Net FII inflows hit US$50bn
Cumulative FII investment into the equity market crossed US$50bn since foreign investors were allowed to enter the local capital market back in early 1990s. This year, FIIs have pumped in close to US$8.5bn, with US$2bn coming in November. Last year, they had poured in US$10.7bn, with US$2bn coming in December. So, if the bulls are to carve out yet another record, foreign funds will have to bring in another US$2bn this month. Foreign funds have been net buyers this year except for May, when the market took a beating. The trend started reversing slowly from July onwards as the market recovered from the carnage in May and June. Not much money came into the market in July. But, in the next three months, foreign funds poured in US$1bn each. The icing in the cake came in November, when FIIs pumped in US$2bn.
Danone may exit JV with Wadias: report
The tussle between the Wadia family and French food major Groupe Danone is getting uglier. Danone is reportedly considering pulling out of the equal joint venture or buying out the Indian partner's stake in Associated Biscuits International Holding, the holding company of Britannia Industries. Earlier in the week, the Wadia family won the first round in the fight with Danone. The Bombay High Court asked the French dairy products major not to sell the shares of Avesthagen, a Bangalore-based bionutritional company. Danone was asked not to sell its stake in the company till the next hearing, which is scheduled for January 31, 2007. Danone acquired a 5% stake in Avesthagen for US$5mn a few days ago, prompting the Wadias to move the High Court claiming that the move violated the joint venture agreement signed by the two companies in 1995. The court case over Avesthagen is the latest in a series of issues that are threatening to rock the joint venture between the Wadias and Danone. The two are fighting over the use of Tiger brand by Danone in international markets, besides the consolidation of Britannia results with Danone. According to the agreement between the Wadias and Danone, any new opportunity in the food and beverages business had to be brought before the JV first. Only if the Wadias reject the new business opportunity, could Danone go ahead on its own. The Wadias allege that when the opportunity was presented before the JV, a Danone director opposed the resolution, thwarting their participation. They also say that Danone and Avesthagen conspired to keep them out.
MRPL objects to Cairn IPO disclosure - paper
The mega IPO of Cairn India has turned a little controversial. MRPL objected to some of the disclosures made by the Indian arm of the British oil & gas explorer in the issue prospectus. MRPL has written to capital market regulator SEBI, objecting to what describes as "partial disclosure of facts" by Cairn, which it says impacts its credibility. "The DRHP states that Cairn’s production schedules for crude may get delayed due to MRPL's failure to keep its commitment on building the pipeline. But this does not represent all the facts," ONGC Chairman R.S. Sharma said. "MRPL is under no liability to build the pipeline. We had offered to build it provided we could recover the cost through the discounts," he said. Moreover, the DRHP does not mention that Cairn and MRPL had signed a joint letter dated June 30, 2005, to build a well-head refinery at Barmer. Cairn as the operator of the Rajasthan field has maintained that it is ready to offer its crude to any company nominated by the Government. MRPL has been designated as the nominated company which would offtake the crude from these fields. However, ONGC has maintained that it would be ready to buy the crude from Barmer only if it is economically feasible. Separately, Cairn India continues to be dogged by demands for discounts on crude from its Barmer fields. After ONGC, which has a 30% interest in Cairn India's Rajasthan field, Indian Oil Corp also sought an opportunity cost for buying the waxy oil. According to reports, IOC has sought a discount of US$8-10 a barrel. Cairn India aims to launch India's biggest IPO on Dec. 11 for up to US$1.4bn.
Reliance close to buying Adani Retail: report
Looks like the planned entry of Wal-Mart in the country has sparked off the much-awaited scramble for scale. And, what better way to attain that than through acquisitions. Reliance Retail, the wholly-owned subsidiary of Reliance Industries Ltd., is close to acquiring Gujarat-based Adani Retail for about Rs1-1.1bn. The Adani group has reportedly fixed a price tag of Rs2bn for its retail chain. Though Adani group officials claimed they were in talks with four parties - Reliance, Tatas, Aditya Birla Group and an unidentified private equity player - reports said negotiations with RIL had reached an advanced stage. If it goes through, the deal would give Reliance Retail access to 54 retail locations across nine cities in Gujarat. Reliance Retail is reportedly also in advanced stages of talks for acquiring Maratha Stores, a Mumbai-based local co-operative store chain. According to reports, what’s attracting the company is the real estate that the relatively unknown retail chain has. Maratha Stores has a chain of around 20 outlets in various catchment areas of Mumbai. In aggregate, it has close to 75,000 sq ft of retail space. Separately, retailers Subhiksha and Landmark have categorically denied newspaper reports that they are up for sale and that they are in talks with Reliance Retail for selling out to the Mukesh Ambani-controlled company.
