Tuesday, March 31, 2009

Suzlon to provide infra support to AGL Energy

Wind power major Suzlon Energy on Tuesday said its Australian subsidiary has entered into an agreement with AGL Energy for providing infrastructure support to the latter (AGL Energy).

Suzlon Energy Australia Pty Ltd, a wholly-owned subsidiary of the company, has entered into an agreement with AGL Energy Ltd for turnkey delivery, which includes engineering, procurement and construction of the entire wind farm, Suzlon said in a filing t o the Bombay Stock Exchange.

The wind farm would consist of 63 units of Suzlon's wind turbine generators, translating to 132.30 MW of capacity, it added.

Last month, both the firms had entered into an agreement for supplying 54 units of Suzlon's wind turbine generators, translating to 113.4 MW of capacity.

Shares of Suzlon Energy were trading at Rs 42.15, up 1.93 per cent on the BSE

Slowdown bites retail sector, sales fall to 11 per cent

Hit by the economic slowdown, the country's retail sales growth sharply fell to 11 per cent in December 2008 from 34 per cent in the like period of 2007, according to a study by global consultancy KPMG.

"Falling footfalls and poor conversion ratio have led to a decline in sales growth to 11 per cent in December 2008 compared to 34 per cent in December 2007," said the KPMG report, 'Indian Retail: Time to change lanes', released on Tuesday.

Factors like store rationalisation, working capital management, regionalisation, cost optimisation and manpower resizing are some of the key "top of mind" issues for the retailers in the current context, KPMG said.

The study added that the the slowdown was likely to last 12-18 months, but dependent on the government policies.

It urged the government to increase spending on infrastructure and other development initiatives.

"We believe that players which take immediate strategic measures will be the dark horses. Be it store rationalisation, change of supply chain, consolidation of operations, improvement in IT infrastructure, retailers need to think quick to protect their margins,” KPMG global head of markets Neil Austin said.

The retail sector is also bearing the brunt of the liquidity crunch, the study said.

"Slowing sales resulting in lower inventory turnover and increasing working capital requirements to fuel growth have resulted in liquidity pressures for many domestic retailers,” KPMG (consumer markets) national industry director Ramesh Srinivas said.

Mindtree to undertake organisational restructuring

IT solutions company Mindtree on Tuesday said it will undertake an organisational restructuring and also rejig the senior management from April 1, with the objective of becoming a one billion dollar entity.

The restructuring would include entering new market segments, setting up new business units, and new roles for senior management, the company said in a statement.

Post the restructuring, the current Chairman and Managing Director, Mr Ashok Soota would assume the role of MindTree's executive chairman.

In his new role, Mr Soota would focus on strategic initiatives and long-term development. However, Mr Soota would continue to be the chairman of the board.

Mr Krishnakumar Natarajan, currently MindTree's CEO, would take over the position of CEO and MD. He would be responsible for MindTree's day-to-day operations.

The company further added that it would focus on five business areas - IT services, product engineering services, infrastructure management and technical support, independent testing and the newly formed knowledge services.

“Being focussed on the five business units will not only enable faster growth in our chosen areas, but will also help MindTree build greater capacity. This is significant milestone in Mindtree's journey towards becoming a one billion dollar organisation, ” Mr Soota said

Rupee ends at 50.73 against dollar

The rupee on Tuesday rose 44 paise against the dollar to close at 50.73. This is after it posted its worst performance in a month on Monday.

Dealers said weakening of the dollar against global currencies and upswing in stocks brought the spring in the rupee. However the dollar demand from importers capped a sharper rise, they pointed out.

The dollar was weaker against some of the major currencies. The benchmark BSE Sensex rose 1.5% on Tuesday, joining a rally across Asian bourses.

"All fundamentals indicate that rupee would continue to be under pressure in the coming weeks," says Rugved Dhumale, associate vice president, Mecklai Financial. "Its unfair to expect the RBI to support India's worsening trade deficit by drawing on its forex reserves," he said.

The focus is now turning to the summit of Group of 20 leaders in London this week, with investors hoping that they may reach agreement on measures to help revive the global economy. Dealers say that statements made by global leaders here will determine the short term trend for the dollar and Asian currencies.

Bonds gained, snapping a seven-day loss, as rising yields encouraged fresh set of investors to enter the market. Banks and primary dealerships may have increased bond purchases after benchmark yields rose 64 basis points since March 18 to 7.08%. The yield on the 6.05% benchmark note due February 2019 fell 8 basis points to 7% at the end of the session.

