Friday, December 06, 2013
As per the provision of Securities Contracts (Regulation) Rules, 1957 and the Rules, Bye-laws and Regulations of the Exchange, a Company listed on BSE Limited is required to comply with various clauses of the Listing Agreement, failing which trading in securities of such defaulting Companies is liable for suspension.
Trading members are requested to take note that the following 28 Companies have failed to comply with various provisions of the Listing Agreement up to quarter ended June 2013.
Allied Computers International (Asia) Ltd
Amalgamated Electricity Company Ltd
Anand Credit Ltd
Ashco Niulab Industries Ltd
Crew B.O.S. Products Ltd
Emporis Projects Ltd
Iris Mediaworks Ltd
KLG Systel Ltd
Lords Chemicals Ltd
LS Industries Ltd
Maestros Mediline Systems Ltd
Marvel Capital & Finance India Ltd
Nakshatra Infrastructure Ltd
Parekh Distributors Ltd
Polar Industries Ltd
Sanmit Infra Ltd
Secure Earth Technologies Ltd
Sharp Industries Ltd
Sindhu Trade Links Ltd
SM Energy Teknik & Electronics Ltd
Sql Star International Ltd
Stelco Strips Ltd
Sun Granite Exports Ltd
Taksheel Solutions Ltd
United Van Der Horst Ltd
Vanasthali Textile Industries Ltd
Vibros Organics Ltd
Yash Trading & Finance Ltd
Trading in securities of these 28 Companies will be suspended w.e.f. (being 15 trading days from issue of notice); on account of non-compliance with the provisions of the Listing Agreement.
(i) In case, the Company complies (to the satisfaction of the Exchange) with all the provisions of the Listing Agreement on or before ; trading in securities of the company will be suspended for Five Trading Days i.e. up to .
(ii) However, in case the Company fails to comply with the provisions of the Listing Agreement, to the satisfaction of the Exchange on or before ; the suspension will continue till such time the Company complies with the procedure prescribed for revoking suspension in a scrip and the Company complies with all extant norms for revocation of suspension laid out by the Exchange.
It may be noted that suspension of trading in securities of a Company will be revoked only if the Company has complied with all the provisions of the Listing Agreement up to the latest quarter for which the compliances are required.
India Daily: Strategy - GameChanger Prespectives; Change in Reco - Wipro; Updates - Tech Mahindra, Tata Global Beverages, Economy
India Daily: Strategy - GameChanger Prespectives; Change in Reco - Wipro; Updates - Tech Mahindra, Tata Global Beverages, Economy
Key benchmark indices edged higher as exit polls on Wednesday, 4 December 2013, predicted a strong showing for the Bharatiya Janata Party (BJP) in the recently concluded assembly elections in four states viz. Rajasthan, Madhya Pradesh, Chhattisgarh and Delhi. But, the key benchmark indices gave away a portion of the initial strong gains. The barometer index, the S&P BSE Sensex, and the CNX Nifty, both, attained their highest closing levels in more than 4 weeks. The S&P BSE Sensex, fell below the psychological 21,000 mark, having alternately moved above and below that level in intraday trade. The Sensex garnered 249.10 points or 1.2%, off close to 208 points from the day's high and up close to 29 points from the day's low. The market breadth, indicating the overall health of the market, was positive. In the foreign exchange market, the rupee strengthened past 62 against the dollar.
Indian stocks snapped two-day losing streak today, 5 December 2013. The Sensex had lost 189.30 points, or 0.91% in two trading sessions to 20,708.71 on Wednesday, 4 December 2013, from a recent high of 20,898.01 on Monday, 2 December 2013. The Sensex has lost 165.88 points, or 0.8% in this month so far (till 5 December 2013). The Sensex has garnered 1,531.10 points or 7.88% in calendar 2013 so far (till 5 December 2013). From a 52-week low of 17,448.71 on 28 August 2013, the Sensex has risen 3,509.10 points or 20.11%. From a record high of 21,321.53 on 3 November 2013, the Sensex has fallen 363.72 points or 1.71%.
Coming back to today's trade, index heavyweight and cigarette maker ITC edged lower. Another index heavyweight Reliance Industries (RIL) edged higher. Bank shares were in demand after a foreign brokerage upgraded target prices of select bank shares. Capital goods stocks also gained.
