Petrol Prices Cut
Succumbing to political pressure, the Government cut retail prices of petrol and diesel in line with the steep fall in crude oil prices. Petroleum Minister Murli Deora said the price of petrol was reduced by Rs2 per litre while diesel will be cheaper by Re1 a litre in the capital. The prices will differ from state to state as per their respective tax levies. Sonia Gandhi, the President of the Congress party, asked Prime Minister Dr. Manmohan Singh to reduce petrol and diesel prices to pass on the benefit of the lower crude oil prices to the general public. There was no change in the price of politically sensitive Kerosene and LPG. Though the move might help contain inflation to some extent, oil marketing companies will bear the brunt of the cut in fuel prices. Private players like Reliance Industries will be hurt even more. Motor fuel prices were last reduced on November 16, 2004, but were raised thrice subsequently, the last being on June 6, to compensate public sector oil companies for losses incurred on selling petrol and diesel at a discount after crude oil prices soared in world markets. But, since hitting a record of US$78.40 per barrel on July 14, crude prices are down more than 20%, leading to calls for a reduction in local fuel prices from coalition partners such as the Left parties.
October exports rise 11.3% yoy
India's merchandise exports grew by 11.35% last month to US$9.62bn. Imports climbed by 36.8% to US$15.83bn, widening the trade deficit to US$6.21bn from US$2.93bn in the same month last year. Crude oil imports stood at US$5.35bn in October compared with US$3.44bn in the corresponding period last year, registering a growth of 55.35%. During the month under review, non-oil imports were estimated at US$10.48bn, up 28.92% over non-oil imports of US$8.13bn in October 2005. Between April-October 2006, cumulative merchandise exports were up 22.1% at US$69.53bn. Imports during April-October 2006-07 grew by 21.5% to US$99.76bn, leading to a trade gap of US$30.23bn. The trade deficit for April-October 2005-06 was at US$23.52bn. Crude oil imports during April-October 2006-07 were valued at US$34.01bn, which was 39.45% higher than US$24.39bn in the corresponding period last year. Non-oil imports stood at US$65.75bn, up 13.5% over the level of US$57.92bn in April-October 2005-06. Exports from India rose 25% to US$101bn in the year ended March 31, 2006, exceeding a target of US$92bn. The Government wants to boost exports to US$165bn by March 31, 2010. That will help India gain a 1% share of global merchandise trade from the current 0.8%.
Govt okays Essar, Fiat FDI proposals
The Government cleared 17 Foreign Direct Investment (FDI) proposals worth Rs35.36bn (US$790mn). Among the prominent cases approved includes Essar Group's plan to ramp up foreign holding in Hutchison Essar, its joint venture with Hong Kong-based Hutchison Telecom International. Essar is aiming to increase the foreign stake in Hutch Essar, by 5.85% to the maximum permissible limit of 74%. Essar communications Mauritius will bring in Rs2.3bn for this transaction. The biggest proposal was that of Fiat Auto SpA. The Italian auto major plans to pump in an additional Rs20bn in its Indian unit, Fiat India Automobiles. This will take its total foreign investment in India to Rs40bn. A group of NRIs, Persons of Indian Origin and other overseas investors were permitted to invest Rs10.9bn in ICICI Venture Funds Management, a unit of ICICI Bank. ICICI Ventures will use the money to set up an India Advantage Fund for investment in local companies. Korea-based Mando Corp. would invest Rs1.03bn to set up a new wholly-owned subsidiary in Chennai for manufacturing, marketing and distributing power steering system for Hyundai Motor India and other auto companies. Fox International Channels Inc. of USA, a unit of News Corp., also got an approval for investing in an Indian company that will broadcast non-news and current affairs TV programming.
Parsvnath, Lanco shine on listing
Shares of Parsvnath Developers Ltd., one of the leading real estate developers in the country, surged on their stock market debut on Nov. 30, as investors bet on the sector's promising outlook. The stock opened at Rs540 as against the issue price of Rs300, translating into a premium of 80%. The scrip closed at Rs510 on the Bombay Stock Exchange (BSE) after touching a high of Rs579 and a low of Rs481. The issue was oversubscribed 62 times. Shares of Lanco Infratech Ltd., an infrastructure development company with interests in power generation, construction and property development, rose 12.5% on their debut on the stock exchanges on Nov. 27. The stock got listed at Rs270 on the BSE. It finished at Rs262, after touching a peak of Rs270 and a low of Rs228. The public issue of Lanco Infratech was subscribed 11.88 times. The offer price was fixed at Rs240 per share.
