Reliance can hike KG gas prices, says Centre

New Delhi, Oct. 30: In a startling revelation, the petroleum ministry has said that the $4.20 per mmBtu price fixed by an Empowered Group of Ministers (EGoM) for gas from Reliance Industries' KG-D6 fields was only for the purpose of valuation of government share and the selling price could be higher.

In a presentation on pricing of natural gas to the Parliamentary Standing Committee on September 11, the ministry said the EGoM meeting held on September 12, 2007 suggest that the price formula approved was for valuation of the gas for the purpose of determining government share.

"But we have been referring to it as selling price in ministry's communications," said the ministry. The price formula approved last year had taken the biddable parameter in the formula at zero and since the EGoM had mentioned that the "biddable character of the formula" be retained, the ministry said "the (actual) selling price could be higher." Reliance had submitted to the government a formula for determining the selling price of gas from its eastern offshore KG-D6 fields which the EGoM tweaked to "bring the price down by eight per cent." The EGoM approved the price formula according to which the minimum delivered price of gas at landfall point would be $4.20 per mmBtu for five years.

EGoM, the ministry said, had decided that price discovery process for determining the rates at which the fuel would be sold, would be on arm's length basis.

The price thus discovered would be uniformly applicable to all the sectors. — PTI

Source: Asian Age

Tata trashes RIL's coal-to-liquid tech

A move that strengthens its case against Mukesh Ambani-controlled Reliance Industries Ltd (RIL), the Tata group has told the government that the technology proposed by its partner, Sasol of South Africa, is the most suited for setting up the country's first $8-billion coal-to-liquid (CTL) project.

While there are 22 contenders for setting up India's first CTL project, which would have a capacity to produce 80,000 barrels of oil a day, the joint venture of Tata Sons and Tata Industries with Sasol—SETSL—is a frontrunner along with RIL.

While making a strong pitch for the technology proposed by Sasol for the project, the Tatas, in a recent letter to the government, have made a specific reference to Headwaters Inc of USA, the technology partner of RIL. Its letter to the coal ministry reads, "Headwater's was originally selected to undertake the direct liquefaction project in China. However, the Chinese government has now decided, for various reasons, that the key technology development will no longer be undertaken by Headwaters but by Shenhua (part of Chinese government). This change in technology leadership has since been implemented."

About its own technology partner, the Tatas have said, "Sasol's proven record in CTL is now internationally recognised from among various other technology suppliers and that the technology challenges in CTL are such that it is critical that India's first CTL project has least technology risk."

Further, taking a leaf out of China's experience, the Tatas said, "The Chinese government has been evaluating various technologies for CTL, and recently, after a series of such deliberations with various technology providers of CTL, decided to go forward with two CTL projects, one of which is with Sasol."

These comments by the Tata's assume significance as they come at time when the inter-ministerial group is in the process of identifying a private party offering the best CTL technology for this project. Talking about the technology risks associated with non-proven technologies, the Tatas have also stated that the Chinese government has stopped development of all other CTL projects.

It said, "An order issued in August 2008 by the 'office of the NDRC' (National Development & Reform Commission) states that out of the two selected CTL projects, an Indirect Coal Liquefaction (CTL) Project of 80,000 barrels per day would be undertaken by Sasol and the Direct Coal Liquefaction Project will be undertaken by Shenhua (which is now an in-country, indigenous development project of the Chinese government)."

Commenting on the nature of the technology challenges in CTL, and therefore, the need to select partners with least technology risk, the Tatas wrote, "This has been illustrated by Shell's GTL plant experience in Malaysia (other than Sasol/Sasol licensed plants). Shell is the only other company that has a running commercial scale GTL plant, while no commercial scale CTL plant exists other than with Sasol)."

With crude oil prices rising, countries like India and China are seeking alternative sources of energy to fuel their economic growth. As a result, there has been a huge rush of proposals before the coal ministry from the country's big corporates, including Tata Sons-Sasol, RIL, Anil Ambani's Reliance Power, Essar, SAIl, Indian Oil, Adani, Sterlite, JSW, GMR and Gail, for setting up this project.

