Budget eyes Rs 40,000 cr from stake sales in FY11

ndia expects stake sales in state firms to fetch Rs 40,000 ($8.6 billion) in 2010/11, an estimate analysts believe is achievable as most upcoming government offers would draw investor interest. The targeted amount was announced by Finance Minister Pranab Mukherjee on Friday during his presentation of the Budget for the fiscal year that starts on April 1. The government is currently implementing an ambitious plan to offload holdings in 60 state-run firms over the next few years aimed at raising funds for welfare programmes without stretching an already wide fiscal shortfall. India raised about $1.8 billion from stake sales in government firms Oil India and NHPC in 2009, and has offloaded stakes in No. 1 power producer NTPC and power finance firm Rural Electrification Corp for about $2 billion this year. The government is expected to raise about $3 billion from a sale in state-run miner NMDC in March. "The government had set a target of Rs 25,000 crore for the current fiscal, which it has more than delivered, and so the estimate it has given for the next year is very reasonable," said Sonam Udasi, vice president at BRICS Securities. "It could have been more aggressive and given a higher number, but divestment is a sensitive topic and he is cautious considering what happened with NTPC," Udasi said, referring to Mukherjee. The NTPC sale was just covered on the final day after state-run Life Insurance Corp of India and State Bank of India stepped in to buy shares in the absence of robust foreign-investor interest that was blamed on a market downturn and a controversial French auction book-building system. But the REC sale, which closed on Tuesday, was covered more than three times, helping raise about $760 million and easing concerns that interest in government stake sales was waning. "There is no doubt when Coal India and others come to the market next year, there will be some genuine interest for them," Udasi said. Stake sales in state-run Steel Authority of India, Hindustan Coppe, Coal India and telecoms firm BSNL are expected in 2010/11.

Markets off day's highs

The markets have remained strong, albeit off their highs, post the budget. The Sensex is now quoting at 16460, higher by 205 points and the Nifty is at 4930, up 70 points. It has been infrastructure, auto and financials all the way. HDIL (appreciated by 8.5% at Rs 318), DLF (stronger by 7.6% at Rs 311) and Unitech (up 4.6% at Rs 73) are the major infrastructure gainers. In the auto space, Tata Motors has strengthened by 6.5% at Rs 712 and M&M has hardened 5.9% at Rs 1016, while Hero Honda and Maruti have strengthened more than 4% each. And in the financials space, ICICI Bank has appreciated by 2.7% at Rs 874 and HDFC Bank is up 2% at Rs 1721). The market breadth is strong. Out of 2830 stocks traded on the BSE, there are 1909 advancing stocks as against 844 declines.

Govt lifts borrowing in budget, bonds hit

The government will increase market borrowing by 1.3 per cent in the next fiscal year, disappointing bond investors, as it counts on a surging economy and a partial rollback of stimulus measures to cut its fiscal deficit. Bond markets reversed earlier gains on worries over the government budget's plans to increase market borrowing, and some watchers said India missed an opportunity to take more aggressive fiscal measures. Finance Minister Pranab Mukherjee rolled back some tax incentives implemented to help tide the economy through the worst of the global downturn, and outlined plans to bolster agricultural output. Gross borrowing for the new year will total Rs 4,57,000 cr, slightly below a Reuters poll forecast for rs 4,61,000 and above the expected Rs 4,51,000 cr in the current fiscal year. "The government missed the opportunity of fiscal timing despite growth being on a strong trajectory," said Robert Prior-Wandesforde, HSBC senior Asian economist in Singapore. "Given that the fiscal stimulus withdrawal was not strong, the Reserve Bank of India may have to be more aggressive in its policy tightening," he said.

ITC slips 6% on excise duty hike

ITC Ltd shed over 6 per cent to Rs 232, after the Finance Minister announced structural changes in the excise duty on cigarettes, cigars and cigarillos. After a flat opening at Rs 248 levels, the stock touched high of Rs 252 before the Budget proposals, and is now trading down almost 8per cent from its intra-day high level backed by huge volumes. Around 2.4 million shares changed hands so far, as compared to average 210,000 shares that were traded in last two weeks. The Budget proposes a hike in excise duty (on filter cigarettes of length exceeding 60 mm) between 10 per cent and 18 per cent. At present, cigars, cheroots and cigarillos of tobacco attract ad valorem rate of basic excise duty (BED) of 8per cent plus health cess of 1.6per cent. These rates are now being replaced with a composite rate of 10per cent or Rs 1,227 per thousand, whichever is higher (BED) and 1.6per cent or Rs.246 per thousand whichever is higher (AED). Cigars, cheroots and cigarillos of tobacco substitutes will now attract BED of 10per cent or Rs 1,473 per 1000 whichever is higher. Basic excise duty on branded unmanufactured tobacco and tobacco refuse is being increased from 42per cent to 50per cent.

