Top Infrastructure Bonds

Following are the best infra bonds in India:

• IDFC Infrastructure Bonds
• L&T Infrastructure Bonds
• IDBI Flexibonds
• IIFCL Long Term Infrastructure Bonds
• IFCI Infrastructure Bonds
• ICICI Safety Bonds
• REC Tax Saving Infrastructure Bonds

Right now, IFCI is providing the best in terms of interest rates with 9.09% for its 10 years bonds and 9.16% for the 15 year infra bonds. REC investors can expect a rate of 8.95% for the 10 year bonds, PTC India Financial investors will receive 8.93% for the same bonds, and for the SREI Infra Finance investors the rate is 8.90%. The rate for 15 year bonds for the three companies is 9.15%. 

REC enjoys a credit rating of AAA, which implies that it offers the most security for its investors especially in factors such as timely repayment of principal and interest. Following are the ratings details of some other infra bond issuing organizations: 

• IFCI - AA- (from Brickwork Ratings), CARE A+ (from CARE), LA (from ICRA)
• PTC India Financial Services - A+ (from both CARE and ICRA)
• SREI - AA (from CARE)

Experts think that investors get the maximum security from REC and IFCI as they are government owned. 

IDFC Infra Bonds 

• Interest rate - 8.70%
• Eligible for maximum tax benefit of INR 20,000
• AAA rating by ICRA and Fitch
• Lock in period - 5 years
• Can be sold at both NSE and BSE after lock in period

How to choose infra bonds 
At the least, an investor needs to compare the returns being provided by various companies issuing the infrastructure bonds and check out their credit rating. Experts opine that an investor should also keep in mind the latest financial performance of a company before buying its investment instruments. 

How to invest in infra bonds
Investors looking to make the most of their money in infra bonds are often asked to put 50% of the deductible money in the 10 year bonds and the rest in the 15 year bonds. But experts opine that since 20,000 is a small amount it is better to not split it as it may not be tracked properly. 


From the 2012-13 fiscal onwards the infrastructure bonds will not provide tax benefits. The tax benefit had been extended till 2011-12 and experts had asked that the tax exemption limit be increased. 

However, the Union Finance Ministry did not touch upon the infra bonds in the latest bonds and opted to completely do away with the tax benefits being granted previously. 

Did the Indian Capital Controls Work as a Tool of Macroeconomic Policy? by Ajay Shah

Did the Indian capital controls work as a tool for macroeconomic policy, Ila Patnaik and Ajay Shah. IMF Economic Review, page 439--464, volume 60, 2012.

In 2010 and 2011, there has been a fresh wave of interest in capital controls. India is one of the few large countries with a complex system of capital controls, and hence offers an opportunity to assess the extent to which these help achieve goals of macroeconomic and financial policy. We find that the capital controls were associated with poor governance, were unable to sustain the erstwhile exchange rate regime, and did not support financial stability. India's experience is thus inconsistent with the revisionist view of capital controls. Macroeconomic policy in India has moved away from the erstwhile strategies, towards greater exchange rate flexibility combined with capital account liberalisation.

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India 4th largest economy but has low per capita income: Survey

India has become the fourth largest economy in the world due to a strong economic growth but still has a low per capita income, the Economic Survey revealed today.

“India has emerged as the fourth largest economy globally with a high growth rate and has improved its global ranking in terms of per capita income. Yet, the fact remains that its per capita income continues to be quite low,” it said.

“India has moved up the ranks, but is still the poorest among the G-20,” the survey added.

The per capita income of India stood at $ 1,527 in 2011, it said. “...this is perhaps the most visible challenge. Nevertheless, India has a diverse set of factors, domestic as well as external, that could drive growth well into the future,” the survey said.

Between 1980 and 2010, India achieved a growth of 6.2 per cent, while the world as a whole registered a growth rate of 3.3 per cent. As a result, India’s share in global GDP more than doubled from 2.5 per cent in 1980 to 5.5 per cent in 2010, it said.

Consequently, India’s rank in per capita GDP showed an improvement from 117 in 1990 to 101 in 2000 and further to 94 in 2009. China, however, improved its rank from 127 to 74 during the same period.

