India Equity Analysis, Reports, Recommendations, Stock Tips and more!
Search Now
Recommendations
Saturday, May 03, 2008
Weekly Newsletter - May 3 2008
Bharti Airtel slashes NLD, roaming rates
Bharti Airtel, one of India's leading wireless telecom companies, cut tariffs on its national long-distance (NLD) and roaming services for its over 62 million customers. Airtel has reduced its NLD rates dramatically to Rs1.50/ minute from the earlier Rs2.65/ minute. The new tariffs will be effective from April 30. Airtel also revised its roaming rates. Airtel customers will now be able to receive a call while roaming at Re1/minute, compared to Re1.75/minute at present. Further, while roaming, Airtel customers can make an outgoing local call at Re1/minute and an NLD call at Rs1.50/minute. But, smaller telecom companies were not too happy with Bharti's unkind cut. Five small telecom operators will have to bear the cost of Bharti’s 40% tariff cut for roaming and STD calls, says a financial daily. These telcos, which use Bharti’s national long-distance network (NLD) for routing their STD traffic and pay a carriage fee of Rs25 paise a minute, will now have to pay double the amount.
BHEL and NTPC form EPC JV
Bharat Heavy Electricals Ltd. (BHEL) and NTPC Ltd. joined hands to set up a Joint Venture company called NTPC-BHEL Power Projects Pvt. Ltd. The main objective of the JV is to carry out EPC contracts for power plants and other infrastructure projects as well as manufacture and supply of equipment in India and abroad. The JV should have an initial authorized and paid up capital of Rs50mn equally subscribed by the promoters. A financial daily reported that Alstom Projects India is likely to forge an alliance with NTPC-BHEL Power Projects. The JV would provide a ready platform to Alstom to enter manufacture of high-value turbine/generator (TG) sets, the newspaper added.
ArcelorMittal signs pacts with Satyam, Mindtree
ArcelorMittal decided to formalise framework agreements with two Indian IT services firms - Satyam Computer Services and Mindtree - for delivering IT services in combination with their European (current incumbent) partners. The framework agreements are valid until end 2011. The move was part of a detailed review of the steel giant's IT subcontracting activities in Western Europe, and a move towards a more global IT supply model. The move included efforts to consolidate sub-contractors activities, currently provided by a multitude of vendors, with two global IT providers. The objective is to improve the cost-effectiveness and flexibility of the IT organisation, whilst maintaining (and ultimately improving on) current processes and service levels, ArcelorMittal said. It is expected that about 70% of the currently subcontracted activities in the scope of this initiative will be carried out by the new vendors, allowing internal IT employees to focus on high value adding activities, ArcelorMittal said. There will be no direct job losses as a result of this initiative, it added.
KPIT Cummins books MTM loss of Rs892.68mn
KPIT Cummins Infosystems said that it has suffered a Mark to Market (MTM) loss of Rs892.68mn as on March 31, 2008. Since the company has not cancelled the contracts, this loss will be non-cash / notional loss. The company said it is in the process of ascertaining the accounting treatment of the contracts in the light of the Accounting Standard - AS 30 - mandated by the Institute of Chartered Accountants of India on March 27. During the year, apart from forward contracts, the company entered into forex derivative transactions to the tune of US$42.6mn, covering a period of five years. Apart from a committed INR - US dollar conversion rate, the contracts also had a component of contingent premium payment with reference to Euro-US dollar rates beyond benchmark Euro-US dollar rates. The company's current and future exports in Euros, based on the current sales trend indicate that net inflows to the company is higher than the amount on which the premium is payable on the forex derivative contracts. The company therefore believes it would not incur a loss by virtue of these contracts, although there could be an opportunity loss. The company has made its cost structure compatible with the benchmark Euro-Dollar rates, it added.
SC asks Tata Tele, RCOM to pay Rs7bn to BSNL
The Supreme Court (SC) ruled that Tata Teleservices and Reliance Communications (RCOM) are liable to pay Access Deficit Charge (ADC) of Rs7bn to state-run telecom giant BSNL for interconnection. A bench headed by justice H.S. Kapadia upheld the Telecom Dispute Settlement and Appellate Tribunal's (TDSAT) order of September 2005 that had ruled that Tata Tele's 'Walky' and RCOM's 'Unlimited Cordless' are not fixed line phones but limited mobile services. The country's apex court had earlier reserved its judgment on petitions filed by Tata Tele and RCOM, challenging the telecom tribunal's order which had termed their fixed wireless services as limited mobile services. RCOM is liable to pay an ADC of over Rs4bn to BSNL, while Tata Tele owes about Rs3bn to the public sector company. Reacting to the Supreme Court verdict, RCOM said that the pending ADC levy to BSNL would not put any additional burden on the company as it has been taken care of in the previous years.
