According to sources, Reliance Industries (RIL) has initiated talks with global majors to offload upto 10% stake in its D-6 block in the Krishna Godavari (KG) basin. RIL owns 90% of its D6 Block located in the Krishna-Godavari, or KG, basin off the Bay of Bengal. RIL is likely to spin off its KG assets into a new company and then offer close to 10% stake to a strategic partner. This is to ensure that the partner does not get a stake in RIL. This deal, if it goes through, will help RIL’s plans, as a lot of capital expenditure required for the gas production and transmission can be done through this deal.
The gas output from RIL’s D-6 block in the KG basin may rise another 50% to 120 mmscmd after eight new discoveries. With the gas projection from KG basin being increased to 120 mmscmd and commercial production just a quarter away, the valuation of the field will go up by 50%. This strategic move will create additional share holder value, if done after resolving its gas sales dispute with Reliance Natural Resources (RNRL).
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After seven straight years of growth, the Indian automobile industry declined 4.7% to 96.48 lakh units in 2007-08 against 1.01 crore units in the previous financial year. The automobile industry, which was plagued by high interest rates affecting local consumer demand, credit squeeze and rising input costs, interestingly reported a robust growth in exports (22.3% growth to 12.37 lakh units in FY08 as against 10.11 lakh units in last fiscal.) According to figures released by the Society of Indian Automobile Manufacturers (SIAM) yesterday, the total production declined 2.29% to 1.08 crore units against 1.11 crore units in FY07 as demand remained low.
The industry was largely impacted by the steep decline in two-wheeler sales, which reduced 7.92% to 72.48 lakh units in FY08 against 78.72 lakh units the previous year. Motorcycles proved to be the biggest dampener. It declined 11.90% to 57.68 lakh units in FY08 as against 65.47 lakh units of the previous year. Scooter sales, however, remained positive and grew 11.64% to 10.50 lakh units in FY08. Mopeds, on a slightly lower base, grew 16.63% to 4.13 lakh units in FY08 against 3.54 lakh units of the previous year.
Passenger cars sales, increased by 12.17% to 15.47 lakh units last year against 13.79 lakh units clocked in FY07. More than 50 new cars launched in the last fiscal pushed sales as the mid-size cars segment Maruti SX4, Tata Motors Indigo, Hyundai Verna grew the highest at 14.6% to 2,25,719 units while the B segment Maruti Swift & WagonR, Hyundai Santro & i10, Tata Motors Indica grew 14.1% to 8,59,137 units. More than 60 new cars and models are expected to hit the market in current year, which is likely to keep the sales momentum going.
The commercial vehicle market posted positive sales on the back of strong sales growth in light commercial vehicles (LCV) and buses. The total LCV market grew 12.29% to 2,15,823 units last fiscal and buses grew 34.72% to 38,655 units.
The industry is fighting the credit squeeze problem in the market, which has affected much more than the prevailing high interest rates. The lack of finance in semi-urban and rural areas and the rising fuel cost are worrisome trends and are likely to hit the industry in the current fiscal too.
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India’s largest private sector steel maker Tata Steel is forming a special purpose vehicle (SPV) with state-owned MMTC for acquiring gold and diamond mining businesses abroad. MMTC would hold 26% stake in the proposed venture, leaving 76% to the Tata Steel.
The venture is likely to start operations by acquiring mining rights for diamond in Angola and Namibia before venturing in other African markets. The SPV would also explore business opportunities in iron ore and coal mining abroad through acquisitions or fresh mining rights. India is the world’s largest importer of diamond and gold with imports to the tune of $10 billion in each category. The joint venture between Tata Steel and MMTC would aim at acquiring mining rights for these minerals mainly in African markets with the aim of reducing country’s import dependence. While African markets would be the prime focus of the venture, it would also explore mineral rights in Australia, Brazil, Russia and Indonesia.
While MMTC is likely to bring its expertise in mineral trading and mining into the venture, Tatas would infuse cash to help the SPV to place aggressive bids for mining rights. The joint sector SPV is being conceived on the lines of a coal SPV formed in collaboration with five PSUs including SAIL and NTPC.
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Power equipment maker Areva T&D (India), which is investing Rs 700 crore to put up three greenfield manufacturing plants, is eyeing to double its sales turnover in the next two to three years. Indian subsidiary of the French major, had recorded a sales turnover of Rs 2,000 crore in the last year, up by 24.9 per cent over 2006. It has eight existing manufacturing facilities in India. Its greenfield projects are coming up at Hosur, Baroda and Padappai. The company has upwardly revised its investment plans in these plants to Rs 700 crore from Rs 500 crore earlier.
