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Thursday, June 18, 2009

LIC turns back on QIPs of private cos

While the queue for qualified institutional placements (QIPs) may be growing longer, sources inform that the country's biggest domestic investor, Life Insurance Corporation of India (LIC) has turned its back on the QIPs of private entities.

This is with regard to the biggest institutional investor of the country—LIC. What we understand from our sources is that LIC has taken a call of not investing in the QIPs of private listed companies. They will be sticking only to the public sector units (PSUs) as of now. They prefer the open market route for the same. What we understand is the rational or the reasoning is that LIC is not comfortable with the price discovery through the QIP route. Also, LIC does not want to get into any controversy later, being a public sector unit that whether they were bias towards one entity or not.

India eligible for a pie of ADB's $3 bn additional funds

The Asian Development Bank (ADB) has said India can access part of the $3 billion additional funds allocated by the bank to help developing nations in tackling the global economic crisis.

The bank has come up with the 'Countercyclical Support Facility' (CSF) aimed at helping developing nations in their effort to ramp up their fiscal spending.

"Eligible countries can now apply for access to the funds. India, as an ordinary capital resources (OCR) designated country, is eligible to apply for access to the $3 billion CSF," an ADB spokesperson told PTI in an e-mailed statement.

The amount for each country from the facility would be capped at $500 million. The programme would provide short- term, fast-disbursing loans.

On Tuesday, the bank had said the facility would "support Developing Member Countries aiming to ramp up fiscal spending to counter the crisis, but who lack the financial means to do so amid tight global credit conditions and a sharp increase in funding costs".

The loans under the new facility would have a lower cost than charged for loans disbursed during the East Asian crisis. The loans could be repaid in eight years.

"Loans under the new facility will have a five-year tenure, with a three-year grace period, and will cost around 200 basis points over ADB's financing cost, pricing that is lower than its special program loans facility set up to help the region in the wake of the 1997-1998 Asian financial crisis," ADB had said.

The bank has laid out a set of conditions for nations to access the CSF. They include significant slowdown in growth, exports and remittances, fiscal constraints and difficulty in sourcing finance from international capital markets on favourable terms.

Further, the countries would also have to "put in place a specific countercyclical development programme, to be supported by CSF, which includes investment in public infrastructure, or a social safety net scheme targeting the poor and vulnerable", ADB had said.

The ADB's board of directors have approved additional funds worth $3.4 billion to help developing nations in responding to the global economic turmoil.

Out of the total amount, the multilateral lending agency would offer $400 million to the Asian Development Fund. India is not eligible for the extra $400 million since the fund is for giving grants and loans at very low interest rates to poorest borrowing countries to help them reduce poverty.

ADB spokesperson said India is not "eligible to apply for grants or loans through the Asian Development Fund, which is open only to ADF designated countries".

Tuesday, June 16, 2009

Unitech sees sale of 20 mn sqft developable area in FY'10

The country's second largest real estate player, Unitech, today said it expects a sale of 20 million sq ft of developable area during the current fiscal.

"Asset sales are doing very well. The valuation are better than our expectations and it is also happening faster. Our target is to sell 20 million sq ft in this fiscal," Unitech Managing Director Sanjay Chandra told reporters after an extra general body meeting here.

The company has already sold 400 apartments comprising about 4 million sqft of area, during the fiscal so far, he added.

Chandra said the company has also increased prices by 2 per cent in its two projects in Gurgaon. "We have increased the prices in our ongoing projects just two weeks ago ... We will evaluate whether there is a need for raising the prices in other projects as well."

The firm also received shareholders' approval for raising capital through issue of 100 crore shares in next 12 months.

"We do not have any intention to raise capital immediately as we are in a comfortable position ... Debt is not an issue anymore," Chandra said.

The company has rescheduled its outstanding Rs 7,800 crore debt into long-term ones and further plans to reduce it by Rs 900 crore within this month, he added.

On its asset sales plan, Chandra said: "The company targets to sell properties worth Rs 1,700 crore in this fiscal, of which Rs 1,000 crore has already been raised by selling two hotels and an office space in Saket."

Besides, Unitech would also raise Rs 1,150 crore by issuing warrants to its promoters.

