Rel Cap to divest 26% in insurance arm

Anil Ambani Group firm Reliance Capital has initiated the process of divesting up to 26 per cent stake in its life insurance subsidiary and is mulling options like bringing in a strategic foreign investor and an initial public offer. "We are planning to divest 26 per cent stake in our insurance arm. We may either go in for an IPO or for a strategic investor or we might also go in for a combination of both the options," Reliance Capital CEO Sam Ghosh said. Without divulging any details as to how much capital the company is planning to raise through this option, Ghosh said "the funds raised through this divestment would be partly infused into the insurance arm and partly into Reliance Capital." Regarding the Insurance Regulatory and Development Authority initiating a process of formulating guidelines for IPOs he said, the sooner the guidelines come the better. The company, which has been going solo so far, has decided on this divestment at this point of time because it will give a better shareholder value, besides sentiments in the market is also looking bright. "We have not yet zeroed in on any foreign investor. We have just started the process and it is expected to be completed in three to four months," Ghosh added. He said even if the government increases foreign investment up to 49 per cent, the company plans to divest only 26 per cent stake to any overseas player.

Economy may recover later this year: RBI

Reserve Bank of India today said the Indian economy is likely to recover from the impact of the financial meltdown later this year as stability gets restored in world markets. “As the monetary and fiscal steps takes way through, and the calm restored in the global markets, we can see an economic turnaround later this year," Reserve Bank Governor D Subbarao said at a financial management summit here. India's less dependence on merchandise exports and its smooth functioning financial system, comfortable forex reserves and modest inflation will help for a swift recovery from the slow down, Subbarao said. Cautioning the policy makers about "challenges" in the domestic economy to manage the recovery, Subbarao said, the "unwinding" of measures taken during crisis time will be less painful for India than in other countries. "While risks from global markets persist, there are challenges in the domestic market (as to) how we manage the recovery in the next six-to-nine-months," Subbarao said. The central bank was confident of achieving a six per cent real GDP growth in 2009-10 as it had projected earlier. Subbarao said that if global factors favour an early recovery in the domestic market and the already-taken stimulus measures yield results, then it could lessen the need for further stimulus measures.

Growth outlook dim; Q4 GDP seen at 4.5%: Moody's

Economic woes are not over but the general election results have buoyed market sentiment this week. The victory of the incumbent Congress Party-led coalition has ensured continuity in policy direction and also created hopes for further economic reforms. The cash-strapped government may not be able to increase spending if the economic environment deteriorates, making policy reform the new focus in improving India's economic prospects. A new five-year term for Prime Minister Manmohan Singh, who has strong credentials in economic reforms, is an encouraging step. Investor confidence has strengthened after the election outcome was announced as some had seen political uncertainty as a setback to India's economic development. The Sensex and rupee both surged following the announcement of election results, as the longer-term outlook of India has brightened. Reforms will likely commence in long-anticipated areas such as banking, insurance and agriculture. Nevertheless, the upbeat sentiment in India may fade when the March quarter GDP numbers are released next week. Although India has not been crippled by the global turmoil in the same way as its more externally oriented Asian neighbours, it has still been hurt in various aspects. The robust export performance seen in the December quarter likely turned negative in the opening months of 2009. Meanwhile, facing falling profits, firms have become increasingly cautious, curbing investment and halting hiring plans. Private consumption and gross fixed capital formation - two important engines of India's growth - likely slowed sharply in the March quarter. Moody's Economy.com expects year-on-year GDP growth to have decelerated from an already-disappointing 5.3% for the December quarter to 4.5% for the March quarter, taking the fiscal 2008-2009 expansion to about 6.3%.

Govt imposes countervailing duty on Chinese chemical

Going all-out to protect the domestic industries from the Chinese onslaught, India has initiated a probe to consider imposition of countervailing duty on imports of key chemical sodium nitrite from the neighbouring country. The Directorate General of Anti-dumping and Allied Duties (DGAD) in the Commerce Ministry has initiated an investigation into a complaint by domestic firms alleging dumping of sodium nitrite originating in or exported from China, DGAD said in a notification. Countervailing duties are imposed when a foreign country subsidises its exports, hurting domestic producers in the importing country. The period of investigation is April 1, 2007 to March 31, 2008, DGAD said adding that during the course of the investigation DGAD would determine whether the product is being subsidised and causing injury to the Indian domestic industry. "The exporters in China, importers and users in India are being informed separately to enable them to file all information relevant," it said. The imports of sodium nitrite, widely used in the pharmaceuticals and textile sector, increased to $5.19 million in April-December 2008-09 from $3.10 million during 2007-08. India has already imposed anti-dumping duty on several products imported from China which includes yarn, fabrics, some stainless steel products and chemicals. China has emerged as the largest source of India's imports in the last two years. India's imports from China almost doubled to $24.16 billion in April-December 2008-09 from $12.64 billion in the comparable period of 2006-07, according to the Reserve Bank of India.