Buzz from Deal Street
Essar Steel Holdings Ltd., part of Essar Global, announced that it has agreed to acquire Esmark Inc. at an estimated enterprise value of US$1.1bn. Essar Steel Holdings agreed to the material terms of a proposed tender offer for cash purchase price of US$17 per share of all outstanding shares of the Nasdaq listed Esmark. The proposed offer was unanimously accepted by the Esmark Board and is subject to customary approvals including those of the US government and United Steel Workers. Esmark plans to enter into definitive agreement upon expiration or waiver of the about 52 day "right to bid" period set forth in the collective bargaining agreement with the United Steelworkers. Esmark is a steel production and distribution company with a capacity of 2.4 MTPA and steel distribution centres across USA.
Reliance Power said that its wholly-owned subsidiary Reliance Coal Resources Pvt Ltd has entered into a definitive agreement to acquire 100% economic interest in three coal concessions in Indonesia. The company plans to invest Rs24bn in mine and related transportation infrastructure to take the capacity of these mines to over 25 million metric tons per annum. Total coal resources of the three mines total 2bn tons. The coal from the Indonesia mines would supply Reliance Power's 4,000-MW Ultra Mega Power Project at Krishnapatnam, Andhra Pradesh and the Shahapur power project in Maharashtra.
Dr. Reddy's Laboratories said it has signed a definitive agreement to acquire BASF's pharmaceutical contract manufacturing business and related facility in Shreveport, Louisiana, USA. This deal is subject to customary closing conditions and is expected to be completed within the first quarter of fiscal year 2008-09, Dr Reddy's said. The transaction will be funded using the company's internal cash reserves or other committed credit facilities, it added. BASF’s pharmaceutical contract manufacturing business involves the contract manufacturing of generic prescription and over-the-counter (OTC) products for branded and generic companies in the US. It recorded revenues of US$43mn for the year ended December 31, 2007.
Weekly Stock Recommendations - May 3 2008
Buy ITC
Buy Reliance Capital
Buy IOC
Buy NIIT Tech
Buy Bartronics
Weekly Snippets - Y.V. Reddy springs another surprise
Y.V. Reddy, the Governor of the Reserve Bank of India (RBI) yet again surprised the markets. While the market has been expecting a small hike in repo rate and reverse repo rate, Reddy left both of them unchanged, but hiked the CRR by another 25 basis points (bps). The CRR hike was in addition to the 50 bps increase announced a few days back and will take it to 8.25%, with effect from May 24. While the previous hike was expected to absorb excess cash worth Rs180bn, the latest one is likely to suck out Rs90bn from the system. The repo rate stands at 7.75% and the reverse repo rate at 6%.
Despite high interest rates, rising inflation and global concerns, the GDP growth rate for the year 2008-09 has been estimated at 8-8.5%. The RBI said it aims to bring inflation down to around 5.5% in the year 2008-09 and would prefer to bring it close to 5% as soon as possible. Going forward, the central bank wants inflation to be in the range of 4-4.5% and maintains medium-term inflation target of around 3%. The RBI said it is targeting a credit growth of 20% and deposit growth of 17% in FY09. The rate of growth in money supply (M3) is placed in the range of 16.5-17% in 2008-09.
The RBI mentioned that it gives high priority to price stability and well-anchored inflation expectations. The central bank also indicated that it stands ready to use both conventional and unconventional measures to reign in inflation expectations. So, the tightening bias will continue in the near term till inflation cools off below 6%. The central bank is likely to use CRR more and more to control liquidity. Lending rates, barring on housing loans up to Rs30 lakh, are not likely to rise from these levels. But, deposit rates may fall as banks try to control costs as margins will be under pressure amid slow credit growth and rising costs.
"Banks are quite happy that only CRR has been hiked and policy rates have been untouched," Chidambaram said after meeting the chief executives of public sector banks in New Delhi. "In the reasonable future, I don't expect any increase in interest rates by the public sector banks." ICICI Bank's CEO K.V. Kamath said interest rates will remain stable in the short term. Banks would still have sufficient cash after the measures to suck out funds, said Kamath. "Given the liquidity situation, interest rates will not rise," Kamath said. "The liquidity situation may change but at this point of time, I don't think interest rates will increase."
Subscribe to:
Posts (Atom)