The FIIs on Friday stood as net seller in equity and debt. The gross equity purchased was Rs4,235.50 Crore and the gross debt purchased was Rs207.70 Crore while the gross equity sold stood at Rs4,704.60 Crore and gross debt sold stood at Rs483.50 Crore. Therefore, the net investment of equity reported was (Rs49.00) Crore and net debt was (275.90) Crore
Monday, June 30, 2008
Friday, June 27, 2008
FIIs On Thursday - June 27, 2008
The FIIs on Thursday stood as net seller in equity. The gross equity purchased was Rs2,901.60 Crore and the gross debt purchased was Rs0.00 Crore while the gross equity sold stood at Rs3,005.20 Crore and gross debt sold stood at Rs187.40 Crore. Therefore, the net investment of equity reported was (Rs103.60) Crore and net debt was 0.00 Crore.
Thursday, June 26, 2008
IT Investors Count On Rupee Fall - June 26, 2008
MUMBAI: With no change in the US economic situation and fresh IT investments by clients on hold, the weakening rupee is the only focus point for investors in IT stocks. While this has provided a breather, it has not made a significant difference to company outlook. In the last three months, the rupee has weakened more than 7% against the dollar. During this period, the Sensex lost 12.31% while the BSE-IT index gained a little over 11%. A further re-rating of the entire sector is expected to happen by the third quarter of the fiscal, when companies anticipate slowdown to ease and more business to start flowing in.
“We don’t expect the fall in the currency to translate to a corresponding increase in earnings. But any uptake in demand, coupled with hedging gains will result in an upward revision in the current valuations of IT firms,” said a senior analyst with a domestic brokerage. This is also borne out by the recent statement made by a senior Satyam Computer Services official when the rupee touched 43.21 against the dollar, that the company was not looking at revision of its FY09 guidance. The stock of Satyam Computers has lost nearly 8% in the last one month.
IT companies have forecast moderate to good growth for the fiscal 2009 with most of the growth being back-ended or happening in the last two quarters. “Unless there is something positive on the (business) volumes or billing (pricing), I don’t see a re-rating. We have to wait and see if volumes (number of contracts) go up,” said an analyst.
Companies are also expected to realise the benefits of a lower rupee from the second quarter onwards. For the first quarter, all of them are expected to have hedging losses because they have entered into forward contracts at higher levels. This will result in mark-to-market losses at the end of the June quarter, an analyst said. Gains will also vary depending on the hedging policy of the company.
Tata Consultancy Services and Wipro, which have entered into long-term contracts of over a year, are expected to have hedging losses over the next three quarters. Infosys Technologies, which has only $750 million in hedges, will benefit the most and could realise the full benefit of the rupee movement from the second quarter onwards. TCS has shed 6% in the last one month, falling from Rs 933.70 to Rs 877.75, while Wipro has lost more than 5% in the same period to close at Rs 456.50 on Wednesday.
In a recent report, CLSA has advised “caution” on Indian IT stocks. CLSA feels that the recent rally has taken much of the upside off the table and the next upswing will have to wait for demand trends. Interestingly, CLSA does not have a buy rating on any of the top technology counter.
“We don’t expect the fall in the currency to translate to a corresponding increase in earnings. But any uptake in demand, coupled with hedging gains will result in an upward revision in the current valuations of IT firms,” said a senior analyst with a domestic brokerage. This is also borne out by the recent statement made by a senior Satyam Computer Services official when the rupee touched 43.21 against the dollar, that the company was not looking at revision of its FY09 guidance. The stock of Satyam Computers has lost nearly 8% in the last one month.
IT companies have forecast moderate to good growth for the fiscal 2009 with most of the growth being back-ended or happening in the last two quarters. “Unless there is something positive on the (business) volumes or billing (pricing), I don’t see a re-rating. We have to wait and see if volumes (number of contracts) go up,” said an analyst.
Companies are also expected to realise the benefits of a lower rupee from the second quarter onwards. For the first quarter, all of them are expected to have hedging losses because they have entered into forward contracts at higher levels. This will result in mark-to-market losses at the end of the June quarter, an analyst said. Gains will also vary depending on the hedging policy of the company.
Tata Consultancy Services and Wipro, which have entered into long-term contracts of over a year, are expected to have hedging losses over the next three quarters. Infosys Technologies, which has only $750 million in hedges, will benefit the most and could realise the full benefit of the rupee movement from the second quarter onwards. TCS has shed 6% in the last one month, falling from Rs 933.70 to Rs 877.75, while Wipro has lost more than 5% in the same period to close at Rs 456.50 on Wednesday.
In a recent report, CLSA has advised “caution” on Indian IT stocks. CLSA feels that the recent rally has taken much of the upside off the table and the next upswing will have to wait for demand trends. Interestingly, CLSA does not have a buy rating on any of the top technology counter.
FII Activity on 25-06-2008 - June 26, 2008
The FIIs on Wednesday stood as net buyer in equity and net seller in debt. The gross equity purchased was Rs3,366.20 Crore and the gross debt purchased was Rs0.00 Crore while the gross equity sold stood at Rs3,092.10 Crore and gross debt sold stood at Rs187.40 Crore. Therefore, the net investment of equity reported was Rs274.10 Crore and net debt was (Rs187.40) Crore.
Wednesday, June 25, 2008
Ford To Invest $500 M In India By 2010
Kolkata: Ford India Pvt. Ltd, a wholly-owned subsidiary of global auto major Ford Motors Co., will invest $500 million to set up a small car production facility and an engine manufacturing unit in India by 2010, a senior company official said here Tuesday.
"The investment is part of the company's capacity expansion plans in India," Ford India executive director (marketing, sales and service) Nigel E. Wark told reporters at the launch of the new Ford Fiesta 1.6S.
He said the new engine manufacturing facility would be constructed adjacent to the existing plant near Chennai. Both petrol and Ford's next generation diesel engines would be manufactured here.
Wark said the car plant capacity would be doubled to 2,00,000 annually, while the initial annual production capacity of the engine manufacturing unit is planned for 250,000 units, with the first engines coming off assembly by 2010," he said.
Ford has been in India since 1907, but received government approval to forge a 50:50 partnership with Mahindra and Mahindra in 1995.
In 1998, Ford got the green signal to increase its stake in the joint venture to 92.18 percent and the company was re-christened as Ford India Pvt. Ltd.
"The company has sold about 65,000 vehicles in India since its launch in 1995. We expect to acquire a good market share with the launch of this new Ford Fiesta range as it would be a fuel efficient car," Wark said, declining to share any specific details about the sales plans in the coming years.
He said the price of new Ford Fiesta model, available in petrol and turbo-diesel variants, would be reviewed in September.
Ford's total market share of the B, B+ Mav segment in India was 15.4 percent in 2007. In the last five months, it sold 12,800 vehicles in India.
"The investment is part of the company's capacity expansion plans in India," Ford India executive director (marketing, sales and service) Nigel E. Wark told reporters at the launch of the new Ford Fiesta 1.6S.
He said the new engine manufacturing facility would be constructed adjacent to the existing plant near Chennai. Both petrol and Ford's next generation diesel engines would be manufactured here.
Wark said the car plant capacity would be doubled to 2,00,000 annually, while the initial annual production capacity of the engine manufacturing unit is planned for 250,000 units, with the first engines coming off assembly by 2010," he said.
Ford has been in India since 1907, but received government approval to forge a 50:50 partnership with Mahindra and Mahindra in 1995.
In 1998, Ford got the green signal to increase its stake in the joint venture to 92.18 percent and the company was re-christened as Ford India Pvt. Ltd.
"The company has sold about 65,000 vehicles in India since its launch in 1995. We expect to acquire a good market share with the launch of this new Ford Fiesta range as it would be a fuel efficient car," Wark said, declining to share any specific details about the sales plans in the coming years.
He said the price of new Ford Fiesta model, available in petrol and turbo-diesel variants, would be reviewed in September.
Ford's total market share of the B, B+ Mav segment in India was 15.4 percent in 2007. In the last five months, it sold 12,800 vehicles in India.
FII Activity on 24-06-2008 - June 25, 2008
The FIIs on Tuesday stood as net seller in equity and debt. The gross equity purchased was Rs2,273.90 Crore and the gross debt purchased was Rs0.00 Crore while the gross equity sold stood at Rs2,894.70 Crore and gross debt sold stood at Rs132.70 Crore. Therefore, the net investment of equity reported was (Rs620.80) Crore and net debt was (Rs132.70) Crore.
Tuesday, June 24, 2008
FII Activity On 23-06-2008 - June 24, 2008
The FIIs on Monday stood as net seller in equity and debt. The gross equity purchased was Rs2,501.50 Crore and the gross debt purchased was Rs0.00 Crore while the gross equity sold stood at Rs3,454.00 Crore and gross debt sold stood at Rs56.00 Crore. Therefore, the net investment of equity reported was (Rs952.50) Crore and net debt was (Rs56.00) Crore.
Monday, June 23, 2008
Jeddah Summit Calls For More Investment In Oil Output - June 23 2008
Jeddah: The world's top oil producing and consuming countries have called for increased investments in oil production as well as greater transparency and regulation of financial markets to rein in spiralling prices.
In a final communiqué issued at the end of the emergency meeting of oil consuming and producing countries convened by Saudi Arabia here Sunday, it was stated participants noted with concern that oil prices have risen sharply.
"Participants also noted that current oil prices and their volatility are detrimental to the global economy and in particular the economies of least developed countries," it said.
The communique was jointly issued by the secretariats of the Organization of Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA), Saudi Arabia and the Riyadh-based International Energy Forum.
Though it did not mention any specific steps to curb global oil prices, it stated: "The existence of spare capacity throughout the oil supply chain is important for the stability of the global oil market. Hence an appropriate increase in investment, both upstream and downstream, is necessary to ensure that the markets are supplied in a timely and adequate manner. Predictable energy and investment policies, as well as better access to technology, are necessary to this end."
It said that the participants recognised that the transparency and regulation of financial markets should be improved through measures to capture more data on index fund activity and to examine cross-exchange interaction in the crude market.
"The quality, completeness and timeliness of oil data submitted through the monthly Joint Oil Data Initiative (JODI) should be enhanced," the communiqué stated.
"In order to further improve market transparency and stability, the seven organisations involved in JODI (Apec, Eurostat, IEA, IEF, OLADE, OPEC and UNSD) are called upon to start work to cover annual data, that includes, among other things, upstream and downstream capacities and expansion plans."
It called for an immediate collaboration between the IEA and Opec secretariats, along with the IEF secretariat, to prepare shared analyses on oil market trends and outlook, as well as of the impact of financial markets on the level and volatility of oil prices, which can be used to better understand the market situation.
The participants also recognised that "development assistance from the national, regional and international finance and aid institutions is intensified to alleviate the consequences of higher oil prices on the least developed countries."
The communiqué called for enhanced cooperation among international, national and service companies from all producing and consuming countries in investment, technology and human resource development.
It was also recognised that "energy efficiency is promoted in all sectors through passing on market price signals, technology transfer and the sharing of best practices in energy production and consumption," it said.
The statement concluded with a call to host Saudi Arabia and the other participating nations in the Jeddah meet to reconvene in London later this year in response to the invitation extended by the British government.
Sunday's meeting was convened by the Saudi Arabian government to discuss what it said was an unjustified rise in prices of petroleum products. Global oil prices have doubled from $ 50 a barrel in August last year to between $ 135 and $ 150.
The meeting was attended by representatives of 36 oil producing and consuming countries including India, seven international organisations, and a number of global oil majors.
The Indian delegation was led by Finance Minister P Chidambaram and Petroleum and Natural Gas Minister Murli Deora.
In a final communiqué issued at the end of the emergency meeting of oil consuming and producing countries convened by Saudi Arabia here Sunday, it was stated participants noted with concern that oil prices have risen sharply.
"Participants also noted that current oil prices and their volatility are detrimental to the global economy and in particular the economies of least developed countries," it said.
The communique was jointly issued by the secretariats of the Organization of Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA), Saudi Arabia and the Riyadh-based International Energy Forum.
Though it did not mention any specific steps to curb global oil prices, it stated: "The existence of spare capacity throughout the oil supply chain is important for the stability of the global oil market. Hence an appropriate increase in investment, both upstream and downstream, is necessary to ensure that the markets are supplied in a timely and adequate manner. Predictable energy and investment policies, as well as better access to technology, are necessary to this end."
It said that the participants recognised that the transparency and regulation of financial markets should be improved through measures to capture more data on index fund activity and to examine cross-exchange interaction in the crude market.
"The quality, completeness and timeliness of oil data submitted through the monthly Joint Oil Data Initiative (JODI) should be enhanced," the communiqué stated.
"In order to further improve market transparency and stability, the seven organisations involved in JODI (Apec, Eurostat, IEA, IEF, OLADE, OPEC and UNSD) are called upon to start work to cover annual data, that includes, among other things, upstream and downstream capacities and expansion plans."
It called for an immediate collaboration between the IEA and Opec secretariats, along with the IEF secretariat, to prepare shared analyses on oil market trends and outlook, as well as of the impact of financial markets on the level and volatility of oil prices, which can be used to better understand the market situation.
The participants also recognised that "development assistance from the national, regional and international finance and aid institutions is intensified to alleviate the consequences of higher oil prices on the least developed countries."
The communiqué called for enhanced cooperation among international, national and service companies from all producing and consuming countries in investment, technology and human resource development.
It was also recognised that "energy efficiency is promoted in all sectors through passing on market price signals, technology transfer and the sharing of best practices in energy production and consumption," it said.
The statement concluded with a call to host Saudi Arabia and the other participating nations in the Jeddah meet to reconvene in London later this year in response to the invitation extended by the British government.
Sunday's meeting was convened by the Saudi Arabian government to discuss what it said was an unjustified rise in prices of petroleum products. Global oil prices have doubled from $ 50 a barrel in August last year to between $ 135 and $ 150.
The meeting was attended by representatives of 36 oil producing and consuming countries including India, seven international organisations, and a number of global oil majors.
The Indian delegation was led by Finance Minister P Chidambaram and Petroleum and Natural Gas Minister Murli Deora.
Sectors To Invest & Avoid Now! -June 23, 2008
With inflation at where it is, the stock markets in an unwind and corporate costs soaring spawning a slowdown, how do the sectors look in terms of investibility? DNA Money’s Pallavi Pengonda and Rabin Ghosh give you a quick take:
Consumer durables expected to underperform in the medium to long term as rising inflation will reduce affordability, increase consumer downtrading to lower-priced, low-margin products even as input costs rise. Also, interest rates on loans will rise, curtailing demand afresh.
