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Saturday, February 28, 2009

CLB refuses to supecede Maytas board

The Government's attempt to replace the board of Maytas Infra, the company run by the elder son of Satyam founder B Ramalinga Raju suffered a setback after the Company Law Board (CLB) said it saw no mismanagement there. It also suggested the naming of new independent directors to represent lenders - IDBI Bank and ICICI Bank. The CLB also said that it would not allow IL&FS, which owns a 37% stake in Maytas Infra, to get a seat on the board because it is a competitor. The Government had, on February 17 filed a petition in CLB for permission to supersede Maytas Infra's board and replace it with its own nominees. CLB continued hearing on the petition on Friday as well.

Electrical equipment industry slips into red

For the first time in five years, quarterly growth of electrical equipment industry has fallen in the negative territory. For the quarter October to December 2008, the industry has shown a decline of 1.76% from 7% growth registered in previous quarter. As a result, the consolidated growth for the period of nine months i.e. from April to December 2008, has declined sharply to 4.93% from 8.98% registered till half year of this fiscal year. IEEMA, the apex body representing the Indian Electrical Equipment industry informed that the growth figures reported were in terms of volume. It observed that during this quarter, demand for almost all product sectors was down with a few exceptions like HT Motors, Power Cables, Power Transformers, HT circuit breakers and Conductors.

Vedanta makes open offer for MALCO

Vedanta Resources Plc, the London-listed founder of Madras Aluminium Co Ltd. (MALCO) said it intends to make a cash offer to acquire the 20% of the target company that it doesn't own in order to continue with its strategy of consolidating its structure. The offer is being made by Twin Star Holdings Ltd., a wholly owned subsidiary of Vedanta and is consistent with the parent company's strategy to consolidate the group structure. The offer to acquire up to 22.5mn shares of MALCO will be made by a reverse book building process, Vedanta said in a statement. The minimum floor price in accordance with Indian regulations is Rs74.77 per share. Vedanta does not intend to acquire shares under the offer at a price exceeding Rs105 per share. Twin Star Holdings plans to delist shares of MALCO from the BSE and NSE. The offer by the founder, who holds 80% of the aluminium maker, will open on March 17 and close on March 20.

RBS announces £24bn annual loss

Royal Bank of Scotland Plc (RBS) it suffered a huge loss in the financial year ended December 2008, partly due to costs related to its ill-timed acquisition of Dutch bank ABN Amro in 2007. The beleaguered British bank slumped to a 2008 net loss of £24.1bn (US$34.2bn) as against a net profit of £7.3bn in 2007. The loss included a £16.2bn write-down of goodwill and other intangible assets, as well as impairment charges of £8.1bn. The loss was still smaller than the £28bn loss predicted by the bank. RBS announced a sweeping restructure that will move £240bn of assets into a non-core division, which will then be sold off or run down. It is also planning to cut more than £2.5bn from its cost and sharply reduce the amount of capital allocated to its global banking and markets unit.

The bank said it is participating in UK asset protection scheme and will raise £13bn new capital as part of the scheme. The biggest bank controlled by the UK government said it will insure £325bn (US$462bn) of assets with a new state guarantee program. Under the government backed insurance scheme designed to extend another lifeline to banks, RBS will be responsible for the first £19.5bn of losses - or 6% of the asset value. The British government will bear 90% of any losses after that, and RBS incurs the remaining 10%.

UK too announces details of its bank rescue plan

The British Treasury announced the details of its Asset Protection Scheme, in which a bank’s riskiest assets will be ring-fenced and under which the UK government will cover up to 90% of future losses. Dubbed as "Operation Broom" by the UK Treasury, the Asset Protection Scheme is an attempt to clean up bank balance sheets by identifying and insuring risky assets, thereby removing uncertainty about the value of past loans. Alistair Darling, the UK chancellor, believes the scheme will help restore confidence in the banking sector by putting a floor under future losses and provide a platform for banks to restructure and to increase lending to business and homeowners. Taxpayers may become liable for £500bn worth of bad loans and investments made by Royal Bank of Scotland (RBS) and Lloyds Banking Group, according to the BBC. It would be part of the government's Asset Protection Scheme, it added.

US unveils stress tests for major banks

The US Treasury Department released details about the "stress tests" that are being applied under the new Capital Assistance Programme. The move is aimed at ascertaining the capacity of banks with more than US$100bn in assets to weather a downturn under an adverse scenario in which unemployment rises above 10% next year and house prices fall by 27% over two years. Financial companies will have to raise more funds from the government if needed. The state may end up owning majority stakes in some banks. Officials, however, played down talk of full bank nationalisation. Sheila Bair, the head of the Federal Deposit Insurance Corporation (FDIC), said there was ambiguity in the word. Federal Reserve chairman Ben Bernanke too echoed Bair's views, sending bank shares higher this week on Wall Street.

