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Reliance’s most risky gamble

Tue, 13 May 2008 01:57:03 EST

Reliance’s most risky gamble - by vipinlara

Over the last 30 years, Reliance Industries has dreamt big, often putting gigantic sums into executing mammoth projects, always within punishing schedules. Now, it is showing that same derring-do in the chip-making business. And this time, it has also become slightly bolder. In India, Reliance is venturing where no other manufacturer, including global biggies like Intel, Advanced Micro Devices (AMD), Texas Instruments, Freescale and STMicroelectronics, were willing to tread—into semi-conductor fabrication.

For one, this is a hugely capital-intensive industry that is both a power and water-guzzler, where even established biggies have pulled out citing inadequate infrastructure. Plus, inordinate delays in transporting these wafers to export markets, caused chiefly due to the delayed turnaround times at Indian ports, has also traditionally turned away semi-conductor makers. Therefore, what Reliance was doing was unprecedented.

With well-established semi-conductor manufacturers in India’s neighbourhood, including in China, Taiwan and Singapore, which have traditionally supported fabrication units with a plethora of incentives, global heavyweights like Intel and AMD have thought it fit to set up shop there, rather than butt heads with India’s patchy infrastructure.

Also, the high-tech chip-making and solar cell businesses are unchartered territory for Reliance, although it has shown scale, leverage and backward integration in the polymers to petrochemicals business, and muscled its way into the oil, telecom and retail businesses. In effect, making 70,000 wafers a month, 10 million chip packages a week and one giga watt of solar cell modules, with one fabrication unit costing anywhere from $3-5 billion, looks like Reliance’s most risky gamble. Small countries like Israel, Vietnam, Taiwan and Singapore export more chips than what they consume. For Reliance too, exports is where the real money will come from. . The good news for Reliance is that domestic manufacturing in sectors such as telecom, information technology, office automation, consumer durables, industrial equipment and automotive is showing signs of picking up. The increasing use of electronics and chips in their product portfolios will help increase the potential of the market.

India's textile exports at $20.5 bn for FY08

Tue, 22 Apr 2008 06:28:40 EST

India's textile exports at $20.5 bn for FY08 - by vipinlara

India's textile exports for 2007-08 stood at $20.5 billion, falling short of the target set by the Indian government. The government had set a target of $25 billion export for the textile sector. In my opinion, textiles exports were impacted by the rupee appreciation but they have been able to register a growth of 10 per cent over 2006-07.

According to experts, India's technical textile market could grow four fold to become a $37-billion industry by 2020, provided issues such as lack of investment and absence of research and development are addressed. It is worthwhile pointing that the Indian technical textiles market has been registering a growth of 11.25 per cent, which now stands at $8.3 billion. The growth of the sector is, however, marred by factors like lack of investment, absence of high quality R&D and database. Technical textiles are materials and products used primarily for their technical and functional properties and not for use as apparels.

GDP to moderate to 8.1%: Crisil

Tue, 22 Apr 2008 05:58:35 EST

GDP to moderate to 8.1%: Crisil - by vipinlara

Crisil has revised its GDP growth forecast to 8.1 per cent for 2008-09 from the earlier forecast of 8.5 per cent in view of the worsening inflation, interest rate and global growth outlook.

Some moderation notwithstanding, I have no doubt that the overall growth scenario is expected to remain strong with investment as the main driver. Domestic private consumption demand will also provide some support to the economy against slowing external demand. Sectoral forecasts for industry and services have also been adjusted downwards to 8 per cent and 9.8 per cent respectively. Assuming a normal monsoon this year, Crisil expects agriculture will grow at 3 per cent.

The current pressure in inflation is from commercial commodities and oil -- a worldwide phenomenon related to the supply crunch which is not expected to ease soon. As a consequence, despite growth deceleration, experts are expecting inflation at an average of 5.5 per cent in 2008-09 under a normal monsoon scenario. While inflation is expected to remain high in the next few months due to a continuation of global pressures and an unfavourable base effect, experts expect it to soften towards the end of the year. If monsoons are sub-normal and agricultural production falters, inflation scenario could worsen.

The Reserve Bank of India has consistently maintained that containing inflation within its target zone is its primary objective. Given high inflationary expectations, the central bank has already raised CRR by 50 basis points ahead of the policy announcement. This will exert upward pressure on the interest rates.

Reliance Industries fourth quarter result

Tue, 22 Apr 2008 00:03:49 EST

Reliance Industries fourth quarter result - by vipinlara

Riding on higher gross refining margins (GRM) of $15.5 per barrel and some assistance from non-operational income, Reliance Industries (RIL) has reported a 24% increase in its fourth-quarter (January-March 2008) net profit to Rs 3,912 crore ($975 million), excluding exceptional items.

In terms of statistic, this was on a turnover of Rs 38,697 crore, an increase of 32% over the corresponding quarter last fiscal. The operating margin (excluding other and exceptional income) during the fourth quarter declined by nearly 270 basis points to 16.1% of net sales against 18.8% compared to the corresponding period last year.

For the entire year, RIL’s net profit grew by 28% to Rs 15,261 crore on revenues of Rs 139,269 crore, an increase of 18% over the previous year. The company’s profit during the year was helped along by a Rs 986-crore profit from foreign exchange transaction and sales tax savings due to higher exports and conversion of its Jamnagar refinery to an export-oriented unit (EOU).