FMCG :A defensive but dicey play. Rising inflation will increase input costs but good monsoons will boost rural income and spur demand. But current valuations are high, and downtrading by consumers is a risk. On the whole, the sector is neutral to positive in the medium term.
Information technology: Positive in both the medium and long terms. If US enters Recession St, offshoring can only increase. The need for technology in emerging markets is rising, as are compliance needs globally, which require more investments in IT systems. Dollar is a key variable, but is seen stable for now. Both India and US go into elections but not many policy changes are expected.
Auto negative in the short and medium terms: The sector is entering a cyclically lean phase and interest rate hikes, higher oil prices, tighter lending norms and rising input costs exacerbate the troubles. There is concern across vehicle segments — passenger cars, commercial vehicles and two wheelers. In passenger cars, growth is expected to also slow down on account of a changed excise duty structure for medium-sized cars, which piloted the sector last year.
Healthcare and pharma: Being quite insulated from macroeconomic factors such as inflation, input cost pressures, oil, and interest rates, they are among the best defensive sectors. In the short to medium term, the impact on the sector will be neutral to positive, while from a mid to long-term perspective, things are positive.
Power: Attractive in the short term, negative in the long term. The stocks are commanding a high price-earnings multiple. Analysts expect government to hike power tariffs in the hope that it slows down industrial production. Hence, companies will show profits for now, but long-term profitability will be affected.
Aviation: Negative for, as far as you can see because capacity is far in excess of demand and jet fuel prices don’t look like ebbing anytime soon. Demand is also expected to slow down since business travel will be reduced as corporates cut back on costs.
Banks: Negative in the short to medium term because of sentiment overhang such as likely mark to market losses, rising delinquency, and credit slowdown. Positive in the medium to long term since the sector has been beaten down and there are stocks available at attractive valuations (some even less than one-time book value). Cost of funds is expected to decrease due to increased money flow from the capital markets to the banking sector assuming that markets remain in a bearish phase. Also, with foreign banks entering next year, any steep fall in private sector banks’ valuation will create acquisition targets.
Metal: Negative in the short term and positive in the long term for both ferrous and non-ferrous. But if global prices fall, margins will be hit. In the near term, ferrous metals would come under government curbs and consumption of non-ferrous metals will slow down, leading to a weakening of prices. Integrated metal companies with their own mines will do far better than others.
Realty: A pariah in the making. Expected to remain weak in the medium to long term. Expect further price erosion as the market starts discounting landbank net asset values from a premium now. Higher interest rates, indecisiveness among buyers, fall in prices and demand will keep stock prices in check. But analysts say if the broader market rebounds, so will this sector.
Oil & Gas: Private sector companies look attractive since their public sector peers have been emasculated with no pricing power. Exploration and production entities are better placed than oil marketers, but even they will be impacted to the extent of sharing of some subsidies provided to the oil marketers. If crude declines to around $100 per barrel, the sector could perform better because there would be a bounceback in demand.
cement: Negative in the medium to long term. There is a steep rise in input costs such as power, freight and coke and then there is the government-induced price control and export curbs to contend with. A further weakening of prices is due next year as major capacities come on stream and demand may not rise proportionately.
Consumer durables expected to underperform in the medium to long term as rising inflation will reduce affordability, increase consumer downtrading to lower-priced, low-margin products even as input costs rise. Also, interest rates on loans will rise, curtailing demand afresh.
FMCG :A defensive but dicey play. Rising inflation will increase input costs but good monsoons will boost rural income and spur demand. But current valuations are high, and downtrading by consumers is a risk. On the whole, the sector is neutral to positive in the medium term.
Information technology: Positive in both the medium and long terms. If US enters Recession St, offshoring can only increase. The need for technology in emerging markets is rising, as are compliance needs globally, which require more investments in IT systems. Dollar is a key variable, but is seen stable for now. Both India and US go into elections but not many policy changes are expected.
Auto negative in the short and medium terms: The sector is entering a cyclically lean phase and interest rate hikes, higher oil prices, tighter lending norms and rising input costs exacerbate the troubles. There is concern across vehicle segments — passenger cars, commercial vehicles and two wheelers. In passenger cars, growth is expected to also slow down on account of a changed excise duty structure for medium-sized cars, which piloted the sector last year.
Healthcare and pharma: Being quite insulated from macroeconomic factors such as inflation, input cost pressures, oil, and interest rates, they are among the best defensive sectors. In the short to medium term, the impact on the sector will be neutral to positive, while from a mid to long-term perspective, things are positive.
Power: Attractive in the short term, negative in the long term. The stocks are commanding a high price-earnings multiple. Analysts expect government to hike power tariffs in the hope that it slows down industrial production. Hence, companies will show profits for now, but long-term profitability will be affected.
Aviation: Negative for, as far as you can see because capacity is far in excess of demand and jet fuel prices don’t look like ebbing anytime soon. Demand is also expected to slow down since business travel will be reduced as corporates cut back on costs.
Banks: Negative in the short to medium term because of sentiment overhang such as likely mark to market losses, rising delinquency, and credit slowdown. Positive in the medium to long term since the sector has been beaten down and there are stocks available at attractive valuations (some even less than one-time book value). Cost of funds is expected to decrease due to increased money flow from the capital markets to the banking sector assuming that markets remain in a bearish phase. Also, with foreign banks entering next year, any steep fall in private sector banks’ valuation will create acquisition targets.
Metal: Negative in the short term and positive in the long term for both ferrous and non-ferrous. But if global prices fall, margins will be hit. In the near term, ferrous metals would come under government curbs and consumption of non-ferrous metals will slow down, leading to a weakening of prices. Integrated metal companies with their own mines will do far better than others.
Realty: A pariah in the making. Expected to remain weak in the medium to long term. Expect further price erosion as the market starts discounting landbank net asset values from a premium now. Higher interest rates, indecisiveness among buyers, fall in prices and demand will keep stock prices in check. But analysts say if the broader market rebounds, so will this sector.
Oil & Gas: Private sector companies look attractive since their public sector peers have been emasculated with no pricing power. Exploration and production entities are better placed than oil marketers, but even they will be impacted to the extent of sharing of some subsidies provided to the oil marketers. If crude declines to around $100 per barrel, the sector could perform better because there would be a bounceback in demand.
cement: Negative in the medium to long term. There is a steep rise in input costs such as power, freight and coke and then there is the government-induced price control and export curbs to contend with. A further weakening of prices is due next year as major capacities come on stream and demand may not rise proportionately.
Friday, June 20, 2008
FII Activity on 19-06-2008 - June 20, 2008
The FIIs on Thursday stood as net seller in equity. The gross equity purchased was Rs2,469.90 Crore and the gross debt purchased was Rs0.00 Crore while the gross equity sold stood at Rs2,919.70 Crore and gross debt sold stood at Rs0.00 Crore. Therefore, the net investment of equity reported was (Rs449.80) Crore and net debt was Rs0.00 Crore.
Yahoo Investor Asks To Weigh In On Microsoft Offer - June 20, 2008
New York: An investor with a minority stake in Yahoo Inc on Thursday urged Microsoft Corp to take its most recent offer for a partial investment directly to Yahoo shareholders and prove its merits.
Mark Nelson, a partner in Mithras Capital, which owns 1.7 million Yahoo shares, said such a move by Microsoft would help shareholders gauge whether the proposal was truly superior to an advertising partnership Yahoo forged with archrival Google Inc.
"We have not been able to have our opinion heard," Nelson told Reuters. "If (Microsoft) does indeed have a superior transaction they should flesh it out."
Yahoo investor urges board compromise with Icahn | Yahoo-Google ad deal has merit: Icahn
Microsoft abandoned a $47.5 billion offer to buy all of Yahoo last month, but more recently discussed a transaction to take a 16 percent stake in Yahoo and buy its search business for $9 billion as it seeks a stronger foothold in online advertising. Talks broke down last week.
Microsoft said its alternate deal was still open for discussion, though Yahoo maintains that selling its search business would be tantamount to giving up on future growth in the wider online advertising market.
"It is our strong belief that there is an ideal solution to Microsoft's current impasse with Yahoo: Microsoft must take its 'alternate transaction' ... directly to Yahoo shareholders via the upcoming proxy vote," Nelson wrote in a letter he said was e-mailed and faxed to Microsoft Chief Executive Steve Ballmer.
Yahoo faces a proxy battle against billionaire investor Carl Icahn ahead of its annual shareholders meeting on Aug. 1.
Icahn proposed a full slate of nine directors to replace Yahoo's current board, though he initially launched his proxy battle to act as a catalyst for a Microsoft takeover deal.
Icahn has yet to say if he will change his strategy now that Microsoft appears to be out of the picture. He told Reuters early this week he was studying the Yahoo partnership with Google that aims to improve its financial performance.
Eric Jackson, another activist investor in Yahoo, this week proposed that shareholders vote for up to four Icahn board nominees rather than replace all the directors to preserve some stability at the company.
Nelson said he had not spoken with other Yahoo investors about his proposals, which include backing Icahn's full slate.
"We're a substantial Yahoo shareholder who has strong opinions," Nelson said in an interview. "We believe we voice opinions that maybe other Yahoo shareholders have not thought about and may consider in the coming month."
Yahoo says the Google deal could add as much as $450 million in operating cash flow within the first 12 months and leaves it open to working with other partners.
Microsoft has said its proposal would deliver an additional $1 billion a year in operating profit for Yahoo and value its stake in the company at $35 per share.
Microsoft declined to comment. Yahoo officials were not immediately available.
Yahoo shares closed down 18 cents to $22.73 on Nasdaq.
Mark Nelson, a partner in Mithras Capital, which owns 1.7 million Yahoo shares, said such a move by Microsoft would help shareholders gauge whether the proposal was truly superior to an advertising partnership Yahoo forged with archrival Google Inc.
"We have not been able to have our opinion heard," Nelson told Reuters. "If (Microsoft) does indeed have a superior transaction they should flesh it out."
Yahoo investor urges board compromise with Icahn | Yahoo-Google ad deal has merit: Icahn
Microsoft abandoned a $47.5 billion offer to buy all of Yahoo last month, but more recently discussed a transaction to take a 16 percent stake in Yahoo and buy its search business for $9 billion as it seeks a stronger foothold in online advertising. Talks broke down last week.
Microsoft said its alternate deal was still open for discussion, though Yahoo maintains that selling its search business would be tantamount to giving up on future growth in the wider online advertising market.
"It is our strong belief that there is an ideal solution to Microsoft's current impasse with Yahoo: Microsoft must take its 'alternate transaction' ... directly to Yahoo shareholders via the upcoming proxy vote," Nelson wrote in a letter he said was e-mailed and faxed to Microsoft Chief Executive Steve Ballmer.
Yahoo faces a proxy battle against billionaire investor Carl Icahn ahead of its annual shareholders meeting on Aug. 1.
Icahn proposed a full slate of nine directors to replace Yahoo's current board, though he initially launched his proxy battle to act as a catalyst for a Microsoft takeover deal.
Icahn has yet to say if he will change his strategy now that Microsoft appears to be out of the picture. He told Reuters early this week he was studying the Yahoo partnership with Google that aims to improve its financial performance.
Eric Jackson, another activist investor in Yahoo, this week proposed that shareholders vote for up to four Icahn board nominees rather than replace all the directors to preserve some stability at the company.
Nelson said he had not spoken with other Yahoo investors about his proposals, which include backing Icahn's full slate.
"We're a substantial Yahoo shareholder who has strong opinions," Nelson said in an interview. "We believe we voice opinions that maybe other Yahoo shareholders have not thought about and may consider in the coming month."
Yahoo says the Google deal could add as much as $450 million in operating cash flow within the first 12 months and leaves it open to working with other partners.
Microsoft has said its proposal would deliver an additional $1 billion a year in operating profit for Yahoo and value its stake in the company at $35 per share.
Microsoft declined to comment. Yahoo officials were not immediately available.
Yahoo shares closed down 18 cents to $22.73 on Nasdaq.
Thursday, June 19, 2008
FII Activity on 18-06-2008 - June 19 ,2008
The FIIs on Wednesday stood as net buyer in equity. The gross equity purchased was Rs2,546.20 Crore and the gross debt purchased was Rs0.00 Crore while the gross equity sold stood at Rs2,173.80 Crore and gross debt sold stood at Rs0.00 Crore. Therefore, the net investment of equity reported was Rs372.40 Crore and net debt was Rs0.00 Crore.
Mindtree To Invest Rs 180 Cr In Chennai Centre - June 19, 2008
Chennai: MindTree, a Bangalore-based information technology company, will invest $45 million (Rs 180 crore) in its new software development centre at Mahindra World City SEZ in Maraimalai Nagar, 45 km from Chennai.
‘MindTree Coromandel’, will be housed in a 2.80 lakh sq ft facility which has a capacity to seat 2,800 employees. Chennai will be the second most important centre after Bangalore, according to Ashok Soota, Chairman and Managing Director. “This expansion is a symbol of our growth.”
‘MindTree Coromandel’, will be housed in a 2.80 lakh sq ft facility which has a capacity to seat 2,800 employees. Chennai will be the second most important centre after Bangalore, according to Ashok Soota, Chairman and Managing Director. “This expansion is a symbol of our growth.”
Wednesday, June 18, 2008
IBM set to invest in KLG Systel - June 18, 2008
Mumbai: IBM India will invest in Gurgaon-based KLG Systel, a small-cap IT company catering to the engineering and utility sector.
Kumud Goel, managing director, KLG Systel Ltd told DNA Money a formal announcement would come on Wednesday.
This would be IBM’s second investment in a small-cap in India after Daksh.
IBM is already an exclusive partner for KLG Systel, providing technology platforms for many offerings including Vidushi, a revenue management system specific to energy firms.
Big Blue also provides technology base Connectgaia, KLG’s demand-side revenue management solution to help small commercial establishments manage their electricity better.
KLG plans to consolidate its revenue management technologies for marketing by its subsidiary KLG Power in partnership with TPG Growth India, an arm of US private equity firm TPG.
“The consolidation is due to low margins (below 9%) in our engineering and procurement business. We are looking to widen our customer base in the US,” said Goel.
Rabindra Nath Nayak, research analyst at Reliance Money said, “The investment from IBM will be a very negligible one. This is basically to assure large government departments that wish to deploy such revenue management technologies that the technology is robust.”
However, Nayak feels the company’s US foray may not be productive. “The revenue management systems in the power sector make sense when the power distribution happens through multiple utility companies and users have the flexibility to switch to different providers. In the US, like India, there are only a couple of power distribution companies.”
On the other hand, a foray into Europe could deliver the goods, on account of there being multiple providers.
