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Saturday, July 04, 2009

Weekly Watch - July 4 2009

Weekly Watch - July 4 2009

Grey Market Premium- Adani Power, NHPC, Mahindra Holidays

Mahindra Holidays 300

30 to 32

Adani Power 110 to 130 (Approximate)

27 to 30

NHPC 15 to 20 Approximate)

5 to 7

Marc Faber Commentary

Marc Faber Commentary

UK economy contracts more than forecast

The British economy contracted more than previous estimated in the quarter ended March 31, 2009, marking the biggest slump in GDP in five decades, according to the revised government figures released. First-quarter GDP shrank by 2.4% from the final three months of 2008, the Office for National Statistics said in London. Economists had forecast a 2.1% decline. The decline was sharper than the 1.9% initially projected. The quarterly drop was the biggest since 1958. About half the revision was due to the introduction of new construction sector data and the rest due to more complete services sector figures showing a sharper decline. Compared to the first quarter of 2008, GDP dropped 4.9%. The Office for National Statistics previously estimated a 4.1% annual drop. Separately, UK consumer confidence increased to the highest level in 14 months in June as households turned more optimistic that the worst of the global economic recession is over, GfK NOP said. An index of sentiment rose 2 points to minus 25, the strongest result since April 2008, the market researcher said in a statement today in London. The gauge of confidence about the economic outlook for the next year climbed 8 points to minus 8.

Job losses, unemployment mount in US, Europe unemployment

American employers cut 467,000 jobs from their payrolls in June, after cutting 322,000 jobs in May, the Labor Department reported. That made June the first month in four in which job losses rose from the previous month. Economists had expected 365,000 job losses. The unemployment rate, generated by a separate survey, rose to 9.5% from 9.4%, short of forecasts for an increase to 9.6%. The jobs report was kind of a rude awakening, prompting people to think that the stock market rally doesn't mean the US economy is coming back. What it could mean is that there is a lot more pain to be endured before there can be a recovery.

The Labor Department’s monthly snapshot of employment flew in the face of growing optimism of a recovery already taking root. The numbers intensified pressure on the Obama administration to show that the initiatives taken to lift the economic gloom are working. After an encouraging May report, some economists had expressed hopes that an economic recovery might finally be emerging. But the June report dented such hopes. The losses for June lifted net jobs shed since the beginning of the recession to 6.5mn - equal to the net job gain over the previous nine years.

The unemployment rate in the 16 eurozone climbed to a 10-year high of 9.5% in May as companies cut jobs to survive Europe's worst post-war recession, according to EU data. Some 273,000 jobs were lost across the eurozone in May as the unemployment rate rose to the highest point since May 1999, the European Union's Eurostat data agency estimated.

Biocon inks drug development pact with Mylan

Biocon Ltd. said that it has executed a definitive agreement with Mylan Inc. for an collaboration on the development, manufacturing, supply and commercialisation of multiple, high value generic biologic compounds for the global marketplace. Through the partnership, Mylan and Biocon bring together highly complementary capabilities that will advance their efforts to secure a leading position in the merging generic biologics industry. The generics segment in the pharmaceutical industry, which is currently based almost entirely on chemically synthesized drugs, is poised for a changing paradigm. The pressure to lower health care costs is galvanizing governmental efforts globally to facilitate the entry of generic bio-tech or protein derived drugs. An estimated US$25bn worth of biologics will have lost patent protection by 2016, creating a significant market opportunity for protein therapeutics like insulin and its analogs, erythropoietin, human growth hormone, monoclonal antibodies and many others.

Areva T&D put on sale by French parent

Shares of Areva T&D India gained as much as 11% on July 1 after its French parent Areva said that it has put the Transmission and Distribution (T&D) division up for sale globally, including the Indian arm. Currently Areva holds ~72% stake in Areva T&D India. The Indian arm of Areva had net profit of Rs2.26bn on net sales of Rs26.55bn. Areva T&D India shares closed at Rs363.30 after touching an intra-day high of Rs373.90 and a low of Rs327. It is up ~11% in a week's time. "Whatever the outcome of this process, Areva T&D India's focus remains unchanged: ensuring the satisfaction of its stakeholders and delivering on its commitments. We will keep you informed about the developments," the Indian arm of Areva T&D said in a statement. Areva group's Supervisory Board finalized the steps to be taken to finance the group’s long-term development plan. The Board has asked the Executive Board to put the group’s T&D division up for sale. Siemens AG, and ABB are reportedly among the interested entities to acquire Areva's T&D business. Areva T&D has €5bn revenues, 31,000 employees, 72 facilities around the world, and is a world leader in its markets.

