NEWS ANALYSIS Fri, Apr 12, 2013
Rajesh Desai
METALS & MINING
Posco may start work on stalled Odisha unit in a year
· The South Korean steel maker Posco is likely to start work on its much delayed steel unit in Odisha within a year as the state has transferred a significant chunk of land required for the mega project to the firm. The Odisha government has already transferred around 1,700 acres to the company out of the 2,700 acres required for the plant in Jagatsinghpur district.
· The Korean major, which is not able to set up the unit for the past seven years due to land acquisition issues and agitation by the locals, has revised its land requirement to 2,700 acres from the earlier 4,000 acres. It has also scaled down its production plan to 8 million tonne in the first phase from 12 million tonne earlier.
· Referring to the issues faced by steel companies in getting approvals, Singh said the Cabinet Committee on Investment is taking up large projects, stalled due to various reasons, and it will soon take up issues relating to SAIL’s proposed project in Jharkhand to expedite the process.
Essar Steel to refinance Rs 20,000 cr debt with dollar loan
· Private steel maker Essar Steel is planning to refinance its entire domestic debt of around Rs 20,000 crore into dollar terms by September with a view to reduce interest costs, which in turn will help it to improve the margins, a top company official said.
· Present interest cost of 12.25-13 per cent will come down to 6-7 per cent, adding this will have positive impact on its margins. The company, which had around Rs 22,000 crore in rupee debt, had received approval from the Reserve Bank to raise $430 million (around Rs 2,400 crore) last fiscal.
Jindal Stainless in supply pact with Posco
· Jindal Stainless has signed an agreement with Posco for selling stainless steel products to the South Korean steel maker but the alliance does not extend to its proposed $12 billion venture in Odisha. JSL, a part of the $15 billion O.P. Jindal group has signed a memorandum of understanding with Posco... to mutually cooperate with each other for long-term joint business opportunities.
· The company said that the pact would also entail joint cooperation in its Odisha project and not Posco’s $12 billion proposed mill in the state.The pact would be for three years with a provision to further extend it and would focus on “long term based supply of 200 series stainless steel products of the company to POSCO or its subsidiaries. The move is set to benefit the domestic player as Posco is the world’s largest producer of stainless steel.
Tata Steel Board Clears Merger with Metaliks
· Tata Steels decision to merge pig iron maker Tata Metaliks (TML) with itself is a key step towards consolidation of group companies under it. Besides,Tata Metaliks Kubota Pipes Ltd (TMKPL),a 100% subsidiary of Tata Metaliks, will also be merged with Tata Steel. Tata Steel currently holds 50.09% stake in Tata Metaliks.
· The scheme of amalgamation of TML with TSL will come into effect from April 1,2013. Tata Metaliks will be amalgamated with Tata Steel followed by the dissolution of the company without winding up. The company said that its subsidiary TMKPL at their meeting held on April 10,2013 has also approved the amalgamation of their company with TSL. The shareholders of TML will get four shares of INR10 each of Tata Steel for every 29 shares of.10 each of TML in terms of the scheme.
BANKING
Meeting Basel-III norms may affect infra funding, says ICRA
As banks move to meet their capital requirements for the Basel-III norms, they might be left with less money to fund infrastructure expansion in the country, according to a study by credit ratings agency ICRA. Therefore, infrastructure-based non-banking financial companies (NBFCs) might fill in the spots that banks vacate. Banks’ likely constraints on account of Basel-III, NBFCs and finance companies with significant exposures in infrastructure may see their growth prospects improve.
According to Basel-III requirements, banks will require an additional capital of Rs 5-lakh crore by March 2018. The new Basel norms were instituted to improve the banking system’s ability to withstand financial shocks.
According to ICRA’s estimates, the total infrastructure credit in India stood at around Rs 10.3-lakh crore as on March 31, 2012. Banks accounted for 60 per cent of the total infrastructure credit, followed by public sector infrastructure finance companies (IFCs) at 32 per cent, and private sector IFCs (7 per cent), ICRA said. India will need to invest over $1 trillion in infrastructure during the Twelfth Plan (2012-17), according to government estimates.
Cobrapost expose: RBI to take action against banks
The RBI is initiating action against ICICI Bank, HDFC Bank and Axis Bank in connection with allegations of money laundering by Cobrapost. Actions are being initiated both at the system level and the individual bank level. Investigation report will be out soon. However, RBI believes that systems are largely safe and there is a need for some corrective action and based on the findings of the investigation.
The country’s three largest private banks — ICICI Bank, HDFC Bank and Axis Bank — were last month named by online portal Cobrapost for indulging in money laundering. The sting operation conducted by the portal alleged that some bank officials had offered to launder unaccounted money by investing in insurance schemes. Soon after the exposes, Reserve Bank Governor D. Subbarao had said some corrective steps would be taken to strengthen the banking system.
Inflation-indexed bonds likely in a month
The Reserve Bank of India and the Government will in a month’s time firm up the guidelines and features for inflation-indexed bonds. Currently, it will be issued like any other government security. The bonds will be linked to the wholesale price index and indexation will happen every six months. The maturity period is likely to be in the range of 7-15 years.
G-SEC WINDOW
The bonds are likely to be made available under the window provided for auction of government securities. The only difference is it will form part of allocation for non-competitive bidding. A common man can also buy these bonds through primary dealers. After a few months, the RBI will look at introducing some certificates (National Savings Certificates, for instance) for such inflation indexation.
Regards,
Team Microsec Research
Microsec Capital Limited
Tel: 91 33 30512100
Fax: 91 33 30512020
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CA. Rajesh Desai