Indian stocks edged higher today, 5 December 2013, after exit polls on Wednesday, 4 December 2013, predicted a strong showing for the Bharatiya Janata Party (BJP) in the recently concluded assembly elections in four states viz. Rajasthan, Madhya Pradesh, Chhattisgarh and New Delhi. The state elections are considered a barometer for the national elections that are scheduled to be held before the end of May 2014. BJP's prime ministerial candidate for general elections in 2014 -- Narendra Modi -- is considered a pro-business leader.
The BJP has emerged as the biggest winner in four key state elections, exit polls forecast on Wednesday, 4 December 2013, a possible blow to the ruling Congress ahead of a general election due next year. Assembly elections in Delhi, Madhya Pradesh, Rajasthan, Chhattisgarh and Mizoram were held over the past few weeks. The elections were marked by record high turnout in most states. Despite the gains predicted for the BJP it was unable to win a majority of seats in the capital Delhi, two polls showed. One poll suggested the race was close in Chhattisgarh. While the exact results varied from exit poll to exit poll, the general trend was clear: The ruling Congress party recorded embarrassing declines in support in Delhi as well as the western state of Rajasthan. Meanwhile voters in Madhya Pradesh and Chhattisgarh voted basically on the same lines they voted five years ago, backing the main opposition party, the BJP.
Counting of votes for assembly elections in Delhi, Madhya Pradesh, Chhattisgarh and Rajasthan takes place on Sunday, 8 December 2013. Counting of votes for assembly elections in Mizoram takes place on 9 December 2013. The results are being closely watched by markets as a potential indicator of the mood of voters in the world's biggest democracy before the 2014 general election.
The S&P BSE Sensex garnered 249.10 points or 1.20% to settle at 20,957.81, its highest closing level since 5 November 2013. The index jumped 456.89 points at the day's high of 21,165.60 in early trade, its highest leve since 3 November 2013. The index rose 220.49 points at the day's low of 20,929.20 in mid-afternoon trade.
The CNX Nifty jumped 80.15 points or 1.3% to settle at 6,241.10, its highest closing level since 5 November 2013. The index hit a high of 6,300.55 in intraday trade. The index hit a low of 6,232 in intraday trade.
The BSE Mid-Cap index rose 0.13% and the BSE Small-Cap index rose 0.39%. Both these indices underperformed the Sensex.
The market breadth, indicating the overall health of the market, was positive. On BSE, 1,269 shares gained and 1,247 shares fell. A total of 167 shares were unchanged.
The total turnover on BSE amounted to Rs 2079 crore, higher than Rs 1973.77 crore on Wednesday, 4 December 2013.
The S&P BSE Bankex (up 4.44%), the S&P BSE Capital Goods index (up 3.59%), the S&P BSE PSU index (up 1.51%), the S&P BSE Realty index (up 1.48%), the S&P BSE Power index (up 1.33%) and the S&P BSE Oil & Gas index (up 1.25%), outperformed the BSE Sensex.
The S&P BSE Healthcare index (down 1.47%), the S&P BSE FMCG index (down 0.94%), the S&P BSE IT index (down 0.51%), the S&P BSE Teck index (down 0.36%), the S&P BSE Auto index (up 0.37%), the S&P BSE Consumer Durables index (up 0.38%) and the S&P BSE Metal index (up 1.11%), underperformed the BSE Sensex.
From 30-share Sensex pack, 20 stocks rose and rest fell.
Index heavyweight and cigarette maker ITC shed 1.39% at Rs 308.90. The scrip hit high of Rs 318.05 and low of Rs 307.80.
Another index heavyweight Reliance Industries (RIL) gained 1.58%. RIL is currently producing about 10 million standard cubic metres per day (mscmd) of gas from the Krishna-Godavari basin's D6 block, off India's east coast, B. Ganguly, chief operating officer of its exploration and production business, told reporters. The current output is sharply lower from the 60 mscmd production at the end of 2010, and RIL and partner BP (BP.L) have cited geological complexities for the fall in output. The falling output has prompted the government to disallow proportionate cost recovery to RIL, leading to arbitration proceedings over the issue. The finance ministry has also asked for gas prices for RIL to be capped because it's gas production from the block is far below its supply commitment.
Bank shares were in demand after a foreign brokerage upgraded target prices of select bank shares. ICICI Bank (up 6.66%), Yes Bank (up 6.33%), Canara Bank (up 5.75%), HDFC Bank (up 4.52%), Union Bank of India (up 3.80%), Bank of Baroda (up 3.58%), IndusInd Bank (up 3.14%), IDBI Bank (up 3.05%), Bank of India (up 2.64%), Punjab National Bank (up 2.20%), State Bank of India (up 1.87%), Kotak Mahindra Bank (up 1.67%) and Federal Bank (up 0.77%), edged higher.