Govt levies cess on coal; prices likely to go up

The government today proposed a coal cess of Rs 50 to create a fund for promoting clean energy, a move which may push up fossil fuel prices. "To build the corpus of the National Clean Energy Fund announced earlier. I propose to levy a clean energy cess on coal produced in India at a nominal rate of Rs 50 per tonne," Finance Minister Pranab Mukherjee said while presenting Union Budget 2010-11. "This cess will also apply to imported coal," he added.After the last year's hike by Coal India (CIL), the domestic coal prices are currently hovering in the range of Rs 448-Rs 2,500 per tonne.The National Clean Energy Fund, is being created to fund research and innovative projects in clean energy technologies, he added. "There are many areas of the country where pollution levels have reached alarming proportions. While we must ensure that the principle of polluter pays remains the basic guiding criteria for pollution management, we must also give a positive thrust to development of clean energy," Mukherjee said. Coal, he said, is the "mainstay of India's energy sector and 75 per cent of the power generation is currently coal based".In its attempt to develop alternative sources of energy and reduce dependence on conventional sources like coal, the government is promoting solar and electric power. "Harnessing renewable energy sources to reduce dependence on fossil fuels is now recognised as a credible strategy for combating global warming and climate change," Mukherjee added. To implement the government's ambitious National Solar Mission among others, the minister proposed to slash customs duty, excise duty and service tax on various such projects. "I propose to provide a concessional customs duty of 5 per cent to machinery, instruments, equipment and appliances etc required for the initial setting up of photovoltaic and solar thermal power generating units. I also propose to exempt them from Central Excise duty," Mukherjee said. "I propose to exempt a few more specified inputs required for the manufacture of rotor blades for wind energy generators from Central Excise duty," he added.Also, to promote the use of energy-saving appliances, Mukherjee reduced the excise duty on LED lights to 4 per cent from 8 per cent, at par with Compact Fluorescent Lamps (CFLs). Among other things, the government levied "a nominal duty of 4 per cent" on electric vehicles and exempted some of their critical parts from the basic customs and special additional duties subject to actual user condition."These parts would also enjoy a concessional Counter Vailing Duty of 4 per cent," he added.

Nalco draws up Rs 50,000-crore expansion plans

Public sector aluminium major Nalco today said it has laid out a Rs 50,000-crore expansion plan spread over the next 8-9 years. "We have taken up the third phase expansion project to increase capacity. The expansion will be completed in 8-9 years involving a capital outlay of Rs 50,000 crore. In FY11, the company will spend Rs 1,500 crore towards capex," Nalco CMD A K Shrivastava told reporters on the sidelines of 'Aluminium India-2010' conference here. National Aluminium Company Ltd (Nalco) plans to increase its capacity from 4.6 lakh MT to 5.75 lakh MT, alumina refinery strength from 21 lakh MT to 29 lakh MT and de-bottlenecking of alumina from 21 lakh MT to 22.7 lakh MT. "We have no fund raising plans for the next two years as we have enough resources. But after that, we would require to raise funds," Shrivastava said, adding that the company has no plans for a follow-on public offer in the near future. The company plans to set up a Rs 16,000 crore greenfield project at Jharsuguda in Orissa and a Rs 5,600 crore alumina refinery at Visakhapatnam in Andhra Pradesh. It is also pllaning to increase its overseas footprint. Nalco is also setting up a smelter in Indonesia, he said.

Budget expected to cut deficit; borrowing a worry

India's annual budget on Friday is expected to slash the deficit as the economy rebounds, but investors were hoping Finance Minister Pranab Mukherjee will also be firm on keeping borrowing in check. Economists polled by Reuters forecast Asia's third-largest economy would cut its fiscal deficit to 5.6 percent of GDP in the year starting April 1, from a target of 6.8 percent in the current year, a 16-year high. Government borrowing was forecast to rise by another 2.2 percent to 4.61 trillion rupees ($99.5 billion), according to the Reuters poll. Indian federal bond yields rose late on Thursday after Planning Commission Deputy Chairman Montek Singh Ahluwalia said strong growth in 2010/11 could absorb higher borrowing, raising concerns that the government may be looking to tap markets for more than had been expected. Calls for fiscal discipline have gained urgency as inflation is forecast by some economists to reach 10 percent in coming weeks as high food prices fuel broader inflation expectations. Finance Minister Mukherjee was expected to count on surging economic growth, which his ministry forecasts will grow by 8.5 percent in the next fiscal year, as well as higher revenues from sales of government company stakes and 3G mobile licences to forestall the need for spending cuts. The government growth target for next year exceeds the 8 percent forecast in a Reuters poll of economists in late January. Mukherjee, scheduled to begin speaking at 11 a.m. (0530 GMT), was expected to unveil gradual measures to roll back fiscal stimulus measures that were implemented to ease the pain of the global downturn, including tax breaks to several sectors. He may also unveil plans to address shortfalls in food production and distribution that have been a key driver of inflation, as well as initiatives to address India's chronic infrastructure deficit.

