daily said that the company was planning to team up with Fiat's CNH (New Holland Tractors India). Actis had acquired a 29% stake in Punjab Tractors for about Rs2.7bn while the Burmans bought 11.2% in the company in 2005.
Moser Baer India Ltd. announced it would acquire OM&T BV, a highly specialized technology company for optical R&D and currently a 100% subsidiary of Philips. "This acquisition is a major strategic milestone for the Moser Baer as we implement our strategy to be at the forefront, of technology in both the optical and solar photovoltaic (PV) segments," said Ratul Puri, Executive Director of Moser Baer. This acquisition will complement the existing cutting edge technology research being done in Moser Baer's R&D center in India and help the No.2 player in the optical media market to further consolidate its leadership position.
Action Construction Equipment Ltd. (ACE) said that Frested Ltd. (the company's Cyprus based wholly owned subsidiary) had acquired a 73.9% stake in Romania's SC Forma SA for US$2.15mn. ACE intends to enter the European market of Cranes, Loaders, Forklifts etc. through SC Forma. The company also intends to acquire further stake in SC Forma, by way of an open offer, through Frested. SC Forma is a 58-year old company. Its shares are listed on Rasdaq Stock Exchange in Bucharest.
Indian Bank, PFC public issues get strong response
The Initial Public Offering (IPO) of Power Finance Corporation (PFC) received a tremendous response, particularly from foreign investors and well-heeled individuals. The issue, which opened on January 31 and closed for subscription on Tuesday has been subscribed 77.24 times. The issue price of PFC was fixed at the higher end of the Rs73-85 price band and the shares of the public sector giant are likely to get listed on bourses in the third week of February. While the QIB portion of the issue was subscribed 137.16 times, the HNI portion was subscribed 48.80 times and the retail portion more than 8 times, according to data provided by the National Stock Exchange (NSE). Similarly, Indian Bank's public issue too got strong response from investors. The IPO of the Chennai-based bank was subscribed 29 times with the QIB portion getting subscribed by 53 times.
GBN, Cambridge Tech shine on debut
Shares of Global Broadcast News Ltd., the operator of business television channels CNN-IBN and IBN-7, jumped on debut on Bombay Stock Exchange (BSE). The stock listed at Rs417.10 as against the issue price of Rs250, translating into a premium of 66.8%. The closed the week at Rs490.95. Earlier, it hit a high of Rs534 and a low of Rs381.25. Shares of Cambridge Technology Enterprise Ltd. climbed in their maiden trading day on BSE. The stock opened at Rs48.90 versus the issue price of Rs38. It closed the week at Rs96.6 after touching a peak of Rs119.9 and a low of Rs48. Shares of Akruti Nirman Ltd. ended marginally higher in their stock market debut after a strong start. The stock opened at Rs701.35 as against the issue price of Rs540 a share. The scrip closed at Rs555.1 after hitting a high of Rs729 and a low of Rs546.6. Pochiraju Industries Ltd. opened its account on BSE at Rs45 versus an issue price of Rs30. The stock touched a peak of Rs64 and a low of Rs35 before closing at Rs49.15.
Oil tops US$60 per barrel
Crude oil prices in New York rose past the US$60 per barrel mark amid renewed US- Iran tension, violence in Nigeria and cooler weather in the US. Also, a fire shut output from the Elk Hills field in California, adding to delays and production outages in the US Gulf and Canada. Light, sweet crude for March delivery dropped 14 cents to US$59.57 a barrel on the New York Mercantile Exchange at 11:59 a.m. London time. The contract had advanced as much as 71 cents, or 1.2%, earlier to US$60.42, the highest since Jan. 3. Oil prices jumped US$2 a barrel yesterday after Occidental Petroleum Corp. said it had shut most output from the seventh-largest field on the US mainland. Separately, Iran's Supreme Leader Ayatollah Ali Khamenei said that Tehran would retaliate against any US attack, raising concern that the long-standing nuclear issue may cut supplies from OPEC's second-largest producer. England-based oil-tanker tracker Oil Movements predicted lower February shipments from OPEC members. The market was also keeping a watch in Nigeria, where a Frenchman was kidnapped in the latest round of violence targeting oil workers. A late cold snap has pushed US fuel demand to a 13-month high. Oil touched a 20-month low of US$49.9 in New York on Jan. 18 after mild weather in the US Northeast cut heating oil demand. But, oil futures have gained 21% since, as temperatures dropped and US gasoline demand remained above the year-ago levels.
ECB, BoE keep rates steady
The dollar fell slightly against the euro on Friday, after indications by the European Central Bank (ECB) that it would increase its key interest rates next month. ECB President Jean-Claude Trichet warned that strong vigilance remains of the essence so as to ensure that risks to price stability over the medium term do not materialize. The remarks were taken to mean a rate hike in the following month. The ECB held interest rates steady at 3.5%. The euro was last quoted $1.3003 in early Friday trading, down slightly from US$1.3038 in late New York trading. The dollar rose slightly against the Japanese yen, to 121.45, up from 121.05 yen on Thursday. British interest rates remained at 5.25% after a surprise quarter-point increase last month. Meanwhile, Australia's central bank kept its benchmark interest rate unchanged at a six-year high of 6.25% after consumer prices fell for the first time in eight years.
