NEWS ANALYSIS
RAJESH DESAI
INFRASTRUCTURE
SPML Infra bags Rs 325-cr order from Rajasthan govt
· SPML Infra has bagged an order worth Rs 324.91 crore from the Rajasthan Government. The work is for building a cluster distribution network with operation and maintenance included under the Nagaur Lift Project, phase 1.
RPower ties up $ 1.1 bn Chinese loans for Sasan project
· Reliance Power has tied up loans of $ 1.1 billion (over Rs 6,000 crore) from three Chinese lenders for its upcoming 3,960 MW Sasan ultra mega power project in Madhya Pradesh. The State Council of Government of China has granted the final approval for Chinese banks to finance the Sasan project. It would be the largest financing by Chinese Banks to an Indian project across all sectors. The long term loans have a duration of over 13 years.
· The Chinese banks’ financing is to support import of Boiler—Turbine Generator (BTG) from Shanghai Electric Group Company Ltd.
BHEL to chug into Pakistan
· In what could be a major boost to Bharat Heavy Electricals Ltd (BHEL)’s railway business, the state-run power equipment firm is close to winning a contract worth Rs 1,000 crore from Pakistan to manufacture railway locomotives. This will be the company’s first deal in the neighbouring country and is happening at a time when both India and Pakistan have started opening channels of bilateral trade.
· The financing arrangement for the contract was yet to be finalised, it could come as a soft loan from the Indian to the Pakistani government and could be worth over Rs 1,000 crore.
Power ministry reiterates proposal to levy 21% import duty on equipment
· The power ministry has stuck to it its original proposal to levy a total of 21% import duty on power equipment despite changes sought by a host of central ministries seeking higher duty protection for the domestic engineering firms such as Bhel and L&T.
· In a recent draft Cabinet note, the power ministry has retained the proposal to levy 5% basic customs duty, 12% countervailing duty (after the excise hike announced in the Budget to 12%) and 4% special additional duty on power equipment for all categories of projects bearing non-mega, mega and ultra mega tags.
METALS & MINING
Steel demand dip may shut more mills in Europe
· Concern that there may be further closures of European steel plants continues to build, as the slump that followed the bounce back of 2010 shows no sign of waning. The European steel market staged a strong recovery in 2010, after demand plummeted the year before (demand for sheet steel fell 30 per cent), as initiatives by European government, such as the car scrappage scheme, helped buoy demand.
· Ratings agency Fitch has warned that further steel production capacity closures are likely across Europe over the next 12 months, as demand is set to remain muted into 2013, production overcapacity continues to linger, cost pressures remain high, and firms have struggled to keep up prices. In 2012 everyone expected prices to stick but they haven’t: steel demand is likely to be in the doldrums for the rest of the year, and we’ve seen margin erosions across companies.
· With raw material costs rising, he argues, the only real alternative left to firms is to cut higher cost capacity, and for the industry to move towards a utilisation capacity of around 90 per cent, from the current levels of around 80 per cent. Others have warned that sliding prices in southern Europe will put pressure on northern European prices, bringing them down further, despite the best efforts of firms to hold prices steady.
BEML promises to work with Coal India, DVC to reopen Durgapur facility
· BEML Ltd promised to work in joint venture with Coal India Ltd and Damodar Valley Corporation to reopen the closed mining machinery facility of Mining and Allied Machinery Corporation (MAMC) in Durgapur. The Bangalore-based mine gear major previously wanted to pull out of the proposed joint venture. It has promised to seek board approval for entering a 48 per cent joint venture with CIL (26 per cent) and DVC (26 per cent). If approved by the board, BEML will include the coal and power majors in MAMC Industries as joint venture partners. BEML, CIL and DVC will enter into shareholders agreement to form the joint venture, MAMC Industries, by August 31.
JSW Steel output up 27% in Q1
· JSW Steel reported that its crude steel production in the first quarter of this fiscal was up 27 per cent at 2.14 million tonnes. Production of flat steel, which is used by the white goods and automobile sectors, was up 36 per cent at 1.61 mt, while that of long products used in infrastructure and real estate projects was up 27 per cent at 0.44 mt.
· The capacity utilisation at the Vijayanagar plant in Karnataka was at 80 per cent in the first quarter of this fiscal. The plant has a capacity of 10 million tonnes a year. Production at the plant was hit due to constraints in availability and quality iron ore in e-auction in Karnataka.