G-20 or the Group of 20 nations was formed in 1999 after the East Asian crisis as a forum of finance ministers and central bank governors.

Meanwhile, the survey said any slowdown in eurozone, which accounts for 19 per cent of the global GDP, could impact the Indian economy. The International Monetary Fund (IMF) has forecast that the eurozone is likely to go through a mild recession in 2012.

India’s macroeconomic performance

Per Capita Income of Indian states

Sl. No	State/UT	2010-11 (Rupees)	2011-12 (Rupees)	2011-12 % Growth
1	Andhra Pradesh	62912	71540	13.7
2	Arunachal Pradesh	55789	62213	11.5
3	Assam	30569	33633	10
4	Bihar	20708	24681	19.2
5	Jharkhand	29786	31982	7.4
6	Goa	168572	192652	14.3
7	Gujarat	75115	N.A	N.A
8	Haryana	94680	109227	15.4
9	Himachal Pradesh	65535	73608	12.3
10	Jammu & Kashmir	37496	41833	11.6
11	Karnataka	60946	69493	14
12	Kerala	71434	83725	17.2
13	Madhya Pradesh	32222	N.A	N.A
14	Chhattisgarh	41167	46573	13.1
15	Maharashtra	83471	N.A	N.A
16	Manipur	29684	32284	8.8
17	Meghalaya	50427	56643	12.3
18	Mizoram	48591	N.A	N.A
19	Nagaland	52643	56116	6.6
20	Odisha	40412	46150	14.2
21	Punjab	69737	78171	12.1
22	Rajasthan	42434	N.A	N.A
23	Sikkim	81159	N.A	N.A
24	Tamil Nadu	72993	84058	15.2
25	Tripura	44965	50750	12.9
26	Uttar Pradesh	26355	29417	11.6
27	Uttarakhand	66368	75604	13.9
28	West Bengal	48536	55864	15.1
29	A & N Islands	76883	82272	7
30	Chandigarh	128634	N.A	N.A
31	Delhi	150653	175812	16.7
32	Puducherry	98719	95759	-3
All-India Per Capita Net National
Income(2004-05 base)		53331	60972	14.3

India’s average Per Capita Income is Rs. 60,972/-.

China's 2012 October PPI drops 2.8%

This marks the eighth straight month of year-on-year decline, as China's PPI dropped for the first time in March this year since December 2009.
But the PPI inched up 0.2 percent in October on a month-on-month basis, according to the NBS.

Diageo buys 53.4% stake in United Spirits for Rs 11,166 crore

Diageo Plc has agreed to buy a 53.4 per cent stake in liquor baron Vijay Mallya's United Spirits Ltd for more than $2 billion, according to an internal memo related to the deal obtained by Reuters.
The purchase marks the biggest inbound Indian M&A deal since British oil firm Cairn Energy Plc's agreed to sell a majority stake in its Indian business to Vedanta Resources Plc last year. The Diageo deal concludes an on-again, off-again courtship that began in 2008.








The purchase would ramp up Diageo's presence in the world's largest whisky market, while Mallya will gain much-needed cash to reduce United Spirit's debt although it may not be enough to revive his grounded Kingfisher Airlines Ltd.

The two companies said in September that they were in talks about a possible deal.

"United Spirits and Diageo Plc confirm that the UK-based company is in discussion with it and United Breweries Holdings in respect of possible transactions to acquire an interest in the liquor firm," United Spirits had said in a filing to BSE.

The purchase marks the biggest inbound Indian M&A deal since British oil firm Cairn Energy Plc's agreed to sell a majority stake in its Indian business to Vedanta Resources Plc last year. The Diageo deal concludes an on-again, off-again courtship that began in 2008.

The purchase would ramp up Diageo's presence in the world's largest whisky market, while Mallya will gain much-needed cash to reduce United Spirit's debt although it may not be enough to revive his grounded Kingfisher Airlines Ltd.

The two companies said in September that they were in talks about a possible deal.

"United Spirits and Diageo Plc confirm that the UK-based company is in discussion with it and United Breweries Holdings in respect of possible transactions to acquire an interest in the liquor firm," United Spirits had said in a filing to BSE.