Montek rules out double-digit inflation soon

Planning Commission deputy chairman Montek Singh Ahluwalia on Thursday ruled out possibility of inflation hitting double-digits in the near-term, even as the Economic Survey raised concerns about continuing price rise. "I don't expect double-digit inflation," Ahluwalia told reporters in New Delhi. Earlier in the day, the Economic Survey warned that overall prices would go up further in the next few months and partially blamed poor food management policies for the prevailing double-digit food inflation. "Since December, there have been signs of high food prices, together with a gradual hardening of non-administered fuel products prices, getting transmitted to other non-food items,thus creating some concerns about a higher-than- anticipated generalised inflation over the next few months," the Survey said. Conforming to the assessment on GDP growth made by the Survey, Ahluwalia said, "that broadly has been our own assessment. The Survey projects a growth rate of around 8.75% for the coming year. We are very encouraged by that. Our own feeling was that growth in the coming year would be well above 8%." "I don't think that 5.5% (fiscal deficit for 2010-11) should be seen as written and stoned. It is true that we need to have a transition back to some kind of acceptable fiscal deficit but it does not have to be 5.5%. I know that the Finance Commission has said 5.7%," Ahluwalia said.

With worst over, India set for high, inclusive growth: FM

The worst is over for the Indian economy after two hard years and the country will return to a high growth path with renewed confidence and even log double-digit expansion, Finance Minister Pranab Mukherjee said on Friday. "Today, as I stand before you, I can say with some confidence we have weathered this crisis well," Mukherjee told the Lok Sabha, the lower house of parliament, while presenting the federal budget for the next fiscal. "That is not to say that the challenges today are any less than they were nine months ago, when the UPA (United Progressive Alliance) was voted back to power under the leadership of Sonia Gandhi and Prime Minister Manmohan Singh." He said three challenges he had listed last year remained today -- those of quickly reverting to a high growth path of 9 percent and cross over to double-digit expansion; making growth more inclusive and developing infrastructure; and strengthening food security. "We hope to breach the 10 percent growth mark in not too distant future," he said, adding that the government will also review the fiscal stimuli to make the country's growth more broad based. He said 46 percent of the plan allocation will be for infrastructure, the direct tax code will be implemented from April next year, foreign direct investment policy will be simplified and a roadmap drawn to reduce public debt. The allocation for education was also stepped up considerably. He also said Rs.35,000 crore ($7 billion) was raised by the government by way of divesting stake in public sector enterprises and that more will be accrue to the exchequer during the upcoming fiscal. The minister also promised more banking licenses for the private sector. Mukherjee said in 2009, when he presented the interim budget in February and the regular budget in July, the Indian economy was facing grave uncertainties, the economy had slowed down and business sentiment was low. This year, however, the budget has come against the backdrop of the Economic Survey for 2009-10, saying India's growth can go up to double digit levels in four years, with the country emerging as the fastest growing economy in the world. The market reaction, as the finance minister read his speech was positive, with the sensitive index (Sensex) of the Bombay Stock Exchange (BSE) ruling at 16,360.90 points, against the previous day's close at 16,254.2 points, with a gain of 106.7 points, or 0.65 percent. Those in the packed house presided over by Speaker Meira Kumar, included Prime Minister Manmohan Singh, United Progressive Alliance (UPA) chairperson Sonia Gandhi and Leader of Opposition Sushma Swaraj. This was Mukherjee's fourth budget of his career as finance minister and the second for the United Progressive Alliance (UPA) government in its second straight term after being voted back to office in May last year. Although the budget speech also contained some policy pronouncements and other steps directed at reforms, it is basically an annual statement of accounts for the upcoming fiscal in terms of receipts and expenditure, along with direct and indirect tax proposals. The budget was presented after a quick meeting of the federal cabinet inside the parliament house presided over by the prime minister for a customary approval for the proposals.

