NEWS ANALYSIS
RAJESH DESAI
INFRASTRUCTURE
JSPL to spend over Rs 10K cr on capex in FY’13
· Naveen Jindal-led JSPL will invest over Rs 10,000 crore in 2012-13 to part-fund its Rs 2 lakh crore capex plan that aims to ramp up its steel making capacity to 18 million tonnes in five years.
· JSPL produces around 4.5 million tonnes per annum (mtpa) at its Raigarh plant in Chhattisgarh. It is now setting up three steel facilities at Angul in Odisha, Patratu in Jharkhand and Raigarh to raise capacity to 18 mtpa. Besides, it is setting up 4,200 MW captive power plants in Chhattisgarh and Jharkhand. The company is also investing Rs 45,000 crore in a Coal to Liquid project in Odisha.
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Neyveli plans 2,000-Mw plant with Odisha PSU |
· Chennai-based Neyveli Lignite Corporation Ltd (NLC), a navratna public sector unit, has evinced interest in setting up a 2,000-Mw coal-fired power unit in Odisha through a joint venture (JV) with a state government owned PSU. The proposal envisages an investment of around Rs 10,000 crore
· The plant is to be set up by forging a JV with any of the state PSUs —Odisha Hydro Power Corporation, Odisha Power Transmission Corporation or Grid Corporation of Odisha Ltd. NLC is the only central PSU with core competencies in both power generation and coal mining,
· The state government had earlier signed memoranda of understanding (MoUs) with 29 independent power producers (IPPs) for setting up coal-based plants with a combined capacity of 37,000 Mw. Power availability is expected to reach 4,455 Mw by 2013, higher than the power demand of 3,726 Mw projected by the Central Electricity Authority.
Thermal coal imports via Paradip jump 50%
· Thermal coal imports through Paradip port improved by 50 per cent to six million tonnes during 2011-12. This comprised the lion’s share of the 16 million tonnes of import traffic handled by the port during the year. The sharp jump in coal import through the port is attributed to higher demand for low-ash content coal.
· Thermal coal imports improved to 37 per cent of total imports in 2011-12, from 30 per cent of the 13 million tonne import traffic seen in 2010-11, due to increasing demand for low-ash content coal,Even though Orissa is the second largest coal producer in the country after Jharkhand with 25 per cent of country’s deposits, the high ash content in its coal makes it less viable to produce power.
· Our 2011-12 coal buying was certainly higher than the previous year as we had problems with supply from MCL (Mahanadi Coalfields Ltd).MCL is mandated to supply 4.7 million tonne tonnes of thermal coal to Nalco every year, but its supplies were 360,000 tonne less in the last fiscal, forcing the aluminum producer to import more coal. It had placed an import order for 200,000 tonnes of coal in September after a fall in production.
GMR sells Rs 179 cr worth of shares in Karur
· Bangalore-based infrastructure major GMR Group has offloaded around 44.6 lakh shares it had in Karur Vysya Bank Limited for a total amount of around Rs 178.87 crore through bulk deal in the National Stock Exchange (NSE). GMR (Grandhi Mallikarjuna Rao) and his group had a total 52.86 lakh shares in Karur Vysya Bank, as per the data filed with the NSE in December, 2012. Meanwhile, Sundaram Mutual Fund has picked up stakes worth Rs 87.3 crore in the company through bulk deals in NSE.
UP Power Corporation to cut losses by Rs 4,300 cr this year
· Uttar Pradesh state power utility UP Power Corporation Limited (UPPCL) is looking to cut its losses by Rs 4,300 crore in the current financial year. UPPCL has been incurring massive losses over the years, which touch about Rs 7,000 crore annually, including subsidy part of Rs 4,000 crore. The accumulated losses stand at around Rs 18,000 crore.
· In 2000, loss-making UP State Electricity Board (UPSEB) was unbundled as UPPCL, with separate distribution companies (discoms) for operational efficiency in the power sector. However, the losses have continued to mount due to yawning gap between revenue and Expenditure.The Company would cut losses by Rs 4,300 crore this year by higher revenue generation, checking power pilferage, deftness in purchase of power and judicious management of power demand.
· UPPCL has also to gear up for free electricity to farmers and weavers as promised in the ruling Samajwadi Party manifesto during UP poll 2012. This alone could cost the exchequer Rs 1,000 crore per annum.
Coal India could get to pass on cost of expensive imports
· The government is weighing a new coal pricing dispensation to help Coal India (CIL) recover the extra cost of imported coal it might have to give power plants to comply with the fuel supply agreement (FSA). The agreement means Coal India must guarantee supply of at least 80% of fuel required by these plants.