In the middle- to long-term, the company expects its GRM to be robust because of the global demand-supply mismatch in spite of new capacities. The company claimed that outside the US, refineries are working at an extended utilisation ratio of 80-90%, which will keep the demand-supply balance in favour of demand for at least the next few years.

TCS financial results

Mon, 21 Apr 2008 23:52:25 EST

TCS financial results - by vipinlara

According to experts, weak volumes took their toll on Tata Consultancy Services Ltd, India's largest software-services company, which reported financial results for the quarter ended March 2008.

The company's net profit rose 4.15 per cent to Rs 1,245 crore as compared to the same quarter of the previous year, while revenue was up 18.13 per cent to Rs 6,098 crore. Compared to the previous quarter (third of 2007-08), its net profit was down 6.17 per cent.

Except for Satyam Computer Services, which posted 7.7 per cent net profit growth quarter-on-quarter, all the other tier-I information technology firms (Infosys, HCL and Wipro) reported poor sequential growth numbers. The three firms have recorded low sequential growth in revenue as well.

For the full year, TCS reported 19.31 per cent growth in net profit to Rs 5,026 crore, while its revenues grew 22.36 per cent to Rs 22,863 crore. Banks, financial service providers and insurers accounted for 44 per cent of Tata Consultancy's sales in the fourth quarter. The world's biggest banks and securities firms have reported credit losses and asset writedowns exceeding $255 billion.

At the end of 2007-08, TCS' total employee strength stood at 111,407 with a gross addition of 35,672 and a net addition of 22,116 during the year. Its employee utilisation rate is around 76 per cent (including trainees).

The company has made 22,451 campus offers for 2008-09 including over 4,000 science graduates for its science-to-software transformation programme, Ignite.

Tata Power, Bhel to sign long-term sourcing deal

Mon, 21 Apr 2008 05:08:36 EST

Tata Power, Bhel to sign long-term sourcing deal - by vipinlara

In what can be termed as one of the biggest public-private partnership initiative, Tata Power (TPL) will enter into an agreement with state-owned Bhel for sourcing equipment for all its future power projects. This would be the first time a private sector company placing a bulk order for a series of power projects with Bhel.

Bhel is also talking with Reliance Power for supplying equipment for its 4,000 mw ultra mega power project at Krishnapatnam in Andhra Pradesh. To begin with, Tata Power would source equipment for a capacity of around 5,000 mw from Bhel through the negotiated route.
The list of power projects under discussions includes the 2000-2400 mw Dehrand thermal power project in Maharashtra, the 1800 mw Maithon thermal project in West Bengal, the 540 mw Naraj Marthapur project in Orissa and the 100 mw Bhira hydro power project in Maharashtra.

Bhel is executing the 250 mw Trombay and 1050 mw Maithon power projects of Tata Power. For most of the mega capacity projects like the Dehrand and Maithon power projects, Bhel has offered its 600 mw thermal sets. In my opinion, Bhel is the domestic leader in the power equipment business and should be strengthened.

Satyam Computer eyes 26% growth in revenue in fiscal `09

Mon, 21 Apr 2008 05:01:18 EST

Satyam Computer eyes 26% growth in revenue in fiscal `09 - by vipinlara

According to sources, Satyam Computer Services consolidated revenue under Indian GAAP is expected to be between Rs 10,500 crore and Rs 10,670 crore, implying a growth rate of 23.9% and 25.9% over fiscal 2008. EPS for the full year is expected to be between Rs 29.54 to Rs 30.04, implying a growth rate of 17% to 19%.

For the fiscal 2009, under US GAAP, revenue is expected to be between $2.65 bn and $2.69 bn, implying a growth rate of 24% to 26% over fiscal 2008. Basic earning per ADS for fiscal 2009 is expected to be between $1.44 and $1.47, implying a growth rate of 15.2% - 17.6% over fiscal 2008.

For Q1FY09, under US GAAP, revenue is expected to be between $631.7 mn and $634.8 mn, implying a growth rate of 3% to 3.5%. Basic earning per ADS for the quarter is expected to be $0.38, implying a growth rate of 11.8%. For the same period, under Indian GAAP consolidated, corresponding revenue is expected to be between Rs 2,500 crore and Rs 2,512.5 crore, implying a growth rate of 3.5% and 4.0%; EPS for the quarter is expected to be between Rs 7.64 to 7.68, implying a growth rate of 9.7% to 10.2%.

CRR hike and its impact on Indian ruppee

Mon, 21 Apr 2008 03:35:57 EST

CRR hike and its impact on Indian ruppee - by vipinlara

The Reserve Bank of India last week did what market participants had largely expected it to do. Firing its first salvo against inflation, the central bank announced a hike in the banks’ cash reserve ratio (CRR) by 0.50% in two stages to 8%.

According to experts, the timing of the CRR hike also leaves the door open for policy rate hikes on April 29th when the Reserve Bank of India announces its monetary policy for the current fiscal year.

The impact of the tightening of the monetary levers is broadly positive for the rupee in the medium term. In the week ahead also, the rupee could receive limited boost from the CRR hike. But the Reserve Bank of India is standing in the way of the rupee strengthening beyond 39.90 at the moment. Its intervention has also been more effective as pace of capital inflows is not strong.