Separately, US President Barack Obama said that financial institutions would face greater government oversight in the wake of the global economic crisis, and that trust in the system could only be rebuilt with transparency and openness. "This financial crisis was not inevitable," he said. "Here in Washington, our regulations lagged behind changes in our markets, and too often regulators failed to use the authority that they had to protect consumers, markets and the economy."

Air India seeks Rs39.8bn in aid from Govt

The National Aviation Co. of India Ltd., which operates national carrier Air India, is seeking Rs39.8bn in aid from the Government. The company has submitted a proposal for a loan of Rs27.5bn and equity infusion of Rs12.31bn, Civil Aviation Minister Praful Patel told Parliament. "The airline industry globally, including the Indian airline industry, is passing through one of the most critical periods in its history," he told lawmakers in a written statement. Carriers such as Air India and Thai Airways International are seeking government assistance as people reduce travel for leisure and business. The global airline industry may lose as much US$2.5bn this year, with the Asia-Pacific region accounting for almost half of the deficit, according to the International Air Transport Association (IATA).

L&T bags new orders

Larsen & Toubro (L&T) has bagged three new orders worth Rs14.38bn. Two orders worth Rs11.30bn were booked in the Gulf Region and a third, worth Rs 3.08bn, was bagged from the West Bengal State Electricity Distribution Company. Separately, L&T's Buildings & Factories Operating Company - part of its construction division has bagged new orders aggregating around Rs11.62bn in the fourth quarter of 2008-09 for the construction of factories & residential projects.

Subhiksha founder ready to quit

R. Subramanian, founder of the troubled neighbourhood retail chain Subhiksha Trading Services Ltd. has announced that he is willing to quit the management of the company if required. Subramanian said he had not drawn his salary since April and won’t desert the company or evade responsibility. "If there is a need to install a new management for the better future of the business, its employees and customers, then I shall be more than happy to facilitate this," Subramanian, Managing Director of Subhiksha, said in a statement. "I reiterate that my only reason to be in this job is a sense of responsibility to the stakeholders." On Jan 30, Subhiksha said its business had come to a near standstill and it needs Rs3bn to resume operations. The Chennai-based retailer, founded in 1997, ran out of cash in October after relying on a high level of debt, according to the company. Subhiksha is seeking the rescheduling of Rs7.5bn of loans.

Weekly Stock Picks - Feb 28 2009


Buy McDowell

Buy IVRCL Infra


Buy JP Associates

Weekly Newsletter - Feb 28 2009

After an eventful week, thanks largely to the latest tax cuts and fresh measures for recession-hit export sectors, the markets have fresh news to ponder and speculate on. Reliance Industries has done it again and finally announced a board meeting to mull merger with Reliance Petroleum. Seven years ago, it was the largest ever merger in the history of corporate India. With Fortune 500 companies coming down in value, mergers like this may well create the balance sheet size that Indian conglomerates desire. All said and done, bulls and bears may hardly March anywhere this F&O series.

HK, Tokyo overtake London as most expensive office locations

London has lost its status as the world’s most expensive office location for the first time in nine years.According to the new Office Space Across the World 2009 report from global real estate advisor Cushman and Wakefield, Hong Kong and Tokyo are now the world’s two most expensive locations relegating London to thirdplace. The cost of occupying a prime square metre of office per year in Hong Kong now stands at €1,743.

Although rents in Hong Kong actually fell 4 per cent in 2008, the much larger 23 per cent fall in London’s West End pushed occupancy costs down further to €1,403 per sq m per annum. The cost of space in Tokyo now stands at €1,649 per sq m per annum, a fall of 19 per cent in 2008.

Office Space Across the World 2009 compares office occupancy costs in 202 key locations in 57 countries around the world. Of these 202 locations, 58 per cent showed rental growth in 2008, 26 per cent saw stable rents and 16 per cent showed a rental fall (compared with only 1 per cent in 2007). Office rents globally rose on average by 3 per cent, significantly below the 14 per cent achieved in 2007 and the lowest growth rate since 2004.

South America was the best performing region with rental growth averaging 12 per cent for the year. Western Europe was the poorest performing region with average rental growth of only 1 per cent. The impact of the global economic downturn has been felt in all markets although some were better placed to withstand declining occupier demand for space. The expansion of financial institutions, particularly the hedge funds, have driven up rents in London’s most prestigious West End market for the last few years but it has now felt the full impact of the credit and banking cri

Belated stimulus...Govt unveils tax cuts

A week after presenting a disappointing Interim Budget (Vote-on-Account), acting Finance Minister Pranab Mukherjee decided to swing into action by cutting indirect taxes to spur demand in a sluggish economy. He reduced the general rate of Central Excise duty from 10% to 8%. The Centre also retained the rate of central excise duty on goods currently attracting ad valorem rates of 8% and 4%, respectively. It also trimmed the rate of central excise duty on bulk cement from 10% or Rs290 per million ton, whichever is higher to 8% or Rs.230 per million ton, whichever is higher. In addition, the 4% cut in excise duty that announced in December was extended beyond March.

