NEWS ANALYSIS
RAJESH DESAI
INFRASTRUCTURE
BHEL bags Rs 380 cr order for gas-based plant in Rajasthan
· State-owned BHEL today said it has bagged Rs 380 crore order for setting up a 160 MW gas-based plant in Rajasthan.BHEL has secured a contract for setting up a 160 MW Combined Cycle Power Plant (CCPP) in Rajasthan from Rajya Vidyut Utpadan Nigam Limited (RRVUNL).
· The Rs 380 crore contract is the expansion project (Stage IV) of Ramgarh power plant in Jaisalmer district of Rajasthan. The equipment for the project will be supplied by BHEL’s Hyderabad, Trichy and Bangalore plants, while the company’s power sector — Northern Region will undertake erection and commissioning of the equipment.
85,000 MW capacity addition planned for 12th Plan period: Govt
· The projected power demand of 1,354.87 billion units by 2017 will be met as 85,000 MW capacity addition is planned during the 12th Plan, the Rajya Sabha was informed today.A massive power capacity addition programme of 85,000 MW has been planned in the current five-year plan of which work on about 75,000 MW projects are already underway.
· The 18th Electric Power Survey (EPS) report estimated the energy requirement in the terminal year of 12th Plan period (2012-17) at 1,354.874 billion units. The 12th Plan capacity addition targets are being finalised keeping in view the projected demand for electricity in the country.
L&T looks overseas for growth with local orders tapering off
· India’s largest engineering and construction company, Larsen and Toubro Ltd (L&T), is banking on overseas markets to fuel growth as it braces for tapering order inflows, deferment of capital expenditure and fresh investment decisions in the domestic markets—a weakness that the company says will likely persist in the near term.
· The builder of power networks and infrastructure projects, which announced quarterly earnings that exceeded estimates, announced on Monday that it is targeting 15-20% growth in 2012-13 and will focus on west Asian markets such as Saudi Arabia, the United Arab Emirates (UAE), Qatar, Kuwait and Oman in the current fiscal.
· Company is doing well in UAE and Oman. L&T will improve their market share in Qatar, Kuwait and Saudi Arabia, which has tremendous potential. L&T said it also expects growth in the US where investments in shale gas have led to increased production of natural gas liquids and, hence, a greater demand for creating downstream facilities that the company can help build.
Coal Ministry asks CIL to adopt new FSAs for upcoming plants
· The coal ministry has asked Coal India to sign the new format fuel supply agreements with power units coming up between January 2012 and March 2015.
· The directive came in response to a clarification sought by the miner on whether it should sign supply pacts with new thermal plants on the terms mentioned in the existing contracts or the new agreements, which significantly dilute the miner's supply obligations. The ministry has asked CIL to sign the new FSAs for plants to be set up between January 2012 and March 2015.
· The ministry has asked us to sign the new FSAs for plants to be set up between January 2012 and March 2015. The decision to invite new units to sign the same FSAs is likely to irk power producers even more. Power producers want to sign the FSAs on the terms of the existing contracts, which stipulate that if Coal Indi fails to supply 80% of the contracted coal, it will pay 40% of the value of the shortfall as penalty. This penalty has been reduced to 0.01% in the new FSAs.
CAPITAL GOODS
L&T Q4 net up 14%; sees challenging FY13
· Looking forward to a challenging year, L&T toned down its growth guidance to 15-20 per cent for the fiscal. Announcing its annual results, Mr A.M. Naik , Chairman, said the growth projection was on par with the 25 per cent growth projected by the company last year. The company had achieved a 21 per cent growth in the last fiscal.
· The order inflow for the fourth quarter of fiscal year 2011-12 was down 30 per cent at Rs 21,159 crore. For FY12 it was 12 per cent lower at Rs 70,574 crore. The order book for the year closed 11 per cent higher at Rs 1,45,723 crore.
· Margins for the last fiscal were at 11.8 per cent against 12.8 logged in FY11. The effort is to maintain 12-13 per cent margins. We should factor in a 50 bps point volatility to indicate the conditions in which we are now operating. There are opportunities in the domestic and international markets and we are gearing up to take advantage of it.