Portfolio investors remain marginal buyers of Indian equity, thus closing down one of the key routes of capital inflows. In the meantime, downward pressures through the merchandise trade front continue to build-up. Point to be noted here is that international crude oil prices climbed to $116.5 per barrel, rising 5.8% last week. Food prices too are scaling new highs, with rice crossing $1,000 per tonne. And prices of another of India’s key imports — fertiliser — are now sky rocketing.

Various pension plans in India

Sun, 20 Apr 2008 13:18:39 EST

Various pension plans in India - by vipinlara

Financial planning for one’s retirement should start as early as possible. Waiting till the mid-40s or even later to get into the act, as most of us end up doing, can result in a small and sub-optimal retirement corpus, thereby impacting the quality of one’s retired life.

So, choosing a retirement product to suit one’s requirements is important. ICICI Prudential offers a choice of six pension funds, while ING Vysya offers three—equity, debt and liquid funds. Then, there is Bharti Axa, which recently set up an asset management company to manage its funds. Unlike others, Bharti Axa offers flexible premium payment options within the same plan to suit one’s means.

Pension plans should constitute an important part of a person’s portfolio. Today, there are plans that take into account specific risk appetites of people by offering variable combinations of equity, debt and money market securities, bearing in mind the safety of the fund. ICICI Prudential and ING Vysya offer portfolio management for people who are not mutual fund-savvy or have little time to learn the niceties.

LIC’s Market Plus product levies a low premium allocation charge upfront and distributes this at the rate of 2.5 per cent till the end of the tenure.

In contrast, many others stop charging this after the fifth or sixth year. Also, tracking LIC’s surrender values is a tedious exercise— investors have to get it from agents.

Pension plans allow a commutation of one-third of the fund value at the end of the accumulation phase. Subsequently, the pensioner has to buy an annuity—he has the freedom to buy it from any company offering it. However, annuity rates are currently very discouraging, at around 6 to 7 per cent.

Before opting for any pension plan, study the offering in detail to distinguish baits from true benefits. Also, it’s never too late to invest in retirement plan.

Caution is the buzzword in corporate India

Sun, 20 Apr 2008 13:15:21 EST

Caution is the buzzword in corporate India - by vipinlara

I have no doubt in my mind that caution is back in boardroom discussions in corporate India. There is still optimism, but irrational exuberance—a phrase popularized by Alan Greenspan, former chairman of the US Federal Reserve—has, for all practical purposes, gone out of the picture.

According to the International Monetary Fund (IMF), the world economic growth is poised to slow down to 3.7 per cent—the lowest in nearly five years, as developed economies battle the R word. India, intertwined with the world more than ever before, is also seeing its own growth estimates getting revised downwards from highs of 8-plus per cent to between 7 and 8 per cent for the year 2008-09. And it seems that slackening demand is not the only thing that is circulating through the world economy. It is also high food, fuel and metals inflation.

Global factors are stoking inflation in India, too. A combination of policy measures (such as not increasing retail fuel prices) has partly insulated India from the worst of global inflation. Nevertheless, at 7.41 per cent in the week ended March 29, the increase in wholesale price index (WPI) has signaled political worries ahead of several state assembly polls.

The silver lining appears to be in the fact that even drastic cutbacks in estimates predict a growth at the very least of 7 per cent. And that for an economy flirting with the $1-trillion (Rs 40 lakh crore) mark is still a pretty good growth rate. It would do us well to remember that the 9 per cent growth phenomenon is a fairly recent one for India. We do not have the pipeline in terms of physical and human capital to cope with this growth.

Tata and Reliance Industries in world’s 25 most innovative companies

Sun, 20 Apr 2008 13:12:17 EST

Tata and Reliance Industries in world’s 25 most innovative companies - by vipinlara

India’s two leading conglomerates, Tatas and Mukesh Ambani-led Reliance Group, have made it to the league of the world’s 25 most innovative companies, riding on the cheapest commercial car Nano and an aggressive growth path, respectively. In the list of world’s 25 most innovative companies, Tata group is ranked at the sixth position, while Reliance Industries is at 19th spot.

The list has been compiled by Business Week magazine in collaboration with Boston Consulting Group. Both Tata and Reliance have made it for the first time to the annual list which is topped by Apple Computer, followed by Google, Japanese auto major Toyota, General Electric (GE) and Microsoft in the top five.

Tata group has been ranked higher than companies like Nintendo, Procter & Gamble, Sony, Nokia, Amazon.com, IBM, Blackberry-maker Research in Motion, BMW, Hewlett-Packard, Honda Motor, Walt Disney and General Motors. Reliance Industries has beaten global giants like Boeing, Goldman Sachs, 3M, Wal-Mart, Target and Facebook.

Ranbaxy in number of agreement with Astrazeneca

Tue, 15 Apr 2008 06:19:42 EST

Ranbaxy in number of agreement with Astrazeneca - by vipinlara

Ranbaxy Pharmaceuticals has reached number of agreements with AstraZeneca. Two of these agreements concern Esomeprazole magnesium capsules. The third agreement pertains to Omeprazole 40mg tablets, and the fourth agreement pertains to Felodipine ER capsules. All of the agreements are specific to the U.S. market.

It is worth mentioning in this regard that the agreement settles the patent infringement litigation filed by AstraZeneca following Ranbaxy’s submission to the United States Food & Drug Administration of an Abbreviated New Drug Application for a generic version of Esomeprazole magnesium. Under the settlement agreement, Ranbaxy concedes that all six patents asserted by AstraZeneca in the patent litigation are valid and enforceable.