Tata Motors project...Singur sinks deeper into trouble
Tata Motors' dream one-lakh-car project continues to face obstacles. The controversy surrounding the company's land acquisition process at Singur, in West Bengal turned violent. Activists of a Maoist organisation ransacked a Tata Motors showroom in Kolkata. Meanwhile, the fencing work on the Singur land, where Tata Motors plans to build its production facility for the one-lakh-car project, continued amidst tight security. West Bengal Chief Minister Buddhadeb Bhattacharjee said in the assembly that the land would be handed over to the Tatas this month. In related news, Trinamool Congress leader Mamata Banerjee began an indefinite fast at Dharmatala area, demanding immediate halt in land acquisition at Singur and withdrawal of police force from there. On Sunday, Banerjee had served a 24-hour ultimatum to the state government and said that she would go on an indefinite fast if the land acquisition process was not stopped. BJP president Rajnath Singh was arrested near Dankuni and allowed to go free immediately afterwards by the police on his way to Singur, where the Prohibitory orders continued to be in force. Social activist Medha Patkar, who again tried to go to Singur, was also stopped at Nasibpur. Despite her plea that she should be allowed to meet the farmers there, police refused to let her proceed to Singur.
i-flex shares jump as Oracle hikes offer price
Oracle Corp. raised the open offer price for i-flex Solutions Ltd. for a second time. The world's second-largest software maker also agreed to purchase an additional 35% of the company's stock. At Rs2,100, the new offer is 42% higher to i-flex' earlier offer of Rs1,475 and 20% up from the closing price of Rs1,751 on Dec. 7. The bid is scheduled to expire on Dec. 23 and won't be raised again, California-based Oracle said in a statement. "This is the last opportunity for i-flex shareholders to tender their shares to Oracle," Chief Executive Officer Larry Ellison said. Oracle already owns a 43% stake in the Mumbai-based i-flex. The bid comes about two weeks after Oracle postponed its plan to buy more i-flex shares. On Nov. 22, the company said that it would raise the per-share price and add an interest payment to compensate for the delay. On April 14, Oracle offered to buy about 16.6mn i-flex shares for Rs1,475 each, an 11.6% premium over i-flex's closing price the previous day. On Nov. 22, when Oracle announced the delay, it said that it would buy an additional 2,320 shares.
Mysore Cements...SEBI seeks higher open offer
Capital market regulator SEBI asked HeidelbergCement AG to increase its offer for buying an additional 20% stake in Mysore Cements Ltd. by 25% to Rs72.50 per share. The capital market regulator wants HeidelbergCement to raise the open offer because the German company paid non-compete fees to the promoters of Mysore Cements, effectively raising the offer price, a financial daily reported. The German firm had bought a majority stake of 50.1% from the S. K. Birla group, promoters of the Bangalore-based Mysore Cement for US$100mn in July. The public offer, at Rs58 per share was supposed to open on Sept 6 and close on Sept 25. On July 9, Mysore Cements announced that it would issue up to 66.5mn shares, representing 42.08%, to HeidelbergCement on a preferential basis at Rs54 a share. HeidelbergCement was to buy 13.4mn shares, totaling 8.48%, from the promoters at Rs58 a share, which excluded non-compete fees of Rs14.50 per share. HeidelbergCement took management control of Mysore Cements by subscribing to the preferential offer and also got a place on the company’s board of directors. HeidelbergCement is likely to contest SEBI's view on this matter in the Securities Appellate Tribunal (SAT). HeidelbergCement said it is preferring an appeal before SAT, seeking to set aside the SEBI direction for revising its open offer.
IPOs and pre-issue placement
Aditya Birla Group’s Idea Cellular Ltd. filed the Draft Red Herring Prospectus (DRHP) with SEBI for its forthcoming IPO. The company is planning to raise Rs25bn through the maiden public issue, which also has a green shoe option of Rs 3.75bn. The company is also considering a pre-IPO placement not exceeding 15% of the issue The issue proceeds will be utilised towards expanding services in new circles, NLD operations, as well as launch in Mumbai, redemption of preference shares, general corporate purposes and issues expenses.
The Cabinet Committee on Economic Affairs gave its approval to the IPO of shares by National Hydroelectric Power Corporation (NHPC). The Government will sell up to 24% of NHPC's share capital in one or more tranches from the domestic/external markets. The issue proceeds will be used for enabling the PSU to met the capacity addition targets. The present authorized capital of NHPC is Rs150bn and the paid up share capital is Rs103.49bn.
