Budget on 31st Nifty to touch 5000

New government plans to present budget by July 31 market will hold entire June ahead of budget Nifty may touch 5000 before budget

Tata Tele to invest about Rs 10,000 cr for GSM operations

With plans to invest about Rs 10,000 crore this year to expand its network in the country, Tata Docomo, the GSM brand of Tata Teleservices, today announced commercial launch of its operations in Orissa. "We plan to invest two billion dollars (about Rs 10,000 crore) for our GSM pan-Indian services, while about Rs 350 crore investment is planned for Orissa this year," managing director of Tata Teleservices Anil Sardana said at the launch of the GSM service here. Promising one paisa per second for all calls - locals and STD, he said the company's next gen GSM service with an aggressive back to back roll out plan started its GSM service in Tamil Nadu, Kerala and Orissa covering a total a total of 20847 towns and villages. Tata Docomo's pan-Indian service rollout would be completed this year, with south Indian circles going live first followed by circles in east, west and northern region, Sardana said adding "subscribers will now be able to enjoy the benefits of 'pay as you use'. The company also announced the introduction of the 'pay as you use' advantage for many of its value added services, including all its voice portals, 24-hour music, cricket commentary and voice chat.

Reliance Inds stares at a flood of gas

Reliance Industries (RIL) will request the government to expedite the process of finding buyers for the natural gas produced from its D-6 block in the Krishna Godavari basin. On Thursday, PMS Prasad, CEO of the firm, was in the capital to put across his firm's views to oil ministry officials. "The production capacity has already reached 37 mmscmd (million cubic metre per day), but consumption is only around 25 mmscmd," pointed out a company source. "We sent draft purchase agreements last week to the three steel companies approved by the government, but the contract is yet to be inked," he added. RIL's inability to fully utilise its full production capacity stems partly from the highly regulated nature of the selling process. During the last three years, the government has interpreted its rights under the production sharing contracts it signs with oil and gas exploration companies to include 'guidelines' governing the sale of the hydrocarbons produced. Under these guidelines, the government reserves the right to determine the recipients of the natural gas produced by the contractors and companies such as RIL cannot sell gas to anyone else. Under the policy thrashed out by an empowered group of ministers in 2007, the first 40 mmscmd of gas produced by RIL was supposed to have been parcelled out between power plants, fertiliser plants and CNG, LPG and piped gas projects. RIL is expected to reach a production capacity of 40 mmscmd by end of July. Yet, RIL has run into oversupply issues even as its production has hit just 35 million cubic metres, despite being given the go-ahead to sell gas to 3 steel makers. It is currently gearing up its production capacity uniformly every month to reach a total of 80 million cubic metres per day by the end of 2009. "We have signed agreements for around 29 mmscmd, but RGCPL (Ratnagiri Gas and Power, formerly Dabhol Power) is unlikely to need its 2.7 mmscmd till september due to their pre-existing contracts. On top of this, some of the fertiliser companies are not fully utilising their allotments," the source added. "The negotiations with steel companies are on," he added. As a way out, RIL is likely to push for larger supplies to existing power companies and a further diversification of the customer profiles to captive power plants within factories as well as makers of ceramics, glass etc.. Against an anticipated demand of 18 million cubic metres from power companies, RIL has so far signed agreements only for around 11.1 mmscmd. "We have been told to supply gas to run the power projects at 60% load. Increasing the load factor can help us sell more," the official said. Another factor for the glut has been the absence of the National Thermal Power Corp (NTPC), which has a total consumption capacity upwards of 13 mmscmd. The company is engaged in a legal dispute with RIL after the latter pulled out of a bid to supply 12 mmscmd of gas at $2.34 per unit for 17 years in 2005, objecting to indemnity clauses contained in the draft supply agreement supplied by NTPC. While RIL has been pushing for NTPC to buy gas at higher rate of $4.2 per unit, the latter has been resisting, pointing to the ongoing court case.