Rush hour on QIP street...GMR falters, others survive

More than half a dozen Indian companies announced plans to sell shares to institutional investors through the QIP route, with only GMR Infra failing to successfully close the issue and had to eventually withdraw the offer. Bajaj Hindusthan Ltd. announced that its Board decided to close the issue and also approved the issuance of 35,450,000 shares of Re1 each at Rs204 a piece, aggregating to an issue size of around Rs7.23bn equivalent to around US$150mn. The issue was priced marginally higher than the SEBI-determined floor price of Rs203 a share. The development came a day after the Bangalore-based GMR Infrastructure called off its QIP of US$500mn, citing adverse market conditions.

Hindalco Industries announced that its Board had approved a QIP issue to eligible investors up to amount not exceeding US$500mn equivalent to Rs24bn. GVK Power & Infrastructure Ltd. raised US$150mn from selling shares to institutional investors. The shares were sold at Rs41.35 apiece. Emami mopped up Rs3.1bn through its QIP. The company issued around 10,000,000 shares of Rs2 each at Rs310 per share to qualified institutional buyers. Hindustan Construction Co. (HCC) said that it will raise over Rs4.8bn through private placement of shares to institutional investors at Rs102.15 a piece.

Housing Development & Infrastructure Ltd (HDIL) raised Rs16.88bn from a clutch of global investors such as KKR, Blackstone, Fidelity in a qualified institutional placement (QIP) of its shares. HDIL became the latest realty company to tap the QIP route for funds. So far, Unitech, which has raised funds through QIP twice, Indiabulls Real Estate, Sobha Developers, among others have raised Rs76bn in the last three months.

A representative claiming to be from KKR has left a comment

I am writing to you on behalf of Kohlberg, Kravis & Roberts (KKR) regarding your post titled 'Rush hour on QIP street...GMR falters, others survive.' The story reports that a number of investors including KKR have acquired stakes in HDIL through their recent QIP issue.

This is factually incorrect -- KKR was not involved in this transaction and holds no investment in HDIL.

We’d greatly appreciate if you could remove any reference to KKR from the post immediately.

Many thanks for your kind attention.


Rohan Cornelio

Tech Mahindra offer for Satyam gets lukewarm response

Tech Mahindra's public offer to acquire an additional 20% stake in Mahindra Satyam ended on July 1 with the company getting a very lukewarm response from investors. As a result, Tech Mahindra will now exercise the option of increasing its stake through the preferential allotment route. On the conclusion of the mandatory open offer to shareholders of Mahindra Satyam, the new owner has a little over 42% stake in the Hyderabad-based company, as against the original plan of acquiring a total of 51% of the equity. The response to the open offer was poor, as the secondary market price of Mahindra Satyam was well above Rs70 per share during the period of open offer (between June 12 and July 1), whereas the price announced by Tech Mahindra was Rs58 per share. On Wednesday, Satyam’s share price closed at Rs 71.55. Tech Mahindra had acquired 302.76mn shares, equivalent to 31% of the expanded equity capital, for Rs17.56bn. In addition, it announced an open offer another 199mn shares, equivalent to 20% of the equity capital of Satyam, under the SEBI takeover code. A successful open offer would have increased the total acquisition cost to Rs29.12bn.

Inflation decelerates for third week in a row

The annual rate of inflation, calculated on a point to point basis, stood at (-)1.30% in the week ended June 20, 2009 as compared to (-)1.14% in the week ended June 13, 2009, the Government said. It was at 11.91% during the comparable week of last year (June 21, 2008), the Commerce & Industry Ministry said.

Inflation in the 'Primary Articles' group decreased to 5.4% in the week under reference from 5.7% in the previous week. In Food Articles group, inflation fell to 8.5% from 8.7% in the week ended June 13, 2009 due to deceleration in inflation in all components, except Fruits & Vegetables, and Milk. In Non-food Articles, inflation fell to (-) 1.9% from (-) 1.3% and (-) 0.9% in the earlier two weeks. For the ‘Minerals’ group, inflation rose to 4.4% after having been stable at 4.2% for three consecutive weeks.

In the 'Fuel & Power' group, inflation eased to (-) 12.4% in the week ended June 20 from (-) 12.8% and (-) 12.6% in the weeks of June 6 and June 13, 2009. Inflation in the 'Manufactured Products' group, declined to 0.5% from 0.8% in the previous week. 'Paper & Paper Products, Chemicals & Chemical Products and Transport Equipment & Parts are the only three sub-groups out of 12 which registered increase in inflation. Negative inflation in Basic Metals, Alloys & Products eased marginally.