KLG Systel earned a net profit of Rs 77 crore in the year to March and has provided a guidance of Rs 99 crore net profit and Rs 540 crore revenue for the current fiscal. It has Rs 4,000 crore of orders in the pipeline from six state governments.
Kumud Goel, managing director, KLG Systel Ltd told DNA Money a formal announcement would come on Wednesday.
This would be IBM’s second investment in a small-cap in India after Daksh.
IBM is already an exclusive partner for KLG Systel, providing technology platforms for many offerings including Vidushi, a revenue management system specific to energy firms.
Big Blue also provides technology base Connectgaia, KLG’s demand-side revenue management solution to help small commercial establishments manage their electricity better.
KLG plans to consolidate its revenue management technologies for marketing by its subsidiary KLG Power in partnership with TPG Growth India, an arm of US private equity firm TPG.
“The consolidation is due to low margins (below 9%) in our engineering and procurement business. We are looking to widen our customer base in the US,” said Goel.
Rabindra Nath Nayak, research analyst at Reliance Money said, “The investment from IBM will be a very negligible one. This is basically to assure large government departments that wish to deploy such revenue management technologies that the technology is robust.”
However, Nayak feels the company’s US foray may not be productive. “The revenue management systems in the power sector make sense when the power distribution happens through multiple utility companies and users have the flexibility to switch to different providers. In the US, like India, there are only a couple of power distribution companies.”
On the other hand, a foray into Europe could deliver the goods, on account of there being multiple providers.
KLG Systel earned a net profit of Rs 77 crore in the year to March and has provided a guidance of Rs 99 crore net profit and Rs 540 crore revenue for the current fiscal. It has Rs 4,000 crore of orders in the pipeline from six state governments.
Ashok Leyland investors to get Nissan JV stake June 18, 2008
Mumbai: Ashok Leyland, India’s second largest commercial vehicle manufacturer, is considering giving equity to its shareholders in the light commercial vehicle (LCV) joint venture it has with Nissan Motors, a senior company official said Tuesday.
Ashok Leyland and Nissan have set up a 51:49 joint venture to manufacture LCVs, which would soak investments worth Rs 2,400 crore. At debt-equity ratio of 1:1, Ashok Leyland’s equity contribution would be about Rs 600 crore.
Ashok Leyland proposes to give entitlement to its shareholders to hold stock of the joint venture out of its own 51% share.
Chief financial officer K Sridharan said the company hasn’t finalised the exact quantum of equity it would offer to its shareholders.
“Our long-term plan is to list the joint venture. We are not doing this to raise money, but to reward our shareholders,” he said at the sidelines of an analyst meet.
Sridharan said in order to beat the cyclicality of the commercial vehicle business, Ashok Leyland was aiming to increase the steady business, non-auto engine trading, Defence, spares, and exports to 45% over the next 3 years from current 32%.
Ashok Leyland is moving towards reducing its dependency on the highly-cyclical CV business, which currently is in a bear grip owing to factors like increased interest rates, slowdown in industrial production, and fuel price hike.
During the year, exports increased 21%, engine volumes grew 37%, and spare part sales rose 45%.
In engine trading, the vehicle maker is aiming at doubling volumes in two years and exports are expected to double in three years.
Ashok Leyland has set a target to improve its market share in the truck and bus segment to 33% over three years from the current 28%, it has been maintaining over the last two years. The company is raising capacity to 1,84,000 units per annum from 84,000 currently over the next three years.
Managing director R Seshasayee said the company would try to maintain margins at current levels, about 10%, even though there are pressures like input price hike.
It has margin levers in the form of component sourcing from China, price hikes, and expected fiscal incentives from the Uttarakhand plant, which is expected to go on stream from second half of 2009.
Ashok Leyland has lined up capex worth Rs 3,000 crore over the next two years.
Ashok Leyland and Nissan have set up a 51:49 joint venture to manufacture LCVs, which would soak investments worth Rs 2,400 crore. At debt-equity ratio of 1:1, Ashok Leyland’s equity contribution would be about Rs 600 crore.
Ashok Leyland proposes to give entitlement to its shareholders to hold stock of the joint venture out of its own 51% share.
Chief financial officer K Sridharan said the company hasn’t finalised the exact quantum of equity it would offer to its shareholders.
“Our long-term plan is to list the joint venture. We are not doing this to raise money, but to reward our shareholders,” he said at the sidelines of an analyst meet.
Sridharan said in order to beat the cyclicality of the commercial vehicle business, Ashok Leyland was aiming to increase the steady business, non-auto engine trading, Defence, spares, and exports to 45% over the next 3 years from current 32%.
Ashok Leyland is moving towards reducing its dependency on the highly-cyclical CV business, which currently is in a bear grip owing to factors like increased interest rates, slowdown in industrial production, and fuel price hike.
During the year, exports increased 21%, engine volumes grew 37%, and spare part sales rose 45%.
In engine trading, the vehicle maker is aiming at doubling volumes in two years and exports are expected to double in three years.
Ashok Leyland has set a target to improve its market share in the truck and bus segment to 33% over three years from the current 28%, it has been maintaining over the last two years. The company is raising capacity to 1,84,000 units per annum from 84,000 currently over the next three years.
Managing director R Seshasayee said the company would try to maintain margins at current levels, about 10%, even though there are pressures like input price hike.
It has margin levers in the form of component sourcing from China, price hikes, and expected fiscal incentives from the Uttarakhand plant, which is expected to go on stream from second half of 2009.
Ashok Leyland has lined up capex worth Rs 3,000 crore over the next two years.
Tuesday, June 17, 2008
FII Activity on 16-06-2008 - June 17, 2008
The FIIs on Monday stood as net seller in equity. The gross equity purchased was Rs2,712.10 Crore and the gross debt purchased was Rs0.00 Crore while the gross equity sold stood at Rs2,763.90 Crore and gross debt sold stood at Rs0.00 Crore. Therefore, the net investment of equity reported was (Rs51.80) Crore and net debt was Rs0.00 Crore.
Bank Deposits Rule The Investment Roost - June 17, 2008
igh inflation and bearish markets have led to low returns and disappointed investors over the past six months, with the equity and commodity markets being particularly affected. Banks have always performed well for those looking for steady incomes and secure investments. In the last six months, the bank deposits have increased.
"Deposit rates have risen since last year. Perceiving bank deposits as one of the safest investment tools in these conditions, many people have invested their money in banks for stable returns", says H C Pattnaik, CGM of the State Bank of India (SBI).
He says, "Last year, in the first quarter we had deposits worth Rs 430 crore while this year, in just two months, deposits have touched almost Rs 600 crore".
"Rising crude prices have global economies unstable and as a result investment sectors are all passing through a bad phase. Investors are opting for safe investment and no sector will provide more safety than banks", says G G Joshi, GM, Bank of Baroda (BoB).
He says the money flow has increased as the BoB increased 0.50% deposit rate two week ago.
"Though many investment avenues like equity market, mutual funds, and gold offer higher returns than bank rate, people prefer to invest their money in banks", said the ICICI Bank spokesperson.
He said safety is a prime concern for investors in India and hence banks lead as the most preferred option of investment.
"Bank deposits increased in the first quarter and we hope that more customers will take advantage of higher deposit rates", said T K Sharma, GM, Union Bank.
"Deposit rates have risen since last year. Perceiving bank deposits as one of the safest investment tools in these conditions, many people have invested their money in banks for stable returns", says H C Pattnaik, CGM of the State Bank of India (SBI).
He says, "Last year, in the first quarter we had deposits worth Rs 430 crore while this year, in just two months, deposits have touched almost Rs 600 crore".
"Rising crude prices have global economies unstable and as a result investment sectors are all passing through a bad phase. Investors are opting for safe investment and no sector will provide more safety than banks", says G G Joshi, GM, Bank of Baroda (BoB).
He says the money flow has increased as the BoB increased 0.50% deposit rate two week ago.
"Though many investment avenues like equity market, mutual funds, and gold offer higher returns than bank rate, people prefer to invest their money in banks", said the ICICI Bank spokesperson.
He said safety is a prime concern for investors in India and hence banks lead as the most preferred option of investment.
"Bank deposits increased in the first quarter and we hope that more customers will take advantage of higher deposit rates", said T K Sharma, GM, Union Bank.
Yahoo Investor Urges Board Compromise With Icahn - June 17, 2008
San Francisco: Dissident Yahoo Inc investor Eric Jackson on Monday urged fellow shareholders to vote for a board comprising five existing directors and four nominees from billionaire investor Carl Icahn's slate.
Jackson, who leads a group of 146 investors holding 3.2 million Yahoo shares, said that while he supported Icahn fully, he recognized that major shareholders may not. So he proposed a "third option" to create a new board that is more responsive to shareholders' concerns.
Icahn, who owns more than 4 per cent of Yahoo, launched a proxy battle in May to replace the Web pioneer's board in the wake of Microsoft Corp's failed effort to acquire the company.
"Neither side running for election can guarantee that Microsoft will ever come back to the table with an offer for Yahoo," Jackson said in a statement. "We must accept that reality and select a board to do the best job in the current situation (even as distasteful as the situation is)."
He added: "I want Icahn to win outright, but I am putting forward this "Third Option" because I fear several large shareholders will worry about the operational abilities of Icahn and his team."
Jackson said his move was aimed at major Yahoo shareholders, including Capital Research, Legg Mason and Vanguard, as well as proxy advisory firms like RiskMetrics and Glass Lewis.
Yahoo last week signed a Web search advertising deal with Google Inc after talks with Microsoft broke down. The news sent Yahoo shares plunging more than 17 per cent.
Jackson became the star of Yahoo's 2007 annual meeting when he accused then-chairman and CEO Terry Semel of mismanaging the company and failing to do more to revive its falling stock price. He also spearheaded a campaign against board-nominated directors, resulting in a hefty minority vote against the re-election of Semel, who stepped down soon after.
In May, Jackson launched a "vote no" campaign, reaching out to Yahoo shareholders via the Internet to urge them to vote against Yahoo directors.
Recommended changes
Jackson said on Monday that the three members of Yahoo's compensation committee, including Chairman Roy Bostock, and a fourth director, Softbank Capital's Eric Hippeau, should not be re-elected.
"I frankly hold Bostock more responsible (than Yahoo CEO Jerry Yang) for the break-down in talks with Microsoft," wrote Jackson, who runs investment firm Ironfire Capital and personally owns only a handful of Yahoo shares.
"He supposedly has much more experience in such deal-making matters than Yang," Jackson wrote, "and I find it puzzling that he would choose not to attend that fateful meeting on May 3rd in Seattle, which led to Microsoft finally pulling the plug on their offer."
Yang met with Microsoft Chief Executive Steve Ballmer on May 3 in a last attempt to negotiate before the software giant rescinded its offer to buy all of Yahoo. Ballmer had sweetened the offer to $33 a share, but Yahoo would not go below $37, sources told Reuters earlier.
Jackson endorsed Yang's re-election, but left it to the new board to determine whether he should remain chief executive.
From the Icahn slate, he endorsed venture capitalist Adam Dell, who is Dell Inc chief Michael Dell's brother; Harvard law professor Lucian Bebchuk; former Nextel CEO John Chapple; and former Grey Global CEO Edward Meyer.
Jackson said electing a minority of Icahn's nominees to Yahoo's board would also keep a $2.6 billion severance plan from being triggered through a change of control clause, which would happen if Icahn's entire slate was elected.
Jackson, who leads a group of 146 investors holding 3.2 million Yahoo shares, said that while he supported Icahn fully, he recognized that major shareholders may not. So he proposed a "third option" to create a new board that is more responsive to shareholders' concerns.
Icahn, who owns more than 4 per cent of Yahoo, launched a proxy battle in May to replace the Web pioneer's board in the wake of Microsoft Corp's failed effort to acquire the company.
"Neither side running for election can guarantee that Microsoft will ever come back to the table with an offer for Yahoo," Jackson said in a statement. "We must accept that reality and select a board to do the best job in the current situation (even as distasteful as the situation is)."
He added: "I want Icahn to win outright, but I am putting forward this "Third Option" because I fear several large shareholders will worry about the operational abilities of Icahn and his team."
Jackson said his move was aimed at major Yahoo shareholders, including Capital Research, Legg Mason and Vanguard, as well as proxy advisory firms like RiskMetrics and Glass Lewis.
Yahoo last week signed a Web search advertising deal with Google Inc after talks with Microsoft broke down. The news sent Yahoo shares plunging more than 17 per cent.
Jackson became the star of Yahoo's 2007 annual meeting when he accused then-chairman and CEO Terry Semel of mismanaging the company and failing to do more to revive its falling stock price. He also spearheaded a campaign against board-nominated directors, resulting in a hefty minority vote against the re-election of Semel, who stepped down soon after.
In May, Jackson launched a "vote no" campaign, reaching out to Yahoo shareholders via the Internet to urge them to vote against Yahoo directors.
Recommended changes
Jackson said on Monday that the three members of Yahoo's compensation committee, including Chairman Roy Bostock, and a fourth director, Softbank Capital's Eric Hippeau, should not be re-elected.
"I frankly hold Bostock more responsible (than Yahoo CEO Jerry Yang) for the break-down in talks with Microsoft," wrote Jackson, who runs investment firm Ironfire Capital and personally owns only a handful of Yahoo shares.
"He supposedly has much more experience in such deal-making matters than Yang," Jackson wrote, "and I find it puzzling that he would choose not to attend that fateful meeting on May 3rd in Seattle, which led to Microsoft finally pulling the plug on their offer."
Yang met with Microsoft Chief Executive Steve Ballmer on May 3 in a last attempt to negotiate before the software giant rescinded its offer to buy all of Yahoo. Ballmer had sweetened the offer to $33 a share, but Yahoo would not go below $37, sources told Reuters earlier.
Jackson endorsed Yang's re-election, but left it to the new board to determine whether he should remain chief executive.
From the Icahn slate, he endorsed venture capitalist Adam Dell, who is Dell Inc chief Michael Dell's brother; Harvard law professor Lucian Bebchuk; former Nextel CEO John Chapple; and former Grey Global CEO Edward Meyer.
Jackson said electing a minority of Icahn's nominees to Yahoo's board would also keep a $2.6 billion severance plan from being triggered through a change of control clause, which would happen if Icahn's entire slate was elected.
Monday, June 16, 2008
FII Activity on 13-06-2008 - June 16, 2008
The FIIs Friday stood as net seller in equity. The gross equity purchased was Rs3,169.50 Crore and the gross debt purchased was Rs0.00 Crore while the gross equity sold stood at Rs4,311.20 Crore and gross debt sold stood at Rs0.00 Crore. Therefore, the net investment of equity reported was (Rs1,141.70) Crore and net debt was Rs0.00 Crore.
