NEWS ANALYSIS
RAJESH DESAI
INFRASTRUCTURE
L&T Construction bags orders worth Rs 744 cr
· L&T Construction has bagged orders valued at Rs 744 crore. In power transmission & distribution sector, the company has secured orders worth Rs 479 crore.
· This includes orders for electrical, instrumentation and automation for a furnace project for National Mineral Development Corporation in Chhattisgarh, a 400 KV switchyard and plant electrics for Jindal Power at Tamnar, Chhattisgarh, besides electrical work for a super thermal project for National Thermal Power Corporation.
BHEL bags contract for Solapur power project
· Public utility giant BHEL today said it has bagged a contract for supplying equipment at Solapur Super Thermal Power Project in Maharashtra. The company did not provide financial details of the contract.
· BHEL’s scope of work in the contract involves design, engineering, manufacture, supply, and erection and commissioning of the complete ESP package.
NTPC, Coal India to sign fuel supply pacts on 2009 terms
· The NTPC and Coal India have agreed to sign new fuel supply agreements (FSA) on 2009 terms. The only change is the trigger level, which has been scaled down to 80 per cent from 90 per cent, as directed by the Prime Ministers’ Office. The trigger level is the point up to which Coal India has to meet the supply commitment.
· The power producer will sign fuel supply pacts for 4,300 megawatts. Currently, it is sourcing coal based on a memorandum of understanding signed with Coal India for these projects.
· The power producers were irked by Coal India’s new clauses in the FSA, which has brought down the penalty clause to as low as 0.01 per cent and has the liberty to discontinue supplies at any time.
ABB bags Rs 175-cr NTPC order
· Power and automation major ABB India has won a Rs 175-crore order from National Thermal Power Corporation to build two sub-stations in Maharashtra. The sub-stations will facilitate transmission of electricity from new power generation plants being constructed in the region.
· ABB's turnkey project scope comprises the design, engineering, supply, installation, commissioning and associated civil works for the sub-stations. The project is scheduled for completion in 2016.
Merger of BHPV: BHEL scouts for legal consultant
· The State-owned utility BHEL is scouting for a legal consultant for its proposed merger with Bharat Heavy Plate and Vessels.BHEL intends to engage a law firm for providing legal services in connection with the merger of Bharat Heavy Plate and Vessels Ltd (BHPV) with itself.
· The top-most qualifying requirement for the legal firm is that it should have successfully completed at least one assignment of amalgamation or merger of a Central Public Sector Enterprise (CPSE) in the last five financial years.
CIL focuses on output, not shale gas diversification
· Coal India Ltd (CIL) has said its focus, for now, would be on raising output, not on diversification. The government-owned company, the country’s near-monopoly producer, had diversification plans on coal liquefaction (CTL) and gasification. Last year, Partha S Bhattacharya, former chairman and managing director (CMD), had indicated CIL might foray into production of shale gas.
· Company has to do diversification, but at this stage, their focus is only on increasing coal production and to meet the target. If they have to look into it, the foray would be to coal and coal-related items, rather than venturing into unrelated areas like shale gas.
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ICVL set for rejig as CIL, NTPC plan exit |
· International Coal Ventures is set for a restructuring following NTPC and Coal India's intent to exit from the consortium, but existing members would prefer sharing stakes among themselves than inducting a new partner.
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Crisil lowest bidder for coal consultancy |
· Global firm Crisil has emerged as the lowest financial bidder for the Coal Ministry’s contract to prepare the methodology for determining reserve price for coal block auctions. Crisil emerged as the L1 bidder (the bidder which quoted the lowest price) when the financial bids were opened. The consultancy work would be allocated to Crisil only after examining its documents.
CAPITAL GOODS
ABB bags Rs 175-cr NTPC order
· Power and automation major ABB India has won a Rs 175-crore order from National Thermal Power Corporation to build two sub-stations in Maharashtra. The sub-stations will facilitate transmission of electricity from new power generation plants being constructed in the region, a press statement said.
· According to the statement, ABB's turnkey project scope comprises the design, engineering, supply, installation, commissioning and associated civil works for the sub-stations. The project is scheduled for completion in 2016.