Fortis Healthcare Ltd. would raise up to US$33.33mn by issuing equity shares to Quantum (M) Ltd. and Blue Ridge Ltd. Partnership and Blue Ridge Offshore Master Ltd. Partnership (Blue Ridge) in a pre-IPO placement. The company will issue a maximum of 5.96mn shares to Quantum and Blue Ridge each at a price equal to the IPO price. The shares to be issued to Quantum and Blue Ridge will be subject to a lock-in after the IPO, as per SEBI regulations.
Maruti launches Zen Estilo
Maruti Udyog Ltd. launched the Zen Estilo in the highly competitive B segment. The company has chosen interesting colours like Purple Fusion, Champagne Beige, Virgin Blue and Olive Green for Zen, to go with the car's stylish image. The cheapest version of the car will have a showroom price of Rs 319,403 in New Delhi.
Toyota, Skoda to hike prices
Toyota Kirloskar Motor is considering an increase in prices of all its products. While the exact quantum of the increase is yet to be finalized, it could be between 1-2% of the vehicle cost. The company said the increase had been necessitated by several cost adjustments that the company had done this year across all products due to rising input costs. SkodaIndia has also decided to hike prices due to the rising input costs. A hike of Rs15000 is expected across all models, with effect from 1st January 2007.
Action heats up in aviation
GMR Infrastructure Ltd. has announced the master plan for the re-development of the Indira Gandhi International Airport in New Delhi. Delhi International Airport Pvt Ltd (DIAL), a Public Private Partnership, has been mandated to operate, manage and develop the Delhi airport. The master plan envisages the construction of a new integrated passenger terminal (Terminal 3) to cater to both domestic and international traffic. This terminal will be ready before the Commonwealth Games in 2010. In its first phase, the airport would be capable of handling 37mn passengers per annum. The airport is being designed with an ultimate capacity of 100mn passengers per annum.
Airbus said that it would invest US$1bn in India in various businesses over the next decade. The company also increased its forecast for new plane orders by India and predicted that the country is set to become the world's fastest-growing air travel market in the next decade. The Toulouse, France-based firm said that India would need 1,100 planes, valued at US$105bn until 2025.
Jet Airways India Ltd signed a contract with CAE, a world leader in providing simulation and training solutions to commercial airlines, for supply of Boeing 777-300ER (Extended Range) and Airbus A330 simulators. The company said that the move is in preparedness for the induction of wide bodied aircraft into the company's fleet next year.
Air India received the delivery of the first of its planned purchase of 68 Boeing jetliners. The digitally designed Boeing 737-800 aircraft is part of the largest commercial airplane order in India's civil aviation history placed by Air India in Dec 2005. The brand new aircraft will be joining the existing fleet of B 737-800's of Air India Express, a low-cost airline subsidiary of Air India. The delivery of the second B737-800 is expected by the third week of December, followed by three more aircrafts in January 2007.
The Government may allow foreign investors to own a larger stake in cargo airlines to help ensure optimum freight capacity. Union Civil Aviation Minister Praful Patel said that overseas investors may be able to own as much as 74% of Indian cargo airlines compared with the existing 49%. The Government may also make similar changes for helicopter and some aircraft-chartering businesses, he added. The country will need a total of 500 freighters within 10 years, Patel said.
Big Deals
Blackstone Group LP and Texas Pacific Group are reportedly planning to make a bid for Hutchison Essar, the Joint Venture (JV) between India's Essar Group and Hong Kong-based Hutchison Telecommunications Ltd. The Wall Street Journal (WSJ) has said that the offer from the two private equity majors could be as high as US$8bn, excluding debt. Blackstone might partner with Reliance Communications Ltd., the newspaper said.
Indian Oil Corporation Ltd. acquired a 12.5% stake in the Trans-Anatolian Pipeline Company (TAPCO), which is laying a crude oil pipeline between Turkey's Black Sea port of Samsun to the Mediterranean coast town of Ceyhan. According to reports, the price of the acquisition will be decided once the equity structure of the project, estimated to cost US $1.5bn, is finalised. The 550-km Samsun-Ceyhan pipeline will carry 1.5mn barrels of oil a day, or 70mn tons a year, when completed by 2009-10.