The brokerage increased Bank of Baroda's target price to Rs 775 from Rs 645 and for Kotak Mahindra Bank, the target was raised to Rs 790 from Rs 762. SBI's target price was increased to Rs 2,200 from Rs 1,933. ICICI Bank's target price was raised to Rs 1,290 from Rs 1,250.
AXIS Bank rose 4.33% to Rs 1,241.20. In its clarification to a news report that the private sector bank has initiated discussions for selling its network of credit and debit card swipe machines business, AXIS Bank today, 5 December 2013, said that the bank evaluates opportunities for various strategic initiatives on an ongoing basis. As and when any of these discussions fructify, the bank will make suitable announcements to the stock exchanges, it said. The news report said that three global payment processing giants, Global Payments, WorldPay and Total System Services (TSYS), are bidding for AXIS Bank's network of more than two lakh credit and debit card swipe machines business valued at Rs 1200 crore.
Adani Group shares rose after exit polls predicted a strong showing for the key opposition Bharatiya Janata Party in state elections held since November. Adani Group is based in Gujarat, where BJP's prime ministerial candidate Narendra Modi is chief minister. Because of the location and perceptions of close ties between Adani and the BJP, shares of the Adani Group can at times move depending on the perceptions of electoral success for the party. Adani Ports and Special Economic Zone (up 3.62%), Adani Power (up 2.89%) and Adani Enterprises (up 0.99%), gained.
Symphony lost 2.09% as the stock turned ex-dividend today, 5 December 2013, for dividend of Rs 6.50 per share for the year ended 30 June 2013.
Shares of Pfizer and Wyeth dropped on turning ex-dividend today, 5 December 2013, for liberal interim dividends. Wyeth (down 16.39%), and Pfizer (down 24.75%) slumped.
Pfizer had declared an interim dividend of Rs 360 per share to its shareholders and Wyeth had declared an interim dividend of Rs 145 per share. The record date for the dividend payment has been set at 6 December 2013 by both the companies. The announcement of highly liberal interim dividends was after the boards of Pfizer and Wyeth approved the merger between the two pharmaceutical companies on 23 November 2013.
Before turning ex-dividend, Pfizer offered a dividend yield of 21.04% based on the closing price of Rs 1710.60 on Wednesday, 4 December 2013.
Before turning ex-dividend, Wyeth offered a dividend yield of 14.61% based on the closing price of Rs 992.80 on Wednesday, 4 December 2013.
As per the merger scheme, shareholders of Wyeth will get seven Pfizer shares for every 10 shares held. The appointed date of the merger scheme would be 1 April 2013. The merged entity will create a single brand of Pfizer.
In the international market, Pfizer acquired Wyeth in 2009. The global merger of these companies was completed by the end of the same year except certain countries, including India. The valuation of equity swap and regulatory hurdles for the merger of two listed entities were the main reason for the delayed decision for the consolidation of these companies in India.
Jubilant Life Sciences hit a lower circuit limit of 9.96% at Rs 126.05 after the firm said that one of its manufacturing facilities, Jubilant HollisterStier, LLC in the United States has been issued a warning letter by US Food and Drug Administration. The announcement was made during trading hours today, 5 December 2013.
Jubilant Life Sciences (JLL) said that as required by the United States Food and Drug Administration (USFDA), JHS-Spokane will respond to the warning letter from USFDA on or before 12 December 2013. The response will identify corrective actions already been completed as well as some pending corrective actions to ensure on-going cGMP compliance, the company said in a statement.
JLL said that USFDA specified in the warning letter that until all corrections have been completed and that they have confirmed correction of the violations and firm compliance to cGMPs, USFDA may withhold approval of new applications or supplements listing JHS-Spokane as the drug product manufacturer.
JLL said it expects that the on-going manufacturing, distribution and sale of products from this facility will not be impacted as the warning letter will affect new approvals only. JHS-Spokane is committed to implementing the necessary corrective actions required to address the FDA concerns, and will work closely with the USFDA to bring resolution to this matter, the company said.
During first half of FY 2014, the contract manufacturing operations at JHS-Spokane contributed 7% to consolidated sales and 4% to consolidated EBITDA of JLL, the company said in a statement.
