SBI Funds upbeat on infra; wary of IT

The fund unit of State Bank of India is betting on domestic infrastructure stocks but is wary of software exporters as a lingering global economic slump continues to blur sector outlook, a fund manager said. The firm also favours commodities and has beefed up stakes in financials and defensives such as utilities, drug and consumers. However, infrastructure remains the top bet as the success of the India story depends on how fast and efficiently the country fixes its creaky roads, ports and bridges, said Jayesh Shroff, who manages about $1 billion in equities at SBI Funds Management. "It is a tactical idea on top of a very strong macro, that without infrastructure there is no India story," Shroff said. "I think a lot of effort from the government and the private sector is going towards building a better infrastructure. That ultimately will lead to a sustainable high growth economy," the Mumbai-based executive told Reuters in an interview. "We are overweight overall infrastructure space," said the fund manager whose firm raised exposure to companies such as Bharat Heavy Electricals, Crompton Greaves and Larsen & Toubro in March. Shroff said high beta infrastructure stocks had paid off well for his funds during the recent market surge, with capital goods index rising by more than a third in the last one month as against a 22 percent rise in the main stock index. "This market will throw up a lot of opportunities," he said but cautioned investors to be selective because many firms had high leverage and foreign exchange exposure. "Within that we need to take company-by-company view but I think underlying theme in infra is very, very strong," he said.

JSW Steel to invest 3,000 cr in India projects in FY'10

The country's leading steel maker JSW Steel plans to invest Rs 3,000 crore in its India projects in 2009-10, a top company official said on Thurstoday. "Our business plan is to invest Rs 3,000 crore in the current financial year. The investment will be (spanned across) our plant in Vijaynagar and upcoming projects in Jharkhand and West Bengal," JSW Steel Vice-Chairman and Managing Director Sajjan Jindal told reporters on the sidelines of a conference here. Of the proposed investment, Rs 1,500 crore would be from the company's internal accruals while the rest out of debt, Jindal said, adding JSW Steel will prefer domestic firms to overseas lendors for the debt. With the commissioning of an extended production line of three million tonnes at Vijaynagar in Karnataka early this year, JSW Steel's annual production capacity has reached 6.8 million tonnes, making it India's largest single-location unit. Besides brownfield expansion, the steel major has lined up two greenfield projects of 10 million tonnes per annum each in West Bengal and Jharkhand with a cumulative investment of Rs 70,000 crore. In West Bengal it has laid the foundation for the plant, while in Jharkhand it is in the process of acquiring land.

PowerGrid plans to raise Rs 3k cr via fresh issue

India’s largest power distributor Power Grid Corporation of India plans to raise up to Rs 3,000 crore by issuing fresh shares by year-end, at a time when most companies dread the stock market. “We will approach the government for our second tranche of public offer by the end of this year or the beginning of next year,” PowerGrid chairman and managing director SK Chaturvedi said. PowerGrid’s confidence to approach the choppy market probably stems from the 78% return on its stock since the lows of October last — the third-highest gains on the Nifty — as well as its successful bond issues worth Rs 1,000 crore each in February and March. While the first float offering 9.6% interest received applications for Rs 2,600 crore, the second one offered 9.2% interest and received Rs 2,500 crore. PowerGrid will use the money raised from the follow-on public offer for strengthening its systems, evacuating more power from different parts of the country and entering consultancy business in a big way. So far, PowerGrid has executed small-ticket consultancy projects in Southeast Asia, but it is now eyeing the big league. The company is in advanced talks with firms in the US and central Asia for high-end consultancy projects. The company is hoping for a rerun of its successful initial public offer (IPO) in October 2007, when it raised close to Rs 3,000 crore. Considering the big investment in the power sector with a number of ultra-mega power projects coming up in the country and PowerGrid’s virtual monopoly in power distribution, the public offer is expected to attract an overwhelming response from investors.