L&T ties up with Essar Oil for bitumen supply
· Essar Oil will supply high quality bitumen to infrastructure projects undertaken by L&T in Gujarat. The two companies have signed have signed a memorandum of understanding (MoU) for the purpose. The initial supply agreement is for 15,000 tonnes and is likely to be extended to other projects in and around the State.
· Essar Oil has an existing relationship with L&T under which it supplied about 60,000 tonnes of bitumen over the last 18 months to L&T. This MoU is over and above the quantity earlier agreed to.
· Essar Oil will provide supplies for the Kandla-Mundra Road Project and the Samakhaiyali-Gandhidham Road Project from its Vadinar refinery. Essar Oil is fully geared to meet the supply for increased demand of high quality bitumen for road construction.
BANKING
LIC’s 10-year, single premium plan
Life Insurance Corporation of India has launched a non-unit linked single premium insurance plan. The plan, ‘Jeevan Vaibhav', has a ten-year term with a minimum sum assured of Rs 2 lakh and there is no upper limit on the sum assured. For a Rs 2-lakh sum assured, minimum single premium would be Rs 95,210 without service tax. There will be a loyalty bonus and a facility to take 65 per cent of premium paid as loan. The policy, which has a guaranteed return, is being offered for 120 days from May 21. It can be surrendered for cash after at least one year. The minimum guaranteed surrender value is equal to 90 per cent of the single premium paid, excluding extra premium if any. The policy is open for those who are aged between eight years and 65 years.
Now, road-accident victims can get insurance details of vehicles online
Victims of road-accidents can now access the insurance policy details of the vehicle involved with a click of a mouse. The Insurance Regulatory and Development Authority has launched the facility on the portal of its Insurance Information Bureau, which will update the data being provided by the insurers. The insurance status of the vehicles can be known by filling in, among others, the registration number of the vehicle and date of accident. The information will then immediately pop-up. As there is a time lag of two months for submission of information by insurers to the data repository, there is a possibility of information not being available immediately. In such cases, a message will be flashed giving reasons for absence of information which might include, time lag in uploading data by the insurer. In the case of new vehicles, only the chassis and engine numbers are submitted by the insurer to the regulator. When the record is not available, the searched registration/chassis or engine number will be automatically communicated to all general insurers to verify their database and check whether the information can be provided.
Regards,
Team Microsec Research
Microsec Capital Limited
Tel: 91 33 30512100
Fax: 91 33 30512020
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CA. Rajesh Desai
RAJESH DESAI
INFRASTRUCTURE
Few takers for NTPC power from fossil-based fuels
· NTPC was stuck with almost 16.107 billion units of surplus electricity in 2011-12. This is because of grid restrictions, and there were few or no takers for electricity produced from expensive fuel.The company's generation loss in 2011-12 was much higher than the 13 billion units in the previous fiscal due to low demand for electricity generated from expensive fuel.
· Of the 16.107 billion units, more than 10 billion units were from gas-based plants, an official said. Power generation in India is predominantly based on fossil fuel — coal and gas. It is always more viable to source fuel from the domestic market, as imported fuel means input costs going up, leading to higher electricity tariff.
NHPC to finalise JV for Bhutan project
· State-run NHPC Ltd along with the Bhutan government expects to soon finalise details of a joint venture company, to be set up for developing 770-Mw Chamkharchhu-1 hydro power project in the neighbouring nation. NHPC would have 51 per cent shareholding in the joint venture entity while the remaining stake would be with a Bhutan government entity.
· The project would be funded on a debt to equity ratio of 70:30. Out of the total debt portion, around 51 per cent would come from NHPC and the remaining from Bhutan entity. The draft of the Detailed Project Report (DPR) was submitted to Indian and Bhutanese governments by NHPC in March 2012. About 20 per cent of the electricity generated from the project would be utilised in Bhutan and the rest would be available for India.
No scam in coal block allocation: Jaiswal
· Dismissing allegations of corruption against Prime Minister Manmohan Singh levelled by Team Anna, Coal Minister Sri Prakash Jaiswal on Sunday said all decisions on allocation of coal blocks were taken with the consent of the state governments in a transparent manner.
· According to Jaiswal, not a single coal block has been allotted without the consent of the state government. Not only this, the committee through which the coal blocks are allocated has a chief secretary-level officer from the state concerned as its member.