I have a talk with few experts and they were of the opinion that the settlement agreement will allow Ranbaxy to commence exclusive sales of a generic version of Nexium under a license from AstraZeneca on May 27, 2014. During the 180 period following the date, RPI will distribute the only generic Esomeprazole magnesium product in the US market.

AstraZeneca and Ranbaxy have separately entered into an agreement under which Ranbaxy will formulate a significant portion of AstraZeneca’s U.S. supply of Nexium from May 2010, including provisions for the manufacture of Esomeprazole magnesium, the Active Pharmaceutical Ingredient (API) from May 2009.

AstraZeneca and Ranbaxy have also entered into two separate agreements designating Ranbaxy as the U.S. distributor for the authorized generic versions of Felodipine Capsules and Omeprazole 40mg Tablets. Ranbaxy will be compensated for its distribution services on standard commercial terms.

NHPC IPO to tap markets in August

Tue, 15 Apr 2008 05:54:16 EST

NHPC IPO to tap markets in August - by vipinlara

According to sources, the Rs. 1,676-crore Initial Public Offering (IPO) of National Hydro Power Corporation (NHPC) will be cleared on priority and the IPO will hit the markets positively by August.

Point to be noted here is that the delay in appointment of independent directors has adversely affected the IPO. There are three independent directors to be appointed and the matter is in an advanced stage of finalisation.

In my opinion, the IPO is quite important for NHPC to take up modernisation and commercial orientation in the changing scenario. Despite the presence of private players, the PSU would continue to play a major role in developing the hydro power potential of the country.

Progress of NHPC has not been satisfactory during the last many years due to various reasons. According to experts, the aim would be to double the capacity of the organisation from around 5,000 MW at present to 10,300 MW by the end of the XI Plan.

Infosys Technologies Q4 result

Tue, 15 Apr 2008 03:45:12 EST

Infosys Technologies Q4 result - by vipinlara

The Q4 result of Infosys Technologies is in line with its own expectations. The net profit for the fourth quarter stood at Rs 1249 crore up 20.9%. However, Q4 results have been affected by a downturn in the US economy and the late announcement of IT budgets for the calendar year 2008 by some of its clients.

In my opinion, the results can be considered credible as it comes on consolidated profit of Rs 4659 crore. Company has added one USD 300 mn client in Q4. As far as net sales are concerned the company posted consolidated net sales of Rs 16,692 crore up from Rs 13893 crore up 20 %.
The company declared a final dividend of Rs 7.25 on shares of Rs 5 each (145 percent) and a special dividend of Rs 20 per share (400 percent on an equity share of face value of Rs 5). The company is expecting earnings per share at Rs 92.32-93.92 for FY09. It has raised dividend payout to 30 per cent from 20 percent. The FY`09 guidance is based on dollar at 40.02/$1.

According to experts, the results have also been helped by a surge in rupee as there was about 1 percent rupee depreciation against the US dollar during the quarter. The rupee ended at 40.72/73 against the dollar on March 17, its weakest since Sept 06.

Larsen & Toubro bags Rs 2000 crore contract from Bombay Dyeing

Tue, 15 Apr 2008 03:37:55 EST

Larsen & Toubro bags Rs 2000 crore contract from Bombay Dyeing - by vipinlara

According to sources, Engineering major Larsen & Toubro has secured a Rs 2,000-crore order from the Wadia Group flagship firm Bombay Dyeing for construction related works at its city-based complexes.Larsen & Toubro's construction division has bagged the order for developments at the textile mills and spring mills complexes at Worli and Wadala regions of Mumbai.

Initial signs are that the turnkey project involves construction of mixed-use developments of around 4 million sq ft at the textile mills in Worli and 5 million sq ft at the spring mills development in Wadala scheduled to be completed within the next 46 months or by the end of December 2011.

About Larsen & Toubro:

Larsen & Toubro Limited operates in four segments. The Engineering & Construction segment comprise execution of engineering and construction projects to provide solutions in civil, mechanical, electrical and instrumentation engineering to core sectors/infrastructure industries, shipbuilding and supply of complex plant and equipment to core sectors. The Electrical & Electronics segment comprises manufacture and sale of low-voltage switchgear and control gear, custom-built switchboards, petroleum dispensing pumps and systems, electronic energy meters/protection (relays) systems, control and automation products and medical equipment. The Machinery & Industrial Products segment comprises manufacture and sale of industrial machinery & equipment, marketing of industrial valves, construction equipment and welding/industrial products. Others include ready-mix concrete, property development activity, and engineering services and embedded systems.

Indian Oil Corporation losing Rs 320 crore per day on fuel sales

Mon, 14 Apr 2008 22:38:05 EST

Indian Oil Corporation losing Rs 320 crore per day on fuel sales - by vipinlara

Indian Oil Corporation, India's biggest oil firm is losing Rs 320 crores a day on fuel sales and may see future projects getting impacted if the current situations continues in 2009.At this moment of time, IOC loses Rs 10.78 a litre on petrol, Rs 17.02 per litre on diesel, Rs 316.06 per LPG cylinder and Rs 25.23 a litre on kerosene as the government has not allowed public- sector fuel retailers to raise domestic prices in line with rise in international cost.