Source: FE

'India Inc may lay off 25% jobs in 10 days'

Indian firms are likely to lay off a quarter of their employees in the next 10 days, as part of steps to contain costs in the face of shrinking margins amidst the economic turmoil, an industry body said on Wednesday. Trade body Associated Chambers of Commerce and Industry of India (ASSOCHAM) said the job cuts would be across the steel, cement, construction, real estate, aviation, IT-enabled services and financial services sectors.

Expansion has slowed in Asia's third-largest economy in the last two quarters, from the 8 per cent or more annual growth in the past four years, with high interest rates crimping demand and on the global financial crisis.

The central bank last week cut its forecast for growth in 2008/09 to 7.5-8 per cent from its earlier view of 8 per cent. This compares with the economy's 9 per cent growth in 2007/08.

"Employers have no other alternatives as part of their corporate strategy ... for sustaining their operations with squeezed margins (even) after after drastic cost cutting measures," ASSOCHAM said in a statement.

Last week, realty firm Parsvnath Ltd said it would axe "non-performing" employees, as it was facing slowing sales.

Top private carrier Jet Airways had sacked 1,900 employees mid-October, citing declining demand and high fuel costs, but reinstated them days later on protests and political pressure.

 

Source: FE

 

 

 

American Express to cut 7,000 jobs in effort to reduce costs by $1.8 billion next year

NEW YORK (AP) -- American Express says it will cut 7,000 jobs, or about 10 percent of its work force, as part of an effort to slash costs by $1.8 billion in 2009.

The New York-based credit card issuer says it is also suspending management level salary increases next year and instituting a hiring freeze.

It plans to scale back investments in technology, marketing and business development and streamline costs tied to some rewards programs. It also expects to cut expenses for consulting and other professional services.

As a result, the company expects to take a restructuring charge of $240 million to $290 million in the fourth quarter.

American Express earlier this month reported a 24 percent drop in third-quarter profit as cardholders restrained their spending.

 

Source: Yahoo

 

 

 

 

Companies see slower order book growth

B G Shirsat & Deepak Korgaonkar in Mumbai

The global credit crisis has slowed order growth of Indian construction and engineering companies, indicating that several big projects, planned earlier, are being pushed back either for lack of capital, or because they have become unviable now.

Orders in the second quarter grew by 52.44 per cent, compared to a 136.29 per cent jump in the first quarter. Data culled from information given by companies to stock exchanges show that 65 firms have bagged orders worth Rs 60,588 crore (Rs 605.88 billion) in the second quarter as compared to Rs 39,745 crore (Rs 397.45 billion) in the same period of the previous financial year. Sequentially, orders grew 29.73 per cent.

Comparatively, companies recorded a 136.3 per cent jump in orders in the first quarter of FY09 and 127.55 per cent in the fourth quarter of FY08. The orders grew at a slower pace of 46.48 per cent in the third quarter of FY08 compared to 155.66 per cent in the second quarter of the same financial year.

Order flows are unlikely to improve in the near future since banks have become extremely cautious about sanctioning fresh loans to projects. "In the past two weeks, across the banking system you have a situation where banks are not sanctioning new lines," Credit Suisse analyst Neelkanth Mishra said in a report to their clients.

Most of the orders in the second quarter were awarded by public and private sector firms, accounting for 45 per cent (21.1 per cent), while the share of overseas orders dropped to 19.41 per cent (26.84 per cent). Rest of the orders, or 35.59 per cent (52.06 per cent), came from various states and the Central government.

State governments have given construction orders to Siemens, Bharat Heavy Electricals Ltd [Get Quote], HCC, BGR Energy and ICSA India. Larsen & Toubro, ABB, BEML, Punj Lloyd [Get Quote], Man Industries and Thermax bagged orders from the Centre. Foreign orders were mostly from West Asia for infrastructure development, power equipment, oil pipelines and technology work.

