NEWS ANALYSIS
Rajesh Desai
INFRASTRUCTURE
APSEZ to divest Abbot Point stake to Adani family
· Adani Ports and Special Economic Zone ( APSEZ) informed that the board of directors of the company has given in-principle approval for divestment of stake in the Australian venture Abbot Point Coal Terminal in Queensland to the Adani family. The announcement came after the board meeting held.
Overseas roadshows for NTPC’s Rs13,000 cr share sale
· The government has started road shows in five countries, including the US, the UK and Japan, for promoting the proposed Rs13,000 crore stake sale in power producer National Thermal Power Corp (NTPC).
· In November last year, the government approved 9.5% stake sale in NTPC. It currently holds 84.5% stake in the company, which come down to 75% would post the offer. NTPC will not raise any fresh equity through this offer.
METALS & MINING
JSW Steel net down 18% on poor ore supply
· JSW Steel reported that its net profit was down 18 per cent to Rs 137 crore (Rs 168 crore) in the December quarter following lower capacity utilisation on the back of constraints in sourcing iron ore. Net sales were up five per cent at Rs 8,275 crore (Rs 7,860 crore). Earlier, the company said its consolidated results would be announced later.
· Justifying the provision, JSW Steel said it would be prudent to set aside the amount though the subsidiary may have a longer gestation period than originally planned. The company had considered a recent independent valuation of an underlying tangible asset and is in the process of making a detailed assessment of the fair value of net assets. Steel output was up 14 per cent at 2.17 million tonnes. The capacity utilisation was at 78 per cent.
· NMDC has not been able to produce one million tonnes of iron ore per month as per the Supreme Court directive given 17 months before, it said. So far only six mines of Category ‘A’ resumed operations. These mines produced 0.71 million tonnes so far but it has not been put on e-auction. In this backdrop, the company expects improvement in availability of ore in the March quarter.
Higher fee to benefit Indian copper smelters |
· In a major relief for Indian copper smelters, global miners have agreed to raise the treatment and refining charges ( Tc/ Rc) by 10 per cent for the January-March quarter. Higher rates reflect a recovery in copper mine supply after years of deficit. · Pan Pacific Copper, Japans biggest copper smelter, has successively negotiated more than 10 per cent increase in Tc/ Rc for 2013 from global miners. Similarly, China’s leading smelter, Jiangxi Copper, has also won increase in charges from global miner Freeport McMoRan Copper. The fees for Japan have climbed from $ 63.5 a tonne ( Tc) and 6.35 cents per pound ( Rc) last year, reports said, putting the 2013 figure above $ 69.85 and 6.985 cents, within the $ 65-$ 75 and 6.57.5 cents range expected by traders. · China’s Jiangxi Copper and global miner Freeport McMoRan Copper and Gold settled Tc/ Rc at $70 per tonne and seven cents per pound, up 10.2 per cent from $ 63.5 and 6.35 cents in 2012. This sets the benchmark for the rest of the global smelters, including Hindalco Industries and Sterlite Industries, to get higher realisation for converting copper concentrate into virgin finished products like cathodes. · Consequently, Indian companies are set to get better fee as Tc/ Rc this year. After the worse last year, higher fee for smelters is a good news for Indian copper smelters. Tc/ Rc was very low last year which probably had hit the lowest in five- six years. |
BANKING
Axis Bank to raise Rs 5,546 cr via QIP, pref issue
India’s third largest private sector lender, Axis Bank, launched its Rs 5,546-crore fund-raising drive through qualified institutional placement (QIP) and preferential allotment. The bank will raise Rs 5,546 crore by issuing about 39 million shares to institutional investors. This is one of the biggest share issuances in recent times. The bank’s QIP issue size is for Rs 4,726 crore which involves a dilution of 34 million shares. It will also allot 5 million shares aggregating Rs 820 crore on preferential basis to Life Insurance Corporation of India, among other promoters.
The offer price is at Rs 1,390 per equity share. The allotment date for the QIP is February 1, and the credit date, February 4.