It’s Never Too Early To Invest In Funds - June 16, 2008
Early birds score even if they lose their way.
“One of the greatest pieces of economic wisdom is to know what you do not know.”
— John Kenneth Galbraith
Jack and Jill were twins, and both got their first job at the age of 20. Both wished plenty from their life and started splurging on expensive luxuries.
Jack deferred his decision for an investment account for the time being. Jill, however, acted on her father’s advice and started saving a token amount of Rs 1,000 per month (cumulative amount Rs 12,000 per year) in a diversified mutual fund.
The next 10 years were fun for both, as they were living life to the fullest. Jack never started his investment account and Jill never cared to increase her investments from the meager Rs 12,000 per annum.
Accumulation phase
Ten years later, it was time to take stock. Jack, obviously, had nothing to show. Jill’s investment, on the other hand, had returned at the rate of 15% pa and her total investment of Rs 1,20,000 (Rs 12000 x 10 years) has grown to Rs 2,43,645.
Jill was not impressed with the amount at all. She decided to discontinue her investment plan. She, however, decided to leave her accumulated investment alone in the same fund.
Jack, on the other hand, decided it was time to start investing. He opened an account with the same diversified mutual fund Jill was investing in and started contributing Rs 12,000 pa.
After 30 years, it was time for both Jack and Jill to retire.
Jill had never touched her corpus, but she hadn’t bothered to put in fresh money either. This meant her invested corpus still stood at Rs 1,20,000. Jack, on his part, had invested Rs 3,60,000 (Rs 12,000 x 30) over three decades.
Both had got an annual return of 15% on their investments.
Interestingly, at the end of 30 years, Jack had accumulated Rs 52.16 lakh, while Jill, who had saved for only 10 years, had Rs 1.06 crore. Retirement phase
The accumulation phase was over now and both were in the retirement phase.
Both wished to play safe and shifted their corpuses to investment accounts that were less risky, but offered an assured return of 9% pa.
Both assumed they would live till 100. They would withdraw a level amount at the beginning of every year for the next 40 years to meet their expenses such that, assuming both survived till 100, nothing would be left for their successors.
Calculations threw up even more shocking figures. Though Jill started with 100% more retirement corpus compared with Jack, she could actually withdraw a sum of Rs 13.75 lakh pa, which was 300% more than what Jack could (Rs 4.44 lakh pa).
Summing up from the age of 60 till 100, Jill would have withdrawn Rs 5.50 crore (13.75 lakh x 40 years), while Jack would have taken only Rs 1.77 crore (4.44 lakh x 40 years).
Bottomline
The story of Jack and Jill ends here. However, I am getting tempted to tell you some interesting possibilities as an extension to the story. What may have happened if Jill never stopped her investment or Jack started his investment plan earlier?
Had Jack started at the age of 20 and invested Rs 12,000 pa, then at the age of 60, he would have accumulated Rs 2.13 crore.
Working to a financial plan early in life sure is a paying proposition. What say?
“One of the greatest pieces of economic wisdom is to know what you do not know.”
— John Kenneth Galbraith
Jack and Jill were twins, and both got their first job at the age of 20. Both wished plenty from their life and started splurging on expensive luxuries.
Jack deferred his decision for an investment account for the time being. Jill, however, acted on her father’s advice and started saving a token amount of Rs 1,000 per month (cumulative amount Rs 12,000 per year) in a diversified mutual fund.
The next 10 years were fun for both, as they were living life to the fullest. Jack never started his investment account and Jill never cared to increase her investments from the meager Rs 12,000 per annum.
Accumulation phase
Ten years later, it was time to take stock. Jack, obviously, had nothing to show. Jill’s investment, on the other hand, had returned at the rate of 15% pa and her total investment of Rs 1,20,000 (Rs 12000 x 10 years) has grown to Rs 2,43,645.
Jill was not impressed with the amount at all. She decided to discontinue her investment plan. She, however, decided to leave her accumulated investment alone in the same fund.
Jack, on the other hand, decided it was time to start investing. He opened an account with the same diversified mutual fund Jill was investing in and started contributing Rs 12,000 pa.
After 30 years, it was time for both Jack and Jill to retire.
Jill had never touched her corpus, but she hadn’t bothered to put in fresh money either. This meant her invested corpus still stood at Rs 1,20,000. Jack, on his part, had invested Rs 3,60,000 (Rs 12,000 x 30) over three decades.
Both had got an annual return of 15% on their investments.
Interestingly, at the end of 30 years, Jack had accumulated Rs 52.16 lakh, while Jill, who had saved for only 10 years, had Rs 1.06 crore. Retirement phase
The accumulation phase was over now and both were in the retirement phase.
Both wished to play safe and shifted their corpuses to investment accounts that were less risky, but offered an assured return of 9% pa.
Both assumed they would live till 100. They would withdraw a level amount at the beginning of every year for the next 40 years to meet their expenses such that, assuming both survived till 100, nothing would be left for their successors.
Calculations threw up even more shocking figures. Though Jill started with 100% more retirement corpus compared with Jack, she could actually withdraw a sum of Rs 13.75 lakh pa, which was 300% more than what Jack could (Rs 4.44 lakh pa).
Summing up from the age of 60 till 100, Jill would have withdrawn Rs 5.50 crore (13.75 lakh x 40 years), while Jack would have taken only Rs 1.77 crore (4.44 lakh x 40 years).
Bottomline
The story of Jack and Jill ends here. However, I am getting tempted to tell you some interesting possibilities as an extension to the story. What may have happened if Jill never stopped her investment or Jack started his investment plan earlier?
Had Jack started at the age of 20 and invested Rs 12,000 pa, then at the age of 60, he would have accumulated Rs 2.13 crore.
Working to a financial plan early in life sure is a paying proposition. What say?
Lehman Bros To Invest $175 M In Unitech Project - June 16 ,2008
Mumbai: Developer Unitech Ltd said on Monday Lehman Brothers Real Estate Partners has agreed to invest about $175 million for a 50 per cent stake in the initial phase of a project in Mumbai.
Unitech and its local partners will develop one million square feet of office space, in the initial phase, out of a total developable area of about 18 million square feet on the Western Express Highway, the company said in a statement.
The construction costs will be equally split between Lehman Brothers and Unitech with its partners, it added.
Both firms intend to expand the relationship by considering future investments in subsequent phases of this project as well as in additional projects.
Unitech and its local partners will develop one million square feet of office space, in the initial phase, out of a total developable area of about 18 million square feet on the Western Express Highway, the company said in a statement.
The construction costs will be equally split between Lehman Brothers and Unitech with its partners, it added.
Both firms intend to expand the relationship by considering future investments in subsequent phases of this project as well as in additional projects.
Saturday, June 14, 2008
IOC, OVL To Invest $3 B In Iran Block - June 14, 2008
An Indian consortium led by ONGC Videsh would invest $3 billion in developing gas reserves at the Farsi block in Iran, a senior official from Indian Oil Corporation, which is also a part of the group, said on Friday.
ONGC Videsh, a wholly-owned subsidiary of Oil and Natural Gas Corporation (ONGC), and Indian Oil, India's largest oil refiner and marketer, hold 40% each in the Farsi block, with Oil India holding the rest. Requesting anonymity, the official said that the block may hold reserves of up to 12.8 trillion cubic feet of recoverable gas.
"We submitted the commerciality report for gas development in the block in December 2007. Indian Oil's share in the investment would be $1.2 billion," the official said.
The Farsi block is estimated to have over one billion barrels of in-place oil. Though the official did not give a timeframe for the proposed investment, he said that Iranian authorities have indicated that the commerciality of the gas discoveries could be approved "anytime soon".
Calling the oil discovered at the Farsi block "very heavy", the official said gas development could be completed within three-four years after the approval comes through. However, the consortium would not be allowed to import the oil and gas to India as it is a service contract. "We will get 35% return on the exploration investment made in the block and hope to get 15% return on development. The returns could be less as the risk is low," the official said.
According to an analyst, the primary concern for the consortium would be starting development and production at the earliest. "They may find it very difficult to secure funding if uncertainty over the timeframe for starting production continues," the analyst said, on condition of anonymity.
The high interest-rates, considering the uncertainty and the current credit situation, may directly affect the consortium's profitability, the analyst added. He said the group might want to convert the gas obtained into liquefied natural gas (LNG) and bring it into India, as the economics for LNG are positive now.
"There is a huge infrastructure available and under development for transporting and also regasifying LNG but there is not enough gas. LNG sells at almost double the price in the spot market than the piped gas sold at Nymex," he said.
However, the group will have to maintain prices to be able to find enough buyers. Indian Oil officials did not comment on the possibility of such a move.
ONGC Videsh, a wholly-owned subsidiary of Oil and Natural Gas Corporation (ONGC), and Indian Oil, India's largest oil refiner and marketer, hold 40% each in the Farsi block, with Oil India holding the rest. Requesting anonymity, the official said that the block may hold reserves of up to 12.8 trillion cubic feet of recoverable gas.
"We submitted the commerciality report for gas development in the block in December 2007. Indian Oil's share in the investment would be $1.2 billion," the official said.
The Farsi block is estimated to have over one billion barrels of in-place oil. Though the official did not give a timeframe for the proposed investment, he said that Iranian authorities have indicated that the commerciality of the gas discoveries could be approved "anytime soon".
Calling the oil discovered at the Farsi block "very heavy", the official said gas development could be completed within three-four years after the approval comes through. However, the consortium would not be allowed to import the oil and gas to India as it is a service contract. "We will get 35% return on the exploration investment made in the block and hope to get 15% return on development. The returns could be less as the risk is low," the official said.
According to an analyst, the primary concern for the consortium would be starting development and production at the earliest. "They may find it very difficult to secure funding if uncertainty over the timeframe for starting production continues," the analyst said, on condition of anonymity.
The high interest-rates, considering the uncertainty and the current credit situation, may directly affect the consortium's profitability, the analyst added. He said the group might want to convert the gas obtained into liquefied natural gas (LNG) and bring it into India, as the economics for LNG are positive now.
"There is a huge infrastructure available and under development for transporting and also regasifying LNG but there is not enough gas. LNG sells at almost double the price in the spot market than the piped gas sold at Nymex," he said.
However, the group will have to maintain prices to be able to find enough buyers. Indian Oil officials did not comment on the possibility of such a move.
Friday, June 13, 2008
FII Activity on 12-06-2008 - June 13, 2008
The FIIs Thursday stood as net seller in equity. The gross equity purchased was Rs3,768.40 Crore and the gross debt purchased was Rs0.00 Crore while the gross equity sold stood at Rs3,919.90 Crore and gross debt sold stood at Rs0.00 Crore. Therefore, the net investment of equity reported was Rs(151.50) Crore and net debt was Rs0.00 Crore.
Thursday, June 12, 2008
FII Activity on 11-06-2008
The FIIs Wednesday stood as net seller in equity. The gross equity purchased was Rs3,311.50 Crore and the gross debt purchased was Rs0.00 Crore while the gross equity sold stood at Rs4,155.50 Crore and gross debt sold stood at Rs0.00 Crore. Therefore, the net investment of equity reported was (Rs844.00) Crore and net debt was Rs0.00 Crore.
Realty Investors Begin To Under-Cut Builder Rates - June 12, 2008
Mumbai: The carnage in the stock markets — where realty stocks have taken a beating along with the rest — may hasten the slowdown in the real estate market over the next six months, say experts.
“The market is already slowing as high property prices have affected sales,” says Balaji Rao, managing director, Starwood Capital India Advisers.
“Developers are delaying construction and delivery of new projects as they are facing a liquidity crunch. In addition, rising input costs, with the probability of an increase in interest rates, has dampened realty stocks. Even assuming that oil prices and inflation go down, the market faces a rough time.”
Even as realty stocks are quoting at huge discounts to their issue prices (DLF at Rs 479.85 against Rs 525 issue price; and Omaxe, Parsvnath and Puravankara at 40-50% discounts), realty is suddenly looking scary for investors.
Many investors are thus opting to book profits by selling their flats at up to 15% lower than the builders’ rates. These are investors who don’t want their notional profits to be eroded if the rates decline.
“Mind you, these investors may be selling at a discount, but they are still booking huge profits as they had booked the flats at very low rates two to three years ago,” says
Rajiv Jain of Jaisons Property Management, a real estate consultant at Bandra, who has sold at least eight investor-held flats in the past three months.
“In Bandra and Khar,” he says, “investors are willing to sell at Rs 21,000-15,000 per sq ft as against the prevailing rates of Rs 23,000 and Rs 18,000.”
Mahesh Ahuja of Aruba Homes Pvt Ltd, another real estate consultant, says, “Unlike six months ago, there are too many sellers, but hardly any buyers. Sales have declined as property prices have appreciated, making some investors rethink their exit strategy before the lull sets in.”
Ahuja, who has also sold seven flats in the past three months, believes that it makes good business sense for investors to exit now and reinvest down the line. “Holding on to property when rates are stagnant or falling results in reduced return on investment,” he says.
A recent report by Credit Suisse says that though developers insist that prices have remained stable or are increasing, they are finding it difficult to raise funds from the equity and debt markets.
“It is leading to distress sales and a slowdown in execution,” says Anand Agrawal, the bank’s analyst.
“Further, as companies follow the percentage completion method for recording sales and profits, rising input costs may lead to write-downs in future if costs incurred are higher than estimated.
Pranay Vakil, chairman, Knight Frank, global property consultants, says that though the amounts may be small, developers are borrowing at phenomenal rates of 24% to complete their projects. “Unless they complete the projects, they won’t be able to rent or sell flats,” he says.
“The market is already slowing as high property prices have affected sales,” says Balaji Rao, managing director, Starwood Capital India Advisers.
“Developers are delaying construction and delivery of new projects as they are facing a liquidity crunch. In addition, rising input costs, with the probability of an increase in interest rates, has dampened realty stocks. Even assuming that oil prices and inflation go down, the market faces a rough time.”
Even as realty stocks are quoting at huge discounts to their issue prices (DLF at Rs 479.85 against Rs 525 issue price; and Omaxe, Parsvnath and Puravankara at 40-50% discounts), realty is suddenly looking scary for investors.
Many investors are thus opting to book profits by selling their flats at up to 15% lower than the builders’ rates. These are investors who don’t want their notional profits to be eroded if the rates decline.
“Mind you, these investors may be selling at a discount, but they are still booking huge profits as they had booked the flats at very low rates two to three years ago,” says
Rajiv Jain of Jaisons Property Management, a real estate consultant at Bandra, who has sold at least eight investor-held flats in the past three months.