L&T, India's largest engineering firm, showed a robust 60 per cent rise in orders in the quarter, but a marginal 2 per cent sequential growth. Punj Lloyd, however, registered a 160 per cent jump in orders in the period. India's biggest power equipment maker, Bhel, saw its orders decline by 18 per cent year-on-year (y-o-y) and quarter-on-quarter (q-o-q).

Construction and engineering companies won 27 orders, accounting for almost 47 per cent of the total orders received in the second quarter. Many of the engineering and construction firms deal mostly with big corporations, and hence there has been no impact yet

Source: Rediff

 

 

 

 

 

Mid-cap IT firms may shed 10% staff

Shivani Shinde & Kirtika Suneja in Mumbai India's mid-cap software companies may shed as much as 10 per cent of their workforce as revenues and margins have shrunk owing to a global slowdown, analysts say. Compared with the top-5 domestic software-makers, mid-cap companies' second-quarter margins and revenues have been adversely impacted due to foreign exchange losses, failure to diversify business, and a drop in revenue because of the slowdown. "In terms of margins and revenues, the tier-II firms were hit 30-40 per cent more than the top-5. These firms might see a layoff of 5-10 per cent in the next few quarters," said Avinash Vashishtha, CEO and MD, Tholons. "It is important for the mid-cap companies to diversify their business." Second-quarter figures of mid-cap IT firms were a mixed bag. Rolta India had to set aside Rs 61 crore (Rs 610 million) as provisions for outstanding FCCBs, despite growth in all three business verticals. This impacted the net profit of the company, which dropped by 55 per cent. Rolta's enterprise information and communication technology vertical revenue more than doubled to Rs 91 crore (Rs 910 million) while the GIS segment and engineering design vertical grew by 24 and 42 per cent respectively on a year-on-year basis. Firms such as Tech Mahindra, Patni and NIIT Tech have registered positive growth in revenue and bottom lines, but analysts are cautious about their future growth. "Patni continues to disappoint us. We haven't heard anything significant from the company. Similarly, while Tech Mahindra did deliver good numbers this quarter, its dependence on a few clients is worrisome, especially in this scenario," said an analyst. A positive for Tech Mahindra is its order book of $2 billion, spread over the next five to seven years, as it gives the company good visibility. Analysts, however, say the company has not been able to book significant revenues as yet, from its largest-ever $1-billion BTGS deal. "Rupee depreciation hit us strongly as we had taken forward contracts at Rs 46. We plan to liquidate them in this quarter," said Vishnu R Dusad, CEO and MD, Nucleus Software. Nucleus, which saw a 75 per cent fall in its net profit might see a delay in customer spending, say analysts. Still, the layoffs and impact may not be uniform for all mid-cap companies. Firms such as Infotech Enterprises and 3i Infotech have managed to perform well on account of focus on the domestic market and niche business offering. The Mumbai-based IT products and solutions firm 3i Infotech was a rare case, where the company revised its FY09 revenue guidance upwards. For 3i Infotech, the company's strategy of growth through the inorganic route is paying dividends in such a situation. Inorganic growth contributed 74.6 per cent to the revenues on a y-o-y basis. Net profit of the company was up 24 per cent sequentially and 67 per cent on a y-o-y basis. The company revised its revenue guidance for FY09 between Rs 2,200 crore (Rs 22 billion) and 2,300 crore (Rs 23 billion) from Rs 1,700 crore (Rs 17 billion). "3i Infotech continues to perform well. The only concern is from its products earnings, which is 50 per cent of its revenue. In such conditions, clients are not keen on investing into anything new. Rather, they focus on increasing efficiency from the existing systems. This kind of mindset could impact the company in the future," said an analyst. Hyderabad-based Infotech Enterprises has been another firm that bucked the trend. With top line growth of 10.4 per cent q-o-q, the company in dollar terms crossed the $50 million mark for the first time and registered a growth of 5.2 per cent. On a year-on-year basis, top line grew by 28.4 per cent in dollar terms. In comparison, many of the top IT firms reduced their dollar guidance for the coming quarters. "Infotech has clearly performed well. There were no major slowdown impacts on the company's operations. The visibility is good, and overall the business model is good," said Harit Shah, research analyst, Angel Broking. However, others could not gain much despite their niche offerings and segment focus. For instance, Sasken. It's profit fell by 28 per cent in the second quarter ended 30 September. Sasken also downgraded its FY09 guidance in dollar terms, from the earlier estimated 20-25 per cent y-o-y growth, the company now estimates its services business to grow by just 10 per cent y-o-y. "Sasken has been a bit of a disappointment. The main portion of the business is still not steady. Besides, some of the deals that the firm entered are yet to mature, especially with Nokia," said an analyst tracking the firm