Inflation in the food index for the week under consideration fell marginally to 8.9% after having been at over 9% for six weeks from the second week of May 2009. Yet, inflation remains in double digits in Cereals, Pulses, Fruits & Vegetables and Other Food Articles. The Sugar group continued to record progressively soaring inflation rates of over 25%since the first week of May 2009.

May core sector growth 2.8% YoY

Growth in the output of six key infrastructure industries stood at 2.8% in May 2009 as against 3.1% in the same month last year, the Government said. The core sector growth was at 5% in April 2009. The index for the six key industries rose to 250.1 in May from 243.2 in the corresponding month a year earlier, the Ministry of Commerce and Industry said in a release in New Delhi.

Crude oil production shrank by 4.3% in May 2009 compared to a growth rate of 3.2% in May 2008. Petroleum refinery production declined by 4.3% in May 2009 compared to growth of 0.1% in May 2008. Electricity generation registered a growth of 3.3% in May 2009 compared to a growth rate of 2.0% in May 2008. Coal production registered a growth of 10.2% in May 2009 compared to growth rate of 8.8% in May 2008.

Cement production registered a growth of 11.6% in May 2009 compared to 3.8% in May 2008. Finished steel production registered a growth of 1.4% in May 2009 compared to 3.3% in May 2008. During the first two months of the current fiscal year (April-May 2009-10), the six infrastructure industries registered a growth rate of 3.9% as against 2.7% in April-May 2008-09.

Weekly Stock Picks - July 4 2009

Buy Neyveli Lignite


Buy Patel Eng


Buy Indiabulls Real Estate

Weekly Newsletter - July 4 2009

We've just gone past another winning week, not to mention the turmoil associated with ekeing out some gains. The Economy Survey gave its dose of ifs and buts. The railway budget on Friday had a long list of trains but whether plans of private-public partnership get on track only time will tell. The big event, (some have already termed it non-event) is on Monday when the budget will be announced. A lot of impetus will be given to infrastructure and social spending for sure. The big question would be where will the rupee come from as by now most of us could figure out where most of the rupee goes. Chances of big bang announcements are least expected this time. Unless the Finance Minister announces something terrible for the market, there is nothing much to fear. The global cues, as always will take control sooner than later.

Bandra-Worli Sea Link...bridge over troubled water

After several years of delays, const-overruns and controversies, the Bandra-Worli sea link was finally thrown open to the people of Mumbai with much fanfare. A fireworks, lights and laser show, coupled with music, was held on June 29 at the main cable-stayed bridge at the Bandra end.

UPA chairperson Sonia Gandhi and Union Agriculture Minister Sharad Pawar threw open the Bandra-Worli Sea Link at a public function held on June 30 at 3.30 pm at the Mhada ground near Rang Sharda. In a move that left everyone bamboozled, Pawar named the Sea Link after late Rajiv Gandhi, kicking up a political controversy in the state.

Mahim Causeway is currently the only route that connects the western suburbs and island city. The Bandra-Worli Sea Link will be the second major route. During peak hours, around 7,000 to 8,000 cars are expected to use the sea link per hour. However, reports said that on the very first day, the bridge was not able to cope with the traffic rush. The first five days were toll-free, leading to a large number of people using the link.

Currently, it takes 35 to 40 minutes to go the 7.7-km distance between Mahim flyover and Love Grove Junction, Worli. Transport experts estimate that traveling the link plus its approach and exit roads, which also measure about 7.7 km, will take at least 25 minutes. The builders claim that traveling the 4.7-km main link will take just 6 minutes. The daily one-way toll for Car or SUV is Rs 50, for Mini bus or mini truck Rs75 and Bus or truck Rs100.

Passes will be given out on a daily and monthly basis. The main link cost Rs7.5bn while the total cost was Rs16.3bn. Initial cost for the main link was Rs4.34bn. Initial deadline was December 2004 (later revised to December 2007 and December 2008). The bridge got completed on April 21, 2009 and all allied work was finished on May 31, 2009.

Highlights of Railway Budget for FY 2009-10

Presenting the Railway Budget for the fiscal year 2009-10 in Parliament on Friday, the Union Minister of Railways, Mamata Banerjee announced that there will be no increase in passenger fare and freight tariff. She said that the Budget will have approach for ‘inclusive growth’ and expansion of rail network to take development to every corner of the country.

Banerjee proposed an outlay of Rs.40,745 crores for 2009-10. Out of this, Rs.2,921 crores will be spent on new lines, Rs.1,750 crores on gauge conversion and Rs.1,102 crores on passenger amenities, which is 119% more than the allocation in the interim budget. Rs.424 crores will also be spent on railway staff amenities. She proposed freight loading target of 882 MT and estimated gross freight receipt at Rs.88,419 crores.