Strides Arcolab tumbled 14.50% after the company said it has completed sale of its Agila Specialties Division to Mylan Inc. for a total consideration of up to $1.75 billion. Strides Arcolab said that since the initial announcement of transaction pertaining to the sale of its Agila Specialties Division, the company's board of directors approved final transaction terms to include a hold back of $250 million contingent upon satisfaction of certain regulatory conditions. Consequent to the warning letter received by the company for one of its units in Bangalore, Strides has agreed to a hold back of $250 million, which will be contingent upon satisfaction of certain regulatory conditions related to the injectable facilities in India. The company expects those contingent conditions will be satisfied sometime in 2014.
Since the initial announcement of this transaction, Strides now expects an additional expenditure of $150 million. This includes cost towards acquisition of additional assets from its erstwhile partners and an estimated remediation cost related to its regulatory commitments post the warning letter.
Strides Arcolab also said that a meeting of the Board of Directors of the company will be held on 10 December 2013 to consider declaration of special dividend.
ICRA rose 1.28%. ICRA Management Consulting Services (IMaCS) and Cambridge Systematics, Inc. have signed a Memorandum of Understanding (MoU) to collaborate in providing consulting services to the transportation sector in India, across Asia, and in Africa. IMaCS and Cambridge Systematics will offer a broad mix of consulting services to public and private sector clients in the transportation sector. The announcement was made during trading hours.
Cambridge Systematics, founded in 1972, is a global transportation consulting and technology solutions provider headquartered in the United States. IMaCS, a wholly-owned subsidiary of ICRA, is a policy and strategy consulting firm headquartered in India with an operating footprint across 45 countries, principally across Asia, Africa and Europe. IMaCS has expertise in financial services, transportation, energy, urban and social infrastructure and manufacturing sector.
Capital goods stocks also gained. ABB (up 4.67%), Larsen & Toubro (up 4.49%), Crompton Greaves (up 4.10%), Bhel (up 3.93%), BEML (up 2.94%), Punj Lloyd (up 2.89%), Siemens (up 2.46%), Jindal Saw (up 2.08%), Praj Industries (up 1.50%), Havells India (up 0.33%), Pipavav Defence & Offshore Engineering Company (up 0.22%) and AIA Engineering (up 0.18%), edged higher.
Shares of state-run Power Grid Corporation (PGCIL) rose 0.63% to Rs 96.15. The company's follow-on public offer (FPO) was subscribed 4.72 times by 16:00 IST on the last day of the bidding for the FPO by institutional investors today, 5 December 2013. The FPO received bids for 371.24 crore shares till 16:00 IST today, 5 December 2013, compared with 78.70 crore shares on offer, as per NSE data.
The FPO closes tomorrow, 6 December 2013, for retail investors and employees of the company. The price band for the FPO has been set at Rs 85 to Rs 90 per share. A discount of Rs 4.50 per share on the final issue price discovered through the book-building route will be available to retail investors and eligible employees of the company.
PGCIL is issuing a total of 78.70 crore shares through the FPO, which includes 60.18 crore fresh equity shares and disinvestment by the Government of India (GoI) of 18.51 crore equity shares held by the President of India, acting through the Ministry of Power. After the successful divestment, GoI's holding in PGCIL will come down to 57.89% from the present level of 69.42%.
PGCIL, a navaratna public sector undertaking under the ministry of power, is the country's central transmission utility (CTU). The company owns and operates more than 90% of India's inter-state and interregional electric power transmission systems (ISTS). As principal electric power-transmission company of the country, it owns and operates 102109 circuit kilometers of electrical transmission lines and 172 electrical substations with a total transformation capacity of 172378 MVA as end of Sep 30, 2013.
Shares of realty major Unitech edged higher in choppy trade after the company issued a clarification with regard to news reports that the company defaulted on the payment of interest on a Rs 200-crore loan it had taken from the Life Insurance Corporation (LIC). The stock rose 0.96% at Rs 15.80. The scrip hit high of Rs 16.40 and low of Rs 15.50. Unitech during trading hours today, 5 December 2013, said that due to its confidentiality agreement with the lender, the company cannot comment on the specifics of the media reports. However, the company's financial results for the relevant quarter will reflect no pendency with the said lender, Unitech said. The realty major also said it does not have any exposure to LIC Housing Finance. Shares of Unitech had tumbled 9.53% to settle at Rs 15.65 on Wednesday, 4 December 2013, on reports that the company defaulted on interest payment to LIC.
ICICI Bank clocked a highest turnover of Rs 89.84 crore on BSE. Yes Bank (Rs 76.88 crore), Stride Arcolab (Rs 58.69 crore), State Bank of India (Rs 56.85 crore) and L&T (Rs 50.68 crore), were the other turnover toppers on BSE in that order.