· The aim was to increase market share in Qatar, Kuwait and Saudi Arabia. Also, the company expects to enter Indonesia, Iraq, Brazil and CIS countries in 2013-14. International business contributes 18 per cent currently and the plan is to raise it to 25 per cent and offset any possible shortfall in domestic operations.
· In the hydrocarbon segment there was potential in deep water, upstream and pipelines. The fertiliser segment too holds promise provided urea policy issues were sorted out. In downstream, the prospects were flat as no major investments were expected in the next two to three years.
Regards,
Team Microsec Research
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CA. Rajesh Desai
RAJESH DESAI
INFRASTRUCTURE
NTPC to add over 8,000 MW in next two years
· The public sector power generation major, NTPC, expects to add 4,160 MW and 4,298 MW respectively in the current year and the next.
· In the current year, the company will incur capital expenditure of Rs 20,995 crore. The projects that NTPC is confident of completing this year are: two units of 500 MW each at Mouda, Rihand and Vidhyachal and one unit of 500 MW each at Vallur and Jhajjar, and one unit of 660 MW at Sipat.
· The mood in the company is upbeat about availability of coal, and consequently, about higher generation. In the last quarter of the previous year, supply of coal (38.6 million tonnes) exceed contracted quantity. The company expects this trend to continue into the first (current) quarter of this year.
NHPC all set to directly enter thermal power generation
· Public sector hydro power generator NHPC has now acquired all legal rights to foray into thermal power generation.Though a decision to foray into thermal power generation was taken a few years, the approval from the Power Ministry came just recently. This was because the company was required to make changes in its main objects for doing business.
· NHPC targets to generate 20,550 million units of hydro-generated power in 2012-13, against 18,500 million units in the previous year. At the same time, it is aiming to achieve gross sales of Rs 4,747 crore in the current financial year against Rs 3,931.89 crore in 2011-12.
CESC acquires two hydropower projects in Arunachal Pradesh
· CESC Ltd on Wednesday said it has acquired India Bulls group outfits engaged in developing two separate hydropower projects in Arunachal Pradesh.
· In a communication to the stock exchanges, CESC said it entered into agreements to take over the hydroelectric projects with an aggregate capacity of 146 MW in Arunachal. The acquisition of entire equity shares of Pachi Hydro Power Projects Ltd and Papu Hydro Power Projects Ltd.
· Pachi Hydro is a special-purpose vehicle established to undertake the 56 MW Phangchung Hydro Electric Project in East Kameng district of the State.
Shortfall in subsidy compensation hits power utility
· The power utility in Tamil Nadu must accurately assess the subsidy on agricultural service connections and improve its infrastructure to stem its losses, according to the Comptroller and Auditor General of India.
· In its audit report for 2010-11, tabled in the Assembly today, it says the Tamil Nadu Electricity Board and subsequently after its unbundling, the Tamil Nadu Generation and Distribution Corporation Ltd, face a revenue shortfall of Rs 12,950 crore. This was ten times higher than its shortfall five years previously.
· The power utility supplies nearly one-fifth of power free due to the State Government’s policy. The major segments of subsidised power were agricultural connection which contributes just 4 per cent of the cost of supply and domestic supply which pays about 40.48 per cent of the cost of power supply.
L&T expects more order intake in current year
· L&T is the best bidder in tenders that are worth about Rs 15,000 crore in orders, the company told analysts in a conference call on Tuesday. These orders were supposed to be awarded last year, but have got spilled over to the current year.
· The company ended last year with orders on hand worth Rs 1,45,723 crore. However, order intake had dipped 12 per cent over the previous year, to Rs 70,600 crore. About 43 per cent of the orders are from ‘infrastructure’. The power sector accounted for 28 per cent of the orders and hydrocarbons, 10 per cent.
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Power industry miffed at CIL supply pact clauses |
· The negligible penalty for supply shortfall set by state-owned Coal India (CIL) as a condition for committing supply to fuel-starved power plants is not the only reason why power companies have rejected the new model supply agreement. This has brought the government’s efforts to resolve the ongoing coal crisis back to square one.