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Team Microsec Research
Microsec Capital Limited
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CA. Rajesh Desai
Rajesh Desai
INFRASTRUCTURE
L&T inks $100 mn offshore engineering contract with Petronas
· Larsen & Toubro (L&T) has signed a $100 million contract with PETRONAS Carigali Myanmar (Hong Kong) Limited in Yangon, Myanmar. The contract is for executing an offshore engineering, procurement, construction, installation and commissioning project. The 19-month project includes supplying an offshore wellhead platform and subsea pipeline to be installed in a water depth of 108 meters. The scope also includes host tie-in works on an existing platform in the Yetagun complex. L&T’s facility in Kattupalli on the East Coast of India will undertake the fabrication work for the project.
Neyveli Lignite to add 1,500 MW in 2013-14
· Neyveli Lignite Corporation (NLC) is planning to increase its power generation capacity to 4,240 MW with TPS-II Expansion (500MW) at Neyveli and a coal-based power plant of 1,000 MW at (NTPL), Tuticorin expected to commence operations in 2013-14. This would also help the state of Tamil Nadu to address its power shortage, which is currently around 4,000 Mega Watt (MW).
METALS & MINING
Usha Martin to set up second unit in Thailand
· Usha Martin Ltd plans to set up a greenfield facility in Thailand to manufacture high-performance steel wire ropes. The facility will be set up by Usha Siam Steel Industries Public Company Ltd — a subsidiary of Usha Martin — in joint venture with Japan-based Tesac Wire Ropes Company Ltd.
· According to Rajeev Jhawar, Managing Director of Usha Martin, the 50:50 joint venture company — Tesac Usha Wirerope Company Ltd — will be operational in the next 16-18 months. Tesac Usha aims to manufacture 1,000 tonnes a day of steel rope in the next four-to-five years. Usha Siam will invest close to $16 million (approximately Rs 85 crore) in the next five years in the JV company, Jhawar said.
· Through this joint venture company it plans to cater to the Asean market. The ropes manufactured by Japanese units are becoming expensive and this unit will help address the cost issues. The manufacturing unit is expected to come up close to the company’s existing unit in Thailand which manufactures about 3,000 tonnes a day of steel wires and ropes.
Electrosteel may look for investors for Bokaro plant
· The Kolkata-based Electrosteel group may rope in fresh investors in Electrosteel Steels Ltd (ESL), according to market sources. This is to bridge the finance gap in ESL’s upcoming 2.2-million-tonne integrated steel plant at Bokaro in Jharkhand. The estimated Rs 9,562-crore greenfield project is facing cost overruns after over a year’s delay in commissioning.
· ESL is busy exploring options to raise nearly $250 million (approximately Rs 1,300 crore) in the overseas market. The promoter group currently holds 39.64 per cent interest in ESL. Institutions, both foreign and domestic, hold an aggregate of 1.81 of equity stake in the company.
· Responding to Electrosteel’s call, a Chinese steel-maker has recently shown initial interest in picking up stake in the steel project. ESL is built using Chinese technology. The plant and machinery is supplied by China First Metallurgical Construction Corporation Ltd.
Uttam Galva jumps 16% on ArcelorMittal stake-buy talk
· Shares of Uttam Galva increased by 16 per cent to Rs 122 on Wednesday on unconfirmed news that ArcelorMittal plans to buyout the entire stake of the promoters. Currently, Lakshmi Mittal-owned ArcelorMittal owns 33.80 per cent stake in Uttam Galva, while the promoter Miglani family has 37 per cent.
· Denying the development on ArcelorMittal hiking stake, Ankit Miglani, Managing Director, Uttam Galva, said there is no such proposal, as of now.