IVRCL reported highest volumes of 88.39 shares on BSE. Unitech (81.92 lakh shares), Cals Refineries (42.92 lakh shares), Adani Power (36.75 lakh shares) and GVK Power & Infrastructure (32.15 lakh shares), were the other volume toppers on BSE in that order.
Global credit rating agency Moody's Investors Service has said that its outlook for Indian non-financial corporates is negative, reflecting macroeconomic challenges over the next 12 months. Moody's also expects heightened expectation of a scale back of quantitative easing by the Federal Reserve in 2014 to keep the rupee volatile, making the operating environment more challenging for importers and exporters. Moody's conclusions were contained in a just-released report titled, "2014 Outlook -- India Non-Financial Corporates, Weak Economy, Political Uncertainty and Quantitative-Easing Scale Back Are Biggest Risks".
Companies will also face higher borrowing costs and tight funding conditions with monetary policy likely to remain tight, the report says. Moody's could move to a stable outlook if its GDP growth expectations exceed 6%, the rupee stabilizes -- such that one-year volatility falls below 5% -- and a development and reform-focused government is formed with a strong majority after general elections in 2014.
In the foreign exchange market, the rupee edged higher against the dollar after exit polls on Wednesday, 4 December 2013, predicted a strong showing for the Bharatiya Janata Party (BJP) in the recently concluded assembly elections in four states viz. Rajasthan, Madhya Pradesh, Chhattisgarh and New Delhi. The state elections are considered a barometer for the national elections that are scheduled to be held before the end of May 2014. BJP's prime ministerial candidate for general elections in 2014 -- Narendra Modi -- is considered a pro-business leader. The partially convertible rupee was currently hovering at 61.77, compared with its close of 62.05/06 on Wednesday, 4 December 2013.
On macro front, the Reserve Bank of India (RBI) announces next Mid-Quarter Review of Monetary Policy for 2013-14 on 18 December 2013. The Third Quarter Review of Monetary Policy for 2013-14 is scheduled 28 January 2014.
Global credit rating agency Moody's Investors Service has said in an update on the Indian economy that the outcome of the next general election could impact growth depending on the impact on policies and sentiments. Simultaneously, the agency which expects the Indian economy to pose a slow recovery only in the second half of 2014, has also reiterated the stable outlook for India's rating. "Moody's expects a slow economic recovery in the second half of 2014, if global growth increases while domestic inflation and interest rates decline", the agency said. Moody's added that India's investment climate and competitiveness indicators are weaker than those of similarly rated countries. "Although there have been policy efforts to induce investment in the last year, their impact may not be evident in the near term," it said.
Moody's said that downward pressure on the rating could develop if the medium-term growth and fiscal outlook weaken further; or if there is a decline in the foreign exchange reserves or the asset quality of state-owned banks or if high inflation persists, damaging the fiscal, growth and balance of payments outlook. The agency sounded a note of caution on the country's fiscal deficit saying that a low base limits the revenue-collection capacity of the government.
European stocks edged lower in choppy trade on Thursday, 5 December 2013, before interest-rate decisions from the European Central Bank and the Bank of England. Key benchmark indices in France and UK were off 0.07% to 0.08%. However, Germany's DAX was up 0.05%.
The European Central Bank (ECB) holds its monthly monetary policy meeting today, 5 December 2013. The ECB unexpectedly cut the benchmark interest rate by a quarter-percentage point last month to a record-low 0.25% after inflation slowed in October to the least in four years.
UK's central bank -- Bank of England -- is expected to keep its key policy rate steady at 0.5% after a monetary policy review today, 5 December 2013.
Asian stocks declined on Thursday, 5 December 2013, as better-than-expected US jobs data fueled concern that the Federal Reserve will reduce its monthly bond purchases sooner than forecast. Key benchmark indices in Indonesia, Hong Kong, Japan, South Korea, Singapore, China and Taiwan shed 0.07% to 1.50%. Fed's bond-buying program has been a source of liquidity for most Asian and emerging markets this year.
Japanese Prime Minister Shinzo Abe's cabinet approved a $182 billion economic package on Thursday to pull the economy out of deflation, but doubts remain about the economic impact. The package has a headline value of 18.6 trillion yen, which is an exaggerated figure as the bulk of the package includes loans from government-backed lenders and spending by local governments that was already scheduled. The core of the package is 5.5 trillion yen in spending measures Abe ordered in October to bolster the economy ahead of a national sales-tax hike in April, and the government does not have to sell new debt to fund this spending. The measures approved on Thursday will add 1 percentage point to gross domestic product and create around 250,000 jobs, according to the Cabinet Office. The steps approved on Thursday include measures to boost competitiveness; assist women, youth and the elderly; accelerate reconstruction from the March 2011 earthquake and tsunami; and build infrastructure for the 2020 Tokyo Olympics.