· A detailed analysis of the contentious clauses in the new fuel supply agreements (FSAs) reveal what the power companies are calling a “heavy tilt” in favour of the miner. Miffed at the controversial provisions, the companies are now considering knocking at the doors of the Prime Minister’s Office (PMO) again. This comes less than two months after a special presidential decree forced CIL to commit fresh supplies. This has also left investments worth thousands of crores in new power plants stuck.
NTL Lemnis plans another unit for LED lights
· NTL Electronics Ltd is planning to set up another manufacturing base in partnership with Dutch company Lemnis Lighting. The company is a supplier of electronic ballasts and manufacturer of LED lights.
· NTL Lemnis plans to invest Rs 10 crore in the facility to address the opportunity within the country. The company plans to target the commercial establishment such as special economic zones, IT parks and for city lighting requirements. This is a big shift from the earlier focus on business to business supplies.
· During 2011-2012, the company sold over 2.9 million LED bulbs. These are direct replacements for incandescent bulbs as they retrofit. The company has signed up with the Dutch partner to design and produce LED lighting solutions for India as well as for global requirements.
CONSUMER DURABLES
BPCL, Videocon Up on Mozambique Gas Find
· Bharat Petroleum Corporation (BPCL) and Videocon Industries shares rallied in trade on Wednesday after Texas based Anadarko Petroleum, the operator of the Rovuma Offshore Area 1 in Mozambique, said it has discovered a major new gas find in the area which could hold reserves of 7-20 trillion cubic feet (tcf).This comes after Anadarko had recently declared that this basin, which is globally being seen as one of the largest gas discoveries of the century, could hold up to 30 tcf of gas.
· Bharat Petro Resources (BPRL),a wholly-owned subsidiary of BPCL and Videocon Hydrocarbon Holdings, a wholly-owned subsidiary of Videocon Industries, each hold 10% stake in six blocks in the deep water Rovuma Basin, off the Mozambique coast in southern Africa. On the back of this news ,BPCL was up 3.25% in trade on Wednesday, a 16-month high and closed at.751.80.While Videocon was up.62%,and closed at.171.25.
· This is good news for India which is facing an acute gas crunch currently, as both BPCL and Videocon have a 20% stake in the block which could now hold gas reserves of up to 50 tcf and we plan to transport and market this gas in India, said RK Singh, CMD,BPCL.ET has earlier reported that Anadarko, the operator of the block, had held preliminary discussions with gas utilities GAIL and GSPC to understand the modalities of joint-investments in setting up downstream infrastructure to transport and market the gas produced in the Rovuma basin to India.
Videocon Industries net falls 70%
· Diversified business group Videocon Industries has reported a 69.81 per cent dip in standalone net profit at ~50.32 crore for the quarter ended March 2012, compared to ~166.69 crore in the same period of the previous year.
AUTOMOBILES
Honda takes on Hero in mass bike segment
Honda Motorcycles strengthened its portfolio in the domestic mass biking segment with the launch of its second 110cc model — the ‘Dream Yuga'.
With prices starting at Rs 44,462 (in Delhi), the Dream Yuga joins the more stylish CB Twister (starts Rs 45,140) in the segment, and targets the semi-urban, rural markets.
This also marks Honda's entry into the former partner Hero's stronghold, just over a year after the two companies broke up their 27-year-old joint venture. Hero MotoCorp's popular models in the mass segment include the CD Dawn/Deluxe ( Rs 36,300) and the Splendor range ( Rs 42,950)
FUEL EFFICIENCY
The Dream Yuga delivers 8.5 BHP of power and delivers fuel efficiency of 72 kmpl. While HMSI's current sales is tilted towards scooters, this is expected to help deliver half of overall volumes from bikes going forward.
With an aim to lead the domestic market by 2020, the two volume bike models and its popular scooter range, are expected to help Honda grow the contribution of India to global motorbike revenues to 30 per cent by 2020 (from 13 per cent last fiscal).