Meanwhile, shares of United Spirits surged 6 per cent to a 52-week high on 9 November following reports that Vijay-Mallya led UB Group has reached a deal with the world's largest spirit maker Diageo for stake sale in the company.

After opening strong, shares of USL further jumped 6 per cent to Rs Rs 1,425 -- its highest level in a year on the BSE.

At NSE too, the scrip gained 6 per cent to touch a 52-week high of Rs 1,425.

In September, United Spirits had confirmed that it was in talks with UK-based Diageo Plc for a stake sale.

USL is the world's second largest spirits maker after Diageo and markets various liquor brands including Signature, Bagpiper, Antiquity, Royal Challenge, Signature in the country.

Mallya-led United Breweries Holdings Ltd (UBHL), the promoter of USL, holds 18.03 per cent stake as on September 30.

GDP comparison of BRCS countries

China Vs. India GDP comparison

Indian GDP set to hit $ 2 Trillion mark

The Gross Domestic Product (GDP) in India was worth 1847.98 billion US dollars in 2011. The GDP value of India is roughly equivalent to 2.98 percent of the world economy. 

At the current rate of growth provided the exchange rates remain relatively stable we will see the GDP cross 2 trillion mark towards the end of 2013. (assuming a growth rate of 5.5 %. in constant currnecy terms. The estimated GDP stands today at USD 1.93 Billion.

The country's GDP crossed the trillion-dollar mark for the first time in history when rupee appreciated to below 41-level against the US greenback on 25th April 2011, joining the elite club of 12 countries with a trillion dollar economy.

India was initially supposed to half crossed 2 trillion mark this fiscal year (at an exchange rate of 45 Rs per USD) but a sharp decline in exchange rates means that we will have to wait for another year. India's Gross Domestic Product (GDP) is expected to  cross the US$ 5 trillion mark by 2020

 

United States Government Bond 10Year yield

United States's Government Bond Yield for 10 Year Notes declined 6 basis points during the last 30 days which means it became less expensive for United States to borrow money from investors. During the last 12 months, United States government bond yield declining 0.31 percent. Historically, from 1912 until 2012, the United States Government Bond 10Y averaged 6.5 Percent reaching an all time high of 15.8 Percent in September of 1981 and a record low of 1.4 Percent in July of 2012. Generally, a government bond is issued by a national government and is denominated in the country`s own currency. Bonds issued by national governments in foreign currencies are normally referred to as sovereign bonds. The yield required by investors to loan funds to governments reflects inflation expectations and the likelihood that the debt will be repaid. This page includes a chart with historical data for the United States Government Bond 10Y.

India Government Bond Yield

India's Government Bond Yield for 10 Year Notes rallied 4 basis points during the last 30 days which means it became more expensive for India to borrow money from investors. During the last 12 months, India government bond yield declining 0.66 percent. Historically, from 1998 until 2012, India Government Bond 10Y averaged 8.0 Percent reaching an all time high of 12.3 Percent in February of 1999 and a record low of 5.0 Percent in October of 2003. Generally, a government bond is issued by a national government and is denominated in the country`s own currency. Bonds issued by national governments in foreign currencies are normally referred to as sovereign bonds. The yield required by investors to loan funds to governments reflects inflation expectations and the likelihood that the debt will be repaid. This page includes a chart with historical data for India Government Bond 10Y.

Corporate Events filed by the Companies to the BSE Stock Exchange Nov 6 2012

AMAR RAJA BA

Amara Raja Batteries to set up plant for manufacturing two wheeler batteries The board of Amara Raja Batteries in its meeting on 05 November 2012 has approved the expansion/ setting up of a plant for manufacture of two wheeler batteries at total capital outlay of Rs 99.80 crore.



KOTAK MAH.BK

Kotak Mahindra Bank allots equity shares Under ESOP The committee of Kotak Mahindra Bank in its meeting on 05 November 2012 has allotted 2,35,367 equity shares of Rs 5 each, pursuant to exercise of employee stock options under ESOP.