Trading in US index futures indicated that the Dow may could slide 11 points at opening bell on Thursday, 5 December 2013. US stocks fell a fourth day on Wednesday, the longest slump in 10 weeks for the Standard & Poor's 500 Index, as investors weighed economic data for clues on the timing of Federal Reserve stimulus cuts amid optimism over a budget deal.
Data showed companies boosted payrolls in November by the most in a year. US companies added 215,000 jobs in November, topping estimates, a private survey showed yesterday. A separate report indicated service industries in the US expanded at a slower pace than forecast in November, showing uneven progress in the biggest part of the economy. Purchases of new US homes surged in October by the most in three decades, signaling buyers are starting to take higher mortgage rates in stride.
Investors are keeping a close watch on economic data in the United States as the Federal Reserve monitors the pace of recovery to gauge when it will begin to reduce monetary stimulus for the US economy, which has been aimed at encouraging growth. The US government will release the influential US non-farm payrolls data for November 2013 tomorrow, 6 December 2013. The Fed has said improvement in the labor market is a key factor in its policy assessment.
The Federal Open Market Committee (FOMC) holds a two-day policy meeting on interest rates in the United States on 17-18 December 2013. The US central bank currently buys bonds worth $85 billion a month in a bid to hold interest rates low and encourage economic growth in the world's biggest economy. Minutes of the Fed's October meeting released on 20 November 2013 showed officials may reduce their $85 billion a month of bond buying if the economy improves as anticipated.
Power Grid Corporation of India (PGCIL), a navaratna public sector undertaking under the ministry of power, is the country's central transmission utility (CTU). The company owns and operates more than 90% of India's inter-state and interregional electric power transmission systems (ISTS). As principal electric power-transmission company of the country, it owns and operates 102109 circuit kilometers of electrical transmission lines and 172 electrical substations with a total transformation capacity of 172378 MVA as end of Sep 30, 2013.
As central transmission utility of the country, PGCIL is responsible for the planning and development of the country's ISTS network. As CTU it also required to facilitate non-discriminatory open access to available capacity in the ISTS and carry out real time grid management functions through its wholly owned subsidiary Power System Operation Corporation (POSOCO).
PGCIL was entrusted by GoI with the further responsibility of controlling the existing load despatch centres in the country in 1994, with a view to achieve better grid management and operation. Pursuant to this decision, the control of the five regional load despatch and communication centres (RLDC) was transferred to the company in a phased manner between 1994 and 1996.
As the RLDC operator, the company has modernized the regional and state load despatch centers and their communication networks. In Fiscal 2009, the National Load Despatch Centre (NLDC) was established. The NLDC is responsible for monitoring the operations and grid security of the national grid and supervises the scheduling and despatch of electricity over inter-regional lines in coordination with the RLDCs. All bilateral transactions are undertaken through the RLDCs, while transactions facilitated by the power exchanges are undertaken by NLDC.
POSOCO, a wholly owned subsidiary of the company was established in March 2009 to oversee the grid management function of the RLDCs and NLDC. Accordingly, RLDC and NLDC have been transferred to POSOCO and are in operation under POSOCI since Oct 1, 2010. The fees generated from the RLDC and NLDC operations are determined by Central Electricity Regulatory commission (CERC) in accordance with the Electricity Act and CERC (Fees & Charges of RLDC and related maters) Regulations, 2009.
The company leveraging its strength as India's principal power transmission company has diversified into the consultancy business. Since Fiscal 1995, PGCIL's consultancy division has provided transmission related consultancy services to over 160 clients (including 22 international clients) in over 460 domestic and 55 international projects. As at Sep 30, 2013, the company is engaged in providing consultancy services to clients in 116 domestic and 20 international projects. In its consultancy role, the company has been facilitating the implementation of the GOI funded projects for the distribution of electricity to end users through the Rajiv Gandhi
Grameen Vidyutikaran Yojana (RGGVY) in rural areas. Recently the company signed agreements with six north eastern states of Assam, Meghalaya, Mizoram, Manipur, Nagaland and Tripura to provide consultancy services as ‘Design cum implementation supervision consultant' for implementation of ‘North Eastern Region Power System improvement project', which was funded by World Bank.