The company along with Bharat Petroleum and Hindustan Petroleum is seeking higher compensation from the government for selling fuel at a loss. Currently, government compensates 42.7 per cent of their revenue loss through issue of oil bonds. The oil firms and the Petroleum Ministry want this to be raised to close to 60 per cent. The company's borrowings have risen to Rs 35,400 crore as on March 31, 2008 and it had about Rs 17,000 crore worth of oil bonds in hand. Last year, IOC sold oil bonds worth Rs 10,000 crore and it may sell the same amount during the current fiscal also. IOC plans to invest Rs 7,500 crore in refinery and pipeline projects in 2008-09.

Aditya Birla Group ups stake in Canadian units

Mon, 14 Apr 2008 22:32:06 EST

Aditya Birla Group ups stake in Canadian units - by vipinlara

According to media reports, the Aditya Birla Group has invested around Rs35 crore to increase its stake by 20 per cent each in its two joint venture companies in Canada - AV Cell Inc and AV Nackawic Inc.

It is worthwhile pointing that the Group has acquired the additional stake from the Tembec Group, its joint venture partner in these firms. Grasim Industries, the flagship company of the group, which has a 25-per cent stake in AV Cell Inc, has acquired the additional 20 per cent, increasing its holding to 45 per cent.

The Aditya Birla Group, which holds 75 per cent stake through a joint venture in AV Nackawic Inc, with the balance 25 per cent with Tembec, would acquire the additional 20 per cent, increasing its holding to 95 per cent. PT Indo Bharat Rayon Indonesia, promoted by the Aditya Birla Group would get the additional 20 per cent stake in AV Nackawic.

In my opinion, Tembec's decision to dilute its stake in these two entities is part of its effort to focus resources on its core business units. AV Cell Inc is a 50:50 joint venture between the Aditya Birla Group and Tembec, which commenced commercial production in July 1998. This venture supplies softwood and hardwood pulp, a critical input for the group's viscose staple fibre (VSF) business.

The Aditya Birla Group and Tembec Inc, had jointly acquired the St. Anne Nackawic Pulp Mill, which was later renamed to AV Nackawic Inc. AV Nackawic currently produces paper grade pulp, and upon conversion to dissolving / specialty grades, would provide the required strategic flexibility to the Group's VSF operations. Based in Canada, Tembec is a leading integrated forest products company, with operations in North America and France. The company that started in 1973 employs has sales of around $3.5 billion.

Bad time for investors and market players in India

Sun, 13 Apr 2008 22:58:45 EST

Bad time for investors and market players in India - by vipinlara

At this moment of time, looks like the situation in the Indian stock market will worsen before it can improve. In my opinion, the initial fear of inflation is transforming into a full-blown crisis, sending government and policy-makers into a firefighting mode. This is bad news for investors and market players. As the inflationary pressure in the economy increases, the two will work at cross-purpose. The worst hit will be export-led and capital-intensive sectors.

In FY07, exports accounted for over 12% of the standalone revenues of the country’s top five steel producers. If they are unable to export their products, it will have serious repercussions on their financial health. The worst part is that this may create a crisis of confidence about the government’s commitment to the market principle. It is this confidence which has led India Inc to embark on one of the largest capacity expansions in the history of modern India.

Point to be noted here is that liquidity boom allowed many companies in these capital-intensive sectors to grow despite poor returns on capital employed (RoCE). For instance, some of the largest players in the energy and infrastructure sectors continue to prosper and command record high P/E multiples with RoCE as low as 10% — less than the nominal rate of interest.

This is not sustainable in the long term and calls for either a re-jig in their business model, or tempering of investors’ expectations from companies in these sectors. The gap between perception and reality becomes clear when one compares these bull leaders with the plain-vanilla companies in the typical manufacturing and services sectors.

JK Tyres Buys Mexican Tyre Company Tornel For Rs 270 Cr

Sat, 12 Apr 2008 06:08:34 EST

JK Tyres Buys Mexican Tyre Company Tornel For Rs 270 Cr - by vipinlara

According to sources, JK Tyres has acquired Mexican tyre company, Tornel for Rs 270 crore to become India's fourth largest four-wheeler tyre company. In terms of statistic, JK Tyres' turnover will now exceed USD 1 billion. The company will fund the acquisition through a mix of internal accruals and debt.

Indications are that this buyout will be completed by the end of May, subject to regulatory approvals. In my opinion, the acquisition makes a strategic fit for JK Tyres as it is already the largest exporter, exporting almost 48% to the North and South American markets. Mexico-based Tornel offers free access to the NAFTA trade block and Central and Southern America. Therefore, together both the companies would considerably strengthen the market positioning in these territories.

Tornel has three operating tyre plants with an aggregate capacity of 6.6 million tyres per annum. Tornel has a distribution network of 241 distributors and 282 sales outlets. The turnover of Tornel is USD 202 million, which together with JK Tyre's turnover of USD 800 million will make JK Tyre's combined turnover exceed USD 1 billion.

Toyota betting big on India

Sat, 12 Apr 2008 06:03:53 EST

Toyota betting big on India - by vipinlara

World’s second biggest car maker Toyota Motor Corporation (TMC) has joined the small car bandwagon. After producing a range of utility vehicles and premium sedans during its decade long stint in India, it plans to debut its new global compact sedan by 2010. According to media reports, it is setting up a new manufacturing facility by investing Rs 1,400 crore to initially produce 1 lakh cars annually.