IFCI may not get strategic investor

The finance ministry may abandon the move to rope in strategic investor in the development of financial institution IFCI, as its financial condition has improved and it does not require capital infusion in the near future. The management of the financial institution, it is learnt, is also not keen to bring in a strategic investor in the finance company. The capital adequacy ratio of the institution has gone up to 18% and its non-performing assets (bad loan) has declined to nil. After a long time, the institution could expand its loan portfolio by around Rs 3,000 crore in 2008-09. In the current financial year also, the institution is planning to expand its asset base by around 20% from the present level of Rs 15,000 crore. The institution has been making profit for last three years consecutively. However, the government had initiated a process to divest 25% stake in the institution to a strategic investor in 2007-08. But the process failed because of uncertainty in the equity structure of the institution. During the crisis time of late nineties, the institution had taken loans from the government and other banks with a condition to convert them into equity shares. The central government had lent Rs 52 crore to the institution. With the financial condition of the institution improving and decision of the government to rope in strategic investor, the share price of IFCI jumped from Rs 15 to over Rs 140 within one month. This prompted the banks and the government to consider the conversion of the loan amount into equity shares. But, this could have enlarged the equity base of the institution substantially affecting its earning per share. This had made the various contenders jittery and they pulled out. However, since then the performance of the institution has improved. Since the investments from the strategic investors failed, the share prices of the institution had fallen in tandem with the collapse in the stock markets. In November, its share price had gone down to Rs 15.25. But, on Friday it closed on Rs 55.55. As the company has a capital adequacy ratio of 18% against the statutory requirements of 12%, a further infusion of capital will only lead to reduction on its return on capital.

DLF to cut Rs 14,000 cr debt by half this fiscal

Realty giant DLF today said it will reduce its huge debt of Rs 14,000 crore to half by the end of this fiscal by raising funds through sales of non-core assets/businesses, and internal accruals. "Our debt will be half by the end of this fiscal. Currently, it is Rs 14,000 crore," DLF Group Executive Director Rajiv Talwar told reporters here on the sidelines of a TERI event on green infrastructure. Asked how the company plans to reduce its debt, Talwar said the funds would be raised through internal accruals, and sales of assets and non-core businesses like wind power. "We will do away with those non-core assets and businesses which have a gestation period of 7-10 years," he said. Talwar noted that the market for the residential sector is firming. "Last year, we sold 8,000 flats. In this fiscal, we have already sold 4,000, of which 1,400 alone were in Delhi," he said On fund raising, Talwar said: "No more raising of funds this year." The DLF promoters have recently raised about Rs 4,000 crore by selling nearly 10 per cent of their stake in the company. Asked about the hospitality venture, Talwar said the company has over 40 hotel plots and it is currently developing 21 hotels.

Inflation remains in negative zone

Inflation based on the wholesale price index remained in the negative zone for the second week in a row. Inflation based on the wholesale price index declined 1.14% in the year through 13 June 2009. The decline was, however, smaller than a 1.61% fall in the year through 6 June 2009. Inflation had dipped to negative in early June 2009 for the first time since 1977-78.

ICICI, L&T, RIL to gain from Nifty rejig: Benchmark AMC

Benchmark AMC said that ICICI, L&T, and RIL are likely to gain with fund managers rejigging index funds as Nifty switches from tomorrow to a float market capitalisation methodology. Index funds will have to change portfolios to maintain weightages. Weightages of PSU companies on the Nifty would fall due to high government holdings, the AMC said. Under the full-market capitalization methodology, the total market capitalization of a company, irrespective of who is holding the shares, is taken into consideration for computation of an index. However, if instead of taking the total market capitalization, only the free-float market capitalization of a company is considered for index calculation, it is called the free-float methodology. Free-float market capitalization is defined as that proportion of total shares issued by the company which are readily available for trading in the market. It generally excludes promoters' holding, government holding, strategic holding and other locked-in shares, which will not come to the market for trading in the normal course. Thus, the market capitalization of each company in a Free-float index is reduced to the extent of its Free-float available in the market.

Assocham for no VAT, excise duty, CST on infra projects

The government should exempt infrastructure projects from excise duty, Value Added Tax and Central Sales Tax, until they are commissioned, as these levies increase the capital costs of the projects, an industry body has said. On account of continuing levying of excise, VAT and CST on road, port, power and oil projects, the capital cost of the these become dearer by over 20-25 per cent, thus increasing the burden on developers before the projects are commissioned, Assocham President Sajjan Jindal said. The chamber, in its pre-Budget wish list on the infrastructure sector submitted to the Finance Minister Pranab Mukherjee, has also pointed out that the incidence of 10 per cent service tax imposed on the projects during their implementation phase needs to be discontinued, since infrastructure is a priority area for the government. Assocham said burden of service tax, excise, VAT and CST on all projects question their bankability as developers do not get easy access to liquidity as a result it delays their commissioning. The chamber said tax exemption limit for certain savings schemes should be increased from Rs one lakh to Rs two lakh and interest earned on infrastructure bonds covered under this cap.

IDBI targets 1.1% -1.2% NIM in FY10

RK Bansal, CFO, IDBI, sees the bank’s net interest margins (NIM) at 1.1% -1.2% in FY10. He said the bank was likely to show a slight increase in non-performing assets (NPA), but it will not be very substantial. Commenting on sectors that were likely to see credit growth, Bansal said, “We are seeing signs of pick-up in some of the sectors, especially in infrastructure. In infrastructure, we see good signs of pick-up in power, roads, and telecom.”