· Government sources said a committee of secretaries led by Pulok Chatterjee, principal secretary to the Prime Minister, has been mandated to evolve a pricing dispensation where power companies will have to bear the extra cost of imported coal to the extent of difference in the quality of imported and domestic coal.
· The quality of imported coal is much superior to domestic coal. For example, the ash content in domestic coal can be as high as 40%, compared with 10% in imported coal. The gross calorific value (GCV) of domestic coal is 3,000-3,500 Kcal/kg while that of imported coal is 5,000-7,000 Kcal/Kg.
· CIL will be allowed to recover the balance of the extra cost of imported coal by increasing overall coal price. In other words, the proposed pricing regime will allow CIL to supply imported coal to power plants without having to bear the extra cost.
After making it big in India, AP infra entrepreneurs go global
· Andhra Pradesh's infrastructure entrepreneurs, not content with dominating India's infrastructure sector, are going global now. They have started acquiring assets in emerging markets.
· GVK and Lanco acquired mining assets in Australia while NCC has more than 10 per cent of its revenue coming from West Asia. In India, Andhra Pradesh-based firms span irrigation projects, roads, airports and power, having outbid established players and outpaced them in growth. In fact, India's four best airports — Hyderabad, Bangalore, Mumbai and Delhi — are all managed by AP entrepreneurs.
BANKING
SBI launches ‘virtual' card for online transactions
· State Bank of India has launched a ‘virtual' electronic debit card for e-commerce transactions. The ‘State Bank Virtual' card can be created by a customer using the bank's Internet Banking facility with transaction rights. The product allows the user to create a virtual card for any online transaction and the customer is not required to share the details of the principal account on the merchant Web site. The new product is a convenient and secure gateway to online payment for SBI's Internet banking users. Among the features of the virtual card are: no charges on creation of the card and the customer can create any number of cards at the same time. The card is created for each online transaction and is valid for a maximum of 48 hours.
· There is no transfer of balance from the principal account inasmuch as only a lien is marked on the account. The minimum amount with which the card can be loaded with is Rs 100. There is no upper limit. Transfer of balance takes place only when the customer does the actual transaction online.
Oriental Bank cuts deposit rates by 50-100 bps across select maturities
· Oriental Bank of Commerce (OBC) has slashed deposit rates by 50-100 basis points on certain maturities for deposits of Rs 15 lakh and above. No changes have been made for term deposits less than Rs 15 lakh and all those deposits with maturities of 1 year and above. The revised rates will come into effect from today (April 23). The deposit rate reduction comes close on the heels of the RBI reducing repo rate by 50 basis points at its recent monetary policy announcement on April 17.
Magma Fincorp a step closer to kick-starting insurance biz
Kolkata-based Magma Fincorp Ltd is one step closer to getting its general insurance venture operational. After almost three years Magma has got R2 licence from the Insurance Regulatory and Development Authority (IRDA). In July 2009, Magma had signed a joint venture agreement with Germany-based HDI-Gerling International Holding AG for its foray into general insurance business. The joint venture company — Magma HDI General Insurance Company Ltd — had received Reserve Bank of India's approval in October 2009. The company also received R1 licence from the IRDA in April 2011.
THE LICENCES
R1, R2 and R3 are the three approvals required by an insurance company to kick-start operations in the country.
While R1 is an in-principle approval which basically means the company's business plans will be considered by the regulator for approval, R2 is cleared only when the regulator is satisfied with the company's strategy, business plans and credentials. R3 is the final step, which, once granted, allows the company to start operations.
Magma's stake in Magma HDI General Insurance, set up at an initial investment of Rs 110 crore, is 76 per cent while HDI-Gerling holds the balance 24 per cent. Magma is a non-banking finance company into asset financing. The company has a strong presence in vehicle finance segment, including commercial, car and utility vehicles. So, clearly motor insurance will be a focus area for the general insurance company. The company would also provide insurance for other assets financed by Magma, such as construction equipment and SME (small and medium enterprise) loans.
HDI-Gerling is wholly owned by the Talanx Group and is ranked third among German insurance groups. The company has operations in over 25 countries, with a particular focus on emerging markets such as Brazil, Chile, Mexico, Poland, Turkey, Bulgaria, Slovakia and Ukraine.
Regards,
Team Microsec Research
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CA. Rajesh Desai
RAJESH DESAI
INFRASTRUCTURE
Rajasthan Govt scraps Rs 12K-cr tenders bagged by BHEL
· The Rajasthan Government has scrapped tenders worth Rs 12,000 crore that were bagged by Bharat Heavy Electricals (BHEL) more than a year ago for two separate thermal power projects in the state. Rajasthan Rajya Vidyut Utpadan Nigam Ltd (RVUN), a State Government company, has scrapped EPC (Engineering, Procurement and Construction) tenders for the upcoming new super critical units of Suratgarh and Chhabra thermal power stations.