In 2011-12, HMSI claimed the third largest two-wheeler maker mantle from TVS Motor, and is now biting hard at the heels of Bajaj Auto. Production capacity is also being rapidly increased in line with demand. After a plant in Manesar and Tapukara, a third plant is currently being built near Bangalore, with plans reportedly for two more in the next few years.
CUMULATIVE PRODUCTION
Cumulative production is expected to touch four million by the first half of next year, even as sales are expected to grow 30 per cent to 2.75 million in 2012-13.
CEMENT
Shree Cement changes accounting period; profit up 73% in Q4
Shree Cement Ltd has announced a change in its accounting period. The company will close its accounts on June 30, this year onwards. Shree Cement has reported a near 73 per cent increase in net profit of Rs 114 crore for the quarter ended March 31. It had reported a profit of nearly Rs 66 crore for the corresponding quarter, last fiscal. Shree Cement declared an interim dividend of Rs 6 or 60 per cent an equity share of face value Rs 10 a share. Shree Cement's turnover rose by 38 per cent to nearly Rs 1,478 crore for the quarter. During the quarter, the company has started work on setting up a new clinker unit at Ras in Rajasthan. The unit is expected to be completed by September.
BANKING
RBI offers $2 bn swap arrangement to SAARC countries
The Reserve Bank of India will offer Swap Arrangement of US $ 2 billion both in foreign currency and Indian rupee to member countries of the South Asian Association of Regional Co-operation. This swap arrangement is with a view to strengthening regional financial and economic cooperation. With launching of this facility, member countries -- Afghanistan, Bangladesh, Bhutan, Maldives, Nepal, Pakistan and Sri Lanka -- can now approach Reserve Bank of India for availing of the facility.
The SAARC Swap Arrangement will have a corpus of US$ 2 billion. India will contribute the entire fund. The swap amount available to various member central banks has been arrived at broadly based on two months import cover subject to a floor of US$ 100 million and a maximum of US$ 400 million per country. The swap will be offered in US dollar, Euro or Indian Rupee against the domestic currency or domestic currency denominated government securities of the requesting country.
Under the facility, the requesting member countries can make drawals of US dollar, Euro or Indian Rupee in multiple tranches. Each drawal is of three months tenor and can be rolled over twice. The first rollover will be at the normal rate of interest, while the second one attracts 50 bps interest more than the normal interest rate. For this purpose, the normal interest rate agreed upon is the LIBOR (for three months) plus 200 basis points. The normal interest rate for INR swap is RBI Repo Rate minus 200 basis points.
The Swap Arrangement is intended to provide a back stop line of funding for the SAARC member countries to meet any balance of payments and liquidity crises, till longer term arrangements are made or if there is a need for short-term liquidity due to market turbulence.
Allahabad Bank plans to open four foreign, 250 domestic branches
Allahabad Bank plans to open 250 branches across the country, besides four foreign branches this year. Bank has applied for four licences to the Reserve Bank of India, and hoping to get them shortly. The four foreign branches will be located in Shanghai, Singapore, Dhaka and an additional branch in Hong Kong at Kowloon. The bank currently has a branch in Hong Kong and a representative office in Shanghai.
Allahabad Bank, which currently has over 2,500 branches across the country, plans to add 250 branches to its network this fiscal. The bank also plans to add 1,000 more ATMs to the current network of 350. The expansion will help the bank achieve a 21 per cent growth in total business, which was at Rs 2.7 lakh crore during the last fiscal.
Federal Bank launches three types of cards
Federal Bank launched three cards — two debit and a travellers card — in partnership with MasterCard to address the needs of its varied customer base.
The Kerala-based private sector bank is offering Federal Bank Maestro Card, Premium Master Debit Card and the Cash Passport Card. Federal Bank Maestro Card is a debit card with a daily transaction limit of Rs 1.25 lakh. Targeting high net-worth individuals, the bank will offer the Premium Master Debit Card with a daily transaction limit of Rs 2 lakh.