· The company had to rely on e-auction after the Supreme Court banned iron ore mining in Bellary, Chitradurga and Tumkur districts of Karnataka last year to stop illegal mining. In April this year, the apex court-appointed Central Empowered Committee recommended mining at ‘Category A’ mines, which were not part of illegal mining.
CEA may consider SAIL divestment
· The Cabinet Committee on Economic Affairs (CCEA) may take up the proposal for disinvestment in SAIL on Thursday. The proposal is to offload 10 per cent Government equity by way of auction to bring in Rs 3,500-4,000 crore. This proposal is different from the original one approved by the CCEA in April 2010. At that time, it was decided to divest 10 per cent of Government’s share in SAIL along with issue of 10 per cent fresh equity by the company in two equal tranches. However, due to some issues with merchant bankers and market volatility, the Government deferred the SAIL offer.
Hind
Steelworks Topline Rises 21%
· Hindustan Steelworks Construction Limited (HSCL) has reported a topline growth of 21.27% during 2011-12 with a total income of.1208.23 crore against.996.30 crore achieved during 2010-11.The company's operational profit went up by 16.13% to.82.70 crore in 2011-12 as against.71.21 crore in 2010-11.
· During the year, the company's market share also improved by about 4% with orders worth.1899 crore booked in steel as well as in the infrastructure sector across the country, Malay Chatterjee CMD,HSCL said. Earnings per employee increased by 75.94% from.1.33 crore to.2.34 crore, indicating its cost effective business operations during the year.
CIL Board Meet to Keep Fuel Supply Talks Out of Agenda
· State-run Coal India will not discuss the controversial fuel supply agreement, or FSA, at its board meeting next week. The miner has not received any communication from the government so far for altering the terms of the fuel supply pact it has proposed to sign with power firms. Power producers, including the country’s largest player NTPC, have refused to sign the new agreement with Coal India, saying the contract absolves the supplier of all obligations.
· The crucial board meeting has been rescheduled thrice in the past few weeks. The new fuel supply agreement has become a bone of contention between Coal India and power producers ,and also drawn in the ministries of coal and power in the tussle. The original draft of the proposed agreement had set the trigger point at 80% and penalty at 0.01%.A trigger point is the level of the contracted fuel that the supplier (Coal India in this case ) promises to deliver to the power units. The draft proposed that if supplies fall below this level, Coal India would pay 0.01% of the value of the shortfall as penalty.
Deadlock Over Fuel Supply Pacts May End This Month
· The deadlock over fuel supply pacts between Coal India and power companies is expected to end by the month-end as the issue is being considered at the highest levels of government, the Coal Ministry said on Wednesday. Coal India Ltd (CIL) has some apprehensions whether it can meet the stipulated requirements or not. Coal India is deliberating on the issue and its Board will meet soon.
Regards,
Team Microsec Research
--
CA. Rajesh Desai
RAJESH DESAI
INFRASTRUCTURE
IL&FS Engineering bags Rs 394-cr DLF contract
· IL&FS Engineering and Construction Company Ltd has been awarded a turnkey EPC road contract by DLF Ltd. In a statement to the stock exchanges, the company has informed that the Rs 394.30-crore contract is for the construction of high-speed HUDA sector road starting from National Highway-8 to Sector 55/56 at Gurgaon. The road project is to be completed in 18 months from the date of commencement of work with a maintenance period of five years.
NTPC has not taken possession of land acquired by Bengal Govt
· Land issues are still dogging NTPC’s proposed 1,600 MW super-thermal power project at Katwa in West Bengal. For the last couple of months, the West Bengal Government has been sending repeated reminders to NTPC, asking the power major to take possession of 575 acres acquired by the Government for Rs 100 crore — but without much success.
· The reason is simple. As part of its much publicised ‘no land acquisition for industry’ strategy, the Mamata Banerjee government has asked the company to acquire another 500-plus acres, required to set up a power plant of such size, directly from the farmers. To help the company, the State Government has even earmarked the land to be acquired directly.
L&T expands capacity with new switchgear facility in Vadodara
· Larsen & Toubro said here its new electrical and automation facility for switchgear products, inaugurated on Thursday in Vadodara, will enhance productivity by 2.5 times due to the deployment of labour and automation. Set up on an 18-acre plot next to L&T Knowledge City, this is a capacity expansion initiative for L&T’s Electrical & Automation (E&A) business, makers of low voltage switchgears in India.
|
In Mumbai, Tata Power's gain is Reliance Infra's loss |
· Slowly, but steadily, the migration of consumers from Reliance Infrastructure to Tata Power in the city’s vibrant power sector has gathered pace. Tata Power, with a customer base of 300,000, receives 300-350 consumer applications for a switch daily. In 2011-12, about 120,000 customers switched to Tata Power. Of these, the residential segment accounted for 88 per cent, followed by the commercial segment (11 per cent) and the industrial segment (one per cent).