India has little room for more fiscal measures to stimulate a slowing economy, but low inflation has created space for further monetary easing, a senior official of the Asian Development Bank said on Tuesday.

RBI announced on Tuesday that it has permitted trading in the power bonds maturing on October 1, 2013 and April 1, 2014, issued by various States to Central Public Sector Undertakings (CPSUs).

Banks parked close to Rs 17,000 crore with the central bank in its money market operations on Monday, while select banks also borrowed Rs 10,000 crore showing pressure on the cash situation in the system. The call money rate closed at 4.75%, off an early high of 5.75%, and above Monday's close of 3.75%.

Friday, March 13, 2009

45 percent of world's wealth destroyed: Blackstone CEO

Private equity company Blackstone Group LP (BX.N) CEO Stephen Schwarzman said on Tuesday that up to 45 percent of the world's wealth has been destroyed by the global credit crisis.

"Between 40 and 45 percent of the world's wealth has been destroyed in little less than a year and a half," Schwarzman told an audience at the Japan Society. "This is absolutely unprecedented in our lifetime."

But the U.S. government is committed to the preservation of financial institutions, he said, and will do whatever it takes to restart the economy.

U.S. Treasury Secretary Timothy Geithner plans to unfreeze credit markets through a new program that will combine public and private capital in a fund that would buy bank toxic assets of up to $1 trillion.

"In all likelihood, that will have the private sector buy troubled assets to clean the banks out in terms of providing leverage ... so that we can get more money back into the banking system," Schwarzman said.

He expects the private sector to end up making "some good money doing that," but added there were complex issues on how to price toxic assets.

He put part of the blame for the financial crisis to credit rating agencies.

"What's pretty clear is that, if you were looking for one culprit out of the many, many, many culprits, you have to point your finger at the rating agencies," he said.

Rating companies have been the focus of intense criticism for their role in granting top "AAA" ratings for complex bonds that later plummeted in value, resulting in subsequent rating cuts, in many cases to junk status.

"Once you bought into ... the Triple A paper and it turned out to be paper that was in many situations going to end up defaulting, then you really had the makings of a global problem," he said.

Schwarzman said problems were then exacerbated by mark-to- market accounting rules. Those rules ask banks and other financial institutions to price assets at a value related to how they would be sold in the open market.

Blackstone reported a quarterly loss in February after writing down the value of its portfolio and eliminated its fourth-quarter dividend.

Asked where was a good place to invest, Schwarzman said it made sense to buy cyclical names, which are less exposed to the economic cycles.

He said investors also may find value in debt products, including "senior layers of certain securitizations," where investors can see 15 percent to 20 percent returns, he said.

Geographically, he said there were "pockets of strength" in China, which is committed to getting to an 8 percent growth level, and in India, where the economy is slowing but banks are in good shape.

Monday, March 9, 2009

SpiceJet, GoAir in talks for consolidation

Budget airline SpiceJet Ltd is in talks with the Wadia group-ownded GoAir for either a merger or to acquire a controlling stake, the Business Standard reported on Monday.
SpiceJet chief executive Sanjay Aggarwal met GoAir managing director Jeh Wadia to discuss a deal late last month, the paper said, citing unnamed sources.
In February, Aggarwal had said SpiceJet would look at buying opportunities and expects consolidation in the Indian airline industry over the next two years.
GoAir currently flies to smaller cities such as Jaipur, Ahmedabad and Kochi and has applied for slots to several more.
SpiceJet reportedly plans to set up a regional airline to connect smaller cities, the paper said.
GoAir was looking at increasing its fleet to 20 aircraft by 2011 from five at present, the report added.
SpiceJet’s Aggarwal on Monday told Business Standard he could not “comment on anything relating to a deal at the moment”. GoAir’s Wadia also refused to comment, the paper said.
SpiceJet’s Aggarwal could not be reached immediately for comment by Reuters.
SpiceJet and GoAir spokespersons declined to comment immediately.

Monday, March 2, 2009

Highlights of RIL-RPL merger

he Board of Directors of Reliance Industries on Monday approved the merger of Reliance Petroleum Ltd with the former. The swap ratio stands at 1:18 and each RPL shareholder stands to get 1 RIL share held.

