Bharat Heavy Electricals Ltd will sign a memorandum of agreement today with Nuclear Power Corporation of India to float a joint venture for manufacturing equipment for nuclear power plants. The joint venture would also take up engineering, procurement and construction activities for nuclear power projects in India and abroad. BHEL expects to spend a sum of over Rs 4,000 crore in the proposed joint venture, which would be funded through internal accruals.
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The country’s top steel producers, including Tata Steel, SAIL and Jindal Steel have decided to roll back the prices of long steel products, including construction-grade TMT bars by Rs 2,000 per tonne. The price cuts would be implemented immediately. This reduction in prices of long products is part of the package brokered by the steel ministry with main steel producers with the aim of providing relief to the common man by lowering prices of steel products directly used by him. Accordingly, the steel companies have also agreed reduce the price of galvanised corrugated (GC) sheets use as roofing material for low-cost housing.
The steel companies have also agreed to address the issue of supply constraints resulting in higher prices of steel. The main steel producers would now import the requirement of intermediate products like hot-rolled (HR) coils under advance licensing scheme for producing high-grade steel and GPGC sheets, colour coated steel and cold-rolled (CR) coils. This is expected to unlock an additional two million tonnes of HR coils in the domestic market that would other wise have gone into producing high grade steel meant for exports.
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Reliance Industries (RIL) has proposed to invest around Rs 30,000 crore over 10 years in setting up two plants for semiconductor fabrication and manufacturing solar grade wafers and polysilicon etc. The RIL proposals are among the seven applications received for establishing semiconductor fab facilities. The government had announced the guidelines for the seminconductor policy in September 2007. The total investment expected from the seven proposed facilities for setting up solar fabs is to the tune of Rs 65,000 crore. Besides RIL, the other proposals are from Videocon, Moser Baer, Titan Energy System, KSK Energy Ventures Pvt Ltd and Signet Solar.
RIL is yet to decide the location for its semiconductor fab that will be set up at an estimated outlay of Rs 18,521 crore. The choice is between Navi Mumbai, Hyderabad, Mysore and Haryana. The final decision on the location would be taken based on RIL’s negotiations with the state governments on incentives. RIL’s second proposed plant, at an expected cost of Rs 11,631 crore, would be set up at Jamnagar in Gujarat, once it gets the government clearance. This plant would manufacture polysilicon, single crystal/multi-crystalline ingots, solar grade wafers, SPV modules with a capacity of 1 giga watt. RIL has sought a subsidy of Rs 3,394.6 crore from the government for its first semiconductor plant, and Rs 2,326.2 crore for the second one.
India needed a big player in the chip manufacturing space, while the smaller assembly, test, marking and packaging (ATMP), and solar photovoltaic segment, which is less complex is well set. This will put India on semiconductor map of the world and yet another diversification for Reliance Industries.
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American Tower Company (ATC) is believed to be the frontrunner among the bidders for investing in the tower firm of Tata Teleservices. Boston-headquartered ATC is a publicly-held company owning and operating over 23,000 sites in the US, Mexico and Brazil. According to sources, Tata Teleservices and ATC are in talks over the valuation of the tower entity of the telco.
Recently, Tata Teleservices managing director Anil Sardana had said that the task of divesting stake in its tower company would be concluded by the end of May. Tata Tele wants to divest anything between 26% and 49%. According to the company, around 15 strategic investors were shortlisted for picking up a stake in the hived-off tower entity of Tata Tele. At present, Tata Teleservices Ltd (TTSL) has 10,000 towers, and Tata Teleservices Maharashtra Ltd (TTML) 3,500 towers.
The equity dilution model works very well in the tower business as this is a capital-intensive business. While financial investors offer capital for the infrastructure needed in the business, strategic investors can help in the actual operation of tower companies.
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The Indian Railways has increased the freight rate on iron-ore transportation by 5-6% by reclassifying it into ‘class-180’ from ‘class-170’. The change in the rate of freight is effective from April 1. The Railways has also announced some changes in the surcharge rates. While the surcharge on iron ore transported to ports for export has been increased to 100% from 60%, the surcharge on ore meant for domestic use has been reduced to 30% from 60%. The change in surcharges will be effective from April 15.