"After the issue, the promoters stake will increase to 61 per cent from 51 per cent at present. They will have to infuse 25 per cent of the total money immediately," Chandra said, adding that the entire transaction will be completed within 18 months.

Tata Motors to build electric, hybrid cars on Nano platform

After stunning innovation of the cheapest car Nano, Tata Motors plans to build electric and hybrid vehicles using this platform.

"Tata Motors has plans to use the Nano platform to build electric and hybrid cars," Tata Group said highlighting the Innovation and Innovativeness of the company.

Designed with the transportation needs of a family in mind, the Nano is a full-fledged car with contemporary styling and spacious interiors conforming to standards of emissions, mileage, acceleration, safety and performance.

"The Nano is just not a car for Tata Motors, it is also a platform to create more high-end models that will sell for higher prices and yield better margins," a Tata Group's report on its innovations said.

The introduction of Nano was compared to that of the Ford Model T, the car that completely revolutionised the automobile industry.

Nano is also expected to create a new distinct category in the auto industry - the People's Car.

Tata Group said that Tata Motors should target exports of the car in the developing countries like Brazil, China, Indonesia and Russia, where the growth rate is more than 10 per cent.

A true Indian car, Nano has 97 per cent local content. Before Nano, Maruti 800 was the lowest cost car in the Indian market priced at around Rs two lakh.

Monday, June 15, 2009

U.K. May Sell as Much as 5 Billion Pounds of Debt Through Banks

Britain plans to sell as much as 5 billion pounds ($8.2 billion) of bonds through banks this week, according to the U.K. Debt Management Office.

The “indicative range being talked about is 3 to 5 billion pounds,” Steve Whiting, a spokesman for the debt agency in London, said today. The sale is planned for tomorrow, he said. The debt office hired Barclays Plc, Goldman Sachs Group Inc., HSBC Holdings Plc and Royal Bank of Scotland Group Plc to offer the 4.50 percent gilt maturing in September 2034, it said on June 9.

The first so-called syndication since 2005 for the U.K. is part of a record 220 billion pounds the Treasury aims to raise this year to finance an expanding budget deficit as the recession crimps tax receipts. Chancellor of the Exchequer Alistair Darling said on April 22 the budget shortfall in the year through March 2010 will reach 12.4 percent of gross domestic product, the most among the Group of 20 nations.

“I’ve never seen a level of government debt quite like this, not even in the worst days of the 1970s,” said Stephen Lewis, chief economist in London at Monument Securities. “Costs of borrowing will have to rise. The Debt Management Office will need all the help it can get to take these bonds to the market successfully. It’s a stiff task.”

U.K. May Sell as Much as 5 Billion Pounds of Debt Through Banks

Britain plans to sell as much as 5 billion pounds ($8.2 billion) of bonds through banks this week, according to the U.K. Debt Management Office.

The “indicative range being talked about is 3 to 5 billion pounds,” Steve Whiting, a spokesman for the debt agency in London, said today. The sale is planned for tomorrow, he said. The debt office hired Barclays Plc, Goldman Sachs Group Inc., HSBC Holdings Plc and Royal Bank of Scotland Group Plc to offer the 4.50 percent gilt maturing in September 2034, it said on June 9.

The first so-called syndication since 2005 for the U.K. is part of a record 220 billion pounds the Treasury aims to raise this year to finance an expanding budget deficit as the recession crimps tax receipts. Chancellor of the Exchequer Alistair Darling said on April 22 the budget shortfall in the year through March 2010 will reach 12.4 percent of gross domestic product, the most among the Group of 20 nations.

“I’ve never seen a level of government debt quite like this, not even in the worst days of the 1970s,” said Stephen Lewis, chief economist in London at Monument Securities. “Costs of borrowing will have to rise. The Debt Management Office will need all the help it can get to take these bonds to the market successfully. It’s a stiff task.”

Foreign cos eye India with cautious optimism

At first, last month's clear victory of Congress party raised hopes that the doors to Asia's third-largest economy would be thrown open to foreign investment. The stock market surged on euphoria that with reform-minded leadership firmly in place, Bank of America branches and Wal-Marts would quickly take root across the land.