MAFATLAL IND

Mafatlal Industries approves share exchange ratio of amalgamation On 05 November 2012 The board of Mafatlal Industries in its meeting on 10 October 2012 had approved in-principle, the proposal of amalgamation of Mafatlal Denim (an unlisted group company) and Mishapar Investments (an unlisted wholly owned subsidiary) with the company with effect from 15 April 2012. The board of the company in its meeting held today i.e., 5th November, 2012 has approved the joint valuation report of Ernst & Young India and SSPA & Co., recommending the share exchange ratio of one fully paid up equity share of Mafatlal Industries to be issued and allotted for every ten equity shares of Rs 10 each held in Mafatlal Denim. Mishapar Investments being a wholly owned subsidiary of Mafatlal Industries, the shares held by Mafatlal Industries in the share capital of Mishapar Investments shall stand cancelled and no shares shall be required to be allotted in lieu thereof. Based on the joint valuation report, the share exchange ratio is as under: 1 fully paid up equity share of Rs 10 each of Mafatlal Industries shall be issued and allotted for every 10 equity shares of Rs 10 each held in Mafatlal Denim. [which will lead to enhancement of equity capital of Mafatlal Industries by 40,99,415 fully paid up equity shares of Rs 10 each.] Since Mishapar Investments is a wholly owned subsidiary of Mafatlal Industries, the shares held by Mafatlal Industries in the share capital of Mishapar Investments shall stand cancelled and no shares shall be required to be allotted in lieu thereof. The amalgamation would result in various synergies in operations, administration, marketing and distribution, branding and retailing etc. Based on the exchange ratio approved by the board, the shareholding of the promoters in Mafatlal Industries post amalgamation would be 75.83% and therefore the promoters have agreed to dilute their shareholding so as to ensure that post amalgamation Mafatlal Industries continues to maintain public shareholding of at least 25% as required by the listing agreement. The board of the company has authorised managing director of the company to do all such acts/deeds as he may deem fit to give effect to the proposed scheme and implement the same.



PEL

Piramal Enterprises' board approves scheme of amalgamation On 05 November 2012 The board of Piramal Enterprises in its meeting on 05 November 2012 has approved the scheme of amalgamation and arrangement between PHL Holdings (PHPL) and Piramal Enterprises (the company) and their respective shareholders (the scheme) under Sections 391 to 394 read with Sections 100 to 103 and other applicable provisions of the Companies Act, 1956. PHPL is a company forming part of the promoter group and currently holds 8,40,92,879 equity shares of the company which constitutes 48.73% of the equity shareholding of the company. The main purpose of the scheme is to facilitate a more efficient holding structure by the promoter group. Pursuant to the merger, the equity shares held by PHPL in the company shall stand cancelled, and equivalent number of equity shares of the company will be issued to the equity shareholders of PHPL. There would be no impact on the financials and the shareholding pattern of the company as a result of the merger. The promoters as well as the public will continue to hold the same percentage of equity shares in the company, post merger. The entire cost of the scheme would be borne by the promoters and / or PHPL and the promoters will keep the company indemnified against any liability, if any, arising as a result of this merger. The scheme is subject to requisite consents and approval of the requisite majority of the shareholders, lenders and creditors of the companies, the Hon'ble High Court of Judicature at Bombay and any other statutory or regulatory authorities, which by law may be necessary for the implementation of the scheme.



PENTAMED.G

Pentamedia Graphics appoints director With effect from 01 November 2012 The board of Pentamedia Graphics in its meeting on 05 November 2012 has accepted the resignation of Krish Narayanan from the post of director & CEO and company secretary with effect from 01 November 2012. The board has re-designated V Chandrasekaran as chairman & managing director of the company with effect from 01 November 2012 who is already a director & non executive chairman of the company. The board has approved the appointment of R Kalyanaraman as non-executive/ independent director of the company with effect from 01 November 2012. The board has approved the appointment of A Menaka as company secretary & compliance officer of the company with effect from 01 November 2012.



RAJSH.SUGAR

Rajshree Sugars & Chemicals appoints directors With immediate effect The board of Rajshree Sugars & Chemicals in its meeting on 05 November 2012 has appointed Aditya Krishna Pathy as non-independent non-executive director of the company with immediate effect. Further, the board has appointed B Soundararajan as independent non- executive director of the company with immediate effect.