Making India the hub for small car manufacturing on the lines of Japan’s Suzuki Motor Corporation and Korea’s Hyundai Motors, Toyota plans to export the proposed car to overseas markets. TMC, which operates in India though the joint venture Toyota Kirloskar Motor Private Ltd (TKM), with a majority 89% stake, will manufacture the strategic small car at its 430-acre Bidadi plant in Karnataka.

The compact car is likely to fit in the small car segment as mandated by the Indian government, of less than 4-metres length and up to 1,200 cc (petrol) and 1,500 cc (diesel). Small cars enjoy concessional 12% excise duty while all other vehicles are taxed at 24%. The company has invested Rs 2,500 crore so far in India. The Bidadi plant has an annual production capacity of 63,000 units of Innova multipurpose vehicle and Corolla premium sedan. It imports the Camry sedan and sports utility vehicle Prado.

Indian real estate review

Sat, 12 Apr 2008 04:47:52 EST

Indian real estate review - by vipinlara

In my opinion, high interest rates and overheated asset prices have cooled the super-charged growth in real estate even as a demand-supply mismatch continues in the Indian property market.

I have no doubt in my mind that the price movement over the last three to six months in the central business districts in key cities has been flat

According to experts, prices are expected to be flat in the near future

Recent trend in the market being that speculators moving out, end-users buying cautiously

There is a strong possibility that commercial real estate supply will increase in coming six to eight quarters

Interest rate cut would have helped boost demand, but with inflation up, this is unlikely

Input costs - steel, cement etc - have gone up, along with land price

Residential demand, which is more sensitive to interest rate movement, has cooled in recent times, though developers are reluctant to admit this.

It is a fact that property transactions have dropped and the rate of new home loan disbursals has also fallen.

The State Bank of India, the country's largest lender, saw a home loan portfolio growth rate of 16 per cent in 2007, slower than the 20 per cent growth witnessed in 2006.

SBI has cut home loan rates twice since January 2008, a bank executive said, adding that there was no visible growth as yet in the home loan portfolio. "Property prices are still high and people still cannot afford flats in big cities," he added.

Ashok Leyland FY08 sales down marginally

Tue, 08 Apr 2008 02:00:07 EST

Ashok Leyland FY08 sales down marginally - by vipinlara

According to media reports, Hinduja Group flagship Ashok Leyland, which is India's second biggest commercial vehicle maker has finished the year ended March 31, 2008 with sales of 83,309 vehicles when compared with 83,094 units sold last year. Furthermore, domestic sales in the M&HCV segment dropped to 75,408 units from 76,736 units, but domestic LCV sales increased to 615 units from 333 units sold in 2007. Exports increased 21% to 7,286 vehicles from 6,025 in FY07. Total production for the year was 84,006 units when compared with 83,558 units in the last fiscal.

Ashok Leyland Limited engages in the manufacture and sale of commercial vehicles, related components and accessories in India. The company offers various kinds of buses that primarily include CNG, double decker, and vestibule busses; trucks that comprise haulage models, multi-axle tippers, multi-axle vehicles, tractors, and other types of commercial vehicles; engines for industrial, genset, and marine applications; and defense and special vehicles.

The company also offers design and engineering services to the automobile, power engineering, and aerospace sectors. The company, formerly known as Ashok Motors, was founded in 1948 and is based in Chennai. The company has six plants having a total installed capacity of 77,000 commercial vehicles and 24,000 tons ferrous castings. Two manufacturing units (engines and gearboxes) costing Rs 2,500 million are being set up.

GSK Consumer healthcare review

Tue, 08 Apr 2008 01:41:59 EST

GSK Consumer healthcare review - by vipinlara

In a volatile market like India, FMCG stocks are a safe bet. When your priority is safety rather than higher returns then FMCG stocks is the way to go. GlaxoSmithKline Consumer Healthcare (GSKCH), powered by the Horlicks brand, is a strong stock in this space. GSKCH has taken over the consumer and over-the-counter (OTC) businesses of two very long-standing MNCs in the country.

After its recent corporate mergers and brand buyouts, GSKCH now has a virtual monopoly over the nutritional drinks market. Its line-up is led by Horlicks, which commands more than 50 per cent of the health beverage market in India. Boost, with 13 per cent of the national market, is the leader among the 'brown' health drinks. With ongoing investments in the vending business, there is a strong possibility that company will extend the reach of their product category beyond households.

The company's pharma business consists of OTC products. Here, too, the company owns dominant brands such as the paracetamol-based painkiller Crocin, antacid Eno, and the pain balm, Iodex. Financials. Operating and net profits in the quarter ended December 2008 have gone up by 19.82 per cent and 9.13 per cent to Rs 53.20 crore and Rs 27.50 crore, respectively, from the last year's figures. The current year's yield stands at around 2 per cent.

Indian IT companies to see mixed results in fourth quarter

Tue, 08 Apr 2008 01:34:53 EST

Indian IT companies to see mixed results in fourth quarter - by vipinlara

Often, the fourth quarter is usually a weak quarter for the Indian IT companies due to the lesser number of billing days. This time, however, the good news is that the rupee has depreciated by about 1.3 per cent during the quarter. It is worth mentioning in this regard that every increase/decrease of a percentage point in the rupee lowers/adds to the operating (EBIDTA) margins by 30-50 basis points (bps).