“In Bandra and Khar,” he says, “investors are willing to sell at Rs 21,000-15,000 per sq ft as against the prevailing rates of Rs 23,000 and Rs 18,000.”
Mahesh Ahuja of Aruba Homes Pvt Ltd, another real estate consultant, says, “Unlike six months ago, there are too many sellers, but hardly any buyers. Sales have declined as property prices have appreciated, making some investors rethink their exit strategy before the lull sets in.”
Ahuja, who has also sold seven flats in the past three months, believes that it makes good business sense for investors to exit now and reinvest down the line. “Holding on to property when rates are stagnant or falling results in reduced return on investment,” he says.
A recent report by Credit Suisse says that though developers insist that prices have remained stable or are increasing, they are finding it difficult to raise funds from the equity and debt markets.
“It is leading to distress sales and a slowdown in execution,” says Anand Agrawal, the bank’s analyst.
“Further, as companies follow the percentage completion method for recording sales and profits, rising input costs may lead to write-downs in future if costs incurred are higher than estimated.
Pranay Vakil, chairman, Knight Frank, global property consultants, says that though the amounts may be small, developers are borrowing at phenomenal rates of 24% to complete their projects. “Unless they complete the projects, they won’t be able to rent or sell flats,” he says.
Wednesday, June 11, 2008
FII Activity on 10-06-2008
The FIIs on Tuesday stood as net seller in equity. The gross equity purchased was Rs2,556.60 Crore and the gross debt purchased was Rs0.00 Crore while the gross equity sold stood at Rs3,898.40 Crore and gross debt sold stood at Rs0.00 Crore. Therefore, the net investment of equity reported was (Rs1,341.80) Crore and net debt was Rs0.00 Crore.
Investors Turn Jittery As Market Shows No Sign Of Early Recovery - June 11, 2008
There seems to be no quick-fix mechanism to pull back a market that has gone into a tailspin. Extending Monday’s losses, equity benchmarks fell to their lowest level in 2008, rattled by fears that RBI may raise interest rates to cool inflation.
However, buying towards the fag end of the trading session by domestic funds and insurance companies saw the market recoup some losses. “Though there was some buying towards the end of the day, the market is still in a nervous mode.
Unlike in previous falls, FIIs are not short covering their positions this time round. Volumes are dropping by the day and there are no leveraged positions anymore. There is absolute lack of investor interest in current market,” said Ajmera Associates director Vikram Bhatt.
According to market talk, a band of operators was seen dumping benchmark heavyweights - HDFC, ICICI, ONGC and Infosys - and short covering Reliance Industries shares in large numbers.
The 30-share Sensex ended 176.8 points or 1% lower at 14,889.25 while the 50-share Nifty closed 51 points or 1.1% lower at 4,449.8 on Tuesday. The post-noon session witnessed the Sensex trading 421 points lower at 14,645.31, falling below this year’s previous low of 14,677.24 reached on March 18. Of 2,699 shares traded on BSE, 964 scrips advanced, 1,667 declined and 68 remained unchanged. Shares worth Rs 68,000 crore changed hands on the bourses on Tuesday.
FIIs net sold shares worth Rs 910 crore. “The recent surge in crude prices has not been factored in the inflation figures released last week. Taking this into account, inflation could be more than 8% this week. This will force the central bank to look at another round of interest rate hikes, which in turn, will further destabilise the market,” Mr Bhatt added.
Yet, SBICap Securities’ head of institutional sales Jignesh Desai has a different view and maintains that concerns on inflation apart, the market is likely to consolidate in and around current levels. “We expect a small correction towards the last trading days of the week, but no big drops thereafter. We could see some rally next week as the market is expecting a series of positive policy announcement and relief packages for sectors like infrastructure and real estate,” Mr Desai added.
A look at the technicals reveals that the Nifty has attempted a rally off the lower boundary of the triangle pattern that has developed since the January lows. “Our preferred view for this market is a retest of the August 2007 lows, around the 4,000 mark. A break below 4,448-4,500 would support this view that a decline towards the August-2007 low was underway. We would be tempted to bargain hunt in the 4,200-4,000 range,” a recent CLSA report said.
Elsewhere in Asia, markets fell the most in three months as widening credit-market losses and the prospect of higher borrowing costs fanned concern earnings will decline. Hang Seng, Nikkei, Strait Times and Seoul Compo ended down 1.1% and 4.2%.
Elsewhere in Asia, markets fell the most in three months as widening credit-market losses and the prospect of higher borrowing costs fanned concern earnings will decline
However, buying towards the fag end of the trading session by domestic funds and insurance companies saw the market recoup some losses. “Though there was some buying towards the end of the day, the market is still in a nervous mode.
Unlike in previous falls, FIIs are not short covering their positions this time round. Volumes are dropping by the day and there are no leveraged positions anymore. There is absolute lack of investor interest in current market,” said Ajmera Associates director Vikram Bhatt.
According to market talk, a band of operators was seen dumping benchmark heavyweights - HDFC, ICICI, ONGC and Infosys - and short covering Reliance Industries shares in large numbers.
The 30-share Sensex ended 176.8 points or 1% lower at 14,889.25 while the 50-share Nifty closed 51 points or 1.1% lower at 4,449.8 on Tuesday. The post-noon session witnessed the Sensex trading 421 points lower at 14,645.31, falling below this year’s previous low of 14,677.24 reached on March 18. Of 2,699 shares traded on BSE, 964 scrips advanced, 1,667 declined and 68 remained unchanged. Shares worth Rs 68,000 crore changed hands on the bourses on Tuesday.
FIIs net sold shares worth Rs 910 crore. “The recent surge in crude prices has not been factored in the inflation figures released last week. Taking this into account, inflation could be more than 8% this week. This will force the central bank to look at another round of interest rate hikes, which in turn, will further destabilise the market,” Mr Bhatt added.
Yet, SBICap Securities’ head of institutional sales Jignesh Desai has a different view and maintains that concerns on inflation apart, the market is likely to consolidate in and around current levels. “We expect a small correction towards the last trading days of the week, but no big drops thereafter. We could see some rally next week as the market is expecting a series of positive policy announcement and relief packages for sectors like infrastructure and real estate,” Mr Desai added.
A look at the technicals reveals that the Nifty has attempted a rally off the lower boundary of the triangle pattern that has developed since the January lows. “Our preferred view for this market is a retest of the August 2007 lows, around the 4,000 mark. A break below 4,448-4,500 would support this view that a decline towards the August-2007 low was underway. We would be tempted to bargain hunt in the 4,200-4,000 range,” a recent CLSA report said.
Elsewhere in Asia, markets fell the most in three months as widening credit-market losses and the prospect of higher borrowing costs fanned concern earnings will decline. Hang Seng, Nikkei, Strait Times and Seoul Compo ended down 1.1% and 4.2%.
Elsewhere in Asia, markets fell the most in three months as widening credit-market losses and the prospect of higher borrowing costs fanned concern earnings will decline
Tuesday, June 10, 2008
Axis PE Invests Rs 142 Crore In Two Companies - June 10, 2008
Axis Bank''s private equity arm, Axis PE, on Monday said that it has invested Rs 75 crore and Rs 67 crore in Neesa Leisure and Corrtech International, respectively.These investments further reaffirm Axis PE''s commitment to invest in companies involved in infrastructure development of the nation--hospitality, railways, development of oil and gas pipelines, water supply and sanitation.
The two investments come close after Axis PE making an investment of Rs 120 crore in Harish Chandra (India) earlier this month. Neesa Leisure develops and operates resorts and hotel under the ''Cambay'' brand name. The company currently manages three properties and plans to have seven properties in the next three years spread over five cities in western India. Corrtech is an Ahmedabad-based company involved in a number of high-growth business segments linked to oil and gas transportation infrastructure and repairs and services of gas turbines. Axis PE recently announced the first closure of its Axis Infrastructure Fund (AIF) at Rs 600 crore. Its eventual targeted corpus is Rs 2,000 crore. AIF will seek and participate in growing infrastructure and infrastructure enabling companies through equity investments with a minimum deal size of $20 million.
The two investments come close after Axis PE making an investment of Rs 120 crore in Harish Chandra (India) earlier this month. Neesa Leisure develops and operates resorts and hotel under the ''Cambay'' brand name. The company currently manages three properties and plans to have seven properties in the next three years spread over five cities in western India. Corrtech is an Ahmedabad-based company involved in a number of high-growth business segments linked to oil and gas transportation infrastructure and repairs and services of gas turbines. Axis PE recently announced the first closure of its Axis Infrastructure Fund (AIF) at Rs 600 crore. Its eventual targeted corpus is Rs 2,000 crore. AIF will seek and participate in growing infrastructure and infrastructure enabling companies through equity investments with a minimum deal size of $20 million.
FII Activity on 10-06-2008
The FIIs on Monday stood as net buyer in equity and net seller in debt. The gross equity purchased was Rs2,887.30 Crore and the gross debt purchased was Rs0.00 Crore while the gross equity sold stood at Rs2,580.30 Crore and gross debt sold stood at Rs15.00 Crore. Therefore, the net investment of equity reported was Rs307.00 Crore and net debt was (Rs15.00) Crore.
Monday, June 9, 2008
FII Activity on 06-06-2008 - June 9, 2008
The FIIs on Friday stood as net seller in equity and in debt. The gross equity purchased was Rs3,739.60 Crore and the gross debt purchased was Rs0.00 Crore while the gross equity sold stood at Rs5,158.50 Crore and gross debt sold stood at Rs30.00 Crore. Therefore, the net investment of equity reported was (Rs1,419.00) Crore and in net debt was (Rs30.00) Crore.
Wrong Policies Can Wreck $100 B Investment In Steel: Jindal - June 9, 2008
New Delhi: India runs the risk of losing 100 billion dollar investment in steel if the government persists with restrictions like export duty, JSW Steel Vice Chairman and Managing Director Sajjan Jindal said after taking over as Assocham President.
"We are talking about 100 billion dollars over the next five to six years to be invested in the steel industry. Now if the Government of India levies duties on exports, all these investments will not come," Jindal said.
He said imposition of up to 15 per cent export duty on steel may bring apprehensions in the mind of global investors who have announced their mega plans for India.
"One has to talk to Posco and ArcelorMittal and (ask) if there is an export duty and restrictions, will they still be investing," he said.
As of now, both domestic and foreign steel players have signed 193 memoranda of understanding with states for setting up new units with a total planned capacity of around 243 million tons and a total proposed investment of over Rs 5.14 lakh crore.
While the Assocham would try and convince the investors about the temporary nature of the measures arising out of 45-month high inflation, "investors fear that even if the government withdraws the duty today, what is the guarantee that tomorrow it will not put it at 50 per cent."
The government has not only withdrawn tax refunds on steel export, but also slapped export duty up to 15 per cent. However, it is learnt that the Committee of Secretaries has agreed to roll back the export duty on many of the steel products.
Steel prices have been spiralling for the last few months. Between January and April 2008, price of pig iron went up by more than 70 per cent, construction steel like TMT and wire rods by more than 36 per cent and HR coils by more than 40 per cent.
Jindal said rise in raw material prices, strong demand in international and domestic markets are some of reasons for the sharp increase in rates.
If the fears expressed by Assocham come true, the ambitious targets of 290 million tonne capacity by 2020 will be difficult to achieve.
At present, India has a total capacity of about 53 million tons and there is a demand-supply mismatch adding to the inflation.
"We are talking about 100 billion dollars over the next five to six years to be invested in the steel industry. Now if the Government of India levies duties on exports, all these investments will not come," Jindal said.
He said imposition of up to 15 per cent export duty on steel may bring apprehensions in the mind of global investors who have announced their mega plans for India.
"One has to talk to Posco and ArcelorMittal and (ask) if there is an export duty and restrictions, will they still be investing," he said.
As of now, both domestic and foreign steel players have signed 193 memoranda of understanding with states for setting up new units with a total planned capacity of around 243 million tons and a total proposed investment of over Rs 5.14 lakh crore.
While the Assocham would try and convince the investors about the temporary nature of the measures arising out of 45-month high inflation, "investors fear that even if the government withdraws the duty today, what is the guarantee that tomorrow it will not put it at 50 per cent."
The government has not only withdrawn tax refunds on steel export, but also slapped export duty up to 15 per cent. However, it is learnt that the Committee of Secretaries has agreed to roll back the export duty on many of the steel products.
Steel prices have been spiralling for the last few months. Between January and April 2008, price of pig iron went up by more than 70 per cent, construction steel like TMT and wire rods by more than 36 per cent and HR coils by more than 40 per cent.
Jindal said rise in raw material prices, strong demand in international and domestic markets are some of reasons for the sharp increase in rates.
If the fears expressed by Assocham come true, the ambitious targets of 290 million tonne capacity by 2020 will be difficult to achieve.
At present, India has a total capacity of about 53 million tons and there is a demand-supply mismatch adding to the inflation.
Saturday, June 7, 2008
Fiis Seen Exiting Rcom, Cut Stake By 25% In 1 Yr - June 7, 2008
MUMBAI: Foreign institutional investor (FII) interest in Reliance Communications (RCOM) is waning. While Idea Cellular saw an increase in FII investment in the last one year and Bharti managed to maintain the levels despite choppy market conditions, RCOM failed to remain lucrative to FIIs amid falling market share and lower revenue growth.
According to the information provided by RCOM to the BSE, the FII holding in the company declined from 13% in March ‘07 to 10% in March ‘08. That’s nearly 25% fall in 12 months. The decline has been gradual, with FIIs shedding almost over 50 bps every quarter.
FIIs are considered to be the most astute long term investors on the Dalal Street and constitute single largest group of non-promoter investors in some of India’s most well known companies including HDFC, ICICI Bank, ACC, Grasim and Indian Hotels among others. "FII interest in a company is a reflection of its performance and growth potential," says an analyst.
As FIIs has always been one of the most deep-pocketed investors on the D-street, a sell-off by them triggers erosion in the stock price. And that has what happened to the share price of Reliance Communications.
The company has lost nearly 35% from its peak reached on January 10 this year. In comparison, the Sensex declined by around 25% during the period.
The company has also under performed its two others peers — Bharti Airtel and Idea Cellular during the period. Since the beginning of the year, Bharti Airtel and Idea have fallen 17% and 25% respectively.
In case of Idea Cellular, the FII holding was 6.6% in the December ‘07 quarter and moved up to 7.7% by March ‘08. During this period, the company posted 45% rise in net profit, bolstered by increased ARPUs and zooming subscriber base.
