NEWS ANALYSIS
Rajesh Desai
METAL & MINING
Govt may auction coal mines only after getting green nod
· Learning from the recent flop-show of the 2G telecom spectrum licence auction, a view is firming up within the Government that coal blocks should be auctioned only after environment and forest clearances are obtained. Blocks loaded with ‘in-principle’ clearances would fetch a better floor price, as getting the green nod is a major roadblock in exploiting mines.
· Coal Secretary S. K. Srivastava said that one of the issues to be sorted out before 54 mines go on auction is ‘whether they should be put out with or without environment and forest clearances.
· For instance, currently, Coal India has 178 projects awaiting forest clearance from several States. And 65 more applications are pending with the MoEF. The Coal Ministry may look at a model similar to the one governing the bidding for ultra mega power projects. Power Finance Corporation Limited (PFC), the nodal body that conceives of and plans the mega power projects, gets green clearances before the unit is put out for bidding.
· The Coal Ministry is tightening guidelines for the States while allocating coal mines via Government dispensation route. This is because Government companies need not participate in the auctions. The Secretary said that States such as Orissa and Jharkhand have also sought preference for end-use plants being set up in their respective States.
CIL to Have New Price Pooling Model
· Coal India is working on a new model for price pooling that will allow power generators to buy a mix of imported and domestic coal at one price. The price derived by the new formula will have the cost of imported coal factored into it. The earlier model, proposed by the Central Electricity Authority, involved sharing of 25% of the cost of imported coal equally by all power generators, which would have been eventually passed on to consumers. The remaining cost of imported fuel was to be borne by individual power generators.
· The government had asked Coal India to come up with an alternative price pooling mechanism after the one suggested by CEA was rejected by most power distribution companies. Coal India, however, said the new model needs some fine-tuning.
· The model will be submitted soon to the coal ministry, which will take it forward. It is,however,still not clear how Coal India will arrive at one price for the different categories of coal from its mines. The Coal India board had earlier approved the modified fuel supply agreement (FSA) without price pooling with 65% domestic coal and 15% imported coal at cost plus basis.
· This offer was for power companies that have set up plants between January 2009 and March 2015.The miner has, in fact, sought approval from power generators to import coal on their behalf. According to estimates, Coal India will see a supply shortfall of 26-42 million tonne to meet 80% of contracted coal requirement of power units between now and 2014-15.This shortfall will have to be met through imports. The calculation is based on the requirement to supply coal to some 60,000 mw of power units between 2009 and 2015.For units that have come up before 2009,it has committed a fixed quantity, which will meet 90% of their requirements.
Regards,
Team Microsec Research
Microsec Capital Limited
Tel: 91 33 30512100
Fax: 91 33 30512020
CA. Rajesh Desai
Rajesh Desai
BANKING
RBI allows Indusind Bank to raise FII limit to 49%
The Reserve Bank today allowed Indusind Bank to increase its FII investment limit to 49 percent but asked it to ensure that the aggregate foreign investment in the bank does not exceed 74 percent. "The Reserve Bank advise that its approval to the Induslnd Bank for raising FII investment limit to 49 percent is subject to the condition that aggregate foreign investment in the bank should also not exceed the composite sectoral cap of 74 percent," the apex bank said in a statement.
As on September-end, Foreign Institutional Investors' (FIIs) had 34.26 percent stake in the bank. In its Annual General Meeting, Indusind Bank's promoters had passed resolutions to allow FIIs to buy up to 49 percent of its paid-up equity capital through primary/secondary markets in India.
"As Induslnd Bank has now passed necessary resolutions in this regard, equity shares of Induslnd Bank can now be purchased through primary market and stock exchanges," RBI said. However, the purchase of equity shares by a single FII/SEBI approved sub-account of a registered FII in the Induslnd Bank should not exceed 10 percent.
ICICI Bank rating unchanged following tap bond offer: Moody’s
Moody’s Investors Service said ICICI Bank’s credit rating for an existing unsecured note remains unchanged at Baa2 following the announcement of a tap bond offering.
ICICI Bank has announced a $250 million tap bond offering, which has the same terms as the existing $750 million 4.7% 2018 senior unsecured notes. The unsecured notes were issued through the Dubai branch as part of $5 billion medium-term note programme. The outlook on the ratings remains stable, Moody’s Investors Services said.
Tap bonds defined
Tap issue is a procedure that allows borrowers to sell bonds or other short-term debt instruments from past issues. Usually, the bonds are issued at their original face value, maturity and coupon rate. Such bonds are, however, sold at the current market price. Issue on tap is suited for smaller fund-raising attempts.
Moody’s has a standalone bank financial strength rating of D+ for ICICI Bank, mapping to a baseline credit assessment BCA of baa3 on the long-term scale.
“We believe that the probability of systemic support for ICICI Bank is very high, given its sizeable retail deposit franchise and its importance to the national payments system as India’s second largest commercial bank. Therefore, the long-term local currency deposit and foreign currency senior unsecured debt ratings receive a one-notch rating uplift from its BCA”, the international rating agency said.
Regards,
Team Microsec Research
Microsec Capital Limited
Tel: 91 33 30512100
Fax: 91 33 30512020
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CA. Rajesh Desai