According to experts, Indian IT companies, have increased their hedges significantly over the past few quarters and this could lead to foreign exchange losses (mark-to-market losses on account of forward covers) as the rupee depreciated against the dollar during the period.

TCS, Wipro and HCL Technologies, with forward covers over twice their quarterly revenue, are likely to be impacted the most. In my opinion, most of the mark-to-market losses would get amortised over the contract life due to cash-flow accounting.

I am expecting big players to report a modest 4-6 per cent dollar-based sequential growth in revenue (compared to the trailing quarter), with company-specific weakness in Tata Consultancy Services (TCS). They also expect volumes to lead revenue growth, accompanied with stable pricing.

I have no doubt in my mind that the demand for IT services would undoubtedly reflect the slowdown in the US with a lag of one or two quarters. There is a weak hiring pattern as companies combat the growing demand weakness through increasing utilisation and greater focus on fresher hiring.

Infosys will be the first to declare its results for the quarter ended March 31, 2008 on April 15. It is expected to register a 5-6 per cent quarter-on-quarter (q-on-q) dollar-based revenue growth, with around 35 bps improvement in EBITDA margins. On the other hand, TCS is expected to witness a lower 3-4 per cent q-on-q dollar revenue growth and flat margins.

Wipro Global IT may witness a 5 per cent dollar-based revenue growth, slightly above its guidance of $955 million, which covers the cost of the Infocrossing acquisition. Its operating margins are expected to increase by around 35 bps. Satyam should see a 6 per cent q-on-q dollar-based revenue growth at the higher end of its guidance of 5.6-6.1 per cent. Operating margins are expected to witness an improvement of 120 bps.

Garware-Wall Ropes Review

Mon, 07 Apr 2008 00:33:07 EST

Garware-Wall Ropes Review - by vipinlara

Garware-Wall Ropes (GWRL), a dominant player in the domestic market, produces ropes, fishnets, sports nets and polyester slings. It markets polyester ropes under the brand name of Maxiflex. GWRL's products are in demand mainly in marine applications like messenger lines, mooring lines, on-board oil rigs, oil explorations, construction, fishing and sports nets.

The company's business mainly constitutes of two segments, synthetic cordage and fibre, and industrial products. Both the segments' profitability has gone up by 11 and 15 per cent, respectively, last year. Net sales in the last quarter have gone up by 9.48 per cent. The operating and net profits have gone up by 22.27 per cent and 7.48 per cent to Rs 13.90 crore and Rs 6.90 crore, respectively, in the quarter ended December 2007 from the same period last year.

GWRL is one of the biggest producers of HDPE nets in the world. The impeccable fishing nets it manufactures at its modern, integrated manufacturing facility are sold in more than 40 countries in the world. A seamless integration of technology, manufacturing facilities, trained operators, engineers, best shop floor management practices means that you get product, which is peerless. They manufacture the fishnets with precision and finesse to bring you product, which delivers more benefits than any other make.

IPO close and listing gap to cut to three-five days in India

Mon, 07 Apr 2008 00:12:19 EST

IPO close and listing gap to cut to three-five days in India - by vipinlara

According to media reports, the gap between the closure of an initial public offer and its listing may be reduced to between three and five days from the current 21 days. The proposal, which will be one of the biggest capital market reforms in recent years if it is implemented, has been made by a Group on the Review of Issue Process (GRIP), which is likely to submit a report this week.

It is worth mentioning in this regard that GRIP is a sub-committee of the stock market regulator's Primary Market Advisory Committee. The decision to reduce the IPO closure and listing period was announced by the Sebi after the regulator's board meeting last week.

Indications are that Sebi is also considering changing the price discovery, bidding and allotment process to eliminate grey market operations and having investor money locked up without interest payments for almost a month. Since these reforms will require a smoothly functioning electronic market in which everything from applications to payments will be in e-mode, the broad proposal is to introduce the changes in phases.

In the first phase, applications will be allowed in both electronic and physical formats and the time gap between issue closure and listing kept to seven days. The three-day process could be considered once sufficient experience has been gained on electronic applications.

Point to be noted here is that big IPOs attract many first-time investors who are not necessarily skilled and technology-savvy. As part of the exercise, the information required in the application form may be pared to the bare minimum like the Permanent Account Number or unique identification number issued by the Association of Mutual Funds of India.

Promoters normally take advantage of the time gap between closure and listing to put in bids in the grey market through. Plenty of brokers also take independent positions on stocks and charge clients a premium for doing so. In my opinion, shortening the time gap will also impact institutional investors who may have to pay the entire amount upfront along with their applications, like retail investors do now, against 10 per cent currently.

Indian banks becoming stricter on sanctioning home loans

Mon, 07 Apr 2008 00:05:26 EST

Indian banks becoming stricter on sanctioning home loans - by vipinlara

Almost all banks in India are becoming stricter on sanctioning home loans. Banks are using various methods to do it. One such method is reducing the loan-to-value (LTV) ratio in an indirect manner. That is, if the house costs Rs 20 lakh, normally the bank provides 80 to 85 per cent of the cost of the house, which would be to the tune of Rs 18 lakh.

However, most banks are now valuing the house much lower so that though the loan-to-value stays same, the amount disbursed is lower. For instance, if the same home is valued at say, Rs 15 lakh, the bank disburses around Rs 12 lakh. Effectively it means that the bank has disbursed only 60 per cent, instead of the 80 per cent.