· Jaiswal said that between 1993 and 2009, the then governments had felt that to meet the growing power demand, coal blocks should be allocated in the private sector also as Coal India Ltd alone would not be able to meet the growing demand.
No major gas-based project till end of FY15: Power min
· The 12th Five-year Plan may end without any significant fresh gas-based power capacity being added in the country. The power ministry has issued a directive to all state governments and other central and state utilities asking them not to propose any new gas-based power project at least till the end of fiscal 2015.
· The advisory comes as gas is in short supply domestically and the situation could worsen in coming months as production at the country’s biggest reserve, Reliance Industries’ D6 block in the Krishna-Godavari basin, is expected to fall further from already low levels.
· The power ministry’s advisory virtually seals the fate of close to 15,000 MW of gas-based power projects earlier proposed by companies such as Torrent, Reliance Power, NTPC, Lanco, GMR, GVK and Tata Power for commissioning in the 12th Plan.
· Only projects with a total capacity of 8,000 MW may come up in the 12th Plan as spillovers from the 11th Plan. But there is a big question mark even here as full capacity is unlikely to be realised due to shortage of gas.
AUTOMOBILES
Ashok Leyland Limited has entered the European market, via Turkey by joining hands with Turkish company Utikar. The tie-up is producing a new range of inter-city and intra-city buses for West Asia, North Africa and the CIS markets. According to company officials, this is a stepping stone for the company into the European market in a big way.
The Hinduja Group flagship company ALL is planning to develop 8-metre buses and with Katmerciler and Volkan, a special equipment manufacturer, to produce special application vehicles such as the garbage compactors, hook loaders and fire trucks. All these vehicles will be specially-built on the Ashok Leyland's chassis and will be developed along with Utikar.
The company will strongly leverage technology, manufacturing capabilities and skilled labour of its local partners. Besides, due to its geostrategic importance, Turkey will become the company's distribution base to reach markets like Turkmenistan, Kazakhstan, Georgia, Algeria, Morocco, Tunisia, Egypt and West Asia.
These operations will complement the bus supplies from the company’s manufacturing facility at Ras Al Khaimah in the UAE. In addition to this, AVIA Ashok Leyland Motors represents the company’s presence in Europe that makes and markets the popular D-Line series of trucks, according to company sources. ALL also plans to produce 6-metre, 7-8 metre and 11-metre bus chasses for inter-city and intra-city applications and will also develop rear engine buses in partnership with Utikar.
Apart from bus chassis, Ashok Leyland is also likely to export trucks which have capacity in the range of 9 tonne, 16 tonne and 25 tonne with the chasses built locally in Turkey. The trucks will cater to the growing demand for municipal application vehicles.
CAPITAL GOODS
Crompton Greaves: negatives priced in, no near-term upsides
· Given its dismal earnings trajectory in the last few quarters, the Street did not expect any major surprises in the March quarter from capital goods company Crompton Greaves Ltd. The poor performance through fiscal 2012 is mirrored in the 58% fall in its stock price in the past one year to Rs.108. March quarter revenue and net profit was significantly below Bloomberg’s consensus estimates at Rs.3,077.4 crore and Rs.100.3 crore, respectively.
· Net profit contracted 65.4% from a year ago, partly due to low operating leverage in its overseas operations, where revenue accretion was low. Hence, high costs took a toll on profitability.
· Crompton’s overseas units bled to post a Rs.36.6 crore loss for the quarter, compared with a Rs.33.6 crore profit in the year-ago period. Domestic operations were better off, registering a Rs.136.9 crore net profit, although it was around 37% lower than a year before. On a consolidated basis, the biggest disappointment came from the power segment, which accounts for a little over two-thirds the total revenue.
· The only silver lining in a rather hazy outlook is its improved order inflows for the quarter—11% higher than the year-ago period. Full year order inflows for fiscal 2012, too, grew by a robust 15% in difficult times to Rs.10,264.4 crore, with strong inflows in the power segment. Although the stock trades at reasonable valuation of 10 times estimated price-earnings multiple, a steady improvement in profitability to validate management optimism would be the only shot in the arm for the stock.
