Sweet sops for sugar industry
In a potentially controversial move, the Government announced plans to create a sugar buffer besides providing export incentives to help mills combat an anticipated glut and bunching up of payment arrears to cane farmers. Agriculture and Food Minister Sharad Pawar launched the Rs8.5bn relief package for the sugar industry despite concerns that the Election Commission could take the Government to task for the move ahead of next month's assembly polls in Uttar Pradesh. The Government will build a buffer of two million tons of sugar for two years and provide incentives to exporters amid expectations of a record production. India is set to produce more than 25mn tons of sugar in the year ending in September, up 30% from the previous year and higher than earlier estimates.
Pawar said that there was no plan to block sugar exports through freezing of the Release Order (RO) as reported by certain section of the media. Pawar also said that his announcement of a package for the beleaguered sugar industry ahead of next month's assembly polls in Uttar Pradesh would not lead to any problems with the Election Commission. Reports also said that a section of the sugar industry was not happy with the Government's move to introduce differential transportation incentives for coastal and non-coastal regions.
Inflation unchanged at 6.46%
For the third successive week, India's inflation, based on Wholesale Price Index (WPI), stood at 6.46% in the week ended March 17. Though the latest reading was the same as in the previous week, it was slightly lower than average estimates of 6.5%. The annual inflation rate was 3.69% during the corresponding week of the previous year. With this, the Reserve Bank of India (RBI) is all set to miss its annual inflation target of 5-5.5% as only two more weeks data is to be announced. With less than a month to go for the annual credit policy for FY08, the central bank could well go for another monetary tightening measure in a last ditch attempt to check inflation. Finance Minister P Chidambaram hinted as much when he said this week that there may be further tightening on the cards.
Current account deficit narrows
India's current account deficit, a key barometer of a country's trade, declined to US$3.04bn in the quarter ended December 31, 2006 from US$4.78bn a year earlier, the Reserve Bank of India (RBI) said. The fall in the current account deficit was largely due to the doubling of receipts from professional, software, and business services abroad and remittances by non-resident Indians, the central bank said. The deficit was little changed at US$11.8bn in the nine months ended December 31, 2006 from US$11.9bn in the same period a year earlier. Separately, the Finance Ministry said that India's overseas debt increased to US$142.7bn as of December 31, 2006 as companies stepped up their overseas borrowings amid rising local interest rates. India had an external debt of US$136.5bn by the end of September, the Government said in a statement.
Fiscal deficit 80% of target
India's fiscal deficit in the 11 months ended Feb. 28 reached 80% of the Government's target for the fiscal year ending March 31, the Controller General of Accounts said. The deficit was Rs1.21 trillion, compared with the full-year target of Rs1.52 trillion, the Controller General's office said on its Web site on Friday. The deficit was 90.5% of the target a year earlier.
Sasan UMPP sinks deeper into trouble
The controversial Sasan Ultra Mega Power Project (UMPP) is facing fresh troubles. Newspaper reports suggest that the Lanco Infratech-Globeleq consortium will not be allowed to go ahead with the project implementation. Ernst & Young (E&Y), financial consultant to the Sasan UMPP, has asked the Government to annul the contract awarded to the Lanco-Globeleq consortium (now Lanco-Jindal Steel) and invite fresh bids. The Government has reportedly extended the terms of the Deepak Parekh panel to determine the future course of action on the Sasan UMPP. Though it is almost clear that the Lanco-Jindal Steel consortium will be kicked out of the project, the uncertainty is whether new bids be invited or whether the second lowest bidder be awarded the project. Meanwhile, Lanco says that as per the terms of the bidding documents, the LOI cannot be cancelled once it is awarded, since the consortium is willing to satisfy the above conditions.
GAIL unveils major pipeline expansion plan
GAIL India Ltd. said it had received an approval from the Petroleum Ministry to lay five new gas pipelines. The public sector gas transmission major plans to invest Rs180bn over the next five years in new pipeline projects across India. GAIL will build new pipelines totaling 5,000 km to enhance the company's gas transportation capacity to 280mn standard cubic metres per day (mmscmd) from the current 145 mmscmd, Chairman U.D. Choubey said in New Delhi. The investment would boost revenues to Rs58bn by 2011-12 from 20bn in the current year, he said. Choubey said that GAIL would go to the market to fund the expansion. "Details are being worked out," he said without providing details on whether it would be equity, debt or a combination of both.