Similarly the company has diversified into the telecommunications business in 2001 by leveraging/ utilizing of its nationwide transmission system to create an overhead fibre-optic telecommunication cable network using optical ground wire on power transmission lines. As at September 30, 2013, the network consisted of 29279 kilometers and connected 290 Indian cities, including all major metropolitan areas. It's one of few providers of telecommunication infrastructure with significant presence in remote and rural areas. As of Sep 30, 2013, the company has been leasing bandwidth on this network to more than 106 customers.
As end of September 30, 2013, the company had 86 ongoing transmission projects in various stages of implementation. The Board of Directors of the company have budgeted an investment of Rs 1,00,000 crore in transmission projects during the Twelfth Five Year Plan (April 1, 2012 - March 31, 2017). The investment target for 12th plan was further revised to Rs 1,09,680 crore to include new initiatives such as green corridors for renewable energy integration and projects under TBCB route. The Twelfth Five Year Plan aims to achieve a national power grid with inter-regional power transfer capacity of approximately 65550 MW, which would primarily include the transmission system of PGCIL. The projects in PGCIL's portfolio is largely been funded in part by loans from The World Bank, The International Finance Corporation and The ADB, thereby availing loans at lower interest rates compared to domestic financing costs.
The company has also entered into intra-state transmission by entering into joint venture with state transmission companies from the State of Bihar and State of Odisha. The estimated cost of these projects is Rs 6300 crore and Rs 2490 crore, respectively. It has also approached the Odisha Electricity Regulatory Commission to invest in high temperature distribution system and have made an application in October, 2012 for a licence to participate in the distribution wire business in Central Electricity Supply Utility area of Odisha.
It has also developed a comprehensive master plan for grid integration of renewable energy capacity addition in Twelfth Five Year plan across India through Green Energy Corridors. The master plan was released by the Ministry of Power and the Ministry of New and Renewable Energy. Further, it has also signed MOU with Nalco for conductors and RINL/SAIL for transmission towers albeit at smaller level.
Given its expertise and being CTU, the company is facilitating indigenous development and field testing of 1200 kV ultra high voltage alternating current (UHVAC) transmission system by establishing a 1200 kV National Test Station at Bina, Madhya Pradesh, parts of which achieved successful test charging in January, February, May and October 2012.
While the proceeds from issue of sale will go to GoI, the proceeds from issue of fresh shares to the tune of Rs 4600 crore will be used to fund the capital requirements of 27 identified transmission projects.
PGCIL has grown revenues and profits consistently over the past many years. Its CAGR in revenues and net profit over the past 5 years is around 20%. The consistent growth ahs been achieved in spite of many issues plaguing power sector and rather hostile environment in power sector in the past few years.
As transmission utility the company charges the customers a transmission charge for recovery of annual fixed cost consisting of components: return on equity, interest on outstanding debt, depreciation, operation and maintenance expenditure and interest on working capital. The return on equity is on pre-tax basis at the base rate of 15.5% grossing up the base rate for the tax factor. In addition to 15.5% ROE, the company is also eligible for incentives for completion of project within timeline, availability of transmission network above specified levels. Thus the core transmission business revenue and profits are steady with low volatility.
Operation parameters of the company's transmission systems are very high with high availability rate and lower tripping per line. In the last five years the availability of the transmission system of the company is over 99.5%. Similarly the trip per line (T/L^2) is coming down from about 2.56 in 2009 to about 0.58 in 2013. Pursuant to 2010-14 CERC Regulations the company is entitled to earn an additional return on equity under availability based incentive mechanism.
Long time expertise in conceptualizing, planning and implementation of ISTS projects gives the company a clear edge compared to new entrants under tariff based competitive bidding (TBCB) mechanism, who are largely with little experience in managing long distance projects involving difficult terrains.
The company consistently achieved and exceeded its capital expenditure targets set under the 11th plan period. The company achieved a capex of Rs 17814 crore and Rs 20037 crore for FY2011-12 and FY2012-13 respectively against a target of Rs 17700 crore and Rs 20000 crore. For the six months ended Sep 2013, the company incurred a capex of Rs 10894.59 crore against a full year target of Rs 22150 crore. Moreover the capitalization to capex rate was as high as 59.5% and 73.2% and 85.9% in the last three fiscal of FY11, FY12 and FY13. Capital work-in-progress as of September 30, 2013 stood at Rs 24759.84 crore.