Regards,
Team Microsec Research
Microsec Capital Limited
Tel: 91 33 30512100
Fax: 91 33 30512020
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CA. Rajesh Desai
RAJESH DESAI
INFRASTRUCTURE
Coal India net drops 5% on burgeoning wage costs
· Coal India Ltd today reported an approximately 5 cent drop in net profit to Rs 4,013 crore in the January-March 2012 quarter compared with the same period in 2011. The drop was attributed to Rs 3,447 crore of additional provisioning during the period on account of wage revision. Effected from July 1, the wage pact was finalised in the last quarter.
· For the entire 2011-12, CIL posted 36 per cent rise in net to Rs 14,788 crore as against the previous fiscal. With 0.50 paise final dividend, the total dividend for the year is pegged at Rs 10 per share of face value of Rs 10 each.
· CIL is targeting a production growth of 34 million tonnes in 2012-13. A back-of-the-envelope envelope calculation shows, that at the current average realisation of Rs 1,200 a tonne, the additional production will boost revenues by approximately Rs 4,000 crore, or Rs 2,000 crore short of recovering the wage cost rise.
Toll roads awarded before 2009 can yield 22% return: Crisil
· Crisil Research said toll road projects awarded before 2009 could earn an average return on equity of 22 per cent. The study, covering 23 operational build-operate-transfer projects, indicates that less competition had kept bid amounts modest and higher than expected growth traffic had boosted toll revenues. The 23 projects form one-fourth the length of BOT toll road projects operational in the country. Typically developers look for 16-18 per cent returns while bidding.
· Crisil said on an average, only five developers bid for each project prior to 2009.This was due to uncertainties in policies on BOT toll road projects. Developers were unsure whether the government would transfer land in time for construction.On an average, toll revenues for the 23 projects increased 10-12 per cent over 2008-09 to 2010-11.
· Crisil said assuming future traffic growth at a modest six per cent through the remaining term of the projects the equity returns for these projects were likely to exceed 20 per cent. High inflation also boosted toll revenues.
NHPC pitches for returns during construction of projects
· To make projects commercially viable, state-run NHPC has made a strong pitch for returns during the period of construction of projects, as well as different rates for peak-demand scenarios.
· In a submission to the power ministry and the Central Electricity Regulatory Commission (CERC), NHPC said the clause of 15.5 per cent return on equity applicable for hydro and thermal power projects needed to be revisited, considering the long gestation periods required for their commissioning. As hydro projects usually take six to 10 years, after tackling issues related to clearances and settlement of demands by locals, returns during the construction period would make these more feasible.
· If the construction of hydro project does not begin, say, for two years, owing to implementation issues, the developer does not get returns. Hydro power projects have long gestation periods and, therefore, returns during construction need to be considered by the power ministry and the CERC.
CONSUMER DURABLES
Bajaj Electricals Q4 net slips to Rs 49 cr
· Bajaj Electricals posted a 15 per cent drop in net profit at Rs 49 crore (Rs 58 crore) for the quarter ended March 31, 2012. Net sales were up eight per cent to Rs 1,060 crore (Rs 980 crore). The board of directors recommended a 140 per cent dividend or Rs. 2.80 a share. For FY 12, net sales were up 13 per cent at Rs 3,099 crore (Rs 2,741 crore), while net profit was down 18 per cent at Rs 118 crore (Rs 144 crore).
· For the year ended 2011-12, the lighting segment continued its good work with a top line growth of 21.2 per cent with improvement in margins. Consumer durable segment also performed well, registering a growth of 17.5 per cent. However, market conditions such as commodity prices volatility and exchange rate fluctuations have impacted the margins of the consumer durable segment.
· On Monday, the company scrip closed 2.32 per cent down at Rs 214.65, on the BSE.
HOTELS
Indian Hotels Q4 net dives 30.5% on higher spend
· Indian Hotels Company Ltd net profit dropped 30.57 per cent to Rs 65.21 crore for the quarter ended March 31, 2012, as a result of higher expenditure (higher license fee, staff costs etc). It posted a net profit of Rs 93.93 crore in the corresponding quarter last year. The total income of the company, which owns and operates the chain of Taj hotels and resorts, was Rs 560 crore for the quarter ended March 31, 2012, against Rs 531 crore for the corresponding quarter of the preceding year. During the latter part of the year, the company launched a new hotel (Vivanta by Taj at Yeshvantpur) in Bangalore.