JVs galore for India Inc
Godrej Consumer Products Ltd. said on Monday that it had signed an agreement with Sweden's SCA Hygiene Products AB (SCA), a 100% subsidiary of the SCA Group, to forms Joint Venture (JV) to manufacture and market paper based absorbent hygiene products, specifically sanitary napkins and baby diapers, in India, Nepal and Bhutan. Godrej Consumer and SCA will be equal partners in the JV incorporated as Godrej SCA Hygiene Ltd. Adi B. Godrej, Chairman of the Godrej group of companies will be the chairman of the new entity, which is being set up with an equity capital of Rs 200mn
Tata Metaliks Ltd. said on Thursday that it had signed a Joint Venture (JV) agreement with Kubota Corporation of Japan for manufacturing Ductile Iron (DI) pipes in the country. Kubota is the world leader in the manufacturing of DI pipes. Kubota and Tata Steel plan to start production early 2009 and target annual sales of 10bn yen (US$85mn) in the first five years of operation.
Amtek Auto Ltd. signed an agreement with Belgium's VCST Industrial Products for setting up a 50:50 Joint Venture with headquarters in Sint Truiden, Belgium.
The JV will set up a manufacturing facility for powertrain components in India. It will primarily focus on the manufacture of gears and shafts for automotive on- and off-road applications. The manufacturing facility under the Joint Venture will be set up near Amtek Auto's cluster of manufacturing plants at Sanaswadi near Pune. It will have an initial installed capacity of about 1.5mn components for exports only. The facility is scheduled to start shipping out finished parts by February 2008.
Buzz from Deal Street
Glenmark Pharmaceuticals Ltd. said on Monday that its 100% Switzerland subsidiary Glenmark Holdings SA will acquire a majority stake (over 90%) in Medicamenta AS, giving it a commercial foothold in the European market. Under Czech law, a holding of more than 90% shares in a company will trigger a mandatory takeover bid for the remaining shares. This acquisition provides the company with a strategic entry point into two of the fastest growing and attractive markets in Europe, Glenmark said in a statement.Rain Commodities (USA) Inc. (Rain USA) did not exercise its right to match the sweetened offer by Oxbow Carbon & Minerals Holdings, Inc. (Oxbow) to acquire all the assets of Great Lakes Carbon Income Fund. Rain USA, a wholly-owned subsidiary of Rain Commodities Ltd., had offered C$13.50 per unit for Great Lakes Carbon Income Fund. It had until March 27 to match Oxbow's bid. Great Lakes Carbon Income Fund also said that it will enter into an agreement with Oxbow, which has offered to buy the fund's assets at C$14.00 per unit of the fund in cash. On March 20, the Board of Trustees of Great Lakes Carbon Income Fund said that Oxbow's C$14.00 per unit proposal was a superior proposal. Based on Great Lakes' last quarterly results filing, the company had 51.2mn units outstanding, valuing Oxbow's offer at C$717mn.
Big orders for Man Ind, Patel Eng
Man Industries India Ltd. said that it has recently bagged an order totaling about US$225mn (approximately Rs10bn) from the United States. The company would manufacture and supply 257 Miles of 42 Inch Diameter LSAW and HSAW line pipes with external and internal anti-corrosion coating systems, Man said in a statement. With this new order, the company's order book position will increase to Rs22bn.
Patel Engineering Ltd. announced that it has bagged an order worth Rs8.06bn in joint venture with Gammon Ltd. from the Satluj Jal Vidyut Nigam Ltd. for the 434 MW Rampur Hydro Electric Project. Satluj Jal Vidyut Nigam is a joint venture between the Government of India and Government of Himachal Pradesh. The project is located on the river Satluj in Shimla and Kullu districts of Himachal Pradesh. The project work involves construction of a 15-km-long head race tunnel (HRT), a 140-m deep surge shaft and power house on the right bank of Satluj near village Bael. The project will be completed in the next 54 months.