· Tata Power’s competitive rates led to the surge in migration. According to the proposal for rates filed with the Maharashtra Electricity Regulatory Commission, in 2010-11, the average billing rate of Reliance Infrastructure’s distribution wing stood at Rs 7.06 a unit, against Rs 5.20 a unit for Tata Power’s distribution arm.
· The company’s current power generation capacity allocated to the city is 900 Mw to its own customer base and 900 Mw to Brihanmumbai Electric Supply and Transport. The process of changeover is very systematic and easy, evident through the high changeover numbers.
|
Sobha drags HSBC to court over debt restructuring package |
· Sobha Developers, the publicly-held Bangalore-based real estate developer, has gone to Court against HSBC over restructuring of its debt. In the Suit, Sobha Developers has averred that HSBC went back on its commitments of lower interest rates and waving off the processing and foreclosure fee on a debt restructuring package. According to Sobha Developers, HSBC has breached contract terms, breached Reserve Bank of India Guidelines, breached normal banking practices.
· As per legal Suit filed, Sobha Developers during the year 2008 and 2009 approached HSBC for restructuring loans amounting to a little over Rs 170 crore, with interest rates ranging between 14-20 per cent for the restructured loan and which was backed by adequate collaterals.
CCI nod to Rs. 648 crore UP highway project
· Keeping in mind the forthcoming presidential election, the Congress-led United Progressive Alliance (UPA) took a series of decisions on Thursday aimed at benefiting states that the ruling coalition is banking on to support its candidate, Pranab Mukherjee.
· A day after the Union government cleared a Rs. 45,000 crore package for Uttar Pradesh, the cabinet committee on infrastructure (CCI) approved a Rs. 647.98 crore national highway project in the politically crucial state.
· National highway 231, approved on Thursday, will link Congress party chief Sonia Gandhi’s Rae Bareli constituency with Jaunpur at an estimated cost of Rs.647.98 crore, out of which Rs. 78.62 crore will be for land acquisition, resettlement and rehabilitation, and pre-construction, and Rs. 569.36 crore for construction.
METALS & MINING
|
JSPL Raises 3,500 Cr to Fund Odisha Steel Project · Unfazed by its failure in Bolivia where it has threatened to walk out of a large steel project due to differences with the Bolivian government, Naveen Jindal-led Jindal Steel & Power has raised INR3,500 crore from a consortium of lenders for a steel project it is setting up in Odisha. · The steelmaker will use the loan for a 2-million-tonne,coal-to-gas direct reduced iron (DRI) plant near Angul, Odisha. It’s a viable project and the banks are satisfied as it is the first of its kind in the world, Finance Director Sushil Maroo told ET. The project is based on the two resources abundant in India (non coking coal and iron ore) and will have lower costs compared to traditional plants. The average cost of borrowing is about 11%. · The debt will add to Jindal Steels consolidated debt of.14,716.8 crore as on March 31,2012.Jindal Steel Bolivia is in the process of terminating a $2.1-billion (INR11,746 crore) investment contract the largest foreign investment in the Latin American country after the country reneged on contractual obligations with regard to gas supplies. The company was also building a similar size DRI plant, tapping Bolivias vast iron ore and coal reserves.
· Jindal Steels project will be based on coal from the 225-million-tonne coal block that was allotted to the company earlier, while iron ore sourcing will be through additional captive mining of 7 million tonnes for which approvals are in place and through tie-ups with private miners. |
JSW to setup steel plant in Bellary
· JSW Steel Ltd, the country’s lowest-cost steel producer, plans to set up a 2.3-million tonne per annum cold-rolling mill complex to manufacture high-grade automotive steel at Toranagallu in Bellary district, Karnataka.
CONSUMER DURABLES
Videocon-BPCL venture strikes oil in Brazil
· A joint venture of Videocon Industries and Bharat Petroleum has struck oil off the Brazilian coast, the two companies announced today. IBV Brasil Petroleo Limitada, the equal joint venture company, has a 30 per cent interest in the block named ES-M-661, in the Espirito Santo Basin, offshore Brazil. Petrobras, the national oil company of Brazil, is the operator of the block and holds a 40 per cent interest in it. Another company called Anadarko has the other 30 per cent.