In line with the objective of introducing universal Goods & Services Tax (GST), it decided to reduce the rate of service tax on taxable services from 12% to 10%. To provide relief to the power sector, Naptha imported for generation of electric energy was fully exempted from basic Customs Duty. This exemption which was available up to March 2009, was now being extended beyond that date. "I have tried to make certain changes to provide further stimulus to the economy," said Mukherjee while replying to a debate on an interim budget for 2009-10 that was later approved by the Lok Sabha.

IT companies received a boost from Mukherjee when he accepted that the Section 10 AA that prevented their subsidiaries in SEZs from getting full tax benefits was discriminatory and needed to be removed. However, the software exporters, including TCS, Infosys and Wipro, will have to wait for the new government to bring about the change through an amendment to the Income Tax Act in the new budget.

The Finance Ministry will sacrifice revenues of about Rs300bn with the latest tax concessions. With this, the total indirect tax giveaways in the past few months would amount to Rs700bn this fiscal. This is about 1.5% of GDP. The only worry is on account of the ballooning fiscal deficit. But, given the nature of the current economic situation the government doesn't seem to have too many options at its disposal.

Indian economy loses steam

The Indian economy lost further momentum in the October-December quarter as the global economic slump hit almost all segments of the economy, data released by the government showed. With the third-quarter GDP numbers coming in below expectations, the official full-year estimates are most likely to be scaled down. Also, the Reserve Bank of India (RBI) will come under more pressure to cut interest rates. The GDP grew by 5.3% in the quarter ended December 31, 2008 as against expectations of a 6% expansion. The Indian economy had grown by a much healthier 7.6% in the second quarter while it registered a solid 8.9% growth in the third quarter of the previous financial year.

GDP growth in the April-December 2008-09 period stood at 6.9% versus 9% in the corresponding period of last year, the CSO data showed. The GDP expanded at 7.6% in the first half of the current fiscal year. The Government and the RBI expect the Indian economy to grow by 7.1% in the year ending on March 31. However, given the strong headwinds confronting the Indian economy right now, that outlook now looks very much in danger of being reduced.

Seven years later...RIL to merge with RPL again

Seven years ago, it was the largest ever merger in the history of corporate India. Reliance Petroleum (RPL) merged with Reliance Industries (RIL). The ratio then was one share of RIL for every 11 shares of RPL. History repeats itself as the board of RIL will meet on March 2 , to consider and recommend the amalgamation of its unit RPL with itself. RPL said its board would meet on March 2 and consider and recommend the amalgamation. Chevron holds a 5% stake in RPL while RIL owns 70.38% of RPL. This weekend market will speculate on the possible ratios.

Rates and Currency

Rates and Currency





Janus Capital Holdings

Port Name : Janus Overseas Fund

Sr. No. Stock Qty

1. Balrampur Chinni 13335458

2. HDFC 687598

3. Max India Ltd. 4329428

4. Punjab National Bank 2834764

5. Reliance Industries 9103203

6. Shree Renuka Sugars 4561730

7. Reliance Capital 9459592

8. Reliance Comm 7990806

Port Name : Janus Aspen International

Sr. No. Stock Qty

1. Bajaj Hindustan 2202743

2. Balrampur Chinni 4484380

3. HDFC 213827

4. Max India Ltd. 1324985

5. Punjab National Bank 1228014

6. Reliance Industries 2544192

7. Reliance Capital 3122857

8. Reliance Comm 3915909

9. Shree Renuka Sugars 1888690

Port Name : Janus Advisor International Growth Fund

Sr. No. Stock Qty

1. Bajaj Hindustan 855654

2. Balrampur Chinni 1843537

3. HDFC 197176

4. Max India Ltd. 795587

5. Reliance Capital 2851288

6. Reliance Comm 3593092

7. Reliance Industries 2131011

8. Shree Renuka Sugars 639580

Janus Contrarian Fund (as on Oct 31, 2008)

1. Ambuja Cement (4,36,422 shares)

2. ICICI Bank (3,342,118)

3. ICICI Bank ADR (2,431,429)

4. NTPC (26,223,649)

5. Power Grid (50,754,785)

6. L&T (2,329,996)

7. L&T GDR (640,572)

8. Reliance Power (252,084)

9. Pantaloon (3,714,112)

10. Reliance Energy (7,467,530)

11. Future Capital (13,545)

12. Ballarpur Ind (30,946,059)

13. Bharat Forge (6,936,608)

Global Technology Fund (as on Oct 31, 2008)

1. Satyam Computer Services (698,606)

2. ABB (139,587)

Rollover Analysis - Feb 2009

Rollover Analysis - Feb 2009

India Strategy - Feb 24 2009

India Strategy - Feb 24 2009