UTV Software Communications Ltd entered into an arrangement with Indiagames Ltd for acquisition of controlling stake in the Mumbai-based mobile and online gaming company for Rs680mn. UTV would also be acquiring majority stake in UK-based Ignition Entertainment Ltd., a company involved in developing console games for Rs600mn. UTV said that it has initiated development of animation movie projects with total investments to the tune of Rs1.35bn over a period of next three years.
Opto Circuits India Ltd. signed a Letter of Intent (LoI) to acquire a medical equipment company in Western Europe The all-cash deal is estimated to have cost Opto Circuits Rs720mn, and will be closed in the next few weeks. The company said the transaction is subject to financial and legal due-diligence. The target company designs and manufactures a wide range of balloon catheter assemblies and related products for coronary, renal and other applications and is a profitable company.
The Mahindra Group announced the sale of the Cable Accessories Division of Mahindra Engineering & Chemical Company Ltd. to 3M Electro & Communication India Pvt. Ltd. The Cable Accessories Division of Mahindra Engineering is a leading supplier of cable accessories, including electrical cable jointing kits. It employs approximately 70 people.
Tata Power bags 7 licenses for defense contracts
Tata Power Company Ltd. received seven licenses for its Strategic Electronics Division (Tata Power SED) from the Government. These licenses enable Tata Power SED to be the prime contractor to the Ministry of Defense for designing, development, manufacturing, assembling and upgrading mission critical systems in seven core areas of Defense Strategic Electronics. Earlier this year, Tata Power SED secured orders for Pinaka Multi Barrel Rocket Launcher System from the Indian Army and Futuristic Automatic Data Handling System for Air Defence from the Indian Air Force. "Over the next five years these licenses open a domestic addressable market of over Rs200bn for Tata Power SED," said Rahul Chaudhry, CEO of Tata Power SED.
RIL awarded two blocks in Yemen
Reliance Industries Ltd. (RIL) reportedly won two exploration blocks, block 34 and 37, in Yemen with partner Hood Oil. The company is likely to sign the production sharing contract early next month. The two blocks measuring about 7,500 sq km were amongst the seven fields offered during the second round of licensing. Yemen short-listed 34 of the 63 international oil companies under the third round of licensing. The final results will be announced on Dec 20. RIL already has a stake in the onshore block 9 in Yemen. It has discovered oil in this block and test production has started.
Japan's economy grows slower than forecast
The Japanese economy grew at a much slower pace than previously forecast in the July-September quarter, as spending by corporates and consumers slowed in the world's second-largest economy. The GDP grew by 0.2% in the quarter ended September 30, the Cabinet Office said, revising down its previous estimate of a 0.5% growth. On an annualized basis, Japan's US $4.7 trillion economy - expanded by 0.8% instead of the more robust 2% previously reported. The new figures showed a drop in corporate investment in new factories and equipment. Consumers also spent less than previously thought, particularly on home purchases, the Government said. Overall, domestic demand shrank during the quarter instead of the small growth that was previously reported, the latest government data showed. Only strong growth by exports kept the Japanese economy on track. The slower than expected GDP growth may force the Bank of Japan (BOJ) to defer the proposed hike in its key interest rate until next year. Bond yields were little changed on speculation that the central bank will wait for its quarterly Tankan business confidence survey next week before deciding whether to raise borrowing costs.
Australian economy slows
Australia's economy grew at its slowest pace in three years in the third quarter. The GDP rose by 0.3% from the previous quarter, the Bureau of Statistics said. Economists had forecast an increase of 0.4%. The lower than expected GDP figure has been attributed to a drop in business investment and weakness in agriculture output following the nation's worst drought in a century. The GDP grew by 2.2% in the three months ended Sept. 30 from a year earlier. Economists had estimated 2% annual growth. The economy grew at a revised 0.5% pace in the second quarter from the first. Business spending cut 0.2% from the GDP in the third quarter while agriculture knocked off 0.3% from growth. By contrast, consumer spending and net exports each contributed 0.4% to growth. Separately, a slowing economy, in part triggered by three interest-rate increases since May, prompted the Reserve Bank of Australia to keep its benchmark rate unchanged. The central bank raised its overnight cash rate target by a quarter percentage point in May, August and November, taking the rate to a six-year-high 6.25%.