Coal price pooling would erode railways’ earnings in 2 years: CEA |
· The government’s proposed pooling of domestic and international coal prices to make costly imports viable would erode Indian Railways’ freight earnings by INR 2,200 crore over the next two years. Pooling will rationalize coal transport, bringing down the freight bill of coal companies, according to the Central Electricity Authority ( CEA). · However, as the scheme of imported coal supply will jack up the cost of generation from coastal plants, the cost of imported coal to coastal pants will be brought in line with CIL’s price of domestic coal of similar quality. The cost differential will be recovered by across the board increase in the CIL price to linked consumers. · The government had last year asked CIL to supply at least 85 per cent of Annual Contracted Quantity ( ACQ) of power plants commissioned after March 2009. However, the miner said it would not be able to meet more than 65 per cent of ACQ of plants. Coal accounts for 40 per cent of railway freight earnings of INR68,600 crore. BANKING
SBI cuts base rate marginally to 9.7% State Bank of India has pared its minimum lending rate from 9.75 per cent to 9.70 per cent. This move comes a day after the Reserve Bank of India cut its key policy rate and the cash reserve ratio by 25 basis points each. However, India’s largest lender left deposit rates unchanged. This can be attributed to the challenge the banking system is facing in garnering deposits as savers are buying gold and investing in mutual funds. SBI’s new minimum lending rate, also known as base rate, will be effective from February 4. HDFC Bank cuts auto loan rates HDFC Bank has reduced interest rates on auto loan by up to 50 basis points without altering its base rate, which is currently at 9.70 per cent. The interest rate on car loans has been cut by 25 basis points to the 10.50-11.50 per cent range. The bank’s two-wheelers loans will be cheaper by 50 basis points and will be available at 19.25-22.25 per cent. India’s second largest private sector bank reduced the commercial vehicle loans by 25 basis points. Loans for heavy and light commercial vehicle will be available at 11 per cent and 13.75 per cent, respectively. HDFC Bank’s new auto loan rates will be effective from February 1, a bank official said. IOB to raise Rs 1,542 cr via pref. Issue Indian Overseas Bank (IOB) will raise up to Rs 1,542 crore by way of preferential allotment of shares to the Government of India and Life Insurance Corporation of India (LIC). While the bank has not indicated how much each would be allotted, it is expected that the exercise would be completed before the end of the current fiscal. Bank’s board has approved issue of shares of Rs 10 face value at a premium to be determined on a preferential basis to GoI and LIC (under its various schemes) up to Rs 1,542 crore. This was subject to approvals from both the Government and LIC and a committee of directors has been constituted to take the decision forward. Central Bank of India to raise Rs 2,406 cr Central Bank of India’s board of directors approved raising of up to Rs 2,406 crore through preferential issue of shares in favour of the Government of India. The bank has called for an EGM of shareholders on March 18 to approve the proposal. NHB reduces prime lending rate by 25 bps National Housing Bank has reduced its prime lending rate from 10 per cent to 9.75 per cent with immediate effect. The housing finance regulator has also decided to reduce interest rate by 25 basis points on special refinance scheme for urban low income housing. The move to reduce interest rate on special refinance scheme follows the RBI decision to cut repo rate by 25 basis points. Car, truck insurance premiums set to go up Car/truck insurance bills are set to go up. This could happen as insurance companies may hike premiums by as much as 40 per cent for commercial vehicles and 10 per cent for two-wheelers and personal cars to compensate for high claims in the motor insurance business. The general insurance industry is currently in discussions with the regulator on the revision of premium rates for third party motor insurance which will be applicable from April. |
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Team Microsec Research
Microsec Capital Limited
Tel: 91 33 30512100
Fax: 91 33 30512020
CA. Rajesh Desai
Rajesh Desai
INFRASTRUCTURE
L&T Construction secures orders worth Rs 1,401 cr in Jan
· L&T Construction has secured new order totaling Rs 1,401 crore in various business segments spread across India and overseas in January 2013. The power transmission and distribution business has bagged orders worth Rs 605 crore from domestic and international clients. This includes a major EPC order from Power Grid Corporation of India Limited for the extension of 765 kv substations at Dharmjayagarh, Jabalpur, Bina, Indore and Aurangabad.