ROLTA (I)

Rolta makes strategic acquisition of AdvizeX, USA Rolta India has announced the acquisition through its wholly owned subsidiary, Rolta International of AT Solutions Group, LLC, the parent of AdvizeX Technologies, LLC (AdvizeX), a US company that provides total solutions consisting of hardware, software, and specialized advisory and technology services for implementing cutting-edge IT strategies like Cloud computing and Virtual Data Centers. The consideration for this transaction is about US$ 32 million, including escrows and earnouts. The company made this announcement during the trading hours today, 06 November 2012.



ACC LTD

Encore Cement and Additives amalgamates with ACC ACC has announced that pursuant to an order dated 05 October 2012 of the Hon'ble High Court of Judicature at Bombay, the company's wholly owned subsidiary company, Encore Cement and Additives was amalgamated with the company. The order has been filed with the Registrar of Companies, Mumbai on 01 November 2012.

BIDL


Bhagyodaya Infrastructure Development's CFO resigns With effect from 15 October 2012 The board of Bhagyodaya Infrastructure Development in its meeting on 02 November 2012 has accepted the resignation of S R Soni, chief financial officer & company secretary with effect from 15 October 2012.



DCM LTD.

DCM to consider interim dividend Board meeting on 09 November 2012 The board meeting of DCM will be held on 09 November 2012 to consider and approve the un-audited financial results of the company for the second quarter and half year ended 30 September 2012 and to consider the proposal for payment of interim dividend for the financial year ending 31 March 2013.



VEER ENERGY

Veer Energy gets acquisition proposal at Rs 25 per share In continuation to an offer received from Crown Impex (HK) Co to acquire 24% stake of the company, Veer Energy & Infrastructure has announced that the company has received a revised offer from Crown Impex (HK) Co at a price of Rs 25 per share to acquire 24% stake of the company. As company has already informed them that promoters will not reduce their stake.



NELCO LTD.

Nelco to consider dividend Board meeting on 22 November 2012 The board meeting of Nelco will be held on 22 November 2012 to consider and approve the final accounts for the financial year ended 30 September 2012 and for recommendation of dividend, if any.



ANIL SP STEL

Anil Special Steel Industries' board discusses to sale of land at Kanakpura On 05 November 2012 The board of Anil Special Steel Industries in its meeting on 05 November 2012 has discussed the issue relating to sale of land situated at Kanakpura, P.O Meenawala, Jaipur and pass a resolution in this effect to take a consent of shareholders through postal ballot in order to approve the same in terms of section 293(1) (a) read with section 192A of the Companies Act, 1956 and to shift the existing unit at new location.



BWL LIMITED

BWL to issue equity shares The board of BWL in its meeting on 31 October 2012 has approved the reduction of paid up 6979610 equity shares of Rs 10 each and 2340355 zero dividend redeemable preference shares of Rs 10 each to the extent of 60% consequently reduction in face value per share from Rs 10 to Rs 4 per share and then subdivide into 4 shares of Re 1 each. The board has approved alteration of capital clause in the memorandum for increase in number of shares due to reduction in face value and subdivision of shares. The board has approved the issue of 306100 equity shares of Re 1 each by way of conversion a part of unsecured loan brought by the promoters of Rs 3.40 crore as per direction of the Honorable BIFR.



GMM PFAUDLER

GMM Pfaudler declares second interim dividend Of Re 0.70 per share The board of GMM Pfaudler in its meeting on 05 November 2012 has declared second interim dividend at the rate of Re 0.70 per share of 1,46,17,500 equity shares of Rs 2 each for the year 2012-13. Further, Ashok J Patel has been re-appointed as managing director for a period of three years with effect from 01 January 2013.



RIGA SUGAR

Riga Sugar Company issues convertible equity share warrants The members of Riga Sugar Company have approved to issue, offer and allot upto 14,50,000 convertible equity share warrants to be convertible at the option of the warrant holders within 18 months from the date of allotment into one fully paid up equity share of the company of Rs 10 each at an exercise price of Rs 17.20 (including a premium of Rs 7.20) for each warrant to D G Vitta Vinimay & Properties (11,50,000 warrants) and to Chitravali Barter (3,00,000 warrants). This was approved at the extraordinary general meeting held on 06 November 2012.