· The company said that operating profits for the fourth quarter were adversely impacted on account of the initial gestation period cost of the new hotel, foreign currency fluctuation loss and lower treasury income.
· The company reported a net profit of Rs 3.06 crore in its consolidated results for the 2011-12 fiscal against a consolidated loss of Rs 87.26 crore in the last fiscal. The Board recommended a dividend of 100 per cent or Re l an ordinary share in respect of the year ended March 31, 2012, which is subject to shareholders' approval. IHCL scrip was down 0.52 per cent at Rs 56.90 on the BSE on Monday.
Hotel Leela venture's promoter group pledges more shares
· Hotel Leela venture's promoter group firm, Leela Lace Holdings (LLH) has pledged 19.08 per cent stake to SBI and Bank of Baroda. In a BSE filing on Monday, the promoter said that they had pledged 4.9 crore shares (12.77 per cent stake) with SBI.
· On the same day, LLH also pledged 2.3 crore shares or 6.31 per cent stake to BOB. With this only 6.46 per cent of its total stake of 48.64 per cent in the hotel chain remains non-encumbered. The remaining 42.18 per cent has been pledged.
· In terms of number of shares, LLH holds over 18.86 crore shares and has pledged over 16.35 crore shares as on May 22, 2012, the filing said. Earlier this month, Hotel Leela venture received an in-principle nod for restructuring its Rs 4,300-crore debt from a consortium of banks led by SBI. Hotel Leela venture also fully redeemed bonds for $41.6 million issued in 2007 and listed on the Singapore Exchange Securities Trading, recently.
BANKING
Rupee fall will not impact India’s rating: Moody’s
Global rating agency Moody’s Investors Service said the sliding rupee will not impact India’s sovereign ratings, but may hurt private sector companies with large overseas debts. It says the depreciating rupee will only have a “limited” impact on India’s sovereign ratings, as only 7 per cent of total government debt is placed overseas, comprising 5 per cent of GDP. The bigger pain would come in the private sector, a falling rupee will raise the cost of paying back foreign currency borrowings — Indian companies together face foreign currency convertible bond redemptions this year of nearly $7 billion (Rs 38,000 crore).
The current rupee volatility will be “less damaging than in 1991, when low reserves and a widening current account deficit prompted India’s last balance of payment crisis”.
India’s total private sector external debt is at a “relatively low” 16 per cent of GDP. “Individual firms’ foreign debt repayment troubles are unlikely to lead to the sort of domestic demand collapse or deleveraging seen in countries with more significant private-sector external leverage. Most of the government’s foreign currency debt at 7 per cent is owed to multilateral and bilateral creditors and has a maturity profile that keeps annual foreign currency repayments relatively low. Therefore, the direct effect of depreciation on the government’s own debt repayment capacity is limited. Moody’s has assigned a ‘Baa3/stable’ rating for India.
SBI plans $1 billion medium-term notes issue by August
State Bank of India plans to come out with a medium-term notes (bonds) issue worth about $1 billion before August. The issue is for bank’s overseas operations, preparation for the issue was going on and the bank has time till August. The exact timing of the issue will be decided at a “strategic moment”. SBI has a tier-I capital adequacy of 9.67 per cent.
Regards,
Team Microsec Research
Microsec Capital Limited
Tel: 91 33 30512100
Fax: 91 33 30512020
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CA. Rajesh Desai
RAJESH DESAI
INFRASTRUCTURE
BHEL sets up 250 MW at Parichha Thermal Project
· Bharat Heavy Electricals Limited (BHEL) said on Tuesday that it has commissioned a 250 megawatts unit at Parichha Thermal Power Station (TPS), in Uttar Pradesh. With this, 6 million units of electricity will be added to the grid every day.
· BHEL’s scope of work in the contract includes manufacture, supply, erection, testing and commissioning of the main plant package along with associated auxiliaries and civil works.
GVK's coal, rail projects in Australia get green nod
· Diversified infrastructure company GVK Power & Infrastructure Ltd., has received environmental clearance for the Alpha Coal and rail project located in Queensland of Australia.
· These three mines are estimated to hold about 8 billion tonnes of thermal coal in addition to the rail and port facilities. GVK owns 79 per cent stake in the Alpha project of Hancock Coal and the rest is with Ms. Gina Rinehart, stated to be amongst richest women. GVK had invested $1.26 billion to acquire coal assets in Australia.