Idea’s national market share improved from 8.6% to 9.4% between March ‘07 and March ‘08.
According to the information provided by RCOM to the BSE, the FII holding in the company declined from 13% in March ‘07 to 10% in March ‘08. That’s nearly 25% fall in 12 months. The decline has been gradual, with FIIs shedding almost over 50 bps every quarter.
FIIs are considered to be the most astute long term investors on the Dalal Street and constitute single largest group of non-promoter investors in some of India’s most well known companies including HDFC, ICICI Bank, ACC, Grasim and Indian Hotels among others. "FII interest in a company is a reflection of its performance and growth potential," says an analyst.
As FIIs has always been one of the most deep-pocketed investors on the D-street, a sell-off by them triggers erosion in the stock price. And that has what happened to the share price of Reliance Communications.
The company has lost nearly 35% from its peak reached on January 10 this year. In comparison, the Sensex declined by around 25% during the period.
The company has also under performed its two others peers — Bharti Airtel and Idea Cellular during the period. Since the beginning of the year, Bharti Airtel and Idea have fallen 17% and 25% respectively.
In case of Idea Cellular, the FII holding was 6.6% in the December ‘07 quarter and moved up to 7.7% by March ‘08. During this period, the company posted 45% rise in net profit, bolstered by increased ARPUs and zooming subscriber base.
Idea’s national market share improved from 8.6% to 9.4% between March ‘07 and March ‘08.
Single FII Can Invest Up To $200 M In Debt - June 7, 2008
MUMBAI: Foreign institutional investors (FIIs) will now have an individual ceiling of $200 million for investment in Indian debt securities.
The move is perceived, by many, to be an attempt to avoid concentration of risk in the debt market. Further, the Securities and Exchange Board of India (Sebi) ruled on Friday that the enhanced limits will be allocated to FIIs on a ‘first-come-first-serve basis’.
FIIs wishing to take advantage of the enhanced limit will have to make their applications to Sebi by June 16, 2008, and the first few entities to apply before the total cap of $8 billion is reached will be allocated the debt.
There are doubts over the exact impact of the move, especially since the existing limit also has not been utilised. Sebi’s move has come at a time when interest in government securities has waned resulting in the yield on 10-year bonds inching up to 8.25%.
Bonds have come under pressure, following fuel price hike and the government’s decision to issue more oil bonds this year. But while the new limit may not have a short-term impact, market participants feel that it is a positive signal being sent out by the government and regulators.
Last week, the government had reviewed its external commercial borrowing policy and increased the FII limit in debt securities to a total of $8 billion, of which $5 billion would be for government securities and $3 billion for investment in corporate debt.
The earlier limit for FIIs in debt stood at $4.7 billion, of which $3.2 billion was allocated for government securities and $1.5 billion for investment in corporate debt.
Standard Chartered Bank managing director and regional head for global markets and South Asia Sundeep Bhandari said, "The ceiling Sebi has imposed on companies is probably an attempt to avoid concentration of risk, and broadbase the market. It is a good move by the regulator, as it will negate the volatility that could have been caused by a lesser number of investors pumping in large amounts."
The decision to increase foreign investment in debt securities comes at a time when the market is not doing too well. According Mr Bhandari, the timing could not be better, as it will attract investors with a long term view.
"If this move had come when the market was booming, it would have fuelled a number of speculative investors," he added.
A senior official at a bond house said, "The appetite for Indian debt securities from FIIs has not been high so far. Though the signals sent out by Sebi are clear, it remains to be seen how much of an impact it will have."
Incidentally, the corporate debt market has not performed too well over the past few months. There was only two new issues in the past month. The other two issues currently open, of Gammon India and Punjab State Electricity Board, have been kept open for a period of over two months due to a lack of investor
The move is perceived, by many, to be an attempt to avoid concentration of risk in the debt market. Further, the Securities and Exchange Board of India (Sebi) ruled on Friday that the enhanced limits will be allocated to FIIs on a ‘first-come-first-serve basis’.
FIIs wishing to take advantage of the enhanced limit will have to make their applications to Sebi by June 16, 2008, and the first few entities to apply before the total cap of $8 billion is reached will be allocated the debt.
There are doubts over the exact impact of the move, especially since the existing limit also has not been utilised. Sebi’s move has come at a time when interest in government securities has waned resulting in the yield on 10-year bonds inching up to 8.25%.
Bonds have come under pressure, following fuel price hike and the government’s decision to issue more oil bonds this year. But while the new limit may not have a short-term impact, market participants feel that it is a positive signal being sent out by the government and regulators.
Last week, the government had reviewed its external commercial borrowing policy and increased the FII limit in debt securities to a total of $8 billion, of which $5 billion would be for government securities and $3 billion for investment in corporate debt.
The earlier limit for FIIs in debt stood at $4.7 billion, of which $3.2 billion was allocated for government securities and $1.5 billion for investment in corporate debt.
Standard Chartered Bank managing director and regional head for global markets and South Asia Sundeep Bhandari said, "The ceiling Sebi has imposed on companies is probably an attempt to avoid concentration of risk, and broadbase the market. It is a good move by the regulator, as it will negate the volatility that could have been caused by a lesser number of investors pumping in large amounts."
The decision to increase foreign investment in debt securities comes at a time when the market is not doing too well. According Mr Bhandari, the timing could not be better, as it will attract investors with a long term view.
"If this move had come when the market was booming, it would have fuelled a number of speculative investors," he added.
A senior official at a bond house said, "The appetite for Indian debt securities from FIIs has not been high so far. Though the signals sent out by Sebi are clear, it remains to be seen how much of an impact it will have."
Incidentally, the corporate debt market has not performed too well over the past few months. There was only two new issues in the past month. The other two issues currently open, of Gammon India and Punjab State Electricity Board, have been kept open for a period of over two months due to a lack of investor
Friday, June 6, 2008
FII Activity on 05-06-2008
The FIIs on Thursday stood as net seller in equity and debt also. The gross equity purchased was Rs3,245.70 Crore and the gross debt purchased was Rs0.00 Crore while the gross equity sold stood at Rs4,070.90Crore and gross debt sold stood at Rs15.00 Crore. Therefore, the net investment of equity reported was (Rs825.20) Crore and net debt was Rs15.00 Crore.
Investment In Rural Infrastructure Crucial - June 6, 2008
A writer in the International Herald Tribune recently exclaimed: “Now may be the time to shift from gold. Platinum and agriculture are seen as next areas of demand.” The steeply rising prices of agricultural commodities have engaged the attention of the world; agriculture is perceived to be a new pot of gold. World Bank’s World Development Report, 2008 (WDR) stresses this agricultural perspective worldwide, including the challenges India encounters.
India’s farm sector is projected to record a mere 2.6 per cent growth in 2007-08 against the overall GDP growth rate of 8.7 per cent. As the Economic Survey 2007-08 laments, the growth rate of food-grain production decelerated to 1.2 per cent during 1990-2007, lower than annual population growth rate averaging 1.9 per cent.
The share of agriculture in the GDP has steadily declined from 36.4 per cent in 1982-83 to 18.5 per cent in 2006-07, although this sector still supports more than half a billion people, providing employment to 52 per cent of the workforce. The stagnating agriculture, languishing food output account for millions of poor farmers struggling with high debts and crop failures, hundreds of them compelled to give up their lives.
Lack of drive
Recognising a loss of dynamism in this vital sector, the Economic Survey acknowledges that there has been a “gradual degradation of natural resources through overuse and inappropriate use of chemical fertilisers,” affecting the soil quality (consumption of fertilisers increased from 69.8 kg per ha in 1991-92 to 113.3 kg in 2006-07).
In this context, the Eleventh Five-year Plan (2007-2012) calls for a concerted strategy “to double the growth rate achieved in the 10th Plan and put agriculture on a growth path of 4 per cent.” It is realised that the Millennium Development goal of halving extreme poverty and hunger by 2015 will not be reached “unless neglect and under-investment in the agricultural and rural sectors over the past 20 years is reversed.”
The WDR emphasises that the GDP growth arising from agriculture is almost four times as effective in reducing poverty as GDP originating outside the sector. “Three of every four poor people in developing countries live in rural areas – 2.1 billion living on less than $2 a day and 880 million on less than $1 a day – and most depend on agriculture for their livelihoods.”
China’s feat acclaimed
WDR acclaims China’s unprecedented poverty reduction in the past 25 years from 53 per cent in 1981 to 8 per cent in 2001, pulling about 500 million people out of poverty; rural poverty dropped from 76 per cent in 1980 to 12 per cent in 2001. Growth in Indian agriculture likewise did more to reduce poverty than did industry or services. During the 1960s and 1970s, the introduction of semi-dwarf varieties of wheat and rice led to dramatic leaps in agricultural production and raised farmers’ incomes. Rural poverty came down from 64 per cent in 1967 to 50 per cent in 1977, and to 34 per cent in 1986.
To revive Indian agriculture, WDR recommends measures such as stepping up of investments in the sector, crop insurance for farmers, realistic charges for water and power, reduction in environmental footprints of intense agriculture, and creating greater opportunities in the non-farm sector to absorb displaced agricultural labour.
It calls for a clear “policy diamond” in a continued effort to improve access to markets and develop modern market chains, achieve a large scale and sustainable smallholder-based productivity revolution, achieve food security, improve livelihoods for those who remain as subsistence farmers, and capitalise on agricultural growth to develop the rural non-farm sector.
There must be a clear strategy for investments to increase farm yields and profitability as well as rural roads, irrigation, power and markets.
The need is critical to invest in rural infrastructure. The lack of access to food is a greater problem than the availability of food. Nobel Laureate Amartya Sen strikingly said, “starvation is a matter of some people not having enough food to eat, and not a matter of there being not enough food to eat.”
Long-term investment
Long-term investments in soil and water management are needed to enhance the resilience of farming systems, especially for people in subsistence farming in remote and risky environments.
Agriculture uses 85 per cent of fresh water withdrawals in developing countries. More than one-fifth of groundwater aquifers in India are over-exploited in three of the four leading Green Revolution states – Punjab, Haryana and Tamil Nadu. In Punjab, about 60 per cent of the groundwater resources are already over-exploited, extraction rates exceeding recharge rates.
‘Fiscal drain’
WDR terms public investment in agriculture as “much misspending” because it has been heavily skewed towards providing subsidies — to the extent of 75 per cent. Electricity subsidies to agriculture are described as “fiscally draining and environmentally damaging.” In Punjab, electricity subsidies to agriculture in 2002-03 were 7 per cent of state expenditures. Again, labour productivity has remained stagnant in India since the mid-1990s.
The key to the alleviation of rampant poverty among farmers is the increase in productivity of staple crops. Irrigated land productivity is more than double that of rain-fed land. Productivity of crops in India is not only low relative to other countries; there are considerable inter-State variations. As the Economic Survey testifies, productivity of wheat in 2005-06 varied from a low of 1,393 kg per ha in Maharashtra to a high of 4,179 kg in Punjab.
A paramount paradigm conducive to agricultural resuscitation signals towards “the visible hand of the state” that must provide core public goods, improve the investment environment, regulate natural resource management, and secure desirable social outcomes.
The WDR lays emphasis on safety nets and access to credit in order to minimise distress land sales when farmers are exposed to calamities and shocks. Incentives are necessary for farmers to diversify into high-value horticulture, poultry, fish, and dairy products “through an appropriate pricing mechanism”.
Bio-tech advantage
Two-thirds of the world’s agricultural value added is created in developing countries. It generates an average 29 per cent of GDP and employs 65 per cent of the labour force. Revolutionary advances in biotechnology offer potentially large benefits.
Agricultural intensification has created environmental problems from reduced bio-diversity, mismanaged irrigation water, agrochemical pollution, and pesticide poisoning. Many less favoured areas suffer from deforestation, soil erosion, desertification, and degradation of pastures and watersheds. Global warming is one of the areas of greatest uncertainty for agriculture.
While India keenly looks for a second green revolution, particularly in the rain-fed areas, there are schemes such as credit support, revamp of co-operative credit structure, redesign of the insurance scheme, rehabilitation package for distressed farmers, and easy availability of inputs, which, if properly implemented, will lend an impetus to the languishing sector. The Centre’s National Food Security Mission and the Rashtriya Krishi Vikas Yojana aim at rejuvenating agriculture and improving farm incomes.
The former aims at increasing the production of rice, wheat and pulses by 10,8 and 2 million tonnes respectively over the benchmark levels of production by the end of the Eleventh Plan. The latter, with an allocation of Rs 25,000 crore, aims at achieving 4 per cent annual growth in the agriculture sector during the Plan period.
India’s farm sector is projected to record a mere 2.6 per cent growth in 2007-08 against the overall GDP growth rate of 8.7 per cent. As the Economic Survey 2007-08 laments, the growth rate of food-grain production decelerated to 1.2 per cent during 1990-2007, lower than annual population growth rate averaging 1.9 per cent.
The share of agriculture in the GDP has steadily declined from 36.4 per cent in 1982-83 to 18.5 per cent in 2006-07, although this sector still supports more than half a billion people, providing employment to 52 per cent of the workforce. The stagnating agriculture, languishing food output account for millions of poor farmers struggling with high debts and crop failures, hundreds of them compelled to give up their lives.
Lack of drive
Recognising a loss of dynamism in this vital sector, the Economic Survey acknowledges that there has been a “gradual degradation of natural resources through overuse and inappropriate use of chemical fertilisers,” affecting the soil quality (consumption of fertilisers increased from 69.8 kg per ha in 1991-92 to 113.3 kg in 2006-07).
In this context, the Eleventh Five-year Plan (2007-2012) calls for a concerted strategy “to double the growth rate achieved in the 10th Plan and put agriculture on a growth path of 4 per cent.” It is realised that the Millennium Development goal of halving extreme poverty and hunger by 2015 will not be reached “unless neglect and under-investment in the agricultural and rural sectors over the past 20 years is reversed.”
The WDR emphasises that the GDP growth arising from agriculture is almost four times as effective in reducing poverty as GDP originating outside the sector. “Three of every four poor people in developing countries live in rural areas – 2.1 billion living on less than $2 a day and 880 million on less than $1 a day – and most depend on agriculture for their livelihoods.”
China’s feat acclaimed
WDR acclaims China’s unprecedented poverty reduction in the past 25 years from 53 per cent in 1981 to 8 per cent in 2001, pulling about 500 million people out of poverty; rural poverty dropped from 76 per cent in 1980 to 12 per cent in 2001. Growth in Indian agriculture likewise did more to reduce poverty than did industry or services. During the 1960s and 1970s, the introduction of semi-dwarf varieties of wheat and rice led to dramatic leaps in agricultural production and raised farmers’ incomes. Rural poverty came down from 64 per cent in 1967 to 50 per cent in 1977, and to 34 per cent in 1986.