Rupee gains

With the closely fought US Presidential elections drawing to a close, the rupee began its upward march and gained to 54.25 in opening trade against the dollar. Rupee had closed at 54.43 on Tuesday. On Monday, it had fallen over 80 paise to close at 54.61.

CPCL drops after poor Q2 earnings

A sharp surge in interest expenses adversely impacted Chennai Petroleum Corporation's (CPCL) Q2 September 2012 results. CPCL's interest expenses galloped 1317.3% to Rs 131.81 crore in Q2 September 2012 over Q2 September 2011.




State-run oil refining-cum-marketing giant Indian Oil Corporation (IOC) holds 51.89% stake in CPCL as per the shareholding pattern as on 30 September 2012.

Tamil Nadu Newsprint & Papers (TNPL) gains after strong Q2 results

Tamil Nadu Newsprint & Papers (TNPL) said profit before tax (PBT) surged 169.61% to Rs 30.44 crore in Q2 September 2012 (after providing Rs 43.94 crore for depreciation and Rs 27.85 crore for interest and finance charges) as against PBT of Rs 11.29 crore in Q2 September 2011.



TNPL said it set up a two lakh metric tonnes (MT) per annum capacity cement plant for converting Lime Sludge and Fly Ash generated in the factory into high grade cement. The cement plant has commenced trial production. TNPL said it would produce both ordinary portland cement and pozzolana portland cement.



TNPL produces newsprint and printing & writing paper. TNPL caters to the requirements of multifunctional printing processes like sheet-fed, web offset, and digital printers.

Gulf Oil Corp drops after announcing large US acquisition

Gulf Oil Corporation (GOCL) today, 7 November 2012, said that the company through its subsidiary in the United Kingdom is acquiring 100% stake in Houghton International Inc. for $1.045 billion, subject to customary closing conditions. The company said an agreement was signed for the acquisition by its wholly owned subsidiary in the UK on Tuesday, 6 November, 2012, with the seller which is a US-based private equity fund. Houghton has a global footprint, with sales in more than 75 countries, which are supported by 12 manufacturing facilities in 10 countries. Houghton recorded, on a twelve month basis ending September 2012, sales of $858 million and adjusted EBITDA of $132 million.



GOCL's statement does not mention how the company intends to finance the large acquisition. GOCL said the acquisition fits extremely well with its lubricant portfolio. Houghton has a very strong industrial portfolio, which perfectly complements GOCL's very strong presence in the automotive lubricant sector, GOCL said in a statement. GOCL will operate Houghton as a separate company and the rest of GOCL's operations will be able to leverage Houghton's extensive base of industrial customers to offer them a complete end-to-end range of lubricants and, in addition, there are various synergies that can be achieved in manufacturing, strategic sourcing and distribution, GOCL said.



Founded in 1865, Houghton is the most recognized brand in metal working fluids (MWF), especially in the North American and European markets, GOCL said. Houghton possesses the industry's broadest offering in the MWF segment and related specialty chemicals. It has an extensive library of high performance, proprietary chemical formulations, which are highly technical and are customized to meet specific segments' needs, GOCL said. MWFs are mission-critical specialty chemicals, used for a variety of metal processing applications including metal cutting and removal, metal forming, drawing and stamping, heat treatment and quenching, corrosion prevention and hydraulic systems. Houghton has a diversified customer base in global end-markets such as automotive, fabricated metal goods, aluminium, steel, energy and aerospace. Houghton's management team is highly committed, with extensive experience in the segment, which is one of the key reasons why Houghton has delivered consistent growth and an improvement in returns, GOCL said.



GOCL's net profit fell 33.1% to Rs 10.07 crore on 12.1% growth in net sales to Rs 247.58 crore in Q1 June 2012 over Q1 June 2011.



Hinduja Group firm Gulf Oil Corporation makes lubricant oil for application in automotive, agricultural, industrial, construction and marine segments. The company markets its product under the Gulf brand.

