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Tuesday, March 2, 2010

Reliance may look elsewhere as Lyondell hopes fade

Energy major Reliance Industries is likely to turn its attention to other acquisition opportunities if its bid for LyondellBasell, valuing the bankrupt firm at $14.5 billion, falls short. Reliance, controlled by billionaire Mukesh Ambani, has made no secret of its overseas ambitions and raised a war chest for potential deals by selling $2 billion in stock in recent months.

On Monday, the New York Post reported a creditor group led by U.S. private equity firm Apollo Management, which is controlling Lyondell's bankruptcy process in the United States, is expected to reject Reliance's latest bid. "Reliance, being the size it is, will be looking at other options overseas even if this bid fails, and sooner than later, something else will come up," said Rakesh Rawal, head of private wealth management at Anand Rathi Financial Services. Shares in India's most valuable listed company were trading up about 1 percent by 0602 GMT on Tuesday, underperforming the 1.5 percent gain in the benchmark. The stock had risen as much as 2.1 percent in early trade.

Reliance made a $2 billion offer to buy private Canadian oil-sands firm Value Creation Inc, according to media reports, although three people familiar with Reliance's thinking have said the Calgary, Alberta-based firm may not be an ideal target.Other possible targets include assets owned by U.S.-based Valero Energy and Sunoco, energy assets belonging to ConocoPhillips and refineries in Europe that are up for sale, bankers have said. "In the short term, I will be happy if the bid fails because the acquisition risk has been removed and Reliance's profits will remain unaffected," Rawal said.

"But from a longer-term perspective, I am sad because the company could have gained a lot of synergies from this acquisition over the next few years," said Rawal, who recommends the stock to his clients.Reliance, with interests in petrochemicals, refining, oil and gas exploration and retail, has been trying to buy Luxembourg-headquartered Lyondell since November, when it made a bid valuing the target at about $12 billion.

"The company's shares have underperformed the market since the middle of last year, but that's because of various factors such as a weak refining and petrochemical margin environment, concerns about how the company is going to sustain growth in the long term and the gas case," said Maulik Patel, an oil and gas analyst at K.R. Choksey Shares and Securities.Reliance is embroiled in a legal battle over gas supplies to Reliance Natural Resources, which is led by Mukesh's estranged younger brother Anil.

In November, investors cheered Reliance's Lyondell bid as the company was seen as snatching a potential bargain. A deal would significantly enhance Reliance's presence in major markets such as the United States and Europe and catapult it into the ranks of top global chemicals makers such as Saudi Arabia's SABIC, Germany's BASF and Dow Chemical Co.Reliance has since raised its offer twice, sources have said, with chances for success clouded by the prospect senior creditors such as Apollo Management may take a loss at the price Reliance has proposed and gain more from an independent Lyondell.
Reliance declined to comment on Tuesday.Reliance is being advised by boutique U.S. investment banking firm Perella Weinberg Partners on the Lyondell bid, two sources familiar with the matter have told Reuters.

Auto stocks zoom on surging sales

Auto stocks were in the limelight on Tuesday as most auto majors reported an impressive rise in the sales numbers for the month of February. While Maruti Suzuki reported its highest ever monthly sales in February 2010, Bajaj Auto registered a rise of 75 per cent in the same month. Analysts say that the auto sector has also got a boost in the arm with the finance minister giving concessions to the investor community in the form of higher disposable income.

Till the afternoon session, the BSE Auto index gained was the best performer on the Bombay Stock Exchange (BSE), gaining more than four per cent or 293 points. All the 14 auto stocks that are part of the index were trading in the green. The 30-share Sensex, on the other hand, gained a little less than two per cent or 315 points to trade at 16,745.

Tata Motors gained more than 11 per cent at Rs 790.50. The company has reported an overall 47.1 per cent year on year growth in it's consolidated topline to Rs 26,000 crore. Prabhudas Lilladher, in a report released on Tuesday, has said that it expects Tata Motors to rise further on the back of an improvement in the core commercial vehicle business, coupled with recovery at the JLR front. The brokerage has an 'accumulate' rating on the stock.

Meanwhile, Maruti also surged 2.26 per cent at Rs 1,496.65. Bajaj Auto gained nearly two per cent and is trading at Rs 1,850 around 2pm. Ashok Leyland, Escorts, Hero Honda and Mahindra & Mahindra all gained in the range of three to seven per cent each.