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American Tower Company (ATC) is believed to be the frontrunner among the bidders for investing in the tower firm of Tata Teleservices. Boston-headquartered ATC is a publicly-held company owning and operating over 23,000 sites in the US, Mexico and Brazil. According to sources, Tata Teleservices and ATC are in talks over the valuation of the tower entity of the telco.
Recently, Tata Teleservices managing director Anil Sardana had said that the task of divesting stake in its tower company would be concluded by the end of May. Tata Tele wants to divest anything between 26% and 49%. According to the company, around 15 strategic investors were shortlisted for picking up a stake in the hived-off tower entity of Tata Tele. At present, Tata Teleservices Ltd (TTSL) has 10,000 towers, and Tata Teleservices Maharashtra Ltd (TTML) 3,500 towers.
The equity dilution model works very well in the tower business as this is a capital-intensive business. While financial investors offer capital for the infrastructure needed in the business, strategic investors can help in the actual operation of tower companies.
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JSW Steel Ltd has announced that following the merger of Southern Iron & Steel Company Ltd (SISCOL) with JSW Steel Ltd, the Company posted a growth of 37% in Crude steel production for the year ended March 2008 over the previous year. The Company has also shown on comparable basis a 20% growth in volume of Crude steel production even after excluding 4.55 lakh tons of Crude steel produced by the erstwhile SISCOL. The Hot Strip mill recorded a highest ever production of 27.15 lakh tons during the financial year showing a capacity utilization of 108%.
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A consortium of Mahindra & Mahindra Ltd (M&M) and ICICI Venture Funds Managements Ltd, has signed a definitive agreement agreeing to acquire 100% stake in Metalcastello S.p.A, a leading Italian independent gear manufacturer. However, the company has not disclosed the cost of the acquisition.
Mahindra Forgings (MFL) has already created one of the leading forging Companies in the world. Together with Metalcastello S.p.A, the Company intends to replicate in the gear vertical what MFL has achieved in the forgings space. The customer base of both MFL and Metalcastello is complimentary and will enhance the synergies that Mahindra is already harvesting.
Metalcastello has revenues of around $100 million. The Company was originally founded in 1952 and is among the top gear manufacturers in Europe, focused primarily on the Off-Highway segment. The Company's product portfolio includes complex gears & shafts for use in vehicle transmissions and drivelines. Its Customer portfolio includes most of the global OEMs in the tractor, off highway & construction equipment space.
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Reliance Industries (RIL) has once again struck gas in exploratory block KG-DWN-2003/1of Krishna basin. This is the second consecutive gas discovery in this block in less then two months. This discovery has been christened as Dhirubhai 41 and has been notified to government and the upstream regulator, the Directorate General of Hydrocarbons (DGH). The potential commercial interest of the discovery is being ascertained through more data gathering and analysis.
RIL holds 90% participating interest (PI) in the block and Hardy Exploration and Production India holds the remaining 10%. This deepwater block, which was awarded to RIL in NELP-V, is situated 45 kms away from the coast and covers an area of 3,288 sq kms.
In the last quarter of this financial year (2007-08), RIL has made four discoveries, two in Krishna Basin deep waters, one in shallow waters of Krishna Basin and one in Mahanadi Basin. The commercial production of RIL’s gas from Krishna Godavari basin is likely to start in third quarter of the 2008 fiscal.
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Consumer durables heavyweight Videocon has put in a bid to acquire the loss-making handset business of Motorola as part of an attempt to shore up its planned wireless services business in India, one of the world’s fastest-growing mobile markets. Videocon’s interest has stunned industry watchers at a time when other top probable candidates like LG, Nokia, Samsung and Sony-Ericsson have declined to show similar interest.
Videocon Industries chairman Venugopal Dhoot confirmed his interest in bidding for the mobile devices business of Motorola. The world’s third-largest handset maker had announced on March 26 its intention to hive off the mobile devices business into a separate company. the deal will be financed through a combination of around Rs 1,800 crore of cash reserves and long-term loans raised in the global market. Motorola’s mobile business is expected to be valued at between $3.5 billion and $4 billion. Motorola also has a handset manufacturing facility in Chennai that makes both CDMA and GSM mobile phones.