Rise in edible oils prices

On Tuesday (06 November 2012), the imported palmolein and soyabean refined oil inched up Rs 3 for 10 kg each due to tight supply and a weaker rupee. Sunflower, groundnut and rapeseed oils ruled steady on weak reports from producing centres. Cottonseed refined oil declined by Rs 2 on weak cotton markets. Local refineres quoted Rs 5 higher for palmolein. The volume remained need based and the Malaysian palm oil futures edged down, as investors remained cautious on expectations of record high stocks in October. The market initially rose but could not sustain the rally on concerns over stockpiles and uncertainty ahead of the US elections. According to the Bombay Commodity Exchange, the spot rates were (Rs/10 kg): groundnut oil 1,160 (1,160), soya refined oil 658 (655), sunflower exp. ref. 665 (670), sunflower ref. 725 (720), rapeseed ref. oil 835 (835), rapeseed expeller ref. 805 (805) cottonseed ref. oil 688 (690) and palmolein 513 (510).

Mahindra Holidays buys 49 % stake in Infinity Hospitalities

Mahindra Holidays & Resorts India Ltd. (MHRIL), on Tuesday, said it had acquired 49 per cent stake in Infinity Hospitalities Group Company Ltd. (IHGCL) for an undisclosed sum following which it has added a new resort in Bangkok.

Bullion metals ended higher at Comex

Bullion metals ended higher at Comex on Tuesday, 06 November 2012. Prices rose as Presidential election in US got underway. Prices rose due to increasing physical demand, mainly from India due to its festive season and a relatively weaker dollar index.



Gold for December delivery rose $31.8 (1.9%) to settle at $1,715 an ounce on the Comex division of the New York Mercantile Exchange on Tuesday. Gold ended the month of October 3.1% lower.



On Monday, December silver rose 91 cents, or 2.9%, to settle at $32.03 an ounce on Tuesday.



Traders weighed the U.S. presidential election on Tuesday as well as renewed concerns about Greece and the euro-zone debt crisis.



The dollar index, which weighs the strength of the dollar against a basket of six other currencies, fell by 0.2% at the end of the day.



U.S. stocks extended gains into a second session on Tuesday, 06 November 2012 as Americans went to the polls to decide whether to reelect President Barack Obama or have Mitt Romney replace him in the White House. Stocks opened higher and held modest gains until a considerable risk bid lifted the S&P 500 to fresh highs.



At the MCX, gold prices for December delivery closed higher by Rs 379 (1.2%) at Rs 31,273 per ten grams. Prices rose to a high of Rs 31,367 per 10 grams and fell to a low of Rs 30,855 per 10 grams during the day's trading.



At the MCX, silver prices for December delivery closed higher by Rs 1,336 (2.3%) at Rs 59,910/Kg. Prices opened at Rs 58,595/kg and rose to a high of Rs 60,283/Kg during the day's trading.

Cipla's profit after tax jumped 61.8% to Rs 500 crore stock hits record high

Shares of Cipla have risen 5.13% in two trading sessions from Rs 380.45 on 5 November 2012, after the company after market hours on Monday, 5 November 2012, reported strong Q2 results. The stock had jumped 4.18% to settle at Rs 396.35 on Tuesday, 6 November 2012.



The stock had also witnessed pre-result rally. The stock had rallied 7.3% in four trading sessions to settle at Rs 380.45 on 5 November 2012, from a recent low of Rs 354.55 on 30 October 2012.



Cipla's profit after tax jumped 61.8% to Rs 500 crore on 23.6% growth in gross revenue to Rs 2220 crore in Q2 September 2012 over Q2 September 2011.



The company's operating profit jumped 57.7% to Rs 677 crore in Q2 September 2012 over Q2 September 2011. Operating profit margin edged up to 30.5% of income from operations in Q2 September 2012, from 23.9% in Q2 September 2011.



Cipla said its domestic revenue rose 13.5% to Rs 962 crore in Q2 September 2012 over Q2 September 2011. The growth in domestic revenue was largely on account of growth in anti-asthma, anti-biotics and cardiovascular therapy segments, Cipla said in a statement.



Cipla's exports of formulations jumped 38.2% to Rs 1039 crore in Q2 September 2012 over Q2 September 2011. Exports of active pharmaceutical ingredients (API) rose 9% to Rs 174 crore in Q2 September 2012 over Q2 September 2011. Cipla said the growth in exports was primarily due to growth in anti-depressants, anti-ulcerant and anti-asthma segments.