Here are the highlights of the merger

RPL shareholders to get 1 Share of RIL for every 16 shares held
RIL to cancel holding in RPL
RIL to extinguish 13% treasury stock
Merger effective retrospectively from April 1, 2008
Merger ratio in favour of RPL

Outstanding shares: 157.4 cr shares
Additional Shares to be 6.92 cr shares
New share capital: 164.3 cr shares
Dilution: 4.2% on fully diluted basis
Post merger, RIL promoter holding to come down to 47% from 49%

Management sees merger to be tax neutral
Merger P&L neutral for RIL
Merger will help effective utilization of RPL’s $1.5bn operational cash flow
SEZ benefits to continue for merged entity

FY10E net sales of merged entity seen at Rs 210,000cr
FY10E net profit of merged entity seen at Rs 21,000cr
Earnings increase higher than 4.4% stake dilution in FY10
Merger 3-5% EPS accretive for RIL
FY10E EPS of combined entity at Rs 127-135

Rupee at all-time low at 51.80/$; Citi sees 54/$ ahead

India’s rupee slid to a record low as mounting global stock losses added to concern investors will pull money out of riskier emerging-market assets.

The currency extended a two-week slump on speculation Standard & Poor’s will soon cut the nation’s debt rating to junk. The rupee also fell on concern the current-account deficit will widen from a record as exports decline amid a deepening global economic slump. The MSCI Asia Pacific Index dropped 3 percent after the U.S. Standard & Poor’s 500 Index lost 11 percent last month.

“There’s a lot of pressure on the rupee as portfolio investments are falling amid the worsening global equity prospects,” said Sanjay Arya, Mumbai-based treasurer at state- owned Bank of Maharashtra. “A rating downgrade by S&P is feared. In addition, the outlook for exports looks quite bleak.”

The rupee slid 1.3 percent to an all-time low of 51.81 per dollar as of 9:55 a.m. in Mumbai, according to data compiled by Bloomberg.

Offshore contracts indicate traders bet the rupee will trade at 52.00 to the dollar in a month, compared with expectations for a rate of 51.44 on Feb. 27. Forwards are agreements in which assets are bought and sold at current prices for future delivery. Non-deliverable contracts are settled in dollars rather than the local currency.

Dumping Equities

Funds based abroad sold $1.65 billion more Indian equities than they bought this year, adding to 2008’s record $13.3 billion in net sales, according to data released by the Securities and Exchange Board of India. The Bombay Stock Exchange’s Sensitive Index has dropped 7.8 percent this year, following a record 52 percent slide in 2008.

S&P last week lowered its outlook on India’s credit rating to negative from stable, saying government spending plans to shield the economy from the global recession and win voter support in elections were “not sustainable.” The company rates India’s debt BBB-, the lowest investment grade.

Asia’s third-biggest economy expanded 5.3 percent last quarter from a year earlier, the slowest pace in five years, a government report showed on Feb. 27.

Sunday, March 1, 2009

Buffett Says Oil Will Rise, He Made ‘Mistake’ on ConocoPhillips

Warren Buffett said crude oil will rise far above its current price and that he made a mistake when he purchased ConocoPhillipsstock last year for his Berkshire Hathaway Inc.

“I still believe the odds are good that oil sells far higher in the future than the current $40-$50 price,” Buffett wrote in his yearly letter to shareholders. He also said he made a “major mistake” when he bought a “large amount of ConocoPhillips stock when oil and gas prices were near their peak.”

Buffett’s Berkshire Hathaway today posted a fifth-straight profit drop, the longest streak of quarterly declines in at least 17 years, on losses from derivative bets tied to stock markets. Fourth-quarter net income fell 96 percent to $117 million, or $76 a share, from $2.95 billion, or $1,904 a share, in the same period a year earlier, the Omaha, Nebraska-based firm said in its annual report.

In 2007, Berkshire reported record earnings as Buffett booked a $3.5 billion profit cashing out of a $500 million investment in oil producer PetroChina Co.

Buffett wrote today that “the terrible timing” of his ConocoPhillips purchase cost Berkshire “several billion dollars.” According to figures given in the letter, Berkshire Hathaway purchased the ConocoPhillips stock for $7.01 billion. As of Dec. 31, the stake was valued at $4.4 billion.

Crude oil for April delivery fell 46 cents, or 1 percent, to settle at $44.76 a barrel at 2:50 p.m. on the New York Mercantile Exchange yesterday. Prices are up 7.4 percent this month and 0.4 percent so far this year. Futures have dropped 70 percent from the record $147.27 a barrel reached on July 11.