Videocon’s telecom subsidiary Datacom has already received licences to offer mobile services throughout India and is awaiting allotment of spectrum to launch commercial operations. Videocon has already announced an initial investment of Rs 6,000 crore for its telecom operations in 23 circles of the country and is eyeing 25 million customers in the next three years. Its handset business will be an added advantage as the company can bundle attractive offers with mobiles.
The handset business is growing rapidly in India as the demand for mobile services is scorching. The Indian market for mobile phones is around 120 million units a year. Videocon already has a strong distribution network that will help the company in garnering market share in short time. With a tele-density of 25% in a country of 113 crore people, there remains immense room for growth. The acquisition, if it comes through, will give a boost to Videocon’s plans to become a pan-India player.
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Tata Motors has reported a 5.92 per cent jump in its total vehicle sales (including exports) during March to 66,495 units, against 62,779 units in the same month previous year.
Sales of passenger vehicles in the domestic market during March fell 4.04 per cent to 24,760 units compared to 25,760 units in the corresponding month a year ago. The company sold 13,042 units of Indica, down 14.7 per cent over same month previous year. The Indigo family comprising Sedan Indigo and station wagon Indigo Marina reported sales of 5,135 units, down 6 per cent. Sumo and Safari sales were marginally up during March at 6,560 units. Sales of commercial vehicles during the month were, however, up by 17.16 per cent to 35,993 units against 30,720 units in March last year. Exports in March stood at 5,765 units, down 8.48 per cent, against 6,299 units in March 2007.
For the April-March period of 2007-08, Tata Motor's total sales increased marginally to 5,82,401 units, against 5,78,862 units in fiscal 2006-07. In the passenger vehicle segment, the company sold 2,14,758 units in the domestic market, a decline of 5 per cent over the previous year. The cumulative sales of Indica were 1,35,642 units and the Indigo family posted a sale of 31,416 units. The SUVs Sumo and Safari accounted for sales of 47,700 units.
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At a time when the government is looking at addressing the issue of supply constraint in the steel sector to rein in inflation, public sector SAIL yesterday announced that it has achieved a record production of 13.04 million tonne of saleable steel and 14 mt of crude steel in 2007-08. SAIL accounts for nearly 33% of the total steel produced in the country. Any increase in production is bound to improve the supply situation in the market. There is a small demand-supply gap of 2-mt of steel in the domestic market after accounting for exports and imports.
SAIL registered a growth of 30% in production of special steel and value-added steel items, totalling 3.7 mt. The highest level of production was recorded for rails at 9,11,000 tonne. The company achieved the highest-ever domestic sales of 11.9 mt during 2007-08. Sale of rails grew 54%, plates 8%, hot rolled coils 7%, TMT bars 53% and medium structural steel 15%.
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GAIL has signed a contract with the producers of gas from the consortium of RIL, the BG Group and ONGC for buying the entire quantity of 17.3 million metric standard cubic metre per day (MMSCMD) gas produced from the Panna-Mukta-Tapti (PMT) fields. GAIL will buy the gas at $5.73 per million British thermal unit (mBtu) for Panna field and $5.57 per mBtu of the Tapti field.
Subsequent agreements were also reached regarding the supplies to consumers. GAIL signed a term-sheet to supply, 3.6 MMSCMD of natural gas to RIL and 2.13 MMSCMD of gas to Gujarat Gas Company. It has also inked a short-term term-sheet for 15 days with Gujarat State Petroleum Corporation (GSPC) for the supply of natural gas.
GAIL has signed the contracts to purchase and sell the entire volume of PMT gas. Marketing the entire 17 million cubic meters per day (mcmd) of gas from the PMT fields will increase GAIL’s marketing margin by Rs 100 crore annually, while transportation revenues will go up by Rs 450 crore annually.
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Equipment major Bharat Heavy Electricals Ltd (BHEL) has bagged Rs 550-crore export order for supply of boilers. The order has been received from Koniambo Nickel SAS. The contract envisages supply of 2x135 MW environment-friendly Circulating Fluidised Bed Combustion Boilers and auxiliaries. The equipment to be supplied against the order would be fully compliant with global standards. BHEL is targeting a six-fold increase in its physical exports by 2012.