Federal Cash Passport Card will target overseas travellers. The card will be available in three currencies — US dollars, British pounds and the euro. The travellers card will be prepaid and sold over-the-counter (OTC). Holding an account with Federal Bank is not a pre-requisite for the Cash Passport Card. The loading fee on the card is Rs 100 for any amount and the reloading fee is Rs 75, each time money is added to the card.
Regards,
Team Microsec Research
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CA. Rajesh Desai
RAJESH DESAI
INFRASTRUCTURE
GMR Infra allots Rs 200-cr worth NCDs
· GMR Infrastructure said it has allotted 2,000 secured non-convertible debentures of face value of Rs 10 lakh each totalling Rs 200 crore to ICICI Bank.
Power will cost more as Ministry decides to allow fuel price pass on
· The Power Ministry will soon allow developers to pass on the volatility in fuel prices to customers.The Government will make this provision as part of the soon-to-be released bidding documents. All projects under the 12th Plan will have this benefit.
· Till now, only NTPC was allowed to do so, as it operates under a regulated regime. Private players have been acquiring projects through tariff-based competitive bidding. But they have been crying foul over volatility in fuel prices.
· For 2011-12, NTPC charged around Rs 2.96 a unit to discoms (distribution companies), which had their own commissions. The end consumer price averaged between Rs 4 and Rs 5 a unit. In the case of Tata Power's Mundra project, the tariff is levelised at Rs 2.26 a unit, a price at which they had bid in 2007, despite huge volatility in imported fuel price. The end consumer price is at Rs 2.40 a unit.
· While private players mostly opted for the tariff-based model, NTPC followed the cost-plus method. Incidentally, the private players had termed NTPC's method as safe and expensive.
Cost escalation creates funding concerns over 2 flyover projects
· Cost escalation has created funding concerns over two key flyover projects in Kolkata. Both the projects - implemented under Jawaharlal Nehru National Urban Renewal Mission (JNNURM) - have missed the original deadline and were recently granted extension of completion schedule.
· Executed by Kolkata Metropolitan Development Authority (KMDA); Park Circus-Parama flyover was scheduled to be completed by August . It has now got a fresh deadline of June 2013. The contract of the project was awarded to HCC Infrastructure Ltd.
· The Vivekananda Road Flyover originally slated to be operational by March 2012 is now rescheduled to August 2013. IVRCL is the project contractor. Sources in the government feel that the funds crisis may delay completion beyond the rescheduled deadline.
World Bank aid for NE power generation
· World Bank would give Rs 13,000 crore for infrastructrual development of power generation facilities in the North East, which would be executed by Power Grid Corporation of India (PGCIL).
Reliance Power asks CAG to drop 'undue gains' remark
· After the government recently reaffirmed its earlier decision to allow Reliance Power Ltd (R-Power) to divert surplus coal from its Sasan project in Madhya Pradesh for a nearby project, the company has asked the Comptroller and Auditor General (CAG) to drop its observations of "undue benefit" in a draft audit report.
· A draft report of CAG on coal allocation had alleged undue benefits to the tune of Rs 15,849 crore, extended by the government to R-Power by way of surplus coal allocation for two of its ultra mega power projects (UMPPs).
· CAG officials, however, maintained that a change in the report was not possible since the audit involves scrutiny of decisions during a time period based on the prevailing policy.
DLF, HUDA to invest up to Rs 600 cr on 16-lane road in Gurgaon
· Realty firm DLF and the Haryana Urban Development Authority (HUDA) have joined hands to construct an 8.3-km 16-lane road in Gurgaon at an investment of up to Rs 600 crore.
· DLF, which has been involved in the development of Gurgaon, has signed an agreement with HUDA for the upgradation of the road from the NH-8 toll plaza to Sector 55-56.
· HUDA and DLF would together invest about Rs 400-600 crore on the project, sources said, adding that the bidding process is underway and construction firms such as L&T, Punj Lloyd and Lanco have shown interest.
HDIL to sell Bangalore land to Godrej Properties
· Promoters of city-based property developer Housing Development and Infrastructure Ltd (HDIL) are close to selling their 14-acre land in Bangalore to Godrej Properties, the realty arm of the Godrej group, for around Rs 100 crore, according to sources close to the talks.