METALS & MINING
NMDC likely to raise iron ore prices for Feb |
· After reducing the prices of iron ore for domestic steel mills in the October- January period, state- owned miner NMDC is considering a price rise in February. The company’s board is likely to meet next week to decide on the issue. The rise could be between INR200 and INR400 a tonne and would be based on factors such as demand and supply, prices elsewhere and the recent rise in international prices. In the past two months, prices of iron ore in the international markets have risen significantly. Currently, it is traded at $140- 145 a tonne, about 61 per cent higher than in September. · NMDC was criticized for increasing prices in the July-September quarter. Following this, it had decided to revise the prices monthly. In October, it had cut prices 2- 11 per cent and in November by 3- 11 per cent. In December, it had kept these unchanged. · For January, NMDC had cut the price of iron ore lumps 5.9 per cent, or INR320 a tonne. Prices of fines, however, were left unchanged. Currently, NMDC sells fines from the Bailadila mines ( with 64 per cent iron content) at INR2,610 a tonne, while lumps are priced at INR5,065- 5,100 atonne, excluding royalty. · Miners in Odisha are selling fines ( with 63 per cent iron content) at INR2,300- 2,400 a tonne, including royalty, while those from NMDC cost INR2,900 a tonne (including royalty). “NMDC ore is much better compared to that from miners elsewhere in the country. We have many advantages to offer, including logistics. |
Steel companies to increase long product prices |
· Steel companies are contemplating an increase in the prices of long products this month. Prices of some are likely to increase by up to INR500 a tonne. The reasons for an increase in long steel, primarily used in the construction sector, are two- fold. First, the demand scenario has improved. There has been a revival of activity in construction. |
Jindal Steel makes open offer for Gujarat NRE Coking Coal
· New Delhi-based Jindal Steel and Power (JSPL) has made an open offer to acquire the entire outstanding shares of Gujarat NRE Coking Coal listed on the Australian Stock Exchange (ASX) for a total consideration of A$221.61 million (about Rs 1,200 crore). The offer was made through Jindal Steel and Power (Australia) Pty, a wholly-owned subsidiary of Jindal Steel and Power (Mauritius) and will be open from February 15 to March 15, said Jindal Steel and Power in a statement on ASX.
· The $0.20 (Rs 10.62) cash offer allows Gujarat NRE Coking Coal shareholders to realise full and fair value for their shareholding in a volatile equity market, said Vikrant Gujral, Group Vice-Chairman and head of Global Venture, Jindal Steel and Power, in a statement.
· The offer represents five per cent premium to the closing price of $0.19 on January 29 and 15 per cent premium on the volume weighted average share price over the previous three months, it added. The Naveen Jindal-owned JSPL already owns 19.48 per cent stake in Gujarat NRE Coking Coal. If successful, the acquisition will help Jindal Steel and Power secure coking coal for its projects in India.
· The unconditional offer has no minimum acceptance condition. This means that there is a reasonable likelihood that Jindal will be successful in increasing its stake in the company, said the offer document. Any increase may lead to decrease in trading liquidity and reduce free float of Gujarat NRE on the ASX. As a result certain investor may no longer wish to hold the shares as part of their investment portfolio, which may also have a negative impact on the share price.
BANKING
RBI suggests curbs on number of free cheque books issued to individuals
To encourage use of electronic payments and minimise use of cheques, an RBI discussion paper has recommended that the number of free cheque books given per year to individuals may be kept to a minimum. The charges levied by banks beyond this minimum number may range from moderate to steep (slab rate), depending upon the usage history of the customer. A quick look at the charges being levied by banks shows that generally they provide 20–50 cheque leaves to savings bank customers for free, either on a quarterly or annual basis. Few banks do not provide any free cheque books, while a few others provide free-of-cost cheques every quarter. Beyond this, the charges levied range from Rs 2 to 3 a cheque leaf.
In most banks, current account holding customers are not given any free cheques, though the charges are very nominal ranging between Rs 3 and 4 a leaf.
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Team Microsec Research
Microsec Capital Limited
Tel: 91 33 30512100
Fax: 91 33 30512020
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CA. Rajesh Desai
Rajesh Desai
INFRASTRUCTURE
DLF plans to raise Rs 2,100 crore by selling 8.1 crore shares to institutional buyers as institutional placement programme
· India’s largest real estate developer DLF is planning to rise . 2,100 crore by selling 8.1 crore shares to qualified institutional buyers, known in market parlance as institutional placement programme, or IPP, by April to meet listing guidelines of 25% public shareholding and to reduce debt, a company official said. The issue will be the largest fund raiser in India through IPP.