To revive Indian agriculture, WDR recommends measures such as stepping up of investments in the sector, crop insurance for farmers, realistic charges for water and power, reduction in environmental footprints of intense agriculture, and creating greater opportunities in the non-farm sector to absorb displaced agricultural labour.
It calls for a clear “policy diamond” in a continued effort to improve access to markets and develop modern market chains, achieve a large scale and sustainable smallholder-based productivity revolution, achieve food security, improve livelihoods for those who remain as subsistence farmers, and capitalise on agricultural growth to develop the rural non-farm sector.
There must be a clear strategy for investments to increase farm yields and profitability as well as rural roads, irrigation, power and markets.
The need is critical to invest in rural infrastructure. The lack of access to food is a greater problem than the availability of food. Nobel Laureate Amartya Sen strikingly said, “starvation is a matter of some people not having enough food to eat, and not a matter of there being not enough food to eat.”
Long-term investment
Long-term investments in soil and water management are needed to enhance the resilience of farming systems, especially for people in subsistence farming in remote and risky environments.
Agriculture uses 85 per cent of fresh water withdrawals in developing countries. More than one-fifth of groundwater aquifers in India are over-exploited in three of the four leading Green Revolution states – Punjab, Haryana and Tamil Nadu. In Punjab, about 60 per cent of the groundwater resources are already over-exploited, extraction rates exceeding recharge rates.
‘Fiscal drain’
WDR terms public investment in agriculture as “much misspending” because it has been heavily skewed towards providing subsidies — to the extent of 75 per cent. Electricity subsidies to agriculture are described as “fiscally draining and environmentally damaging.” In Punjab, electricity subsidies to agriculture in 2002-03 were 7 per cent of state expenditures. Again, labour productivity has remained stagnant in India since the mid-1990s.
The key to the alleviation of rampant poverty among farmers is the increase in productivity of staple crops. Irrigated land productivity is more than double that of rain-fed land. Productivity of crops in India is not only low relative to other countries; there are considerable inter-State variations. As the Economic Survey testifies, productivity of wheat in 2005-06 varied from a low of 1,393 kg per ha in Maharashtra to a high of 4,179 kg in Punjab.
A paramount paradigm conducive to agricultural resuscitation signals towards “the visible hand of the state” that must provide core public goods, improve the investment environment, regulate natural resource management, and secure desirable social outcomes.
The WDR lays emphasis on safety nets and access to credit in order to minimise distress land sales when farmers are exposed to calamities and shocks. Incentives are necessary for farmers to diversify into high-value horticulture, poultry, fish, and dairy products “through an appropriate pricing mechanism”.
Bio-tech advantage
Two-thirds of the world’s agricultural value added is created in developing countries. It generates an average 29 per cent of GDP and employs 65 per cent of the labour force. Revolutionary advances in biotechnology offer potentially large benefits.
Agricultural intensification has created environmental problems from reduced bio-diversity, mismanaged irrigation water, agrochemical pollution, and pesticide poisoning. Many less favoured areas suffer from deforestation, soil erosion, desertification, and degradation of pastures and watersheds. Global warming is one of the areas of greatest uncertainty for agriculture.
While India keenly looks for a second green revolution, particularly in the rain-fed areas, there are schemes such as credit support, revamp of co-operative credit structure, redesign of the insurance scheme, rehabilitation package for distressed farmers, and easy availability of inputs, which, if properly implemented, will lend an impetus to the languishing sector. The Centre’s National Food Security Mission and the Rashtriya Krishi Vikas Yojana aim at rejuvenating agriculture and improving farm incomes.
The former aims at increasing the production of rice, wheat and pulses by 10,8 and 2 million tonnes respectively over the benchmark levels of production by the end of the Eleventh Plan. The latter, with an allocation of Rs 25,000 crore, aims at achieving 4 per cent annual growth in the agriculture sector during the Plan period.
Info Edge to invest in Internet start-ups - June 6, 2008
Info Edge India, the provider of online recruitment, matrimonial and real estate classifieds that operates popular job site naukri.com, is looking to invest in domestic internet companies, an official told DNA Money on Thursday.
The company hopes to grow at 45-50% per annum despite slowdown in information technology and financial services, the two big hirers.
Info Edge chief operating officer Hitesh Oberoi said that the company is expected to close two deals in the next three months. "We will invest $1.5-5 million for minority stakes in these companies," he said.
The two deals nearing completion are in addition to one with education portal studyplaces.com. Info Edge invested in this portal along with venture capital (VC) firms KPCB and Sherpalo Ventures.
In the next one year, Info Edge would close three-four deals as the sole investor, Oberoi said. "We are not venture capitalists and we invest out of our own reserves, which currently stand at $35 million. We will invest in areas we understand and which would add value to the ventures," he added.
Last month, Info Edge launched an education portal shiksha.com that competes with studyplaces.com. KPCB and Sherpalo Ventures are invested in Info Edge too. Does this mean a merger of studyplaces.com and shiksha.com is on the cards for increased market share?
"There is no such plan. We are only a minority shareholder in studyplaces.com with no management control. As things stand, both the companies are stated to run independently," Oberoi said.
He said Info Edge's flagship property naukri.com is unlikely to face any pressures due to the slowdown in IT and financial services sectors, two if its largest industry verticals.
"Till two years ago, we were under-penetrated in non-IT sectors. Today, non-IT accounts for 48% of naukri.com's revenues and there are five to seven sectors within it, such as retail, insurance, telecom, and infrastructure that are showing healthy demand. We also believe that IT would recover by the second half of this fiscal," the chairman added. Naukri.com is planning to expand to areas such as senior and entry level placements.
Info Edge also operates matrimony site jeevansaathi.com, property site 99acres.com and a lesser known professional networking site bridge.com. While the company is not aggressively marketing bridge.com, the other two are expected to break even this fiscal.
Oberoi felt that education, matrimony, and property markets are bigger than the recruitment market and in three to five years, these sites could overtake naukri.com's revenues. Shiksha.com may remain in the investment mode for a while longer. Over the next three years, Info Edge will invest $5-10 million into this venture
Its matrimony site Jeevansaathi is venturing out of the virtual world with the launch of 25-30 company-owned stores over the next six months. Each store will see an investment of Rs 6-8 lakh and is expected to break even in 9-12 months.
With three of its five online properties becoming profitable this fiscal, Info Edge's operating margins are seen improving.
The company hopes to grow at 45-50% per annum despite slowdown in information technology and financial services, the two big hirers.
Info Edge chief operating officer Hitesh Oberoi said that the company is expected to close two deals in the next three months. "We will invest $1.5-5 million for minority stakes in these companies," he said.
The two deals nearing completion are in addition to one with education portal studyplaces.com. Info Edge invested in this portal along with venture capital (VC) firms KPCB and Sherpalo Ventures.
In the next one year, Info Edge would close three-four deals as the sole investor, Oberoi said. "We are not venture capitalists and we invest out of our own reserves, which currently stand at $35 million. We will invest in areas we understand and which would add value to the ventures," he added.
Last month, Info Edge launched an education portal shiksha.com that competes with studyplaces.com. KPCB and Sherpalo Ventures are invested in Info Edge too. Does this mean a merger of studyplaces.com and shiksha.com is on the cards for increased market share?
"There is no such plan. We are only a minority shareholder in studyplaces.com with no management control. As things stand, both the companies are stated to run independently," Oberoi said.
He said Info Edge's flagship property naukri.com is unlikely to face any pressures due to the slowdown in IT and financial services sectors, two if its largest industry verticals.
"Till two years ago, we were under-penetrated in non-IT sectors. Today, non-IT accounts for 48% of naukri.com's revenues and there are five to seven sectors within it, such as retail, insurance, telecom, and infrastructure that are showing healthy demand. We also believe that IT would recover by the second half of this fiscal," the chairman added. Naukri.com is planning to expand to areas such as senior and entry level placements.
Info Edge also operates matrimony site jeevansaathi.com, property site 99acres.com and a lesser known professional networking site bridge.com. While the company is not aggressively marketing bridge.com, the other two are expected to break even this fiscal.
Oberoi felt that education, matrimony, and property markets are bigger than the recruitment market and in three to five years, these sites could overtake naukri.com's revenues. Shiksha.com may remain in the investment mode for a while longer. Over the next three years, Info Edge will invest $5-10 million into this venture
Its matrimony site Jeevansaathi is venturing out of the virtual world with the launch of 25-30 company-owned stores over the next six months. Each store will see an investment of Rs 6-8 lakh and is expected to break even in 9-12 months.
With three of its five online properties becoming profitable this fiscal, Info Edge's operating margins are seen improving.
Thursday, June 5, 2008
FII Activity on 04-06-2008
The FIIs on Wednesday stood as net seller both in equity as well as debt. The gross equity purchased was Rs2,966.80 Crore and the gross debt purchased was Rs0.00 Crore while the gross equity sold stood at Rs3,919.20 Crore and gross debt sold stood at Rs25.00 Crore. Therefore, the net investment of equity reported was (Rs952.30 Crore) and net debt was (Rs25.00 Crore).
Wednesday, June 4, 2008
FII Actiity On 03-06-2008
The FIIs on Tuesday stood as net seller in equity. The gross equity purchased was Rs2,483.20 Crore and the gross debt purchased was Rs0.00 Crore while the gross equity sold stood at Rs2,832.50 Crore and gross debt sold stood at Rs0.00 Crore. Therefore, the net investment of equity reported was (Rs349.30 Crore) and net debt was Rs0.00 Crore.
Tuesday, June 3, 2008
More US Venture Capital Firms Investing Abroad - June 3,2008
San Francisco: Taiwan, Japan and Israel are just some of the emerging hotspots for innovation outside the United States, as venture capitalists continue to pour more dollars into global investments, a new survey said on MondayNearly three out of every five of US venture capitalists, or 57 per cent, are now investing outside the country, compared with 46 per cent last year, the 2008 Global Venture Capital Survey found.
The survey measured the opinions of nearly 400 venture capitalists from around the world, including 163 US - based firms, and was conducted by Deloitte LLP and the National Venture Capital Association, a US trade group.
Although the United States maintains its pre-eminent position as global leader in innovation, National Venture Capital Association President Mark Heesen said there will be more venture activity in those destinations ranked No। 2 and No.3 in the survey.
"The secondary trends are more interesting because it shows the up-and-coming locations," Heesen said.
The United States held the top spot in each of the sectors measured -- semiconductors, software, biopharmaceuticals, medical devices, and alternative, or clean, technology.
But Germany ranked second for innovation in alternative energy and medical devices. Fifteen per cent of venture capitalists said Taiwan had the best semiconductor technology, after the United States. India ranked No. 2 for software innovation, followed by the UK, Israel and Germany.
"While the US isn't losing ground, the globalisation of innovation is underway," said Mark Jensen, national managing partner of Deloitte's venture capital services.
US venture capitalists have begun pumping more money into start-ups in other countries; last year, they put in nearly $9 billion, or one-fifth of all dollars they invested, into international investments.
About $2.5 billion of this amount went to China and India, still two of the hottest emerging markets for venture dollars, compared to $1.9 billion in 2006, according to data from Thomson Reuters and NVCA.
"Asian countries have advantages over the US when it comes to technology," said Dixon Doll, founder of DCM, an Asia-focused venture firm.
In addition to well-trained and "reasonably priced" engineers, countries like China and India "typically know and can figure out the relevant ways to build local services... optimised for the requirements of local users," Doll said.
The combination of local talent and local markets has led tech giant IBM to focus more keenly on emerging economies, said Claudia Fan Munce, the managing director of IBM's Venture Capital Group, in a recent interview.
International Business Machines Corp does not invest in start-ups, but instead partners with traditional US venture capital firms in their search for marketable technologies.
Fan Munce said her international travel has shot up in the past year because more and more venture capitalists are looking beyond US borders for the next big idea.
She listed Canada, Peru, Vietnam, Russia and Ireland as new centers for technological innovation, in addition to the BRIC countries (Brazil, Russia, India and China).
"IBM follows the money," she said. "We want to go (to emerging markets) when they have dealflow."
FII Activity on 02-06-2008 - June 3, 2008
The FIIs on Monday stood as net buyer in equity. The gross equity purchased was Rs4,215.20 Crore and the gross debt purchased was Rs0.00 Crore while the gross equity sold stood at Rs3,960.60 Crore and gross debt sold stood at Rs0.00 Crore. Therefore, the net investment of equity reported was Rs254.60 Crore and net debt was Rs0.00 Crore.Monday, June 2, 2008
Govt Makes More Money On US-64 Than Investors
The law of intended consequences states that actions of government often have unanticipated consequences. Unit Trust of India's Unit Scheme-64 fiasco fits the bill completely.
Around early 2003, US-64, which was India's largest mutual fund scheme then, was in a bad shape. Rather than face the wrath of the public in a pre-election year, the government of India came up with a rescue scheme.
US-64 Bonds: Do the holders deserve a bonus?
In May 2003, UTI offered to buy back the first 5,000 units of US-64 at Rs12 and the remaining at Rs 10. Alternatively, investors had the option of taking 6.75% tax-free bonds in lieu of their investments.
These bonds matured on May 31, 2008. Around Rs 8,000 crore would be needed to redeem these bonds.
Around the same time, the government handed over the equity holdings of US-64 to the Specified Undertaking of UTI (SU-UTI) that was to handle its dud investments.
Nobody, though, thought then that SU-UTI will make a killing from these equity investments. But that's exactly what has happened. "Over the last five years, this portfolio has seen gains far in excess of the government's liabilities on the tax-free bonds.
While the latest figures are not yet available, a rough estimate would put the government's profits at not less than Rs 18,000 crore," says Dhirendra Kumar, chief executive of Value Research, a mutual fund rating agency. What this means is that after paying the Rs 8,000 crore needed to redeem the bonds, Rs 10, 000 crore is still left as profit.
"To make the scale clearer, consider an investor who started with Rs 1 lakh in these bonds. Over these years, he would have received Rs 38,000 as interest and now he will get back Rs 1 lakh back as redemption money. However, even after redemption, the government would still get to keep at least another Rs 1 lakh that it has earned out of investing his money. And this is a conservative estimate; I think the government's real profit on the deal could actually be higher", says Kumar.
The question is: should SU-UTI (proxy for the government of India) be making a profit out of the entire exercise? "The bonds were issued in lieu of the value of US-64 units. By exchanging what was essentially a quasi-equity instrument for a fixed income one, the government undertook the entire risk of the US-64 equity portfolio.