Reliance Power to invest Rs 12,000 cr in Arunachal

Anil Ambani-led Reliance Power will invest over Rs 12,000 crore for executing 2,520-MW hydro power projects in Arunachal Pradesh, to be commissioned in the next Five Year Plan (2012-17). "Reliance Power has signed an agreement with the Arunachal Pradesh government for developing 2,520 MW of hydro power projects in the state," a Reliance Power spokesperson said. The company has signed agreement with the state government for developing four hydro power projects -- 1,200 MW Kalai-II, 420 MW Amulin, 500 MW Emini and 400 MW Mihundon. These projects were awarded to the company through competitive bidding conducted by the state government. The current hydro project portfolio of Reliance Power is 4,620 MW, one of the largest in private sector in India. Besides, the other projects of the company in the state are 700-MW Tato-II and 1,000-MW Siyom, a company statement said. Construction activities have commenced at Tato-II and Siyom and preliminary work like preparation of Detailed Project Report is going on for all the other projects, it said. All these projects are Run-of-river (ROR) projects and would take 6-7 years to get commissioned. They are expected to be commissioned in the next plan period (2012-17) and Tato-II will be the first project to go on-stream.

FII investment crosses $3 bn-mark

Foreign Institutional Investors (FIIs) inflow into the Indian stock markets has crossed the three-billion-dollar mark (over Rs 15,725 crore) so far this year, with as much as two billion dollar coming in just five trading sessions. As per the latest data available with the Securities and Exchange Board of India (SEBI), FIIs made net purchases worth 3.2 billion dollars or over Rs 15,725 crore so far in 2009, with the stock market seeing major investments in the past three weeks. On Tuesday alone, FIIs put in as much as Rs 5,044.8 crore (1.06 billion dollars) in the domestic share markets, the SEBI data shows. "Since several past weeks, overseas fund houses are making investments in the many emerging markets and India is the part of that investment," brokerage firm Sharekhan's Research Head Gaurav Dua said from Mumbai. Since last week, FII inflows increased significantly with net investments of Rs 4,085 crore on May 14, followed by 1,000 crore on May 18, Rs 53 crore on May 19 and again a huge Rs 5,044 crore on May 20. However, during the period, the markets also witnessed sale of shares worth Rs 345 crore by the overseas investors, the SEBI data shows. Since the beginning of new fiscal year, FIIs have started putting money in domestic stocks, including blue-chips.

Govt gives NTPC ultimatum to sign gas pact with RIL

The government has given NTPC an ultimatum to decide on buying natural gas from Reliance Industries (RIL) by the weekend, failing which it (government) will cancel its allocation and give the fuel to other power producers. The Oil Ministry has conveyed to NTPC Chairman R S Sharma that the state-run firm has to decide this week on taking 2.67 million cubic metres of gas a day that was allocated to it from RIL's Bay of Bengal KG-D6 fields, a senior official said. "There is a long waiting list. Many plants need the fuel and NTPC cannot be sitting on the allocation," he said. Before the stern message to Sharma, the ministry had on May 12 written to the Power Ministry saying NTPC was not signing the gas purchase contract even though the state-run firm was the one that had vehemently fought to get the allocation. NTPC, he said, was delaying signing the Gas Sales and Purchase Agreement because it has sought legal opinion if such an act would compromise its court gas against RIL. Of the 17.99 mmcmd gas allocated to the power sector, a gas supply pact of only 2.67 mmcmd allocated to NTPC remained to be signed. NTPC's opposition had also delayed the GSPA for a separate 2.7 mmcmd allocated to the Dabhol power plant and the same is now slated to be signed this week. In case NTPC does not want to take the gas, it should state so officially so that the gas can be re-allocated to other fuel-deficit power plants, the official said. Initially RIL opposed selling the gas to NTPC due to an ongoing court case but the state-run firm vehemently challenged it saying its legal battle with the Mukesh Ambani-run company was for future projects and its current plants were entitled to get gas from the country's largest gas field. RIL did not want to sell gas to NTPC as the state-run firm had cited the court case to not only refuse participation in the process of discovering the price of KG-D6 gas but also blocked moves to sell the fuel to the Dabhol plant. RIL had in 2007 offered gas from its KG-D6 fields to RGPPL but NTPC, which is half owner of the country's largest gas-fired unit, blocked the move even though this gas is 25 per cent cheaper than imported-LNG being used at the plant. The Government has now decided that KG-D6 gas, priced at a cap of USD 4.20 per million British thermal units, will go to meet half the fuel deficits at existing power plants. RIL had in June 2004 won an NTPC tender to supply gas to its planned Kawas and Gandhar expansion projects in Gujarat but the two firms did not sign the GSPA due to disputes over issues such as liability in the case of default. NTPC filed a case against RIL at the Bombay High Court in December 2005, claiming that there is a concluded contract in existence for the supply of gas by the Mukesh Ambani-led firm to its power plants. According to RIL, the matter remained at the stage of negotiations.