Maruti Suzuki sold 96,650 vehicles in February 2010 to surpass its previous high of 96,649 recorded in January 2010. The February sales figures also include 11,885 units of exports. In February 2010, the company sold 84,765 units in the domestic market, up 20 per cent over corresponding month last year. This is the highest ever domestic sales in a month.

Bajaj Auto registered a 75 per cent growth in its sales number in February 2010. While two-wheeler sales rose by 77 per cent, the three wheelers division registered a growth of 59 per cent, according to a company release.

In February 2010, Bajaj Motorcycles sold a total of 2,68,678 units that included 2,34,710 two-wheelers and 33,968 three-wheelers. Exports accounted for 77,642 units. Shares of Bajaj Auto gained 1.57 per cent or Rs 28.60 to trade at Rs 1,846. Earlier in the day, it touched a high of Rs 1,859.80. The company is also expanding its motorcycle capacity to 3,00,000 units per month by April 2010 to respond to the continuing strong demand for Pulsar and Discover brands

LyondellBasell Board Said to Reject $14.5 Billion Reliance Industries Bid

The board of bankrupt LyondellBasell Industries AF rejected a $14.5 Billion bid from Reliance Industries Ltd., an oil refiner and explorer controlled by India’s richest man, two people briefed on the matter said.

Mukherjee Lacks `Magic Number' in House For Carrefour, Wal-Mart Opening

Finance Minister Pranab Mukherjee said he lacks support from lawmakers to allow more foreign investment in retail and insurance, stymieing Carrefour SA and Wal-Mart Stores Inc.’s expansion in India

Goldman Is Probably Wrong on India Interest-Rate Forecast, Ahluwalia Says

Goldman Sachs Group Inc. analysts are likely to be proven wrong on forecasting 3 percentage points of interest-rate increases in India this year, an aide to the prime minister said

RIL may have to up its bid for Lyondell

The race to acquire LyondellBasell is still wide open ten days after Reliance Industries had upped its offer for the bankrupt chemicals company to $14.5 billion.

Agency reports, quoting the New York Post, say that a new creditor group led by US private equity firm Apollo Management is “expected to reject” the RIL bid. This would then pave the way for Apollo to merge LyondellBasell with its Hexion Specialty Chemicals operations, the paper said.

The Post also quoted one Lyondell creditor as saying “Reliance is making a mistake by not offering more.” It went on to say that Lyondell may file a reorganisation plan with the US bankruptcy court to transfer ownership to the creditors.

Sources said it now remains to be seen if RIL would up its offer to a level of $16 billion which will still keep it in the race. “By the end of the day, the company would have set itself an upper limit for the offer and may not be inclined to stretch itself beyond a point,” they added.

With RIL mum on the issue, as has been the case over the last few weeks, it is hard to say if it will still go ahead with the Lyondell bidding. “The company did not waste too much time increasing its stake from $13.5 billion to $14.5 billion; it could well do something similar again,” sources said.

Should RIL decide to call it quits at this stage, the curtains will have come down on a high-voltage script that had grabbed the interest of investors across the world

We can't always follow populist fiscal policies: PM

Prime Minister Manmohan Singh virtually ruled out any rollback in the price hike of petrol and diesel as announced in the budget, saying that the direct effect of the hike in fuel prices on wholesale prices will be no more than 0.4 percent.

'Any increase in prices does hurt some section of people, but we have to take a long term view. We cannot save people from inflation if we follow all along populist fiscal policies,' Manmohan Singh said. He was speaking to the media Monday on board the special aircraft that brought him back to New Delhi from his three-day official visit to Saudi Arabia.

Despite promise, Pakistan doing nothing on ground: PM

'The direct effect of the increase in fuel prices on wholesale prices will be no more than 0.4 percent,' he said.

'There is some escalation (in prices) but my hope is that now that the new rabi (winter) crop coming into the market, prices that have caused a great degree of concern like those of wheat, sugar, oilseeds, pulses will see some moderation and that the economy has the capacity to absorb this hike in oil prices without setting in motion any inflationary spiral.'

Lalu, Mulayam join hands to take on UPA

The prime minister said that if these populist policies were persisted with for a long time to come, these sooner or later 'will lead to the erosion of the investment climate, will lead to a erosion of our capacity to create new jobs and will lead to the erosion of our capacity to invest in our flagship programmes for our poor people'.

'So, we have to balance these factors,' he said.

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