Saturday, May 01, 2010
The initial public offer (IPO) of Jaypee Infratech received bids for 190.38mn shares compared to 221.76mn shares on offer. QIBs led the bidding even as he HNIs and Retail investors remained cautious. The IPO was subscribed 86% by 16:00 IST on Friday, as per NSE web site. The company has set a price band of Rs102-117 per share for its IPO. Retail investors will be allotted shares at a discount of up to 5% to the issue price that will be determined as per the 100% book-building route. The issue closes on May 4. The IPO is a combination of fresh issue of equity shares aggregating up to Rs16.5bn and an offer for sale 60mn shares by Jaiprakash Associates. Jaypee Infratech is engaged in the development of the 165-kilometer Yamuna Expressway (access controlled concrete pavement expressway) connecting Greater Noida and Agra. The project which includes development of 5 integrated townships along the expressway, is scheduled to be completed by 2011.
Meanwhile, the IPO of Satluj Jal Vidyut Nigam Ltd. was subscribed 56% as of 4 PM on Friday. The public sector hydro-power utility is planning to raise about Rs12bn via the IPO. The issue will close on May 3. The company has fixed a price band of Rs23-26 per share. The company came out with a public offering of 41.50 crore equity shares. The company is currently constructing the Rampur project, which is expected to be a 412 MW hydroelectric power generation facility located downstream from the NJHPS. The Rampur project is currently and commissioned in 2013. The company has also entered into memoranda of understanding with the state government of Uttarkhand for three hydroelectric projects with an expected aggregate generation capacity of 363MW.
AT&T sold its entire 8.07% stake in Tech Mahindra a month after acquiring it from the Indian promoters. The US telecom major sold 7% stake in Tech Mahindra on April 28 and another 1% over the past few weeks in the market, thus making an exit from its stake in the software firm completely. The 7% stake was sold at Rs762.4 a share, giving AT&T Rs6.6bn and netting it a profit of around Rs5bn in a month's time. A bulk of the shares were purchased by LIC, according to reports. There was no official confirmation from any company. LIC already holds around 7.4% in Tech Mahindra, and the current transaction could take its stake up to 12-14%. AT&T had bought the Tech Mahindra stake in March 2010 by exercising an option it had to purchase the shares at US$3.5 a share or around Rs162 a share. AT&T acquired the right to exercise the options because it fulfilled certain revenue targets in terms of outsourcing contracts to Tech Mahindra.
Shares of Sun Pharma took a big knock after a US district court ruled that the Indian drugmaker will have to withdraw its generic Eloxatin product from the American market on June 30th. Sun Pharma said it will re-enter the US market by 2012. Eloxatin is an anticancer drug with US$1.4bn annual sales in US at innovator prices, IIFL said in a note. Sun Pharma had launched it in March 2010, after a favorable judgment from a court of law regarding the enforceability of its settlement with Sanofi, the innovator. Later, other generic players settled with Sanofi and agreed to withdraw the product from the market on June 30. Sun Pharma can appeal the decision by the district court in a court of appeal, IIFL said. However, even if the appeal court gives a temporary reprieve to Sun Pharma, the sales would practically be at risk of damages, should it lose the appeal, it added.
Separately, Sun Pharma said that a jury returned a verdict in the patent litigation over generic Protonix. The trial is currently underway in the US District Court for the District of New Jersey. The jury determined that Nycomed's US Patent No. 4,758,579 is not invalid. The Court has reserved decision on the issue of the effect to be given to the jury's determinations relating to the obviousness-type double patenting defenses, which as the company has argued, is to be decided by the Court, Sun Pharma said. Pantoprazole Sodium DR Tablets are the AB-rated generic equivalent of Wyeth's Protonix DR Tablets. Protonix is an anti-gastric ulcer drug that had US$2.3bn annual sales at innovator prices.
Only one argument for invalidity (obviousness) had been posted to the jury for examination and the second argument (obviousness type double patenting) is still with the judge to decide upon. "We feel that the risk of adverse ruling is significantly higher than before," IIFL said in a note. Israel's Teva Pharma, followed by Sun Pharma launched generic versions at risk of IP violation in Q1 CY08, according to IIFL. Wyeth had launched an authorized generic as well. Later on, Kudco too entered the market, in March 2009.