Cadila Healthcare to issue bonus shares in 1:2 ratio

Cadila Healthcare today said it will issue bonus shares in the ratio of 1:2, that is one for every two held by shareholders. The board of directors has approved the bonus issue to reward the shareholders who have been a part of its value creation process, Cadila Healthcare said in a filing to the Bombay Stock Exchange (BSE). "We have been focusing on consistent growth in all areas of our business performance and have explored strategic initiatives that create value for our shareholders in the long term. "As we accelerate the pace of growth, our aim would be to look at differentiated ideas, new business models and winning solutions that can help us in the next big leap of becoming a USD 3 billion company by 2015," Zydus Cadila CMD R Patel said. Shares of Cadila Healthcare were quoting at Rs 737.20, down 0.87 per cent in afternoon trade on the BSE.

After HDFC Bank, now ICICI hikes deposit rates

Signalling hardening of interest rates in the industry, India's largest private sector lender, ICICI Bank today hiked its deposit rates in select tenures by upto 0.50 per cent with immediate effect. With this, the bank will now offer 6.75 per cent rate for deposits having 390-days maturity as against 6.5 per cent earlier, ICICI Bank spokesperson said here. Similarly, deposits having 590-days maturity will now offer an interest rate of 6.75 per cent as against the earlier rate of 6.25 per cent, the spokesperson said. The hike in deposit rate comes shortly after another leading private sector lender, HDFC Bank recently announced an upto 1.5 per cent hike in its deposit rates across some maturities. Early this month, government-owned IDBI Bank had also hiked its deposit rates by 0.25 per cent in some tenures. The country's largest lender, State Bank, however, had said that it may not hike deposit or lending rates atleast till May-June as the bank has surplus liquidity. "That may not happen till May-June till the liquidity surplus goes away from the system," Bhatt had said. Banks started hiking their deposit rates apparently due to the tightening of liquidity by the Reserve Bank, which asked banks to park more cash in the mandatory reserve window last month. The central bank hiked its cash reserve ratio (CRR) by 0.75 per cent to 5.75 per cent sucking out around Rs 36,000-crore liquidity from the system. With ICICI Bank and HDFC Bank taking the lead, more lenders are likely to follow the suit in the coming days.

UPDATE: Govt allows 3 operators for 3G in most circles

The government today invited applications from mobile operators to participate in the auction of 3G spectrum and allowed three private players in most of the circles while four in five states including Punjab and Bihar. According to the Notice Inviting Applications (NIA) for 3G spectrum auction in 22 circles, most of the circles including four metros -- Delhi, Mumbai, Kolkata and Chennai -- would have three private players. Only five states of Punjab, West Bengal, Bihar, Himachal Pradesh and Jammu and Kashmir would accommodate four private operators. The document said all successful bidders would be allowed to offer 3G services on commercial basis from September 1, this year.

Jan infrastructure output up 9.4%: govt

India's infrastructure sector output grew 9.4 per cent in January from a year earlier, higher than an upwardly revised annual growth of 6.4 per cent in December, government data showed on Thursday. During April-January, the first 10 months of the 2009-10 fiscal year, output rose 5.4 per cent from 3.0 per cent a year ago. The infrastructure sector accounts for 26.7 per cent of India's industrial output.

Nissan to showcase new small car at Geneva auto show

Nissan Motor Company, Japan's third largest automaker will showcase its new global compact car next month at the Geneva International Motor Show along with a host of other vehicles such as the Juke small crossover and the Leaf Electric Vehicle. The new global compact car which will replace the March/Micra in many international markets will be sold in India from May onwards. It is the first new model to be developed on Nissan's all new V Platform and will be manufactured in five countries, including Thailand, India, China and Mexico. The company is yet to finalise the fifth plant. The production of this model will commence in May 2010 in India and will be manufactured at the plant that is coming up at Oragadam in Chennai. The car will also be made available in more than 150 countries of which a substantial part will be served by the Indian plant.