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Mahindra, which earlier this year, pulled out of a planned venture with Renault and Nissan Motor, would start operations at Chakan, near Pune, in two years to make 300,000 medium and heavy commercial vehicles. It will invest $1 billion (Rs 1,500 crore) in a new plant as it steps up capacity to take on increasing competition. Mahindra, aims to double domestic sales and quadruple exports by 2010.
Tata Motors would invest Rs 6,000 crore over four-five years to increase capacity at its Pune plant, add new products and build vehicle testing facilities. The investment will increase capacity at its Pune plant by about 40% to more than 600,000 units a year. Tata Motors, which last week announced a $2.3-billion deal to buy Jaguar and Land Rover from Ford, has announced it will raise $4 billion for its local and overseas expansion plans.
Due to competition, things are getting harder, and the only way to offset it is by creating excitement around new products. Both the companies have lined up a range of products for the coming fiscal year with hopes to better the performance.
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Engineering and construction company Larsen & Toubro has been awarded Rs 576-crore order for a 2-lakh-tonne per annum lube oil base stock plant by Hindustan Petroleum Corporation Ltd. The plant will consist of a raffinate hydrotreating unit, mobil selective dewaxing unit and a hydro finishing unit. This is to enable HPCL to produce high quality group II & III lube oils, which are higher value-added petroleum products. HPCL, which operates one of its largest refineries in Mahul, Mumbai, intends to set up the plant as a part of its quality up-gradation project.
The scope of work includes residual process design, detailed engineering, procurement, supply, transportation, storage, fabrication and commissioning. L&T’s E&C division’s refinery projects business unit secured the order.
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The Board of Directors of Great Offshore Ltd has approved the buy back of the Company's equity shares at a price not exceeding Rs 750/- per equity share, and up to an aggregate amount of Rs 55.24 Crore, which doesn't exceed 10% of the total paid-up capital and free reserves, as per the audited Balance Sheet, as at March 31, 2007.
The Company proposes to buy back shares on the BSE and NSE, through open market purchases, from time to time. The number of equity shares to be bought back would depend upon the average price paid for the equity shares bought back and the aggregate consideration paid for such equity shares. The share buy back will be made from the cash and bank balance of the Company.
The maximum price is at a premium of 17% over the closing price of the Company's share, as on March 31, 2008. The buy back is proposed to improve the earnings per equity share, improvement of return on net worth, financial ratios and other performance criteria of the Company.
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Indian Oil Corporation Ltd (IOC) is studying various options for becoming an ethanol producer from being just a buyer. The company would be looking at both organic and inorganic prospects for expanding its business in the bio-fuel category. The company has already amended its memorandum of association to get into agri-related activities, particularly bio-crops that would enable it to carry out business in bio-fuels and allied products. Currently, to sell the five per cent ethanol-blended petrol, IOC has been procuring ethanol from other suppliers.
The Government has already made five per cent blending of ethanol mandatory in notified States and Union Territories and 10 per cent blending is to become effective from October this year. The purchase price of ethanol has been fixed at Rs 21.50 per litre ex-factory on a uniform basis for three years from October 2007. Total requirement of ethanol by oil marketing companies for five per cent ethanol-blended petrol programme implementation is 0.6 million kilo litres per year and for 10 per cent, 1.20 million kilo litres per year for the notified States and Union Territories.
Recently, Reliance Industries Ltd and public sector oil company Hindustan Petroleum Corporation Ltd (HPCL) were among the companies which were awarded financial contracts for the revival of State-run sugar mills in Bihar. However, IOC had not participated in the bids.
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The EPC (engineering, procurement and construction) division of Reliance Energy has bagged two contracts worth Rs 1,200 crore for transmission projects of another group company Reliance Power Transmission (RPTL). The EPC division of REL came up with the best offer on both price and the timely completion among a group of three to four companies. It has agreed to complete the work on over 1,500-km transmission line by 2009 end.
REL’s EPC division undertakes engineering, design, construction and execution of industrial projects in generation, transmission and distribution of power. The current project is, however, its first in the transmission area.