Combined production at India's factories, power utilities and mines is expected to grow by 15% in March, Commerce & Industry Secretary R.P. Singh said. In February, the industrial output had grown by an annual rate of 15.1%. After a blip in February, growth in India's six key infrastructure industries rebounded in March due to strong expansion across the board, data released by the Government showed earlier this week. However, performance of the Petroleum Refinery sub-segment left a lot to be desired. The index of six infrastructure industries stood at 290.6 as against 252.9 in February. The core sector index stood at 271.2 in March 2009 and had registered a growth of 3.3% over the same month of the preceding year. The infrastructure sector index comprises Crude Oil, Petroleum Refining, Coal, Electricity, Finished Steel and Cement, and has a 27% weightage in the IIP.
Property investors and real estate industry players can take a sigh of relief; property prices in India have shown a reasonable uptrend in the last 12 months. As per the March 2010 release of Makaan.com Property Index (MPI), the national index stood at 1117 compared with 954 in the corresponding month last year, an increase of over 17%. The rise in national index is attributed to the hardening of property prices in the western markets of Mumbai and Pune, which rose by 29.4% and 28.1% respectively.
Delhi rose by 6.8% in the same period. Putting pressure on the index were the property price movements in southern cities of Hyderabad, Bangalore and Chennai that corrected by 3.2%, 2.5% and 1.4% respectively over the last one year.
It is interesting to analyze the trends in property price movements. Prices fell in the first half (Jan-June period) of 2009 when the index dropped from 1000 to 946. This period was marked by complete lack of interest among investors & home buyers in making long term high value purchase decisions. With the Indian economy showing sign of revival and consumers becoming more confident about their future earnings, the property prices started rising in the second half (July-Dec period); with the index reaching 1128 in December 2009.
The month of November and December saw two interesting trends. Firstly, developers in Mumbai, Delhi & Bangalore increased the prices of their existing projects. Secondly, new launches happened at prices significantly higher than the prevalent rates. This rise was too fast and too high and led to crowding out of home buyer as they caught off guard with this unexpected jump in rates. This led
to lower transaction during the January to March 2010 period. The national price index moved in a narrow range from 1080 to 1117 during this period; beautifully capturing the mood of the market.
Commenting on the findings Aditya Verma – VP & Business Head Makaan.com says, “Going forward, the signals from the economy are quite positive - the Budget for FY11 has been received positively, there is overall optimism in all sectors, job visibility is better among the salaried class. Realty sector is seeing the effects of this in the form of new launches across cities. For sustained development, it is critical to maintain property price
Well, the bonanza that the Government would get from the auction of third-generation (3G) spectrum keeps climbing. What's more, at Thursday's close, the Centre is expected to get Rs380bn as against projection of Rs350bn from the combined 3G-BWA auction. Bids for one set of pan-India 3G mobile licences reached Rs93.3bn, or 167% above the base price, on the 17th day of the auction, government data showed. The base price for one set of pan-India 3G licences had been set at Rs35bn. As per the details given by the Department of Telecommunications (DoT), more than 100 Clock Rounds were completed as of Thursday. The auction started on April 9 and is still underway. Auction for BWA will start after two days of the close of 3G auction.
"The revenue from 3G auction alone may cross Rs400bn. Revenues from 3G and Broadband Wireless Access (BWA) spectrum put together may touch Rs500-550bn," Telecom Minister A Raja was quoted as saying earlier this week. Mumbai and Delhi continued to be among the most sought-after circles with highest bids of over Rs14bn each.
Out of a total of 22 circles for the 3G spectrum, 17 have three slots, while in rest of the five circles, four blocks of spectrum are available. India's fiscal deficit may come down to 5.2% of GDP from the estimated 5.5% of GDP. The Government has pegged the fiscal deficit at Rs3.81 lakh crores. He also said on Thursday that the 3G auction will be completed in a day or two. "The 3G auction is being held successfully....it will be completed in one or two days," he said during Question Hour in the parliament. The e-auction began on April 9 and will continue till such time that demand equals supply, Raja said. The successful bidders would be allotted air waves in September after the spectrum is vacated by the defence forces.
Markets across the world were rattled briefly after Standard & Poor's downgraded Greece's rating to "junk" while also cutting the ratings of Portugal and Spain, citing these nation's spiraling debt. Risk appetite tumbled, with commodities and stocks taking a beating while the dollar and gold gained. The cost of insuring against sovereign debt default by Greece, Portugal and Spain surged while the spread between the benchmark notes of Greece and Germany shot up. Sentiment across asset classes, markets and regions nose-dived as European leaders dragged their feet over a rescue package for Greece, stoking fears that the debt-ridden nation could end up defaulting on its obligations. Pressure mounted on the leaders of euro-zone countries, particularly Germany’s Angela Merkel, to agree quickly on the details of the proposed bailout.