In fact, some banks have even started using the "Ready Reckoner" issued by the government that gives the price of a certain area, based on the stamp duty paid by property buyers in that area. Besides the above, there are some other measures as well that banks are following stringently. For instance, if there is a cash down payment through a personal loan from a relative, they are insisting on the bank statements of the relative. Also, they are aggressive going through the financial details of the customers. All indications that life is going to get tougher for potential home loan borrowers.

Emaar MGF to set up four new hotels in India

Wed, 02 Apr 2008 21:51:20 EST

Emaar MGF to set up four new hotels in India - by vipinlara

Emaar MGF, the Delhi-based property company, is all set to spend Rs 1,600 crore ($400 million) to set up four hotels in the country in the next three years. According to sources, it has tied up with global hospitality leader Marriott International to manage the hotels.

The company, a joint venture between Dubai's Emaar Properties and Delhi-based MGF, has partnered with Marriott for three JW Marriott hotels in New Delhi, Hyderabad and Kolkata and one Courtyard by Marriott hotel in Amritsar. Initial signs are that the hotels will be completed by the end of 2010.

The main objective of Emaar is to meet the acute shortage of hotel rooms in India with landmark hotel properties. With today's tie-up, company will build hotels of different brands and different price points across the country.

Of the total 912 rooms planned, the Delhi property will have 300 rooms, the Hyderabad hotel 250 rooms, the Kolkota property will have 250 rooms and Courtyard by Marriott in Amritsar will have 112 rooms.

Company is also exploring other cities and other brands of Marriott for their ventures. Emaar MGF has lined up nearly Rs 12,000 crore to build 26,000 hotel rooms in the next six to seven years. It has a 50:50 joint venture with Premier Inn, a unit of UK hotel major Whitbread.

Emaar plans to invest Rs 2,400 crore ($600 million) to build Premier Inn hotels. Emaar has also tied up with Accor, another hotel company, to set up 100 Formula-1 hotels across India with an investment of Rs 1,200 crore ($300 million).

US-based Marriott International has six hotels in the country with a total of 1,528 rooms. It recently announced opening 18 new hotels by 2011, taking its total tally to 25 hotels with more than 4,500 rooms.

The company pulled out its IPO in February after it failed to get full subscription for the issue. Emaar is a very low leveraged company and have a good capital base. They can always raise debt and look for private equity placements at the company level and project level.

Telekom Malaysia to increase stake in Spice Communications

Wed, 02 Apr 2008 21:44:20 EST

Telekom Malaysia to increase stake in Spice Communications - by vipinlara

According to sources, Telekom Malaysia might partner with strategic investors in order to increase their combined stake in Spice Communications to 74 per cent. It is worth mentioning in this regard that the Malaysian giant has 39.20 per cent equity in the telecom company and foreign institutional investors hold 9.59 per cent, taking the total foreign holding to 48.79 per cent.

Talking about potential partners, it include United Arab Emirates's biggest telecom company, Emirates Telecommunications Corp (also known as Etisalat). Spice, the regional wireless service provider, operates in the Punjab and Karnataka telecom circles and has a 2.2 per cent market share in the country's total GSM space.

Not so long ago, Spice received licences to operate in four more circles -- Andhra Pradesh, Delhi, Haryana and Maharashtra -- but is awaiting additional spectrum. The UAE company is looking for a share of the fast growing Indian mobile service market. As a matter of fact, company has entered into direct meetings with number of entities apart from Spice.

Initial signs are that Telekom Malaysia would have to make an open offer if it wanted to directly increase its stake in the company. However, Etisalat can buy up to 15 per cent from the open market without having to make an open offer according to SEBI guidelines. This year Etisalat bought 16 per cent of PT Excelcomindo Pratama for $438 million to enter Indonesia, the world's fourth most populous country. Telekom Malaysia owns 67 per cent stake stake in Excelcomindo.

Indian government to ban cement exports

Wed, 02 Apr 2008 21:34:22 EST

Indian government to ban cement exports - by vipinlara

With rising prices hampering the economic growth party, the Indian government is all set to crack the whip starting with a ban on cement exports. Simultaneously, efforts are on to enhance imports from Pakistan, which by the way is interested in supplying up to 11 million tonnes. Few days back, in the midst of the government's multi-pronged crackdown on inflation, the cement producers had announced a increase in prices.

I have no doubt in my mind that the export ban will augment domestic availability while the cheap imports from Pakistan will soften prices. According to All Pakistan Cement Manufacturers' Association, the country has supplied 457,624 tonnes to India so far. Cement imports picked up only in September last year, when they became viable as a result of a duty cut.

Point to be noted here is that nearly all imports come from Pakistan at an average landed price of Rs 170-175 for a 50 kg bag. Generally speaking, this is much lower than the prevailing domestic prices of Rs 230-235 in north India. It is worthwhile pointing that cement producers in west India have increased prices by Rs 5 a bag, while a similar rise is expected in the north in the next few days. On an average, cement prices have increased by Rs 10 a bag since April 2007.

In terms of statistic, cement exports between April 2007 and February 2008 stood at 3.33 million tonnes, down 38.78 per cent over the corresponding period of 2006-07 on account of higher price realisation in the domestic market. The major cement exporting companies are Gujarat Ambuja and Aditya Birla group's Ultratech.