The transmission and distribution business in India will continue to grow since modernisation of grids & interconnections and new generation capacity are taking place in the country. Transmission contributes 60 per cent of Areva T&D’s total business.
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Yes Bank, one of the new-generation private banks, net profit increased by 109% in the fourth quarter ended March 2008. The bank has so far not faced any delinquency on its derivatives exposure and has therefore made no provisions for such transactions.
The bank’s advances grew 50 per cent to Rs 9,430 crore as on March 31, 2008, from Rs. 6,290 crore in the corresponding period last year. The deposit base rose 61.5 per cent to Rs.13,273 crore, from Rs. 8,220 crore earlier. Its Net interest income went up at Rs 389 crore versus Rs 202 crore. Its total income was up 75.9 per cent to Rs 494.3 crore, compared to Rs 281.09 crore. Its provisions and contingencies rose 80.1 per cent to Rs 22.8 crore, compared to Rs 12.7 crore during January-March 2007. Consequently its net profit went up 108.7 per cent to Rs 64.5 crore. Its Net interest margin is at 3.06 per cent, as against to 2.6 per cent in the fourth quarter of 2006-07. Its cost of funds stood at 8.4 per cent, while capital adequacy ratio was 13.64 per cent. Of the total advances, retail constitutes one per cent, while corporate lending was the major chunk of the loan book.
Of the total deposits current and saving account base, the low-cost source of funds, is about 8.5 per cent. The bank has invested in building the infrastructure to build the retail business and now will focus on growing its retail book. The bank has a target to have 117 branches by end FY09 and 150 by 2010.
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Larsen & Toubro (L&T) has bagged four orders worth Rs 1,687 crore from the government of Rajasthan, Bhushan Steel, SAIL and Damodar Valley Corporation (DVC). The orders are for water supply projects, sinter plant and cold roll mill and a coal handling plant.
The construction division of Larsen & Toubro has secured an EPC contract worth Rs 635 crore from the government of Rajasthan for design, supply, build and commissioning of water supply project. When completed, the project will provide safe drinking water to the people of Jaisalmer and Barmer including army bases. L&T, in consortium with Outotec GmbH, has bagged Rs 555 crore sinter plant order from Bhushan Steel (BSL). Apart from these two orders, L&T's ECC has bagged Rs 272 crore order from the Bokaro plant of SAIL for the construction of civil works for a new cold roll mill.
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A consortium comprising Reliance Industries (RIL) has made a significant oil discovery in Yemen. The discovery in Block 9 in Qarn Qaymah 2 well is learnt to be significant, and RIL is in process of evaluating the potential commercial interest. This was confirmed by RIL’s president for international business Atul Chandra.
Block 9 has an output of 10,000 barrels of oil per day (bopd), operated by Calvalley Petroleum of Canada holding a 50% stake. Hood Oil, subsidiary of the Yemen-based business group, Hayel Saeed Anam Group (HSA) owns 25% in this block and balance 25% with RIL. Now, Qarn Qaymah 2 has encountered excellent hydrocarbon indications while drilling and, depending on the test results, may be the first hydrocarbon discovery within the granite basement zone of Block 9. The basement is a large structural high and could have significant potential, Calvalley Petroleum had said in March. However more details of the said discovery were not available at present stage due to regulatory issues.
Globally, besides Block 9, RIL has acquired stake in two onshore oil blocks, 34 and 37, in Yemen where it is partnering Hood Oil. Both blocks measure 7,500 sq km each and are located along the border with Oman. RIL’s other global exploration assets comprise of two blocks each in Oman and Columbia and one each in East Timor and Australia covering an area of about 38,000 sq km.
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Netherlands-based district court in Hague has upheld an order by the arbitration tribunal of the International Chamber of Commerce in 2006 directing Videsh Sanchar Nigam Ltd (VSNL, now Tata Communications) to permit Reliance Globalcom (formerly Flag Telecom) to upgrade its bandwidth capacity at the cable landing station in Mumbai.
The district court has also ordered the Tata group company to pay proceeding charges of euro 13,092 plus euro 12,844 for legal representation to ADAG. The decision comes just ahead of a final verdict on the dispute in which Flag Telecom has separately sought $400 million (Rs 1,600 crore) in damages. Hearings for this issue have ended.