ECB hikes key rate for 6th time in 2006
The European Central Bank (ECB) hiked its key interest rate for the sixth time in the year, to pre-empt any escalation in inflation as the European economy continues to accelerate. The ECB lifted its key interest rate to 3.5% from 3.25%. The bank is concerned about too much money sloshing around in the system for companies and consumers to spend. The EU central bankers in Frankfurt are going for gradual tightening of monetary policy as money supply is rising at an 8.5% rate. One of the main reasons for the latest hike by ECB is that the euro has been rising steadily against the dollar. With the EU economy being largely led by exports, it is only natural that Europe’s central bankers are a bit more getting edgy. With every rise in the euro, exports get more expensive and growth is harder to sustain. The big question now is whether another rise is likely as the eurozone economy strengthens. Meanwhile, the Bank of England (BOE) kept interest rates unchanged. Economists last week had unanimously forecast that the British central bank would leave rates at 5%. The outlook, however, is less clear and much will depend on the level of wage settlements in the crucial New Year pay round
Failed drug trials rattle Pfizer
Pfizer's share price tumbled after the largest pharmaceutical company in the world said that it had stopped development of Torcetrapib, its most promising drug. Pfizer invested US$800mn and spent 15 years developing Torcetrapib. Pfizer stopped the drug's final clinical test because 82 people taking it died during the trial, compared to 52 in the control group not taking the drug. When this information came in, Pfizer stopped the trials. The company also stopped developing the compound. Torcetrapib was supposed to help people fend off the risk of heart attacks by boosting levels of HDL (good) cholesterol - and insulate Pfizer from its generic competition. "We understand the challenge that this represents and we will respond quickly and aggressively to it," CEO Jeffrey Kindler said. He is under pressure to find a replacement for his company's blockbuster cholesterol drug Lipitor, which generated US$12bn in 2005 and could face generic competition by 2010. Meanwhile other important Pfizer drugs, such as Zoloft, Norvasc, and Zyrtec, have patents expiring next year. Patent expirations will cost Pfizer US$14bn in annual sales between 2005 and 2007, according to Lehman Brothers. Former CEO Hank McKinnell had forecast that torcetrapib could bring in a potential US $30bn in annual revenues. Lehman Brothers downgraded Pfizer to underweight from overweight. Pfizer said it was keeping previous revenue forecasts, including a return to revenue growth for 2009, but its plan for transforming the company will now be accelerated. It is still aiming to introduce around six new products a year starting in 2010.
NTL opts out of race for ITV
NTL dropped plans for a £4.7bn bid for ITV, dashing Sir Richard Branson's hopes of controlling the UK's largest commercial broadcaster. BSkyB's James Murdoch's acquisition of a 17.9% stake in ITV just a week after NTL signaled its desire to start merger talks, scuttled the cable group's plans. The high price BSkyB paid for ITV shares, put a full bid out of the reach of debt-laden NTL. NTL, however, is pressing ahead with its regulatory objection to Sky's stake in ITV. It reserves the right to make a fresh approach for the commercial broadcaster should another bidder emerge or Sky sell all or a material part of its stake in ITV. NTL has moved the Office of Fair Trading and Ofcom, the British media and telecom regulator, to complain about BSkyB's swoop on ITV. Ofcom is already investigating whether BSkyB's stake represents a change in control that might affect ITV's programming.
Separately, in a development could end two years of wrangling between billionaires Rupert Murdoch and John Malone, News Corp. decided to buy back the 19% voting capital held by Malone's Liberty Media in the third-largest US media firm. New York-based News Corp will exchange its 39% of California-headquartered DirecTV Group, pay US$550mn in cash and contribute three regional sports networks to the deal. The DirecTV shares will be bought by Liberty at slightly more than US$21, a discount to their current level, to reflect the cash and assets being added to the deal. For News Corp shareholders, the transaction is similar to a huge share buy-back. Liberty lawyers are completing due diligence on the sports television networks, after which a deal could be finalised as early as next week.
Hard Rock sold to Florida’s Seminole Tribe
The Seminole Tribe of Florida said it had acquired Hard Rock International, the music-themed chain of restaurants, hotels and casinos, from the Rank Group of Britain for US $965mn. This is one of the largest purchases ever by an American Indian tribe. The sale signals the exit of the Rank Group from the restaurant industry, as it seeks to focus on its casino operations amid disappointing earnings. It is also the Seminoles’ largest acquisition yet in gambling. The tribe, which currently draws about 90% of its income from gambling, has sought in recent years to diversify its revenue streams. The Rank Group put Hard Rock up for sale this summer. Founded in 1971 in London, Hard Rock employs about 7,000 at 124 restaurants in 45 countries, as well as at seven hotels, two casinos and two concert venues. The company also owns what it says is the world’s largest collection of rock memorabilia, including items from Elvis, Bob Dylan and Madonna. For the year through June, Hard Rock reported revenue of £133.7 million (US$262.5mn), and profit before interest and taxes of £18.9mn (US$37.1mn).