Advanta IPO subscribed
The Initial Public Offering (IPO) of generic agrochemicals maker Advanta India Ltd., a subsidiary of United Phosphorus Ltd., was subscribed 3.5 times. The company received bids for 11.68mn shares as against the issue size of 3.38mn shares. The price band for the issue was set at Rs600 to Rs650 per share. The IPO opened for subscription on March 26 and closed on March 30. The issue will constitute 20.08% of the post-issue paid-up capital of the company. The company has already allotted 1.7mn shares at Rs625 each to a clutch of investors in a pre-IPO placement. The investors include Morgan Stanley Dean Witter Mauritius Co. Ltd, Morgan Stanley Investments (Mauritius) Ltd., Citigroup Global Markets Mauritius Pvt. Ltd., Deutsche Securities Mauritius Ltd. and Emerging Markets South Asian Stars Fund. Advanta India intends to invest about Rs2.5bn to pay off the dues of its subsidiary Advanta Holdings BV. Post-issue, United Phosphorus' stake in Advanta would fall to just under 50% from 62.43%.Oil hits 6-month peak on Iran woes
Crude oil prices touched six-month high as tension between Iran and the UK escalated over the capture of British by Tehran last week. A day after closing at a six-month high, light, sweet crude futures rose another 45 cents to US$66.48 a barrel in Asian electronic trading on the New York Mercantile Exchange. Trading settled Thursday at US$66.03 a barrel on the New York Mercantile Exchange - the highest settlement price since Sept. 8, 2006, when crude finished at US$66.25. Brent crude for May gained 64 cents on Friday to US$68.52 a barrel on London's ICE Futures exchange. Oil in New York jumped briefly past US$68 per barrel in after-hours trading on Tuesday on rumors that Iran had fired on a US ship in the Persian Gulf.
The UK Government froze diplomatic links with Iran and sought help from its allies, to rescue its sailors and marines held since March 23. Prime Minister Tony Blair stepped up diplomatic pressure on Iran to release 15 navy personnel. Iranian Foreign Minister Manouchehr Mottaki said that Britain must admit that its marines breached Iranian waters before they will be freed. The UN Security Council expressed grave concern over Iran's seizure of 15 British sailors and marines and called for an early resolution of the escalating dispute.
Fed still worried about inflation
Inflation continues to be the primary concern for US central bankers, but they need more elbow room to structure their monetary policy amid growing risks to the world's largest economy, Ben S. Bernanke, the Chairman of the Federal Reserve said. "Our policy is still oriented towards control of inflation, which we consider to be at this time to be the greater risk," he told the Joint Economic Committee of Congress in Washington. "Still, uncertainties have risen, and therefore a little more flexibility might be desirable." Bernanke's remarks came a week after the Fed policy makers surprised the markets by dropping their bias towards higher borrowing costs, which was taken by most as a signal that the central bank was ready to cut rates. However, much to the dismay of the markets, Bernanke's latest comments contained no reference to a possible interest rate cut, which some economists predict as soon as next quarter. In fact, the Fed chief said that policy makers want to move away from guidance on future rate decisions.
US economic growth improves
The US economy grew at a higher than expected pace in the fourth quarter, spurred by swelling inventories and higher exports even though investments in software were revised slightly lower. The Gross Domestic Product (GDP) grew at a 2.5% annual pace in the final three months of 2006, slightly faster than the previous estimate of 2.2%, the Commerce Department reported. Economists had forecast an unchanged reading of 2.2%. The final revision was up from a 2% GDP growth rate in the third quarter and meant that the world's largest economy expanded by a solid 3.3% during 2006. It was the third straight year that GDP grew by over 3%, following a growth of 3.2% in 2005 and 3.9% in 2004.
Chinese steel output will fall
production China's steel production will slow in the current year due to lower domestic demand as Beijing aims to reduce investment in fixed assets to prevent the world's fourth-largest economy from overheating. Crude steel output in China will grow by 13% in 2007 as against 18% last year, Luo Bingsheng, Executive Vice-Chairman and Secretary General of the China Iron and Steel Association said. Speaking at the Steel Market and Trade Conference in Guangzhou, Luo said that China's crude steel output this year would increase to 472mn tons from around 419mn in 2006. The slower production coupled with the Government's measures to curb surging foreign investment will keep exports at the same level as 2006 or lower, Luo said. China exported 43mn tons of steel products in 2006, up 109.6% while imports fell 28.3% to 18.5mn tons.