· RVUN cancelled the separate tenders floated for two 660 MW units — each for Suratgarh and Chhabra, respectively, without specifying any particular reasons.BHEL officials said that no reasons have been assigned by RVUN for cancelling the tenders and the company was trying to get in touch with RUVN for ascertaining the same.
· Scrapping of the tenders would delay the setting up of two projects — having a total capacity of 2,640 MW — in Rajasthan, which is grappling with power shortage. At present, RUVN has an installed capacity of 4,097.35 MW.
· The sources said that Bharat Heavy Electricals Ltd (BHEL) had emerged as the lowest bidder for the Rs 12,000-crore worth tenders. The second lowest bidder was BGR Energy.
· The development comes at a time when BHEL is grappling with slowdown in its order book. Owing to an overall sluggishness in the power sector, the company’s order book more than halved to Rs 22,096 crore last fiscal compared to 2010-11 period.
Highway projects need Rs 200 cr investment a day
· Highways development in the country requires an investment of Rs 200 crore every day in the next 15-20 years, according to a Parliamentary panel. The quantum of financial resources required for implementation of highway projects is significantly high. An estimated investment of Rs 200 crore is required every day for a period of 15-20 years.
· Projects worth Rs 3 lakh crore are likely to be put on bidding under the programme, which is being executed in seven phases. The Project is aimed at upgradation, rehabilitation and widening of major highways to international standards.
Power Min plans review of electricity regulators
· The Power Ministry has set up a panel to look into various proposals including introduction of appraisal system for central and state electricity regulators. The mandate of the committee is to examine and make recommendations on proposed amendments in theElectricity Act 2003.
· The performance of regulatory commissions shall be reviewed annually by a multi-disciplinary body on the basis of a performance evaluation matrix and report to the appropriate government.
· The Forum of Regulators - comprising chairperson of Central Electricity Regulatory Commission (CERC) as well as chairpersons of State Electricity Regulatory Commissions (SERCs) -- is not in favour of such a system.
BANKING
IDBI Bank aims to be among top five in three years
IDBI Bank aims to climb up to the No. 5 slot in terms of business from the No. 7 position it holds among banks now. The bank, which has forayed into insurance and mutual funds businesses, has no plans to dilute its stake to bring in any foreign partner. IDBI Bank had closed the last financial year with a business of Rs 3.91 lakh crore and made a net profit of more than Rs 2,000 crore. The bank had, within eight years of its launch in 2004, climbed up to the No 7 spot. During this year, the bank's aim is to cross Rs 3,000 crore in profit. The domestic banking sector is growing at 18-20 per cent annually on an average.
To achieve its goal of reaching the fifth position. IDBI Bank plans to grow by 20-22 per cent to reach its target. With about 1,000 branches and 15,000 employees, the bank has the lowest average employees' age of 33 among the banks in India. Its per capita profitability (profitability per employee) was the best in the industry. IDBI Bank's net interest margin was around two per cent as it paid higher interest on deposits while charging lesser interest on lending since it kept the customers' interest paramount.
Exim Bank plans $500m MSME fund
Export-Import Bank of India is planning to set up a $500-million fund to assist export-oriented micro, small and medium enterprises (MSME) with long-term foreign currency loans. The development financial institution (DFI) will put together the corpus of the ‘Technology & Innovation Enhancement and Infrastructure Development' Fund on its own and lend to MSMEs over the next five years. Exim Bank will work in collaboration with other commercial banks/ financial institutions to reach out to a large number of MSMEs to build capacities in the area of skill development, design, packaging, and market development, for specific MSME clusters.
LIC Housing Fin to double loan amount to developers in FY13
After keeping away from lending to realty developers for over a year following the bribes-for- loans scam, LIC Housing Finance (LICHF) plans to push up on the segment and is targeting to double disbursals in the high- margin area in the current fiscal. LICHF is targeting a 100% growth under loans to developers this year. Even though loans to individual borrowers grew 18% during the fiscal, the slowdown in project loans was cited as one of the reasons for a drop in net interest margin to 2.44% versus the year ago period's 3.08%.
loans to projects constituted for 12% of the company's books which has now come down to above 5%. LICHF plan to take it to over 8% through the jump in disbursals to project loans.
Regards,
Team Microsec Research
Microsec Capital Limited
Tel: 91 33 30512100
Fax: 91 33 30512020
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CA. Rajesh Desai