NEWS ANALYSIS
Rajesh Desai
INFRASTRUCTURE
Discussions on for restructuring package of discoms: Govt
· The Power and Finance Ministries are in discussions for a financial restructuring package for power distribution companies to make them viable, government said. Replying to Supplementaries in Rajya Sabha, Power Minister Jyotiraditya Scindia said tariff for retail sale of electricity by discoms is determined by State Electricity Regulatory Commissions (SERCs) as per the provisions of the Electricity Act, 2003.
NTPC Board okays Rs 12,953 cr investment for expansion plans
· State-run NTPC said the company's Board has given investment approvals to expansion projects involving Rs 12,953.12 crore. "Board of Directors of the company have accorded investment approval for the Chatti-Bariatu coal mining project having production capacity of 7 MTPA (million tonnes per annum) in Jharkhand at an appraised current estimated cost of Rs 1,314.57 crore," NTPC said in a regulatory filing to the stock exchanges.
AUTOMOBILES
Tractor sales to plough a lonely furrow
Tractor demand is likely to stay muted in the coming months even as costly loans & lower rural incomes put pressure on farm vehicle manufacturers. A collective drop of 9% was reported in January sales at 44,720 units against 49,134 units sold in the year-ago period, according to a report prepared by BRICS Securities.
Besides, the drought-like situation in Maharashtra & lack of state & central government intervention in relief efforts for farmers is expected to put further pressure on the market. Mumbai-based Mahindra & Mahindra (M&M) with a share of 41% in the domestic market led the fall in sales at 16,402 units, a drop of 9% in January as compared to 17,950 units sold in the same month in 2012. The company, which sells its products under the Mahindra and Swaraj brands is expecting a flat-to-negative growth for the industry by March-end. Chennai-based TAFE is the country's 2nd largest tractor maker while Escorts & Sonalika are the 3rd & 4th largest respectively.
Industry demand continues to be held back by firm interest rates, high inflation affecting investment the sentiment of farmers & a rise in tractor prices by domestic manufacturers. Further, demand from the non-agricultural segment remained sluggish over the past months with no significant pick-up in construction & infrastructure-related activities. Meanwhile, the tough economic conditions might have led farmers to down trade of choices as the domestic market has increasingly moved towards smaller, low-powered & affordable tractors, the segment which continues to grow. Newer launches & expected pick-up in government-related schemes in rural areas is expected to push tractor volumes higher next year compared to this year at 585,000 units, a growth of 4%, according to some analysts.
BANKING
Rush for IIFCL’s loan guarantee scheme
Infrastructure biggies, including Larsen & Toubro, GMR Group, Reliance and Essar Group, have approached India Infrastructure Finance Ltd (IIFCL) for availing the latter’s credit enhancement facility for their project bonds. Within a month of signing the guarantee agreement for the first pilot project, GMR Jadcherla Expressways, State-owned IIFCL is now flooded with applications for credit enhancement from various infrastructure companies. As many as 14 projects in sectors, such as airports, ports, roads, power transmission, wind energy and fertilisers, are interested in credit enhancement and seeking IIFCL support.
The cumulative value of the bonds that these companies plan to issue after credit enhancement is estimated at Rs 5,000 crore. Company will do the credit enhancement for the bonds of these projects in next three months.
Through credit enhancement, a lender is provided with reassurance that a borrower will honour the obligation through additional collateral or third-party guarantee. It reduces credit or default risk of a debt, thereby enhancing credit rating and lowering the interest rates on the debt.
SBI sanctions Rs 2,650 cr loan to RINL
SBI was very much impressed with the Rashtriya Ispat Nigam Ltd for its outstanding performance and termed the company “truly a centre of excellence.” SBI Chairman Pratip Chaudhuri made the observation on his maiden visit to the steel plant for completing formalities with regard to a loan of Rs 2,650 crores to the plant for its expansion project. He presented a cheque for Rs 500 crore to RINL CMD A.P Choudhary as part disbursement of the loan.
Andhra Bank cuts base rate by 25 bps
Andhra Bank has made a downward revision of the base rate by 25 basis points. Effective March 1, the rate will be 10.25 per cent, down from 10.5 per cent. The bank has also made a downward revision of BMPLR by 25 bps. The new rate will be 14.50 per cent, down from 14.75 per cent.
Regards,
Team Microsec Research
Microsec Capital Limited
Tel: 91 33 30512100
Fax: 91 33 30512020
CA. Rajesh Desai