Hilton eyes tie up with Indian cos aside of DLF

Hospitality major Hilton international is looking to increase its operations in India. it is looking at tying up with companies other than DLF, with which it already has a 26:74 joint venture. In an application to the FIPB, Hilton said it wants to bring more brands into India and has also proposed a hike in its fee structure, claim sources. Hilton plans to operate in India with companies other than DLF. Hilton and DLF have 26:74 joint venture to own and manage 50-75 hotels. The fee payment to Hilton by the DLF JV and others has been revised upwards and no they will have to pay Hilton a trademark fee of 3% of revenues as against 2% earlier. They will also have to pay 10% of their gross operating profit for managing their properties and an additional 3% of revenues for international marketing as against 1% earlier. Also, companies will have to pay a lumpsum fee of USD 350,000 for hotels managed by Hilton. This fee hike is not for the 20 hotel deals closed by DLF and Hilton, wherein Hilton has stake in four of these hotels and the rest of the 16 hotels are to be managed by Hilton itself. The new fee structure would be applicable only if construction does not begin by March 10. The deal with Hilton was truncated from 50-75 hotels to 20 hotels six months ago.

CREDIT POLICY

RBI cuts REPO RATE, REVERSE REPO RATE BY 25 BPS each. CRR remains unchanged. Repo Rate cut to 4.75% fom 5% Reverse Repo Rate cut to 3.25% from 3.5%

Indian Oil, HPCL scrap oil tender; eyes on Reliance

State-run Indian Oil Corp and Hindustan Petroleum have scrapped their tenders to buy 306,000 tonnes of gasoline and diesel, as they plan to buy the fuel supplies from Reliance Industries, traders said on Monday. "Comparatively low current crude oil prices make it attractive to sell products in the domestic market as an option," said an India-based trader. Last week, Reliance surrendered an export unit tag of its older 660,000-bpd refinery in Western India, as it was struggling to sell oil products in the overseas markets amid falling global demand and margins. IOC and HPCL had issued two separate tenders for oil product imports.

Economy showing signs of recovery

Powered by increased government spending on infrastructure, the cement industry witnessed a dream run with a robust 12.75% sales growth in March over February and a healthy 9% growth in the last quarter. Not just cement, the steel industry, which has been reeling under the slowdown, saw consumption rise 3.8% during the last quarter of 2009. Cement and steel are considered bellwethers of economic activity. According to Rakesh Singh, joint president (marketing), The India Cements Ltd, south India's largest cement maker, "Clearly, the just concluded year was among the best ever the industry has seen. The industry ended the year with a production of 211 million tonnes and plants worked at 80% to 90% of rated capacity. The prices too were stable right through the year. The only problem was higher input costs." "The consumption was driven by individual housing outside the big metro cities and government sponsored programmes," he said. East India witnessed an 11% growth in consumption, south & central India recorded 10% growth during the fiscal, and north & west saw a 5% growth. "Centre and state governments are on an overdrive to complete projects ahead of elections. In Uttar Pradesh, cement prices sky rocketed by Rs 60 a bag in the last two months," a manufacturer said. "Clearly for cement, it was a good year. But the worry is substantial new capacities are coming up during this calendar year, mostly in Andhra Pradesh. From 211 million tonnes of capacity, the expectation for this year is 245 to 250 million tonnes. Therefore, prices may remain spongy," an analyst said. Archana Khemka, a cement analyst with Edelweiss Research, doubted the sustainability of current momentum in cement demand. "Demand has to grow by around 19% in FY10 to maintain utilisation at around 95% (similar to FY09 levels); this seems unlikely. Despite project delays, we believe surplus in FY10 is inevitable. "Second quarter of FY10 will mark the reversal of the current upturn," Khemka said. On the steel front, Union steel secretary Pramod Rastogi said consumption in the country rose 3.8% and production increased 1.2% in the last quarter. Rural housing and infrastructure will continue to boost demand, he said. Economic think-tank Centre for Monitoring Indian Economy (CMIE) has said the demand for steel will continue in this fiscal too. "The ongoing government-funded infrastructure projects during the peak construction season, a slight revival in the automobile industry and a sharp 40-45 % correction in steel prices from the peak level of July 2008 spurred the demand for the commodity," the CMIE said in its monthly review of the Indian economy. Revival of demand, it said, would also start reflecting in the prices, which were up 2% to 3% in March after sharply falling in the previous four months. "While the improved demand scenario would continue in 2009-10, this would not translate into a major recovery in steel prices," CMIE said.