Under an agreement with VSNL, Flag terminated its undersea cable at the Tata group company’s landing station at Mumbai. This meant Flag also required VSNL’s permission to upgrade cable capacity. In 2004, VSNL denied Flag this permission on various technical grounds. ADAG filed for arbitration with the international tribunal in December 2004 against Tata Communications on two accounts. One, it had asked for directions to allow the company to upgrade the capacity of the Indian leg of the cable. Two, it demanded compensation for the business opportunity it had lost due to its inability to upgrade the capacity.
This significant development will pave the way for further expansion and will result in reduced costs for RCom and improvement in services to RCom’s customers. The group has already announced laying of cable at the cost of $400 million connecting 14 countries in West Asia to India and seamlessly integrated with Flag Global Network. Currently, the cable connects 39 countries across four continents. The company had recently announced a $1.5 billion project under which it would be laying 50,000 km of fresh optic fibre, bringing in over 65 countries across six continents within its network.
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Reliance Industries (RIL) and Bhel are in talks to form a joint venture (JV) for setting up solar fab units. RIL has plans to invest over Rs 30,000 crore in the chip manufacturing business. While RIL is scouting for partners for setting up two fab units, Bhel is looking for a strategic partner to venture into equipment manufacturing for solar power.
BHEL has received a communication from the Prime Minister’s Office (PMO) in this regard and may go in for a JV with Reliance Industries. The proposed JV is likely to venture into manufacturing of other small and medium equipment for solar power apart from the solar photo voltaic (SPV) cells. The JV would also look for small and mid-sized acquisitions in the international market for solar power.
The partners-in-waiting have not finalised the financial and technical details for the proposed JV and would firm up the plans in the next couple of months. The JV Company would be eligible for capital subsidies and tax concessions for the solar fab units, a cost of Rs 11,631 crore. The solar fab unit is proposed to be set up at Jamnagar in Gujarat, while the company is in talks with the state government of Maharashtra, Andhra Pradesh and Haryana to finalise the site for the semiconductor fab, according to details available with the government.
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Forgings major Bharat Forge is believed to have acquired an 89% stake in French forgings company Groupe Sifcor (Society of Industrial and Financial Courcelles). The acquisition will give Bharat Forge an entry into the French automotive sector and access to big Sifcor clients like PSA Citroen and Renault. Groupe Sifcor had posted euro 172 million (about Rs 1,152 crore) revenues last year. Last week, news about a possible acquisition appeared in a French newspaper. However the company officials at this stage declined to comment on the same.
Groupe Sifcor has five manufacturing sites in Europe. It employs 1,280 people and spends 3% of its turnover on R&D. In 2007, the company produced 48,000 tonne of high-grade steel. Family-owned Groupe Sifcor was formed in the 1880s and is comprised of three subsidiaries for hot-die forging, warm extrusion and cast forgings.
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Larsen & Toubro, the country’s biggest engineering conglomerate, is bridging a ‘missing link’ in its portfolio. It is setting up a facility for manufacturing heavy-duty forgings. The initial investment for the unit would be to the tune of Rs150 crore.
Very few companies in the world make heavy-duty, single-piece forgings weighing 50-100 tonnes or more. L&T’s forgings division will be to heavy engineering sector, what Bharat Forge is to the automobile sector. L&T has so far depended on external vendors for heavy tonnage forgings. As a result, the forgings often took more time to be delivered than the rest of the equipment, which the company fabricated in-house. With an in-house forging unit, the company will be able to control its delivery schedules better and avoid project execution delays.
The conglomerate’s future plans include making Oman a manufacturing base, with capacities mirroring its massive Hazira complex. Oman currently helps it serve firms in the Middle East, besides the home-grown ONGC.
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Reliance Industries the country's largest private sector company is mulling an entry into the rig manufacturing business but the final decision is yet to be taken. The company plans to enter into rig manufacturing by the end of this year or the beginning of next year and is looking for a suitable partner for this business.
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Private equity firms invested about $3.3 billion across 97 deals in January March quarter 2008. The investment was higher compared to the same quarter a year ago, where it was $2.7 billion from 101 deals. However this investment was lower than the preceding quarter which saw 131 deals worth $5 billion.
The largest investment reported in the Jan March quarter 2008 was $ 395 million raised by Sofia Power Company, a part of India bulls group. Telecom continued to attract investor’s interest with KKR and Morgan Stanley investing in tower infrastructure firms like Bharti Infratel and Tower Vision. Other companies that raised $100 Million plus during the quarter were Cairn India and Ballarpur Paper Holdings amongst others.
Despite the turmoil in the global financial markets, PE investments during January to March 2008 registered growth over the corresponding period in 2007. This indicates that PE firms are still bullish on India story going ahead.
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