Therefore, strictly from a legal viewpoint, the government may well be within its rights to not distribute the portfolio profits. Also, as they are used to receiving the regular 6.75% interest, investors will not be expecting any largesse," says Sandeep Shanbhag, director, Wonderland, an investment and tax advisory firm.
"Legally, the government is well within its rights to keep the money. If the government was just another money manager, which was in this business for profits, its logic for keeping the money would be strong — it took the risk, so it should get the profits. However, the government is not just another money manager.
US-64 investors have lost a lot because of the incompetence and malfeasance of various managements appointed and overseen by the government. It is utterly unethical for the government to profit out of this whole affair. It's really as simple as that," says Kumar.
In fact, SU-UTI has major holdings in Axis Bank, L&T and ITC, as the accompanying table clearly shows. Selling its holdings in just one of the three stocks would be enough to redeem the Rs 8,000 crore of US-64 bonds.
Given this, shouldn't SU-UTI be sharing these profits with the original unit-holders of US-64? "The money that was used to generate these profits once belonged to the old UTI's unit-holders. I think it only fair and ethical that a share of the returns generated in the wonderful boom-time on the Indian stock markets should be shared with the all unit-holders," says Kumar.
"The ethical, and smart thing to do in a pre-election year, would be to distribute the profits. The average US-64 investor was the common man. Such a move would not only be ethical but also go a long way in assuaging his angst suffered five years ago. After all, this is the legacy of US-64," says Shanbhag.
Around early 2003, US-64, which was India's largest mutual fund scheme then, was in a bad shape. Rather than face the wrath of the public in a pre-election year, the government of India came up with a rescue scheme.
US-64 Bonds: Do the holders deserve a bonus?
In May 2003, UTI offered to buy back the first 5,000 units of US-64 at Rs12 and the remaining at Rs 10. Alternatively, investors had the option of taking 6.75% tax-free bonds in lieu of their investments.
These bonds matured on May 31, 2008. Around Rs 8,000 crore would be needed to redeem these bonds.
Around the same time, the government handed over the equity holdings of US-64 to the Specified Undertaking of UTI (SU-UTI) that was to handle its dud investments.
Nobody, though, thought then that SU-UTI will make a killing from these equity investments. But that's exactly what has happened. "Over the last five years, this portfolio has seen gains far in excess of the government's liabilities on the tax-free bonds.
While the latest figures are not yet available, a rough estimate would put the government's profits at not less than Rs 18,000 crore," says Dhirendra Kumar, chief executive of Value Research, a mutual fund rating agency. What this means is that after paying the Rs 8,000 crore needed to redeem the bonds, Rs 10, 000 crore is still left as profit.
"To make the scale clearer, consider an investor who started with Rs 1 lakh in these bonds. Over these years, he would have received Rs 38,000 as interest and now he will get back Rs 1 lakh back as redemption money. However, even after redemption, the government would still get to keep at least another Rs 1 lakh that it has earned out of investing his money. And this is a conservative estimate; I think the government's real profit on the deal could actually be higher", says Kumar.
The question is: should SU-UTI (proxy for the government of India) be making a profit out of the entire exercise? "The bonds were issued in lieu of the value of US-64 units. By exchanging what was essentially a quasi-equity instrument for a fixed income one, the government undertook the entire risk of the US-64 equity portfolio.
Therefore, strictly from a legal viewpoint, the government may well be within its rights to not distribute the portfolio profits. Also, as they are used to receiving the regular 6.75% interest, investors will not be expecting any largesse," says Sandeep Shanbhag, director, Wonderland, an investment and tax advisory firm.
"Legally, the government is well within its rights to keep the money. If the government was just another money manager, which was in this business for profits, its logic for keeping the money would be strong — it took the risk, so it should get the profits. However, the government is not just another money manager.
US-64 investors have lost a lot because of the incompetence and malfeasance of various managements appointed and overseen by the government. It is utterly unethical for the government to profit out of this whole affair. It's really as simple as that," says Kumar.
In fact, SU-UTI has major holdings in Axis Bank, L&T and ITC, as the accompanying table clearly shows. Selling its holdings in just one of the three stocks would be enough to redeem the Rs 8,000 crore of US-64 bonds.
Given this, shouldn't SU-UTI be sharing these profits with the original unit-holders of US-64? "The money that was used to generate these profits once belonged to the old UTI's unit-holders. I think it only fair and ethical that a share of the returns generated in the wonderful boom-time on the Indian stock markets should be shared with the all unit-holders," says Kumar.
"The ethical, and smart thing to do in a pre-election year, would be to distribute the profits. The average US-64 investor was the common man. Such a move would not only be ethical but also go a long way in assuaging his angst suffered five years ago. After all, this is the legacy of US-64," says Shanbhag.
Realty Funds Provide For Hassle-Free Investing
“We differentiate ourselves from the rest of the venture funds by capturing end-to-end value chain in real estate,” says Ved Prakash Arya, MD, Milestone Capital Advisors, a venture fund that invests in Indian real estate. With a background in retail and real estate, Arya, is only too familiar with the realty market and the regional differences. In a chat with Business Line, he discusses how investment options in real estate have widened and Milestone’s investment objectives.
Excerpts from the interview:
Why is the real estate story in India being suddenly discovered now?
About two to two-and-a-half years ago too, real estate investing was very much there. However, it was done by very few, that is, those with surplus cash or who have seen real estate investing in other countries. While there was interest, there were no avenues to invest.
Two years ago, the government allowed venture funds to invest in real estate. Now real estate mutual funds (REMFs) have been approved. With this the options available for investing in real estate have widened.
Further, one needed Rs 25-40 lakh to participate in real estate earlier. There was no opportunity for those with Rs 5-10 lakh. That has now changed.
What drove the prices in some pockets and to the steep corrections later?
The surge was uncalled for. Any hike has to be justified by the productivity of the land. But the land has not been productive. There is a herd mentality here. If one starts constructing IT buildings, everyone follows, without knowing the demand-supply status. This results in oversupply of assets of a similar kind in certain pockets. So the developer is under pressure from customers as a result of excess supply situation and is desperate, resulting in panic selling. If you look at Delhi, Gurgaon or Faridabad, this has been the case. Another aspect that led to the shoot up and later correction was the entry of speculative buyers rather than actual users.
For individuals who hold real estate with a longer perspective of, say, three years, there is no real threat. But if you hold with an idea of making money, like in the stock market, then real estate is a risky bet.
Milestone appears focussed more on Tier-II and III cities. Is the risk-return profile not higher in these areas?
We believe that India would continue to grow at 7-7.5 per cent. But this growth cannot come from the top four cities because the economic activity is no longer concentrated in these cities; it has expanded into the top 25 cities. So we are concentrating on these 25 cities besides the four metros. The amount of new activity/investments in these cities may not happen even in the top metros. Cities such as Mysore, Vizag or Mangalore will attract future investments. We believe India’s growth will come out of these cities and are, therefore, are taking a futuristic view.
Given the expected demand, we expect higher returns on our investments in Tier II and Tier III cities compared to Tier I.
You seem to be heavy on land holdings in cities such as Ahmedabad, Nagpur and Chennai? What are the advantages you see in these places?
Although Chennai is considered a metro, it is not really one. While it has lot of characteristics of a metro, prices have not gone up like the other metros. One can still afford a house or land. It has diversified industries such as auto and foundry. It has attracted a lot of investments from industries without much price increase so far. So believe Chennai is set to witness the next boom.
We also believe that Ahmedabad would be the next Mumbai with a stable government and plans to set up a financial city ($2 billion project). World-class infrastructure is being built there. Despite the proximity to Mumbai, the price in Ahmedabad is less than 20 per cent of that in the former. We see this going up.
Nagpur is in the heart of the country. When Boeing sets up their maintenance base for Asia there and MIHAN (Multimodal International Hub Airport at Nagpur) comes up, this city will see a change. It would be a city for logistics.
Your yield fund is like a REIT. Would this structure not earn more in other Asiatic countries than in India?
Yes they would. But people here do not have access to a Singapore REIT or Europe REIT. But if Indian assets find themselves listed in Singapore as a REIT, then the investors can get better returns. Here’s a typical example: If you would like to sell any property in India, then the offer price has to be such that the lowest yield (return generated by the property) would have to be, say, 10 per cent. Because in India you can earn 9-9.5 per cent by way of bank interest. So why would anybody want to buy below that? But in many overseas countries bank interest is 2.5-3.5 per cent. So people are only too happy to invest money where they would get 7.5 per cent.
How is Milestone different from the other realty funds?
There are various facets to real estate. On the supply side, there is agricultural and non-agricultural land. Residential property — here again for upper class, middle class, and so on. Then there is commercial — office and IT buildings and hotels, serviced apartments, warehouses, marriage and exhibition halls. That’s very vast.
Some real estate bring in money on development and others provide rental yield. Milestone is trying to capture an end-to-end value chain. We are trying to be present from the beginning — from agricultural land to rental properties. How are we different? There are no funds in India at present that cover the entire gamut.
Why is there low awareness about real estate funds among investors?
We do not target retail investors due to regulatory issues. We cannot take investors below Rs 5 lakh. Our Yield Fund started at Rs 10 lakh. Another scheme of ours offers entry at Rs 20 lakh. Yes, there is lack of awareness of real estate funds.
Those who want to begin investing in real estate prefer to invest in a property they actually see — something tangible. However, there are risks of land encroachment and hassles in registering a property. Realty funds offer hassle-free investing.
Similarly, there are others who prefer to put their money in shares of real estate. That amounts to investing in shares not in real estate. It is also fraught with equity risks. Investing in real estate funds instead offer professional services and a wider array of projects to invest within real estate. In that sense it is similar to mutual funds.
Excerpts from the interview:
Why is the real estate story in India being suddenly discovered now?
About two to two-and-a-half years ago too, real estate investing was very much there. However, it was done by very few, that is, those with surplus cash or who have seen real estate investing in other countries. While there was interest, there were no avenues to invest.
Two years ago, the government allowed venture funds to invest in real estate. Now real estate mutual funds (REMFs) have been approved. With this the options available for investing in real estate have widened.
Further, one needed Rs 25-40 lakh to participate in real estate earlier. There was no opportunity for those with Rs 5-10 lakh. That has now changed.
What drove the prices in some pockets and to the steep corrections later?
The surge was uncalled for. Any hike has to be justified by the productivity of the land. But the land has not been productive. There is a herd mentality here. If one starts constructing IT buildings, everyone follows, without knowing the demand-supply status. This results in oversupply of assets of a similar kind in certain pockets. So the developer is under pressure from customers as a result of excess supply situation and is desperate, resulting in panic selling. If you look at Delhi, Gurgaon or Faridabad, this has been the case. Another aspect that led to the shoot up and later correction was the entry of speculative buyers rather than actual users.
For individuals who hold real estate with a longer perspective of, say, three years, there is no real threat. But if you hold with an idea of making money, like in the stock market, then real estate is a risky bet.
Milestone appears focussed more on Tier-II and III cities. Is the risk-return profile not higher in these areas?
We believe that India would continue to grow at 7-7.5 per cent. But this growth cannot come from the top four cities because the economic activity is no longer concentrated in these cities; it has expanded into the top 25 cities. So we are concentrating on these 25 cities besides the four metros. The amount of new activity/investments in these cities may not happen even in the top metros. Cities such as Mysore, Vizag or Mangalore will attract future investments. We believe India’s growth will come out of these cities and are, therefore, are taking a futuristic view.
Given the expected demand, we expect higher returns on our investments in Tier II and Tier III cities compared to Tier I.
You seem to be heavy on land holdings in cities such as Ahmedabad, Nagpur and Chennai? What are the advantages you see in these places?
Although Chennai is considered a metro, it is not really one. While it has lot of characteristics of a metro, prices have not gone up like the other metros. One can still afford a house or land. It has diversified industries such as auto and foundry. It has attracted a lot of investments from industries without much price increase so far. So believe Chennai is set to witness the next boom.
We also believe that Ahmedabad would be the next Mumbai with a stable government and plans to set up a financial city ($2 billion project). World-class infrastructure is being built there. Despite the proximity to Mumbai, the price in Ahmedabad is less than 20 per cent of that in the former. We see this going up.
Nagpur is in the heart of the country. When Boeing sets up their maintenance base for Asia there and MIHAN (Multimodal International Hub Airport at Nagpur) comes up, this city will see a change. It would be a city for logistics.
Your yield fund is like a REIT. Would this structure not earn more in other Asiatic countries than in India?
Yes they would. But people here do not have access to a Singapore REIT or Europe REIT. But if Indian assets find themselves listed in Singapore as a REIT, then the investors can get better returns. Here’s a typical example: If you would like to sell any property in India, then the offer price has to be such that the lowest yield (return generated by the property) would have to be, say, 10 per cent. Because in India you can earn 9-9.5 per cent by way of bank interest. So why would anybody want to buy below that? But in many overseas countries bank interest is 2.5-3.5 per cent. So people are only too happy to invest money where they would get 7.5 per cent.
How is Milestone different from the other realty funds?
There are various facets to real estate. On the supply side, there is agricultural and non-agricultural land. Residential property — here again for upper class, middle class, and so on. Then there is commercial — office and IT buildings and hotels, serviced apartments, warehouses, marriage and exhibition halls. That’s very vast.
Some real estate bring in money on development and others provide rental yield. Milestone is trying to capture an end-to-end value chain. We are trying to be present from the beginning — from agricultural land to rental properties. How are we different? There are no funds in India at present that cover the entire gamut.
Why is there low awareness about real estate funds among investors?
We do not target retail investors due to regulatory issues. We cannot take investors below Rs 5 lakh. Our Yield Fund started at Rs 10 lakh. Another scheme of ours offers entry at Rs 20 lakh. Yes, there is lack of awareness of real estate funds.
Those who want to begin investing in real estate prefer to invest in a property they actually see — something tangible. However, there are risks of land encroachment and hassles in registering a property. Realty funds offer hassle-free investing.
Similarly, there are others who prefer to put their money in shares of real estate. That amounts to investing in shares not in real estate. It is also fraught with equity risks. Investing in real estate funds instead offer professional services and a wider array of projects to invest within real estate. In that sense it is similar to mutual funds.
FII Activity on 30-05-2008
The FIIs on Friday stood as net seller in equity. The gross equity purchased was Rs4,208.90 Crore and the gross debt purchased was Rs0.00 Crore while the gross equity sold stood at Rs5,290.70 Crore and gross debt sold stood at Rs0.00 Crore. Therefore, the net investment of equity reported was (R1,083.90) Crore and net debt was Rs0.00 Crore.
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