The situation seemed to stabilise by Friday evening as all the stakeholders agreed to do their bit to contain the debt contagion. Germany may now approve its share of the bailout by May 7. So, the EU and IMF decided to raise the aid package to €120bn over three years, up from an original plan of €45bn this year. The Financial Times (FT) reported that Greece has agreed the outline of a €24bn (US$32bn) austerity package. Final details of the measures, which are intended to slash the budget deficit by 10-11% of GDP over the next three years, were still being worked out, the FT added. A successful auction of Italian debt also helped soothe nerves. Global stocks also got a boost from strong earnings from major US companies, which lifted Wall Street and raised hopes that the world's largest economy was picking up steam, tempering some worries about Europe's debt problems.
Greece is certainly not as big as the US or even for that matter Spain. So, even as uncertainly and anxiety looms over the fate of this small southern European nation, the contagion effect will not be massive. There will be some temporary pain in global markets if the European debt crisis worsens though right now it appears that Greece will be able to avoid a default. Whether the EU-IMF aid package will be enough only time will tell.
Moody’s said that Greece was vulnerable to a multi- notch downgrade if measures don’t go far enough. Goldman Sachs said it was not sure if the UK would be able to hold its "AAA" rating. For the time being one can only keep one's fingers crossed. Apart from the Greek debt crisis, there is the Goldman Sachs case to contend with, after reports said the US is planning federal prosecution against the Wall Street titan. Then there is the China factor as well.
Coming to the Indian market, new month means auto and cement sales aside from the trade data. Results will continue though at a slower pace. Plenty of big ticket names are yet to announce their earnings. The good news is IIP growth is likely to remain fairly strong even as inflation starts to moderate. Still, there is no escaping the fact that interest rates will rise albeit at a gradual pace unless inflation spikes afresh. What we have in India is a more benign economic conditions. A good monsoon will only add to the optimism about economic growth. In the near-term, the main concerns are on valuations and erratic fund flows.
The Government survived an Opposition onslaught in parliament and also managed to clear the Finance Bill as the Yadav chieftains and Mayawati threw their weight behind the UPA to keep the "communal forces at bay". All efforts by the BJP and the Communist parties to corner the Congress-led coalition on a spate of issues - IPL row, Phone Tapping controversy and price rise - came to naught. Interestingly, the RJD and SP backed Left parties' a Bharat Bandh agitation to protest against the Government's failure to rein in spiraling prices, especially that of essential commodities. In another bizarre development, Sibu Soren voted in favour of the UPA during the cut motions moved by the BJP. The saffron party then announced it would withdraw support to the Soren government in Jharkhand, only to back track on the move on Friday. Despite the BJP's 'U' turn, the JMM was still divided on whether to stick with it or go with the UPA in Jharkhand. Meanwhile, Jharkhand chief minister Shibu Soren wrote to BJP president Nitin Gadkari apologising for voting for the UPA in the cut motions for the demands for grants in relation to the budgetary proposals.
Talking of the Union Budget, finance minister Pranab Mukherjee rejected the Opposition's demand to rollback the hike in taxes on petrol and diesel. A reversal in the prices of fertilizers was not affordable in view of the economic compulsions, he said. Mukherjee announced a debt relief package for coffee growers besides making marginal changes in tax proposals to benefit sectors such as construction and encourage the setting up of new hospitals. At the same time, he rejected the demand for waiving the service tax on air travel saying that the levy on domestic travelers would only be Rs100 per ticket, while international travel would attract a maximum tax of Rs500. Mukherjee pointed out that while the fresh concessions would mean a revenue loss of about Rs3-4bn during the fiscal year. The entire Opposition walked out in stages, starting with the BJP, and the Lok Sabha passed the Finance Bill by a voice vote after including the relevant official amendments. " Any additional burden at this juncture could indulge in financial profligacy that I cannot afford to do...oil price is so volatile...when will it go up...nobody knows," Mukherjee said.
The Finance minister said that construction of hospitals with at least 100 beds in any part of the country would qualify for tax concessions based on their investment. He also restored the customs duty concessions for ‘ostomy' appliances which are used to treat cancer patients while reducing the basic customs duty on 11 drugs to five per cent. Likewise, to render tax relief to the construction sector, Mukherjee announced that by providing higher abatement, the newly imposed service tax would be levied only on 25% of the total value of the property, including land, instead of on 33%, as was proposed in the Budget. For the benefit of the urban poor, the Finance Minister also waived the service tax on low-cost housing under the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) and the Rajiv Gandhi Awas Yojana.