The Index of Industrial Production (IIP) rose 8.6% in February 2008, with capital goods growth rebounding to double-digit levels after falling to an inexplicable low of 2.1% in January, and consumer durables climbing out of negative territory. This comes as good news, as the IIP growth rate had dipped to 5.8% in January from 7.7% in December. Industrial growth at 8.6% in February 2008 is still lower than the 11% achieved in February 2007.
Capital goods growth, which, by falling to 2.1% in January, 2007-08, is back in double digit at 10.4% in February 2007-08. However, it is lower than 18% witnessed in February 2006-07. The story in consumer durable sector, which includes automobile and white goods, has also bettered. From a negative 3.1% in January, the growth in consumer durables sector bounced back with 3.3% growth in February 2007-08, and is near double of 1.8% in February 2006-07. The consumer non-durable sector, comprising largely FMCG products, grew by a whopping 11% in February 2007-08 compared with 9.3% in the same month in 2006-07. The sector’s performance is expected to better with customs duty cuts in edible oils and excise duty cuts in the budget start playing on the demand.
Basic goods and intermediate goods grew by 7.3% (10.7%) and 8.2% (13.3%), respectively, in the month under consideration. Manufacturing, which occupies the highest weightage of about 80% in the Index of Industrial Production, grew at 8.6% against 12% in February, 2007, much higher than 5.9% in January. In February, electricity generation grew by 9.8% from a low of 3.3% a year-ago while mining output managed to maintain the growth rate of 7.5% in February 2007-08. Mining and electricity had dropped to 1.8% and 3.3% in January 2007-08. As many as 15 out of the 17 industry groups showed positive growth in February 2007-08.
The February number reaffirms the belief that India’s growth story is very much on track. Although growth is a tad lower compared with previous months due to high base effect, cumulative growth for the April-December period indicates that investment-led growth is very much intact.
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Lanco Infratech Ltd (LITL) has won two super critical power projects with an installed capacity of 3300 MW in Uttar Pradesh. The bids were called by the Uttar Pradesh Government for development of the two thermal power projects viz., Prayagraj of 1980 MW (3x660 MW) and Sangam of 1320 MW (2x660 MW). As per the terms of the bids, while 90% of power generated through the projects must be sold to the Government of Uttar Pradesh, the remaining 10% could be sold by the successful bidder through the merchant market.
LITL has won both the projects by outbidding other top players like Reliance Power, NTPC and Jindal Steel & Power. The projects include all the required infrastructure linkages like road, water, fuel and rail. From among the four leading business houses that participated in the bid for the Prayagraj Power Project, LITL won the bid with a quote of Rs 2.88 per unit. The second lowest bidder Reliance Power quoted Rs 2.94 per unit, followed by NTPC's Rs 3.44 and Jindal Steel & Power's Rs 3.591. The Sangam Power project had five players in the fray - LITL, Reliance Power, JSW, Jindal Steel & Power and RPG. Here also LITL won the bid through a quote of Rs 2.838 per unit while Reliance Power's was Rs 3.051, CESE's Rs 3.389, JSPL's Rs 3.51 and JSW's Rs 3.545.
LITL will invest around Rs 14,000 crore for developing the two projects in Uttar Pradesh. With the addition of these two projects, Lanco would now have a total capacity of around 13,000 MW, covering both operational and those under implementation and development.
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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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