Unitech will list investment arm in London
Unitech Ltd. said it is contemplating seeking investment from the affiliates of Unitech Corporate Parks Plc in respect of the six special purpose vehicles (SPV) that own IT park/IT SEZ projects of the company. Unitech Corporate Park is a newly established, externally managed, independent entity incorporated in the Isle of Mann. It will focus on real estate investments in IT parks/IT SEZs. Unitech is seeking admission of Unitech Corporate Park's ordinary shares on the London Stock Exchange's AIM Market. A Unitech subsidiary, Nectrus Ltd. will provide investment advisory services and Unitech will provide project management services to the AIM listed Unitech Corporate Park. Separately, a media report said that Unitech plans to raise up to US$700mn from the share sale in Unitech Corporate Park. Unitech, based in New Delhi, will list the real estate investment firm on next month. Deutsche Bank AG and Morgan Stanley are advising Unitech on the Unitech Corporate Park IPO.
Big hotel plans unveiled
Hilton Hotels Corp plans to form a joint venture in India with DLF that will develop and own 75 hotels and serviced apartments over the next seven years. The JV-owned hotels will represent several brands from Hilton portfolio, including Hilton Hotels, Hilton Garden Inn, Homewood Suites and Hilton Residences. The JV will develop and build these properties, while Hilton will manage them. DLF will hold a 74% stake in the JV, and Hilton will hold the remaining minority stake. Over the next five to seven years, Hilton will invest up to US$143mn in the JV, before consideration of debt.
Emaar MGF entered into a joint venture agreement with Accor, global leaders in economy and budget hotels, to bring the Formule 1 brand of budget hotels to India. The new venture, Budget Hotels India has planned investments of US$300mn over the next 10 years. Starting with major metros, it is looking at developing 50 hotels in the first five years of its operations, and the remaining 50 will be developed in the second phase. Nirmal Lifestyles entered into a joint venture with Accor to develop and operate a Rs10bn hospitality project at Mumbai. The project, slated to be one of the largest hospitality projects in the country, is expected to be completed by 2010-11.
GMR Infrastructure’s subsidiary, GMR Hyderabad International Airport Ltd formed a joint venture with Accor Hotels and Resorts, Singapore to operate its first business hotel at Rajiv Gandhi International Airport in Shamshabad. Construction is scheduled to begin shortly and the hotel is expected to become operational by the time new international airport takes off in March 2008. Accor will operate, manage and maintain the hotel in addition to providing technical support during the construction stage. The lease term for operating the hotel is for a 10-year period, which can be extended further on mutual agreement.
Deal Street remains active
Mahindra & Mahindra Ltd. (M&M) agreed to acquire a 66% stake in DGP Hinoday Industries Ltd. The balance 34% stake is in the hands of Hitachi Metals. The shares will be acquired from the company’s existing shareholders, DG Piramal Group and India Private Equity Fund Mauritius. M&M is viewing the acquisition as its entry into the SG Iron casting space and plans to utilize Hinoday's expertise in SG Iron to become a leading casting player in the country.
Ranbaxy Laboratories Ltd. said on Friday that it had acquired Be-Tabs Pharmaceuticals, the fifth largest generics company in South Africa, for US$70mn. The acquisition values Be-Tabs at 2.2 times sales and 7.7 times EBIDTA. Be-Tabs has a strong OTC (over-the-counter) portfolio, which accounts for 45% of its total revenues. It is the No.1 Penicillin manufacturer in South Africa. The acquisition will be funded through the FCCB proceeds.
Thomas Cook India Ltd. announced its decision to acquire Travel Corporation India (TCI). Thomas Cook India proposes to acquire the entire shareholding of TCI, which post acquisition will be a wholly owned subsidiary. The acquisition is subject to the approval of the shareholders of both the companies. The all cash deal is worth Rs1.82bn. Jehangir Katgara, the current MD of TCI, has accepted the request from Thomas Cook India to continue on the Board of TCI, which will help the process of consolidation. TCI which will become a 100% subsidiary but will continue to operate as a separate legal entity.
After announcing big-ticket steel projects, steel king Lakshmi Niwas Mittal has now set its sights on India's real estate sector. Karrick, the London-based NRI tycoon's investment arm, will pick up a 3.33% stake in Indiabulls Infrastructure Development Ltd. for Rs1.12bn. It will buy 2.5mn shares at Rs447 per share. Also, FIM Holding B Ltd., which is part of US-based hedge fund Farallon Capital, acquired a 10% stake in Indiabulls Infrastructure Development for Rs3.35bn. It will purchase 7.5mn shares at Rs447 per share. Indiabulls Infrastructure Development is the real estate unit of Indiabulls Financial Services Ltd. According to a financial daily, the total deal is worth Rs4.47bn, and values Indiabulls Infrastructure Development at Rs33.5bn.