Tata Power's distribution arm bats for tariff revision in Mumbai
· Tata Power's distribution arm with a consumer base of 3.30 lakh in Mumbai has approached the Maharashtra Electricity Regulatory Commission (MERC) to increase its present average tariff of Rs 5.97 per unit to Rs 6.75 per unit for 2013-14, Rs 7.39 per unit for 2014-15 and Rs 8.05 per unit for 2015-16 at a rate of 10.46% annually (CAGR). However, despite the proposed risein tariff the company in its filing has said there would remain a closing gap/surplus of Rs 971.21 crore. Apart from Tata Power, other distribution utilities in Greater Mumbai include Reliance Infrastructure (RInfra), BrihanMumbai Electric Supply and Transport (BEST) and MahaVitaran. BEST, RInfra and MahaViataran are soon expected to approach MERC for tariff revision. RInfra’s average tariff is Rs 6.70 per unit while it is Rs 8 per unit for BEST and Rs 6.50 per unit for MahaVitaran.
METALS & MINING
Coal India, Railways Join Hands to Step up Coal Supply
· Two of India’s state-run enterprises Coal India and Raliways blamed for the country’s coal woes have pooled their strength to promise 55% rise in output. Cash-rich Coal India will fund INR7,500 crore investment that would allow resource-hit railways to set up new rail lines to connect unexploited coal mines in Chhatisgarh, Jharkhand and Odisha. Coal India will be able to step up supply while Railways will add INR10,000 crore a year to its topline.
· A co-ordination committee led by the chairman of the railway board has set clear timelines for these projects in late January. States have agreed to become partners in the project and help in land acquisition. India’s domestic coal output is now 540 million tonnes a year, while demand for coal in 2011-12 was 640 million tones, forcing the country into expensive imports even it sat on some of the biggest reserves in the world. By 2016-17,the government expects domestic coal output to reach 795 million tones, but demand is expected to reach 980 million tonnes by then with 682 million tonnes needed for the power sector alone.
CCEA May Take up Price Pooling Proposal This Week
· The government note on pooling the price of coal - blending the cost of domestic fossil fuel with the imported one - may be placed before the Cabinet Committee on Economic Affairs (CCEA),which is likely to meet this week. A couple of days ago the Coal Ministry had circulated a Cabinet note on price pooling inviting comments from various ministries -- Power, Steel, Shipping, Railways and Planning Commission among others.
BANKING
SBT resets FCNR rates
State Bank of Travancore (SBT) has reset interest rates for FCNR deposits with effect from February 2. New interest rate for FCNR deposits in US dollars will (in percentage figure) be 2.78 for a period of one year to less than two years; 2.43 for two years to less than three years; 3.56 for three years to less than four years; 3.77 for four years to less than five years; and 4 per cent for five years. For deposits in pound sterling, the corresponding rates will be 2.98; 2.76; 3.87; 4.00; and 4.19 per cent, and for Euro, 2.50; 2.69; 3.84; 4.00; and 4.17.
Interest rate for RFC term deposits for six months to less than one year will (in percentage) be 1; one year to less than two years, 2.78; two years to less than three years 2.43; and for three years, 3.56 per cent.
HDFC plans to raise $500 m overseas
HDFC is planning to raise $500 million via the External Commercial Borrowing (ECB) route. The company have applied to raise $500 million through External Commercial Borrowings (ECB) and are awaiting the Reserve Bank of India's approval now
India’s largest standalone housing finance company will be raising the funds before March-end 2013. HDFC largely focuses on meeting the housing needs of the middle-income group. The RBI has allowed ECB up to $1 billion for developers/builders in FY 2012-13 for low-cost affordable housing projects.
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Team Microsec Research
Microsec Capital Limited
Tel: 91 33 30512100
Fax: 91 33 30512020
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CA. Rajesh Desai
Rajesh Desai
INFRASTRUCTURE
Crompton Greaves inks pact with Transpower NZ Ltd
· Crompton Greaves (CG) has signed long term supply relationship agreement with Transpower NZ Ltd, owners and operators of the New Zealand national grid. With this agreement, CG becomes the first of three preferred vendors to supply transformers to Transpower, with the potential to scale to orders worth US$15 million annually. The transformers are being manufactured in CG’s Jakarta, Indonesia facility, the company announced here.