As the growth of core transmission business revenue and profits is largely linked to capacity addition plans and accelerated pace of capitalization given steady stream of revenue, the company has budgeted an investment of Rs 1,09,680 crore during 12th five year plan. This is all likely to take care of the future growth of the company. The company targets a capex of Rs 22150 crore in FY14, Rs 22450 crore in FY15 and Rs 22500 crore in FY16 and Rs 22550 crore in FY17.
Effective Jan 6, 2011 though all transmission projects except some identified projects are to be awarded under tariff based competitive bidding (TBCB) route the company being the Central Transmission Utility (CTU) of the country is to get identified projects for execution on nomination/assigned basis. Typically the identified projects are those which need to be completed urgently or of complex in nature such as 1200 KV Transmission Lines etc. CERC in May 2010 and Dec 2011 has approved high-capacity power transmission corridors totaling 11 in numbers at a total estimated cost of Rs 75,180 crore and majority of these projects are implemented by the company.
SEBs/State power utilities are the largest customers of the company. Given their past track record of long outstanding receivables, the payment may get delayed leading to mounting of receivables even though the states are taking efforts to improve their financial position with recent tariff hike and making use of financial restructuring plan announced by Government of India in 2012-13. The company had trade receivables and unbilled debtors to the extent of Rs 2884.41 crore, Rs 3277.30 crore and Rs 3804.73 crore as compared to its total income of Rs 11073.58 crore, Rs 13727.12 crore and Rs 7738.46 crore, respectively in Fiscal 2012 and 2013 (on a consolidated basis) and in the six months ended September 30, 2013 (on a standalone basis), respectively.
The power transmission revenues of the company principally depend on the tariffs stipulated by the CERC for power transmission and the project expenses for which it is reimbursed. The tariff is subject to change and review by the GoI, and may be decreased in future periods or for specific projects if so deemed fit by the GoI or any regulatory authority, which could materially and adversely affect the financials of the company. Current tariff norms (assuring ROE of 15.5% on cost-plus basis) are expected to be applicable until March 31, 2014 and a new tariff norm is expected to come into force with effect from April 1, 2014 for a period of five years. In case of any adverse change, financial condition and results of operations could be materially and adversely affected.
Effective Jan 6, 2011 all transmission projects except some identified projects are to be awarded under tariff based competitive bidding (TBCB) route. The company has secured only 3 of the seven projects awarded under TBCB route. If in future competition increases, the company's ability to bag projects for future growth needs to be seen.
As per CERC regulation the company gets return on equity in a transmission project only after the commencement of commercial operation of that project. Since the transmission projects are linked to power generation projects any delay in generation projects will result in delay in transmission projects. Even in some case if the transmission projects got ready and generation projects not ready, the company will not be able to recover its fixed costs unless CERC agree to declare transmission project commercial. Mostly CERC declare the transmission project commercial in case TS ready and generation project not ready but that is not assured.
The company's intention to enter into construction and management of intra state Transmission & Distribution network will further increase its exposure to state PSUs.
Operations and performance are subject to regulation and policies of Government of India that governs the power sector.
For the fiscal ended March 2013 the standalone revenue of the company grew by 26% (to Rs 12757.85 crore) and its net profit is up by 30% to Rs 4234.50 crore. On post FPO equity, the EPS works out to Rs 8.1. The PE at floor price (Rs 85) and cap price (Rs 90) works out to 10.5 times and 11.1 times respectively. At current price of Rs 145, NTPC, the nearest comparable company, is trading at 9.5 times its standalone FY13 EPS (Rs 15.3). However, growth track record of PGCIL is much better than NTPC.
In the last three months, high, low and average price of PGCIL was Rs 104, Rs 91.7 and Rs 98, respectively. The stock beta was low at around 0.62 indicates low market related risks.
The book value (per share) works out to Rs 64.21 at floor price and Rs 64.79 at cap price on dividing the post FPO standalone net-worth as on Sep 30, 2013 with expanded post FPO equity. The price to book value works out to 1.3-1.4 times. In comparison the book value of NTPC was at Rs 103.58 and its price to book value was 1.4 times.
The main investor concern with PGCIL is that the company taps primary market with public issues at regular intervals and this puts pressure on the scrip price, which fails to reflect its track record and potential due to constant increase in equity through public offers. The company's last FPO was in November 2010 at the same price band as the current one (Rs 85-90).
The power sector as a whole has been going through challenging times in the last few years. However PGCIL continued to expand its top-line and bottom-line year over year riding on achieving its targeted capacity addition and capitalization. With Government of India taking efforts to address various issues plaguing the power sector and improve the investor confidence, situation can improve in future.