Giving an overview of financial performance of the Railways in 2008-09, the Railway Minister informed that freight loading during the period grew by 5% while traffic receipt increased by 11.4% to reach Rs.79,862 crores.

* No increase in passenger fare and freight tariff
* Budget to have inclusive growth and expansion of railway network to every corner of the country
* Plan outlay of Rs.40,745 cr. Proposed for 2009-10
* Passenger amenities get high priority, to get 119% increase
* Traffic receipts during 2008-09 increase by 11.4 % while freight loading grew @ 5%
* Special trains for perishable farm produce, facilities for transportation of rural craft
* Works for 7 new lines, gauge conversion of 17 lines and doubling of 13 lines to be taken up
* Faster parcel services proposed on three routes
* Tatkal scheme to be made passenger friendly
* Railway tickets to be made available through post offices and ‘Mushkil Aasaan’ mobile vans
* Concession for press persons increased to 50%
* Monthly ticket of Rs. 25 for unorganized sector/poor under ‘Izzat’ scheme
* Only Ladies EMU trains at Delhi, Kolkata and Chennai
* ‘Yuva Trains’ from rural hinterland to metros at concessional fare
* 12 new point-to-point ‘Duranto’ trains
* 57 new trains, extension of 27 trains and increase in frequency of 13 trains and air-conditioned double-decker trains proposed
* 50 stations to be upgraded to world class stations
* Long distance trains to have on-board doctors and infotainment services
* Handicapped and aged persons to have more amenities
* Special trains to ferry perishable agro products and rural handicrafts
* Special fund for the development of north east railway
* Quazigund-Anantnag line to be completed by next month
* 6560 railway staff quarters to be constructed and group ‘d’ employees to get scholarships for their girl child
* Railways to come out with while paper on financial status and vision-2020 document

Highlights of Economic Survey for FY09

The speed at which India returns to the high growth path in the short term depends on the revival of the global economy, particularly the US.

If the US economy bottoms out by September there will be good possibility for the Indian economy repeating its 2008-09 performance

The Economic Survey 2008-09 was presented to the Parliament on Thursday by the Finance Minister Pranab Mukherjee. The Finance Ministry's annual economic report card states that the speed at which the Indian economy returns to the high growth path in the short term depends on the revival of the global economy, particularly the US and the Government’s capacity to push some critical policy reforms in the coming months.

It went on to add that if the US economy bottoms out by September there would be good possibility for the Indian economy repeating its 2008-09 performance i.e. around 7% (plus or minus 0.75%) in the fiscal 2009-10 (assuming a normal monsoon). However, in the event of a more prolonged external economic downturn, the revival of the global economy/US being delayed until 2010, the Indian growth may moderate to the lower end of the range, it added.

The following are some of the highlights of the Economic Survey FY09.

1. Economic growth decelerates to 6.7% in 2008-09 compared to 9% in 2007-08 and 9.7% in 2006-07.
2. Per capita growth at 4.6%.
3. Deceleration in growth spread across all sectors except mining and quarrying; agriculture growth falls from 4.9% in 2007-08 to 1.6% 2008-09.
4. Manufacturing grows at 2.4%, slowdown attributed to fall in exports and a decline in domestic demand.
5. Global financial meltdown and economic recession in developed economics major factors in India’s economic slowdown.
6. Investment remains relatively buoyant, ratio of fixed investment to GDP increased to 32.2% in 2008-09 compared to 31.6% in 2007-08.
7. Fiscal deficit to GDP ratio stands at 6.2%.
8. Credit growth declines in the later part of 2008-09 reflecting slowdown of the economy in general and the industrial sector in particular.
9. Increased plan expenditure, reduction in indirect taxes, sector specific measures for textile, housing, infrastructure through stimulus packages provides support to the real economy.
10.Merchandise export grows at a modest 3.6% in US Dollar terms while overall import growth pegged at 14.4%.
11. A large domestic market, resilient banking system and a policy of gradual liberalisation of capital account to help early mitigation of the adverse effect of global financial crisis and recession.
12. Sharp dip in the growth of private consumption a major concern at this stage.
13. Medium to long-term capital flows likely to be lower as long as the de-leveraging process continues in the US economy.
14. Revisiting the agenda of pending economic reforms imperative to renew the growth momentum.

Financial Technologies

Financial Technologies

Hindalco Industries

Hindalco Industries

Patel Engineering

Patel Engineering

India Engineering

India Engineering

Sasken Communications

Sasken Communications