Hyundai chief sent to 3-yr jail
Hyundai Motor Chairman Chung Mong-koo was given a three-year imprisonment for misappropriation of company funds, dealing another blow to a company battling a rising won and restive labour unions. He was sentenced to jail by the Seoul Central District Court for embezzling US$100mn and bribing government officials for business favors. Despite the conviction, Chung remains free on bail pending his appeal. The court said that Chung used several million dollars for himself, calling the chairman's behavior a "clear-cut criminal act." In a separate judgement, the same court sent the head of Glovis, a logistics arm of Hyundai Motor, to a one-and-a-half-year suspended jail term for similar charges. Lee Ju-eun, president and CEO of Glovis, was found guilty of embezzling about 4.5 billion won (US$4.8mn) in company funds between 2001 and 2006. Amid a series of rulings against the world's seventh-largest car maker, Hyundai Motor said it will begin construction of a new plant in the Czech Republic as planned, adding that its affiliate Kia Motors will hold its scheduled plant opening ceremony in Slovakia.
Metals met on hedge fund losses
Zinc, copper and other metal prices fell following news that Red Kite Management Ltd., UK's metal-trading hedge fund, has made heavy losses in a one-billion fund. Red Kite's US$1bn fund lost 20% in the 12-month ended January 24, the Wall Street Journal reported last week, sending metal prices on the London Metal Exchange (LME) into a tailspin. Red Kite's performance in January was the worst for any month in at least a year, the Wall Street Journal said. One of Red Kite's funds last year gained more than 190% betting on metals, the newspaper reported. Industry analysts say that signs of losses by hedge funds that had poured money into metals during last year's rally may prompt some speculators to cut their holdings, accelerating the decline in prices. But, others say that problems at one hedge fund cannot be taken as signal that metals are a bad investment. Meanwhile, Red Kite plans to extend the notice period for redemptions. The investors will now be required to send redemption notices to the fund by February 15 in order to get their money back at the end of the first quarter. "Given the current size of the fund we believe that to maintain efficient operation it is necessary to increase the withdrawal notice period," Red Kite said in a statement.
HSBC to up bad loan provisioning
Shares of HSBC Holdings Plc fell after Europe's largest bank by market capitalization said it was raising provisions for bad loans by 20% higher than the market had expected. HSBC gets its biggest share of pretax profit from the United States. "Foreclosures have shown a higher severity than expected," CEO Michael Geoghegan said on a conference call. "The major impact was taking into account adjustable mortgage resets." The consensus among 11 analysts had been that credit risk provisions would be US $8.8bn, HSBC said. So, loan provisions would rise to almost US $11bn. Still, over 90% of the portfolio is working," Geoghegan said. "We are taking provisions for what might happen." Separately, US-based New Century Financial, another big lender to stretched borrowers, said it may report a loss for the fourth quarter and will restate earlier 2006 earnings after not setting aside large enough reserves to repurchase sub-prime loans. Investors in mortgage bonds reacted bearishly to news that HSBC and New Century Financial faced bigger-than-expected difficulties with their portfolios of loans to US borrowers with weak credit. A key credit derivatives index tracking credit risk on sub-prime mortgage bonds rose sharply, indicative of a fall in the value of underlying mortgage-backed securities
Alcatel-Lucent hikes job cuts
Alcatel-Lucent, the world's largest telecom-equipment maker, announced it would cut an additional 3,500 jobs, taking the total to 12,500, after it slid into a fourth-quarter loss and forecast a drop in first-quarter sales. The newly merged French-American group said the move will allow it to achieve pretax synergies of 1.7bn euros (US$2.2bn) over three years, up from an original target of 1.4bn euros. At least 600mn euros of these savings will take place in 2007. The company had originally said it would cut 9,000 jobs over three years. "These are difficult but necessary decisions, and we will manage these reductions with care. We are committed to serving our customers' needs, with a competitive cost structure and effective operating model," CEO Patricia Russo said. Goldman Sachs said the move increased its confidence that the company has greater restructuring potential than some investors believe. The group also said it sees some decline in revenue in the first quarter, but expects revenue growth to resume as the year progresses. It forecast that revenue would grow by at least 5% for the year.
Sanofi-Aventis loses major patent
French drugmaker Sanofi-Aventis said it lost a patent infringement lawsuit filed against Amphastar and Teva Pharmaceutical, putting sales of its top-selling drug in jeopardy. Sanofi-Aventis said the US District Court for the Central District of California ruled against the company in its lawsuit over Lovenox, a popular drug to treat blood clots. The company said it was evaluating options for further legal recourse. Lovenox was the company's top revenue producer, with nine-month sales of 1.82bn euros (US$2.4bn). Sanofi-Aventis shares came under pressure in early trading in Paris, losing 2.2%.