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Auto parts-maker Amtek Auto has joined a growing list of Indian companies that are sitting on notional losses on account of their exposure to foreign exchange derivatives. The company has informed that it could potentially make a loss of up to $18 million (Rs 72.18 crore) in the next two years on its exposure to currency hedges and swaps. A Rs 72-crore loss is 30 per cent of Amtek’s standalone net profits of Rs 236 crore on sales of Rs 1,196 crore during the year ended at the end of May 2007 (the company follows a June-to-May financial year). However, the promoters of the company have undertaken to bring in the matching amount to meet the obligation in the form of a 10-year, interest-free non-convertible debentures or preference shares.
About half a dozen other companies have also taken their banks to court alleging that they were sold exotic derivative contracts for speculative purposes. Earlier, software major Hexaware reported Rs 81-crore loss for the quarter ended December. Stationery maker Sundaram Multi Pap Ltd has sued ICICI Bank for its losses on forex derivatives. Coimbatore-based Rajshree Sugars and Chemicals have filed a case against Axis Bank. Sundaram Brake Linings is also involved in a legal dispute with Kotak Mahindra Bank. It is estimated that India Inc’s losses on account of their exposure to foreign exchange derivatives are at Rs 12,000 crore to Rs 20,000 crore. The losses may hog the headlines for the next few quarters as many of the currency swaps are likely to mature after March.
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Surge in prices of metal and food items pushed inflation rate growth by 6.68 per cent, the highest ever in the past one year, dashing hopes of a softer interest rate regime in the near future. After remaining close to 4 per cent in recent months, inflation has begun moving upwards, and surged by 0.76 per cent during the week ended March 15. It was 5.92 per cent in the previous week and 6.56 per cent in the corresponding period last year.
In line with the global trends, metal prices continued to be more expensive. While joist and rolls rose by a whopping 34 per cent, heavy light structural were up by 32 per cent, bright bars by 24 per cent, basic pig iron and foundry pig iron by 17 per cent each and steel sheets, plates and strips by 13 per cent each. Food items, like vegetables, rape seeds and mustard oil also turned costlier.
Announcement of Sixth Pay Commission recommendations, and provisions for enhanced expenditure on social sectors in the Budget 2008-09 coupled with rising crude oil prices have also raised expectations about high inflation. The rise in inflation may not let RBI to go for a soft monetary stance and the central bank is expected to continue the tight interest rate policy.
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The Indian tyre market may become more competitive as State-run MMTC Ltd has finalised plans to market Chinese truck-bus tyres in India. Cross-ply and radial tyres both are to be imported from April 2008 onwards. MMTC is planning to grab 15-20 per cent share of the 1.2-lakh-import market for bus tyres in the country. Apart from directly marketing to large fleet-owners including the State transport corporations, MMTC is also setting up its own dealer network for retail sales.
At present, 35-odd small players dominate tyre import trade. MMTC is set to emerge as the first major outfit to start importing tyres in India. The entry of MMTC will help in consolidation of the trade. Also there would be resistance on increase in prices of tyres by local companies going forward.
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Long-distance telecom (STD) tariffs are set to become cheaper with regulator Trai announcing on Thursday that access deficit charge (ADC) on domestic calls will be eliminated from April. International calls to India will also be cheaper as Trai has halved their ADC to 50 paise per minute from April 1 to September-end, after which it will be phased out. However this reduction of charges on incoming long distance calls will have no benefit for Indian consumers, but will help consumers in other countries like NRI’s to call their relatives back home at rates lower by 50 paise for every minute of the call. This will also help reduce the grey market calls in the international telephony market due to lower arbitration margins.
Currently, all telcos pay 0.75% of total revenues towards ADC, which is used to support state-owned BSNL’s unviable fixed-line operations in rural India. Private operators who were bearing the burden of paying the charges till now stand to collectively save about Rs 750 crore, for individual subscribers this move will translate into a reduction of about 0.75 per cent on their monthly bills. For example if a mobile user spends Rs 200 a month he will now have to pay Rs 1.50 less. The Cellular Operators Association of India also said that the savings will be passed on to the consumers though it may not result in any significant decrease in tariffs when distributed among 300 million subscribers. Within hours of the Trai announcement, all telcos said they would pass on the savings to subscribers.
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