ABG Shipyard joins fray for Great Offshore

ABG Shipyard on Tuesday made an open offer for acquiring a 32.12 per cent stake in Great Offshore at Rs 375 a share, countering an offer made by rival Bharati Shipyard earlier this month. The open offer has been made by Eleventh Land Developers, alongwith ABG Shipyard, for acquiring 1,25,71,072 shares, representing 32.12 per cent stake at Rs 375 a piece, aggregating to over Rs 471.41 crore, shipping firm ABG Shipyard said in a filing to the Bombay Stock Exchange. The offer would begin on August 13 and close on September 1. Kotak Mahindra Capital is acting as manager to the offer. Earlier this month, Bharati Shipyard, which already owns 15 per cent stake in Great Offshore, had made an open offer for acquiring a 20 per cent stake comprising 78,26,788 shares in the logistics firm at Rs 344 a share. Rishi Agarwal, chairman of ABG Shipyard, said that "we always felt that a platform like this is beneficial for ABG such as great synergy and one-stop shop for marine solutions." ABG Shipyard also said that it will evaluate revision in open offer price if needed and it is open to discussions with any entity on Great Offshore, adding that it will use internal accruals and existing lines of credit for Great Offshore buy. ABG Shipyard also said that it will re-look the Great- Bharati Shipyard contract if it gets control.

NTPC to sign gas sale and purchase agreement with RIL

State-run power company NTPC said today that it will sign the gas purchase agreement with Reliance Industries (RIL) for its gas-based power plants other than the projects for expanding the Kawas and Gandhar units, on which litigation is going on with RIL. "We are willing to sign the GSPA (Gas Sale and Purchase Agreement) but not for the Kawas and Gandhar expansion projects," NTPC CMD R S Sharma clarified to reporters in the national capital. The company has been allocated 2.67 million standard cubic metres of gas per day (mmscmd) from Reliance Industries prolific KG-D6 basin for its gas-based power projects, which have a capacity of nearly 4,000 Mw. The state-run firm was initially reluctant to take the allocation and said it will not compromise its court case against RIL, which allegedly did not comply with a 2004 tender. NTPC had earlier said that it would seek legal opinion before signing the agreement so that its legal case with RIL is not jeopardised.

ONGC made 28 oil & gas discoveries in 2008-09

State-run Oil and Natural Gas Corp (ONGC) today said it has made 28 oil and gas discoveries, including in the prolific Krishna Godavari basin, in the last fiscal but did not put reserve number to the findings. The 28 discoveries include Charada structure and Matar field in Cambay basin (Gujarat) and YSAF in KG basin (off Andhra Pradesh coast), the company said in a statement here. The discoveries made in FY'09 have been notified to the Directorate General of Hydrocarbons (DGH). ONGC, however, denied reports that the KG basin find may contain estimated reserves of 10 Trillion cubic feet (Tcf) of gas. "Based on single well, size of any discovery cannot be estimated. The initial flow rates do not indicate reserves anywhere near 10 Tcf." The company said the three discoveries had certainly opened up new areas for exploration in Cambay onshore and KG offshore basins. "Further, study and delineation drilling would be required to estimate the size of these discoveries," the statement added.

Petroleum prices should be linked to world prices: Montek

In the face of rising global crude oil prices, the Planning Commission has said that domestic prices of petrol, diesel and cooking gas should be linked to oil prices in the international market. "They (prices of petroleum products) should be linked to world prices," Planning Commission Deputy Chairman Montek Singh Ahluwalia said when asked about the global crude prices now surging to about 70 dollars a barrel. On whether he agreed with Petroleum Minister Murli Deora, who favoured deregulating domestic prices of petroleum products, he said, "The Planning Commission's view, which is reflected in the integrated energy policy, is that domestic petroleum prices should reflect world prices." Noting that the country imports 70 per cent of its crude oil requirement, Ahluwalia said, "I don't think it is sustainable to delink domestic prices from import costs. "The idea of subsidising imported products (crude oil), which are mainly consumed by the well-off, doesn't make sense," he said. As regards subsidy for the poor, Ahluwalia said, "There is a need for a targeted subsidy for the vulnerable population to assure access to essential items like kerosene for the poor, but that can be handled."