Source: Rediff Money

 

 

 

 

Windfall gains for new players

The Government's decision to give out fresh telecom licences on first-come, first-served basis has resulted in windfall gains to some Indian promoters of new telecom companies. Unitech, which has sold its 60 per cent stake to Telenor, has made a profit of Rs 4,470 crore.

Last month, Swan Telecom sold 45 per cent stake to the UAE-based Etisalat for Rs 4,100 crore ($900 million). This was Rs 2,450 crore more than what its promoters paid to acquire the licences in February. Unitech also had acquired licences for 22 circles by paying Rs 1,650 crore to the Government.

While it is not uncommon for Indian telecom companies to receive huge valuations, the amount received by these companies is unprecedented as neither of them has a single subscriber nor any infrastructure.

"Clearly the international players who are desperate to get a foothold into the booming Indian mobile market are putting a huge value to the spectrum. This is a form of spectrum trading which should not have happened. The Government would have got this money if it had opted to go for an auction," said Mr Romal Shetty, Director, KPMG.

However, new players said that the valuation was not just for spectrum but also for the market opportunity as the Indian mobile-user base is expected to surge to 700 million by 2012.

"It is unfair to say that the promoters of the new companies are making profits for doing nothing. First, they have managed to get the licence legally despite heavy competition. Second, they are giving a window to international players whose traditional market is seeing flat growth," said the owner of a new telecom firm.

The next in line to reap windfall gains could be the Dhoot family and Mr Mahendra Nahata, who have said that they are scouting for a partner for Datacom.

In January, Mr Venugopal Dhoot, Chairman, Videocon Ltd, had said that Datacom had got a number of suitors for buying a stake in the company.

A number of international players such as AT&T, Deutsche Telecom, Telecom Italia and NTT DoCoMo are possibly looking at an entry into the fastest growing telecom market in the world

Source: Hindu Business Online

 

 

 

 

 

JPMorgan India invests $450 mn across sectors

Press Trust of India / Mumbai October 27, 2008, 17:00 IST

JPMorgan India, which plans to invest $1 billion across sectors in the country, has so far committed $450 million in real estate, infrastructure, manufacturing and financial sectors.

"We have a fund of $1 billion to invest in Indian companies. We have committed nearly half the money in real estate, infrastructure, manufacturing and financial sectors," JPMorgan India CEO Kalpana Morparia told PTI.

"These investments are opportunistic," she said adding there was no time-frame for completing investments as the money belonged to the company.

JPMorgan, which started its India operations in 2001, has approached the Reserve Bank for licences to set up four more branches in the country.

The branches would be in Delhi, Chennai, Bangalore and one more destination in the south, she said. Apart from its branch in Mumbai, the company, presently, has back-offices in Mumbai and Bangalore, with a headcount of 11,500.

Notwithstanding the global financial crisis, JPMorgan will increase its headcount in India. "Headcount will grow," Morparia said.

"JPMorgan is focused on increasing its footprint across corporate and investment banking, transaction banking and asset and wealth management segments in Asia," Morparia said.