· The land parcel is located off Sarjapur Road in Bangalore. The deal is in the final legs. Godrej Properties has offered to pay Rs 98 crore now, and added it would increase the price to Rs 105 crore if HDIL promoters obtain all permissions, including commencement certificate.
AUTOMOBILES
Escorts to build on the strength of large tractors
Escorts Ltd hopes to use the muscle power and versatility of its large tractors to make it more attractive to farmers and expand its market.
It will soon be coming out with a total application solution including a wider range of tractor-drawn implements to support farmers.
The launch of its 60-HP Farmtrac range paves the way for increasing the ways a tractor can be used.
Tractor segments
The tractor market is segmented into small tractors, including those of less than 35 HP; medium 35-50 HP; and large over 50 HP, and is shifting towards the large segment. Industry sales is estimated at about 5 lakh units a year and the share of large tractors has grown four times in the last four years to corner one-fourth of the market.
The lion's share is in the midsize which is stable at about 70 per cent, while the small tractor segment has shrunk to a third from 25 per cent.
Farmtrac is available in two models — 60 HP and 65 HP — and are the largest in the market.
With greater pulling power comes greater ability… more and bigger farm implements can be dragged behind the tractor to do the job faster and better. Also, the tractors have a lifting capacity of nearly 2.5 tonnes; they can move or load construction material. A farmer uses a tractor for only a few months. The rest of the time a hoe or a dozer can be linked to a large tractor to hire out for construction work.
Escorts will not just sell the tractor but an entire package of solutions to support farmers. This effort is in the pipeline and will soon be launched.
Farmtrac will be available in six variants with a 24-speed gearbox with 12 forward gears, and an equal number of reverse gears for versatile application and a heavy duty eight-geared plus two reverse geared versions. There will also be new launches every six months.
Escorts led the market a few years back till the advent of multinationals when large tractors were around 50 HP. The company has upped the HP ante to wrest back its leadership position, with home-brewed technology that is ideal for Indian conditions.
CAPITAL GOODS
Nomura cuts L&T rating from ‘buy’
· Shares of engineering major Larsen & Toubro fell 3.51 per cent on Thursday after Nomura downgraded the stock to ‘reduce’ from ‘buy’ and halved its price target.
· Weak primary market conditions have taken a toll on India Inc’s plans to raise funds through initial public offerings (IPOs). Since January1, 2011, about46 companies have called off their IPO plans aiming to raise a total ~38,326 crore, according to SMCGlobal. In 2012 so far, 17 IPOs to raise about~5,928 crore, have been puton the backburner.
· Shares of engineering major Larsen & Toubro (L&T) fell 3.51 per cent on Thursday after Nomura downgraded the company’s stock to ‘reduce’ from ‘buy’ and halved its price target citing unfavorable macro-economic environment. Nomura has slashed its price target for L&T stock to ~992 from ~1,691.
· To Nomura’s and the Street’s surprise, L&T management has guided for 15-20 per cent order intake growth in FY13, which we see as an extremely challenging task. Foreseeing downside to this guidance, as well as being concerned about L&T’s margins, working capital and balance sheet, it believes L&T will see further de-rating over the medium term and thus downgrade our rating to reduce.
· According to Nomura analysts, L&T’s shift towards an asset-heavy model and medium-term macro headwinds will likely pressurise return on equities, thus demanding a valuation de-rating.
CONSUMER DURABLES
Samsung eyes 35% share of flatpanel TV market
· South Korean consumer electronics major Samsung is eyeing a 35 per cent market share in the flat panel TV business that is expected to touch 500,000 units in the current year.
Godrej for inorganic route to expansion
· Godrej Consumer Products Ltd, will consider acquisition opportunities to get into new segments, such as oral care, as it believes that getting into new verticals through normal route would be tough, according to Chairman Adi Godrej. To get in into a totally new category organically would be a tough call.
Regards,
Team Microsec Research
Microsec Capital Limited
Tel: 91 33 30512100
Fax: 91 33 30512020
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CA. Rajesh Desai