Spot exchanges to help in trading warehouse receipts: Survey

Spot Exchanges, which have expanded significantly in 2009, will not only benefit farmers and producers but will also provide a platform for trading of warehouse receipts, the pre-Budget Economic Survey said. A warehouse receipt is a quality and quantity certificate that allows transfer of ownership of a commodity even without physical delivery. Trading in such receipts is allowed in the Warehousing (Development & Regulation) Act, which was passed in 2007, but is yet to be notified. Warehouse receipts also help farmers take loans from banks against their farm produce. "The efficiency level attained as a result of such seamless spot transactions would result in major benefits for both producers and farmers. These spot exchanges will also provide a platform for trading of warehouse receipts," the Survey, which was presented in Parliament today said. At present, National Spot Exchange Ltd, NCDEX Spot Exchange Ltd and National Agriculture Produce Marketing Company are three spot exchanges in the country. Unlike wholesale mandis, farmers and end-users can trade commodities at the spot exchange on real-time basis through electronic counter, thus reducing cost of intermediaries and enhancing price realisation for farmers. The spot bourses would enable farmers to trade seamlessly on the platform by providing real-time access to price and a simplified delivery process. While buyers would also have the simultaneous access to the exchanges to procure commodities at the best possible price, the Survey said.

Steel consumption to rise 9% in 2010: Survey

The Economic Survey today projected domestic steel consumption to grow in the range of 6-9 per cent in 2010 primarily on the back of improved demand from construction and automobile sectors. "Indian steel outlook for 2010 continues to be positive, since Indian steel consumption is expected to be rising at 6-9 per cent during the current year, on account of higher demand from the real estate, construction and automobile sectors," the Survey tabled in Parliament said. However, the projected growth volume was not mentioned. Steel consumption for April-January period has risen 7.9 per cent to 45.93 million tonne over the same period in 2008- 09, a fiscal which saw demand as well as prices of the commodity falling by more than 50 per cent in the second half. "However, recovery gathered strength during 2009-10 and the Indian steel industry appears to have successfully overcome the effects of the global economic slowdown," the Survey added. Domestic steel companies including SAIL, Tata Steel, JSW saw their production surging to pre-slowdown levels and steel prices also maintained an upward trend on the back of firming demand and rising input cost pressure. "The strong growth in GDP in the second quarter of the current fiscal and the Index of Industrial Production (IIP) during April-November 2009 suggests that the demand side of the steel industry is back on stable footing. The IIP in April -November stood at 7.7 per cent against 0.6 per cent in the year ago period.

United Bank of India IPO subscribed 11.24 times

The Rs 330 crore initial public offer (IPO) of state-run lender United Bank of India has received robust response from investors with the issue getting subscribed over 11 times till 1300 hrs on its last day today. The public issue, which opened on February 23, received total bids for over 56.19 shares against five crore equities on offer, data till 1300 hrs with the National Stock Exchange shows. Final figures of the issue would be available only after 1700 hrs. The bank has fixed the issue price at Rs 60-66 per share and has also announced a five per cent discount for retail investors. United Bank will be able to raise Rs 330 crore at the upper band of price range. At the end of second day, the offer was subscribed 2.65 times, with most of the bids coming from institutional buyers. Post-issue, the government's stake in United Bank would come down to 84.2 per cent from the existing 100 per cent, resulting in a stake dilution of 15.8 per cent. The IPO closes today. The bank would utilise the proceeds to expand its balance sheet and augment capital base. SBI Capital Markets, Edelweiss Capital and Enam Securities are book running lead managers to the issue.

Second recession in developed world could mar recovery: Survey

The Economic Survey today warned that second recession in quick succession in the developed countries could mar the economic recovery at home which is only at its nascent stage "The risk of a second-dip recession in the industrialised nations continues to cast a shadow on our nascent recovery," said the Survey tabled by Finance Minister Pranab Mukherjee in Parliament ahead of the Budget. Following the impact of the global slowdown, India's growth rate slipped to 6.7 per cent during 2008-09 from over nine per cent during the three preceding years. The economy, driven by stimulus provided by the government since the global meltdown, is showing signs of recovery and is estimated to grow by 7.2 per cent in 2009-10. Another risk facing India, which the Survey pointed out seems to be rapidly returning to the buoyant years preceding 2008, is in the country's agricultural sector. "The sector that continues to cause concern and, all said and done, is still the mainstay of the Indian population, is agriculture... The drought-hit agricultural sector is not yet back to normal performance," the Survey noted. Some of the important steps suggested by the Survey to propell economic growth include raising farm productivity, introducing coupon system for food and fertiliser, improving effeciency of tax system and reforming bureaucracy. "If we can put into effect some important policy measures, there is no reason why India cannot achieve double-digit gross domestic product (GDP) growth and a rapid diminution of poverty", said the Economic Survey. India is likely to grow at 8.5 per cent (+/- 0.25 per cent) during 2010-11 and 9 per cent in 2011-12, it said. "It is good to see India having averted a recession and come out of the slowdown faster than pundits predicted in April 2009; and an analysis ... Suggests than the nation's medium- and long-term prognosis is excellent," the Survey added..