Now, reality is setting in. Foreign companies are waiting to see how much the new government will open India _ where key sectors like retail and
finance are protected _ to the tough embrace of globalization. Even those bullish on the country's future say if further liberalization comes, it will come Indian style _ which is to say, slowly.

Last week, Swedish retailer Ikea said it broke off talks with the government about setting up shop in India. Ikea wants to retain full ownership of its stores, which isn't possible under current law.

``As soon as the legislation changes we would love to enter the Indian market,'' said spokeswoman Charlotte Lindgren.

If the government decides to raise the cap on foreign investment in
insurance companies, MetLife International would definitely invest more in India, says Rajesh Relan, the company's managing director for India.

``MetLife is keen to increase its stake,'' he said. ``India is a growth engine for the future.''

India's new government has voiced its support, in principle, for opening banks,
insurance companies, and pension funds to greater foreign investment. Many also hope controversial legislation to give foreign corporations greater access to the nation's $430 billion retail market will pass now that once-powerful Communist parties have been sidelined.

U.S. businesses have been encouraged by the return to office of Prime Minister Manmohan Singh, who pushed through a nuclear deal with the U.S., opening the way for greater economic cooperation in sensitive areas like defense and nuclear energy.

But the forces behind India's decades-old philosophy of ``swadeshi,'' or economic self-sufficiency, didn't all vanish with the election.

Eighteen years after India began to shift toward greater economic openness, important swaths of the economy remain dominated by the state. The nation's bureaucracy is as entrenched as ever, and many remain skeptical of globalization _ especially after witnessing the havoc of the US-spawned credit crisis.

``We think we can be partners with India in its growth going forward, but that depends on India's policies and its continued reform process,'' said Karan Bhatia, GE's vice president for international law and policy and former deputy US trade representative for Asia.

The election ``provides political capital to economic reformers within the Congress party,'' Bhatia added. ``I leave it up to them how fast they want to move with it.''

India's new administration wants to spur growth, but it's unclear what role foreign firms will play. The Congress party's victory was rooted in a delicate balance of populism and free markeralization.

Economist Saumitra Chaudhuri, newly appointed to a top government advisory body, said the drop in foreign capital flows due to the global downturn has restrained India's growth. But, he cautioned, ``It doesn't follow that if you just relax every norm on foreign investment we'll get high growth.''

``Eighty to 90 per cent of our problems are homegrown,'' he added, citing inadequate power and roads.

Advocates say increasing foreign participation in banking and finance would deepen the pool of long-term investment in infrastructure, boosting growth without adding to the already onerous fiscal deficit.

But the government has other options for
financing growth, like selling chunks of state enterprises or continued deficit spending.

Opening the retail sector remains contentious. Many fear allowing companies like Wal-Mart unfettered access would ruin millions of family-run shops.

Foreign retailers can run wholesale outlets _ Wal-Mart Stores Inc, with Bharti Enterprises, opened its first on May 30 but can't open direct-to-consumer shops that sell more than one brand.

A Wal-Mart spokeswoman in India declined comment on what the election portends, saying the government's directives on foreign retailing have been ``vague.''

US companies are also hoping to get a piece of the $30 billion India is expected to spend on military procurement in the next five years.

A thicket of details have to be worked out, but the US-India nuclear deal signed last year, which overturned a three-decade ban on atomic trade, could make it easier for the two nations _ once on opposite sides of the Cold War divide _ to share sensitive technologies.

``We're putting a lot of faith in future business in India,'' said Ronald Smith, general manager of ITT Corp's defense liaison office in New Delhi. ``We're seeing a shift from the traditional suppliers of the past, the Soviet Union and the Israelis, possibly toward US technology.''

Most executives now say they're hoping for a slow shift to a more efficient business environment, rather than big-bang reforms.

``When you form a coalition government, you're cutting a lot of deals in the back room,'' said Devesh Garg, who oversees $500 million in India investments for Bessemer Venture Partners. ``There are often times when purposefully there is not clarity provided by the government on what is required to get something done.''

``That's going to take lifetimes to change,'' he said. But hopefully, he added, ``there will be less gridlock.

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