Infra stocks may be upbeat on hopes

Sharesof infrastructure-related companies are likely to remain upbeat and provide significant returns to investors, riding on hopes of increased funding for various infra projects in the upcoming Budget, analysts said. Infrastructure-related industries including construction, cement and power have been on a gaining streak after the Congress-led UPA received a decisive mandate in its favour in the general elections. "Clearly with government spending on infrastructure sector expected to grow considerably under the new government, market sentiment is bullish on stocks of companies related to this sector, including construction, cement, power and capital goods," Bonanza Portfolio Assistant Vice President Avinash Gupta said. Major construction and infrastructure firms, including Maytas Infra, Ansal Housing, Hindustan Construction Company, IVRCL Infra and Jaiprakash Associates have gained in the range of 17-64 per cent in May 18-June 19 period, an analysis shows. According to brokerage firm Edelweiss report an increase in funding for infra schemes like NHDP and Pradhan Mantri Gram Sadak Yojna (PMGSY), accelerated Irrigation Benefit Programme (AIBP) and Bharat Nirman among others is expected in the Union Budget. The Union Budget would be presented by the Finance Minister Pranab Mukerjee on July 6 in Parliament. The expected measures on infra-related sectors in the Budget would have an impact on construction firms due to "increased order inflow", the Edelweiss report added. Maytas Infra has been the biggest gainer climbing over 63 per cent in the one-month period and is followed by IVRCL Infra (43 per cent), Hindustan Construction Company (30 per cent), Ansal Housing (31.6 per cent) and Jaiprakash Associates (17.4 per cent). "Investors looking at a horizon of 3-4 years should definitely look at entering these stocks now," Gupta said. Similarly, stocks of realty firms including Akruti City, Sobha Developers, Parsvnath Developers and Omaxe have also surged in the range of 24-70 per cent in the reviewed period. In a recent report, Citigroup stated that public investment in agriculture and infrastructure, which has increased over past five years, would be stepped up further. "The focus of the new measures would be to stimulate demand in the domestic economy and to ensure that there is more purchasing power in the hands of the people and more liquidity in the hands of companies," it added. Further, cement stocks have also gained about 30 per cent during post-election rally with Shree Cement gaining 32 per cent, ACC and Ambuja Cements gained six per cent. Analysts are upbeat about the infrastructure sector with the Finance Minister Pranab Mukherjee while outlining government's plan of action said he would focus on infrastructure in the budget and reviving the economic growth was the government's top priority.

Govt plans to raise APM gas price by 17%

The government may hike the price of natural gas produced by ONGC and Oil India Ltd by over 17 per cent and index it to inflation rate to help the two firms cut losses on selling fuel below cost. The Petroleum Ministry has prepared a draft Cabinet note for raising prices of natural gas produced by ONGC from fields given to it on nomination basis to Rs 3,765 per thousand cubic meters (or $1.98 per million British thermal unit) from current Rs 3,200 per thousand cubic meter ($1.68 per mmBtu). For OIL, the gas price has been proposed at Rs 4,205 per thousand cubic meters, a senior ministry official said. ONGC currently loses about Rs 3,000 crore in revenues annually on selling gas from fields like Bassein and Mumbai High at Government capped price. "The Cabinet note is ready and will be circulated once Petroleum Minister Murli Deora approves it. In all likelihood, the proposal may go to Cabinet sometime next month," he said. The price would change by Rs 55 per thousand cubic meter for every 10 points change in Wholesale Price Index (WPI). Price of gas produced by ONGC and OIL from fields given to them on nomination basis, called the Administered or APM rate, were last revised in June 2005. APM price would be raised to $4.20 per mmBtu in stages over the next three years, the official said adding this would bring rates at par the sale price of gas produced by Reliance Industries from its giant KG-D6 fields. The official said the Cabinet at the last gas price revision in 2005 had asked the Tariff Commission to recommend producer price for ONGC and OIL. The Tariff Commission had recommended a producer price of Rs 3,600 per thousand cubic metre for ONGC and Rs 4,040 per thousand cubic metre for OIL. It also recommended a Rs 55 per thousand cubic metre rise in producer price for every 10 points change in WPI over 189.40 of March 2005. The monthly WPI current is at 232.7, which translates to a price increase of Rs 165 per thousand cubic metres over the normative producer price recommended by the Tariff Commission. Though the Tariff Commission was asked to determine the producer price effective from July 1, 2005, the price increase would be brought into effect prospectively, he added. The official said consumer price for power and fertilizer units outside North-East may be fixed at 10 per cent above the producer price i.e. Rs 4,141.5 per thousand cubic metre while for the plants in NE it would be 60 per cent of the price i.e. Rs 2,259 per thousand cubic metre. Consumer price for transport and small consumers outside NE may be fixed at 20 per cent above the price for power and fertiliser sectors i.e. Rs 4,969.8 per thousand cubic metre

