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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