Mcleod Russel India Ltd will acquire 72.38% stake in The Moran Tea Co (India) Ltd for Rs414.9mn and has signed a Term Sheet with Moran Holdings Plc for the same. Mcleod Russel expects the acquisition to consolidate its leadership position in tea plantation business with an annual tea output of over 75mn kgs of tea. The company proposes to make an Open Offer to acquire up to 20% more of Moran India from the public shareholders. The company will finance this acquisition through internal accruals. Moran India is engaged in growing and manufacturing of quality tea. It has four tea estates in the quality tea belt in Assam producing around 4.3mn kgs of tea annually.
VW to start making Passat from next year
Volkswagen AG, Europe's largest carmaker, will begin manufacturing the Passat sedan next year in India as part of its plan to capitalise on the rising consumer demand in Asia's fourth largest economy. The German car major will spend €410mn (US$540mn) to set up a greenfield plant at Chakan, near Pune. The new factory will have an installed capacity to manufacture 110,000 cars a year starting 2009. The plant will employ about 2,500 workers. Volkswagen also said it will start using the Indian facilities of its Skoda Auto AS unit at Aurangabad in the middle of next year. Volkswagen said it also plans to develop an India-specific compact car in the foreseeable future based on the Polo. The company will import the Touareg and Phaeton models for sale in India, it said.
India's second-largest beer maker SABMiller Plc plans to invest US$100mn a year for capacity expansion. Speaking at the India Economic Summit SABMiller CEO Graham Mackay said the expansion would take place in existing facilities and the company will make fresh investments as and when permitted. The company has invested US$500mn in the country so far. Abu Dhabi National Energy Company PJSC (TAQA) formed a joint venture with IL&FS for setting up power plants in India. The company plans to invest up to US$1bn over the next three to five years. The partnership potential with TAQA is a lead initiative to mobilize equity funds for these projects, including the 750 MW gas based power project in Tripura, being implemented with ONGC as a partner, IL&FS said.
Cairn, Nissan Copper, Ess Dee Aluminium IPOs announced
Cairn India Ltd plans to raise up to US$2.2bn through an IPO, which will open on December 11 and will close on December 15. The company will offer 328.8mn shares of Rs10 each and there will also be a greenshoe option of up to 49.32mn shares. The IPO proceeds will be used to expand its oil & gas fields, including the lucrative Rajasthan oil blocks. The IPO, will comprise 18.63% of the fully diluted post-issue equity share capital of the company, has a price band of between Rs160 and Rs190 per share, valuing the business at between Rs282.45bn and Rs335.41bn. Cairn had sold around 12% stake in a pre-IPO placement to a clutch of investors, including Malaysian state oil company Petronas, for US$823mn. Cairn will have a 69.5% stake in Cairn India after the IPO.
Nissan Copper is entering the capital market on December 4 with an IPO of Rs250mn. The price band has been fixed between Rs 33 and Rs 39 per share. The issue closes on December 8. The funds raised will be utilized for the expansion of the company's copper product manufacturing capacities. The total cost of the project is Rs350mn of which Rs100mn is part-funded by State Bank of India by way of a term loan and the balance will be funded through the issue.
Ess Dee Aluminium Ltd. said it would be entering the capital market with an IPO of equity shares to fund its proposed expansion plans. The end-to-end pharmaceuticals packaging company plans to issue 6.96mn shares of Rs10 each for cash at a premium, to be decided through a 100% book-building process. The final issue will constitute 25.79% of the post issue fully diluted equity share capital. The promoters' stake, post IPO will come down to 64.9%. The price band for the issue has been fixed between Rs200 and Rs225. The issue will open on December 4 and will close on December 8.
Big orders for TCS, L&T
Tata Consultancy Services Ltd. (TCS) has signed a seven year agreement with UK-based small-format food retailer Somerfield to provide a full range of managed IT services. TCS will take over the entire IT operations, asset management and planning for the company, with which it already has an eight-year relationship, and provide fully managed IT infrastructure and application services. It will also manage third party hardware, software and services contracts with an estimated value of over US$100mn. The project will reduce the headcount at Somerfield's Bristol office by around 115.
Larsen & Toubro Ltd.’s Joint Venture with Alpine Mayreder Bau GmbH, Austria has secured an order worth Rs4.56bn from NTPC Ltd. The contract is for the execution of 4 x 130 MW Tapovan Vishnugad Hydropower project in Uttaranchal. This is the second hydropower project that L&T will execute in Uttaranchal. The earlier project, Singoli Bhatwari project being implemented through the BOT route, is located 125 km from Tapovan Vishnugad.