JPMorgan is a US-headquartered bank that has weathered the credit turmoil in its home country. Outside the US, JPMorgan is involved in only corporate and investment banking business

Source: BS

Sharekhan Post-Market Report dated October 27, 2008

 

Sharekhan's daily newsletter October 27, 2008   Index Performance Index Sensex Nifty Open 8,599.58 2,583.75 High 8,739.48 2,585.30 Low 7,697.39 2,252.75 Today's Cls 8,509.56 2,524.20 Prev Cls 8,701.07 2,584.00 Change -191.51 -59.80 % Change -2.20 -2.31   Market Indicators Top Movers (Group A) Company Price  (Rs) % chg Gainers Unitech 42.70 41.86 Godrej Industries 72.15 18.18 Indiabulls Real Estate 111.45 15.07 Nagarjuna Construction 48.75 12.59 Oracle Financial 477.35 10.26 Losers Glenmark Pharma 259.25 -20.00 Bajaj Holdings 290.00 -17.26 Cairn India 101.40 -15.89 Jet Airways 144.40 -15.73 United Phosphorus 143.10 -15.70 Market Statistics - BSE NSE Advances 515 224 Declines 2,019 1,247 Unchanged 43 12 Volume(Nos) 31.07cr 65.50cr  Market Commentary  Sensex drops by 192 points The market erased most of its losses from the early crash, with the Sensex ending 2.20% lower and the Nifty dipping by 2.32% at close.  The Sensex ended the day with a loss of 192 points after crashing to a low of 7,697 during intra-day trades. The market crashed by over 1,000 points,   in line with the other major global indices. The day started with the Sensex resuming 101 points lower at 8,701. It tanked by another 940 points to touch the day's low of 7,697 on relentless selling in CD, auto, FMCG and PSU stocks. The Sensex managed to recover around 850 points in the late trades, but still ended with a loss of 192 points at 8,510. The Nifty shed 2.31% or 60 points to close at 2,524. The market breadth was negative. Of the 2,577 stocks traded on the BSE 2,019 stocks declined, 515 stocks advanced and 43 stocks ended unchanged. Among the sectoral indices, the BSE CD Index tumbled 6.24%, the BSE Auto Index slipped 5.93%, the BSE FMCG Index lost 5.63% and the BSE PSU Index was down 5.43%. However, the BSE Reality, Teck and Oil & Gas indices gained marginally. Several index heavyweights came under selling pressure and ended in the red. Tata Motors was the major loser and tumbled by 13.95% at Rs140.05. Mahindra & Mahindra at Rs248, JP Associates at Rs53.40, Grasim Industries at Rs952.65, Tata Power at Rs570.25, SBI at Rs1,056.60 and L&T at Rs723.80 slumped by around 7-13% each.  Select counters logged significant gains on fresh buying support. Bharti Airtel bucked the downtrend and gained 5.99% at Rs566.45. RIL was up 5.83% at Rs1,074.70 whereas Reliance Infra, Reliance Communication, Sterlite Industries, ICICI Bank, TCS, Satyam and Infosys also gained marginally.  Over 2.73 crore Unitech shares changed hands on the BSE followed by Suzlon Energy (1.55 crore shares), IFCI (1.02 crore shares), RPL (10.07 crore shares) and Hindalco (83.02 lakh shares). European Indices at 16:00 IST on 27-10-2008 Index Level Change (pts) Change (%) FTSE 100 Index 3687.11 -196.25 -5.05 CAC 40 Index 2989.76 -204.03 -6.39 DAX Index 4126.21 -169.46 -3.94 Asian Indices at close on 27-10-2008 Index Level Change (pts) Change (%) Nikkei 225 7162.90 -486.18 -6.36 Hang Seng Index 11015.84 -1602.54 -12.70 Kospi Index 946.45 7.70 0.82 Straits Times Index 1600.28 0.00 0.00 Jakarta Composite Index 1166.41 -78.45 -6.30

 

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