· This approval will enable the company complete financing and secure final mining approvals for the Alpha project in second half of 2012
Ramky Infra scrip down 7 per cent
· Shares of Ramky infrastructure closed at Rs. 113.05, down 6.72 per cent during the day.
· The Hyderabad-based infrastructure company has been in the news lately for the alleged links of the company Chairman, Mr. Ayodhya Rami Reddy, for securing benefits in the Ramky Pharma City during Dr. Y.S. Rajasekhara Reddy’s tenure. The issue also relates to investment of about Rs. 10 crore made into Jagathi Publication.
· The Central Bureau of Investigation has listed the Ramky promoter as one of the co-accused in the disproportionate assets case of Mr. Y.S. Jagan Mohan Reddy, MP and president of YSR party
L&T close to finalising Hyderabad Metro deals
· L&T Metro Rail Hyderabad Ltd., on Tuesday hinted that the finalisation of contracts for rolling stocks, power traction and signalling systems is at an advanced stage.
· The L&T special purpose vehicle, which is implementing the Rs 16,375-crore elevated metro rail project in Hyderabad, highlighted the financial and commercial risks being taken up by the company in implementing the world's biggest metro rail project in public-private partnership mode.
Power trading prices up 20-25%
· With the mercury rising this month, short-term power prices have seen an increase of 20-25 per cent, with the highest price at which power was traded touching Rs 5 per unit. The average for power trading was Rs 3.5-4 per unit. Due to mismatch in demand and supply, the prices are expected to increase further but it will not reach too high a level.
· There is a shortage of about 9,000 Mw in overall demand from the grid, at a little over 100,000 Mw. The country's biggest power exchange, IEX received purchase bids for 77,000 Mw and of 72,000 Mw for sale today. Traded volumes on the exchange have risen to 45,000-50,000 Mw/hour this month on a daily basis from 35,000-40,000 Mw/hour in April.
Coal India issue: Investment fund TCI firm on action; Ministry sees no need for arbitration
· The Children's Investment Fund Management (TCI) and the Government of India failed to reach a consensus on the question of violation of Bilateral Investment Promotion and Protection Agreements (BIPA) in Coal India.
· TCI said it would continue with its action against the Government over its investment in Coal India, and launch a separate law suit against the company, following a meeting with the Coal Secretary, Mr Alok Perti, on Tuesday. Meanwhile, the Coal Ministry said there is ‘no need for any arbitration' with the London-based investor fund.
CAPITAL GOODS
L&T close to finalizing Hyderabad Metro contracts
· L&T Metro Rail Hyderabad Ltd., on Tuesday hinted that the finalization of contracts for rolling stocks, power traction and signaling systems is at an advanced stage.
· The L&T special purpose vehicle, which is implementing the Rs 16,375-crore elevated metro rail project in Hyderabad, highlighted the financial and commercial risks being taken up by the company in implementing the world's biggest metro rail project in public-private partnership mode.
· The Chief Minister has asked the developers to complete the project at the earliest with least inconvenience to people during the project implementation. The Government and metro developers are seeking to integrate the 72-km rail network with existing rail terminals, Multi Modal Transport System stations and bus .
BANKING
SBI to cut interest rates on loans for small units
State Bank of India plans to cut interest rates by 2 to 5 percentage points for the SME (small and medium enterprises) sector. Bank wants to focus more on this sector in order to bring about some balance between its SME loan portfolio and home loan portfolio. At present, the interest rates for the SME sector hover in the range of 12-17 per cent and this will be brought down to 10-12 per cent. The new interest rates will come into force from the first week of June.
Currently, the SME portfolio, at Rs 80,000 crore, accounts for 12-14 per cent of the total advances of the bank. Taking a cue from the Union Finance Minister's advice on NPA management, SBI will also beef up its Stressed Asset Management Group. Last year, the group managed to register cash recovery of Rs 1,000 crore, the highest ever recorded by the bank. The group has around 400 people working from nine branches – meant exclusively for stressed asset management.
Regards,
Team Microsec Research
Microsec Capital Limited
Tel: 91 33 30512100
Fax: 91 33 30512020
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CA. Rajesh Desai