RNRL files caveat in SC on K-G gas deal

RIL may move apex court next week; Deora says govt’s active involvement is a must. Anil Ambani-promoted Reliance Natural Resources Limited (RNRL) has filed a caveat before the Supreme Court to preclude the chances of an ex parte order (one issued without hearing the other side) on the gas-sharing deal it had signed with Reliance Industries (RIL). Our Mumbai reporter adds: The move comes amidst reports that RIL is planning to move the apex court next week. There was also a buzz in Mumbai throughout the day that the RIL board met today to take a decision on the issue, though an official spokesperson of the company denied it. RNRL filed the caveat after the Bombay High Court upheld on June 15 RNRL’s position on the gas price in its dispute with RIL and ordered that the Anil Ambani-led firm’s dispute with RIL over gas supply should be resolved within a month through a fresh “suitable arrangement”. RNRL submitted that it should be given an opportunity to defend the matter before the apex court. After the Bombay High Court’s judgment on June 15, RIL lawyer Milind Sathe said filing an appeal in the Supreme Court is an option. Meanwhile, Petroleum Minister Murli Deora told reporters here that the warring Ambani brothers had met him after the Bombay High Court’s June 15 ruling on the row. The government wants an early solution to the gas dispute as it cannot afford to lose revenues, Deora told reporters here. “I am in touch with them (Ambanis). The brothers are ‘not very friendly, unfortunately’,” he added. Asserting that nothing could be done on the Krishna-Godavari (K-G) gas dispute without the active involvement of the government, Deora said: “We are trying our best to find a solution to the gas dispute. In no way can the government afford to lose the money. We need the revenues from K-G gas for development of the country.” He, however, declined to divulge details of his meetings with the Ambanis. On Monday, the Bombay High Court had asked RIL to sell gas at $2.34 per mBtu (million British thermal unit) to RNRL. The price was 44.2 per cent lower than the land-fall price of $4.20 per mBtu derived by a government-approved formula. RIL has signed agreements with power and fertiliser firms to sell its D-6 gas (in the K-G basin) at this price excluding transportation charge. RIL wanted the court to uphold the government-approved price, but the court sanctified the lower price of $2.34 per mBtu, which is stipulated in an agreement signed between Mukesh and Anil Ambani at the time of their separation in 2005-06.

SBI to merge State Bank of Indore

Buoyed by the success of the merger of State Bank of Saurashtra with itself, State Bank of India (SBI), the country’s largest bank, on Friday said that it would acquire another subsidiary, State Bank of Indore. The proposal was approved by the SBI board on Friday, the bank said in a filing with stock exchanges. SBI holds a 98.05 per cent stake in State Bank of Indore, the smallest among its six associate banks. SBI’s latest move comes within a fortnight of Finance Minister Pranab Mukherjee’s green light to consolidation in the public sector banking space. While a lot of public sector banks have discussed such proposals informally, only SBI has been able to push ahead with mergers. “There are a lot of talks happening. We are talking to the boards (of associate banks). It (the speed of the merger) also depends on the managements of associate banks,” SBI Chairman O P Bhatt said on the sidelines of the bank’s annual general meeting here on Friday. Last year, SBI had appointed its former Deputy Managing Director Bharati Rao as the advisor for associate banks’ merger. The advisor has conducted talks with the boards of four associate banks, Bhatt said. In August 2008, SBI had merged State Bank of Saurashtra with itself and the bank has said that the merger — which was seen as a test case — has happened without any glitch. Apart from its six associate banks, SBI has 100 per cent stake in State Bank of Hyderabad and State Bank of Patiala. It is expected to take up the merger of its listed subsidiaries — State Bank of Bikaner and Jaipur, State Bank of Mysore and State Bank of Travancore — later. The merger of all associates of SBI will take the total assets of the combined entity to Rs 8,00,000 crore, making the lender a global financial powerhouse. No plans to raise additional capital, says O P Bhatt Pointing to comfortable capital adequacy, SBI Chairman O P Bhatt on Friday said that the country’s largest lender did not plan to raise additional capital through equity offering in the near future. The bank has no plans for either rights issue in the domestic market or issue of American depository receipts (ADRs) /global depository receipts (GDRs) for international investors, Bhatt said, addressing shareholders at the bank’s annual general meeting on Friday. The bank expected its capital adequacy to reach 14.5 per cent by June-end, he added. Referring to the bank’s net interest margin (NIM), he said that this year (2009-10) the NIM was expected to be below 2.7 per cent. Its margin slipped to 2.93 per cent in 2008-09 from 3.07 per cent in 2007-08.