· The exploration well, christened ‘Grana Padano’ was drilled up to a depth of 2,961 metres under the sea bed, where the water depth was 1,208 metres. The drillers encountered oil column of 39 metres at depths between 2,008 metres and 2,047 metres. The consortium will continue the activities in the block, and intends to submit to the national agency of petroleum, natural gas and bio fuels for a proposed evaluation plan.
AC, soft drink production soars
· Call it the summer impact, the production of room air conditioners (ACs) and cold drinks rose significantly in May. While production of room air conditioners rose 30 per cent, compared with the corresponding period last year, that of aerated water and soft drinks increased 25.1 per cent, official data on the Index of Industrial Production (IIP) showed today.
· The consumer goods segment, particularly durables, was one of the few categories that boosted the index, which fell in March and April. In the consumer goods category, production of telecom instruments, including mobile handsets, recorded growth of 22.8 per cent in May, compared to the year-ago period. While production of another consumer item, color television sets, recorded a 25.9 per cent decline, that of an important input for these — color TV picture tubes — fell a whopping 87.6 per cent.
· Items that recorded significant growth in production include carbon steel (23.5 per cent), plastic machinery, including moulding machinery (49.6 per cent), aluminum conductors (58.1 per cent), cold rolled sheets (30.1 per cent), steel structures (28.5 per cent), boilers (28.8 per cent) and purified terephthalic acid (23.3 per cent).
BANKING
Moody’s assigns ‘Baa2’ rating for SBI bonds issue
State Bank of India’s proposed issuance of USD senior notes through its London branch have been assigned a ‘Baa2’ rating by Moody's Investors Service. The outlook for the rating is stable. India’s largest lender is understood to be planning to raise about $1 billion through the senior notes. The ‘Baa2’ rating is underpinned by State Bank of India’s dominant franchise as the largest commercial bank in India, and its moderate financial position. The rating also reflects SBI’s limited ability to manage its capital situation and the protracted challenges it faces in securing capital from the Government of India. The rating incorporates Moody's assessment that the probability of systemic support for State Bank of India, if needed, is very high, based on its position as the largest systemically important bank in the country. Moody’s has also referred to SBI’s critical function in India’s payment system, processing well over 16 per cent of all transactions, its 61.6 per cent ownership by the government, historical evidence of government support for the bank, and its implicit policy role in financial inclusion, both social and fiscal.
IDBI Bank to launch 24x7 loan monitoring system
IDBI Bank will shortly be launching a 24x7 loan monitoring system for its retail as well as corporate clients. Under this facility, a customer can directly inform a centralised system about submission of his/her loan application details to IDBI Bank via SMS, email or through the Web site. The bank has created a dedicated SMS number, email ID and utility in the Web site for this purpose. So far, the customers were able to get details about their loan request only through the branches.
RBI plans new financial products for gold-like returns
The Reserve Bank of India is considering financial instruments that mimic the returns on gold. It is the primarily aimed at curbing current account deficit.
According to Mr. Anand Sinha Deputy Governor of RBI, Gold import has been a substantial part of current account deficit; therefore, it is being looked at what best can be done. Import is one aspect, the other aspect is that the gold that is already existing in the country can be brought out to satisfy the demand by devising financial instruments which can mimic the returns on gold.
Tata Capital launches three new credit card variants
Tata Capital has expanded its credit card portfolio with the launch of three new credit card variants. Issued by SBI Cards, these three credit card variants — Tata Platinum, Tata Titanium and Tata Corporate Card — are aimed at the retail and corporate customer segments. The Platinum and Titanium variants are targeted at the growing number of affluent and mass affluent retail customers. The Tata Corporate Card would cater to the expense management needs of customers in the corporate segment. The new cards offer up to 6 per cent value back at select Tata establishments and up to 3x reward points on select department stores, dining, groceries and international spends.
Tata Card is a white-label credit card issued, operated and serviced by SBI Cards. Tata Capital Financial Services Ltd (TCFSL) undertakes its marketing and distribution. The new variants will help us strengthen Tata Cards portfolio.
Regards,
Team Microsec Research
Microsec Capital Limited
Tel: 91 33 30512100
Fax: 91 33 30512020
--
CA. Rajesh Desai