Supreme Infrastructure bags contracts worth Rs 505 crore
· Supreme Infrastructure has bagged Rs 505.25 crore contracts in five states, including Rs 267 crore contracts for building additional office complex for Supreme Court of India. The company has received another order in Delhi from Delhi Metro Rail Corporation for construction of Metro Rail depot cum workshop at Kalindi Kunj for MRTS project phase - III in which the company has 49 per cent stake. Besides, the company received four other contracts in Punjab, Rajasthan and West Bengal which included construction of a multi-storied residential building in Mohali at a cost of Rs 94.87 crore and construction of Rs 45 crore IT twin towers in Chandigarh from Janta Land Promoters.
METALS & MINING
Steel policy on cards to iron out woes |
· The new steel policy, likely to be announced in a month, is expected to iron out issues related to foreign direct investments, land acquisitions and environment clearances. The draft of the new policy, seen as a stimulus measure, has been circulated for final comments and it would be announced soon. The sector is in the midst of a slowdown due to severe raw material crunch and a halt in commissioning of new projects. · The policy is expected to have solutions to problems plaguing the sector — the recent ban on iron ore mining in Karnataka, Odisha and Goa, land acquisition problems and delays in getting environment clearances. The ban on iron ore mining has forced steel companies to import raw material, increasing costs. Steel projects — including those of ArcelorMittal and Posco — could not take off because of such issues. Policy could end land acquisition and green nod problems, and encourage foreign investors. |
Cabinet to take up coal price pooling today |
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· The Union Cabinet will discuss the proposed coal price pooling mechanism. The idea is to average out domestic and international coal prices to make costly imports viable. This would help to meet the burgeoning domestic coal demand.
· The ongoing fuel crunch for power plants on the back of constrained production from the state- owned miner Coal India Ltd ( CIL) has led to a massive spurt in costly coal imports. The Planning Commission had proposed the pooling mechanism under which domestic and imported prices of coal were to be averaged out to allow consumers to avail of uniform rates, irrespective of the fuel source.
CIL denies wrongdoing in signing of supply pacts
· Coal India Limited ( CIL) has denied any wrongdoing in the signing of supply pacts with power firms. The clarification followed a media report alleging CIL had signed pacts with 11 companies, despite these not qualifying for the process.
· CIL said its subsidiaries didn’t deviate from norms in signing fuel supply agreements (FSAs) with 11 power firms. It added FSAs had officially been executed with only three of the 11 companies —Maithon Power, Rosa Power Supply Company and Adhunik Power and Natural Resource. “ While eight firms have already achieved their milestones, FSAs are yet to be inked with them. However, memoranda of understanding have been signed with two of the eight firms awaiting formal signing of FSAs,” CIL said. These include a unit of NTPC’s Dadri power plant by NTPC and a unit of Damodar Valley Corporation’s Mejia power plant. |
BANKING
Bank employees' strike on Feb 20 & 21
As many as a million bank employees and officers are to strike work on February 20 and 21. The strike call has been given by the United Forum of Bank Unions, a representative body of the nine bank unions of the country. The employees are demanding that the Government should desist from banking reforms and outsourcing of banking related work. The demands include early wage revision besides settling of pending issues like compassionate appointment scheme.
Peerless MF allows cash investment in MF schemes
Peerless Mutual Fund has become the first fund house to introduce the option of making cash investments in mutual fund schemes. The fund house has for this purpose tied up with Allahabad Bank for providing this facility. This option is in accordance with the SEBI guideline allowing mutual fund houses to accept cash investments of up to Rs 20,000 from investors for investing in mutual fund schemes. Peerless Mutual Fund aims to cater to un-banked customers in tier-III and tier-IV locations through this facility. Allahabad Bank has a strong presence in these markets.
Indian Bank cuts lending rate by 0.30%
Indian Bank will cut its lending rate by 0.30 per cent to 10.20 per cent with effect from February 9, 2013. The bank has decided to reduce its base rate by 0.30 per cent from the existing 10.50 per cent. It has also decided to cut its benchmark prime lending rate by 0.25 per cent. This comes a week after the Reserve bank of India cut its repo rate (the rate at which the RBI lends short-term money to banks) and cash reserve ratio (the slice of bank deposits parked with the RBI) by 25 basis points.
Regards,
Team Microsec Research
Microsec Capital Limited
Tel: 91 33 30512100
Fax: 91 33 30512020
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CA. Rajesh Desai