Cipla manufactures pharmaceutical products which include anti-asthmatics, anti-cancer, anti-inflammatory, anti-depressant and other therapeutic products including animal health care products. With over 34 manufacturing units across the country, Cipla manufactures over 2,000 products in 65 therapies.

India Government Bond Yield

India's Government Bond Yield for 10 Year Notes declined 2 basis points during the last 30 days which means it became less expensive for India to borrow money from investors. During the last 12 months, India government bond yield declining 0.75 percent. Historically, from 1998 until 2012, India Government Bond 10Y averaged 8.0 Percent reaching an all time high of 12.3 Percent in February of 1999 and a record low of 5.0 Percent in October of 2003. Generally, a government bond is issued by a national government and is denominated in the country`s own currency. Bonds issued by national governments in foreign currencies are normally referred to as sovereign bonds. The yield required by investors to loan funds to governments reflects inflation expectations and the likelihood that the debt will be repaid. This page includes a chart with historical data for India Government Bond 10Y.

India. Reforms. Really?

As predicted, the Indian government has started its divestment drive.  As outlined earlier, this is part of its plan. It is talking up the markets, announcing reforms that can never be developed on,  and then selling its paper. It will recover Rs 40000 cr. from divestment and Rs. 30000 cr. from spectrum auctions. They say, the money will be applied towards the deficit. In reality it will be used to fund further sops and giveaways in the next budget. The deficit will be kept at 6 % of GDP and they will take their chances with the rating agencies like S and P later.
Much has been made of the “burst of reforms” unleashed by Finance Minister Chidambaram in recent weeks. The stock market has rallied and animal spirits it seems are back. Everybody’s  babbling about how the UPA, after eight years in power, has found religion ie “reforms”in the last eight weeks.

The market is now at 21 times price to earnings (trailing twelve month free float adjusted as per the National Stock Exchange). Once more the mood swings violently. More interestingly the India VIX , the fear index is at 3 year lows of 15. This is usually an indicator of complacency, and historically such lows have signified a massive sell off. The combination of the stretched  price to earnings and the VIX means the market is ripe for a  big  sell off. My two bit as an Ivy educated fund manager in Bombay who has worked internationally on some of the world’s major structural adjustment and economic reform programs.

In reality, the reforms amount to bureaucratic tinkerings with percentages – of a sort that only tax mavens and accountants can comprehend. Witholding taxes go down by a percentage point or two. FII margin percentages change. Service tax percentages for insurance companies change. Now an attempt's been made to increase the percentages foreigners can hold in insurance and pensions. (This last will never pass through Parliament given the unanimous opposition to it).  Blah Blah Blah.

The Indian economy, in fact, requires Parashurama’s ax and not the surgeon’s scalpel. The reference is to the mythical woodcutter of Indian mythology who wields a massive axe when needed.  Wholesale violence will have to be committed on large areas of India’s economy with Parashurama’s  axe, if we are to resume a decent growth rate. 

The government had no choice but to unleash this wave of tinkering and call it “reform”. It is trying to keep the capital markets buoyant because it needs to sell or “chipkao” (i.e. stick, as we say in the business) close to Rs 40,000 crores worth of equity. This with spectrum auctions, hopefully plug the budget deficit a little by March. More crucially, it will also free up resources for massive election giveaways in next March’s budget. This is especially needed if the Food Security Bill –Madame Sonia’s chosen strategy for reelection – is to be passed.

Real reforms for India will not happen for a long time. These include financial sector reform, and an end to the financial repression signified by the statutory liquidity ratio. Privatization of the banking system that’s put an end to the ridiculous spectacle of 75 % of the banking system being owned by the government in a market economy. Bankruptcy and exit laws will have to be introduced. Labour market liberalization and the freedom to hire and fire labour will have to be allowed.

The collapsed state of Indian cities will have to be addressed by building 30 to 40 cities to accommodate massive rural urban migration. Land acquisition which is impossible now will have to be addressed. This list does not even include the sector changes required in real estate and infrastructure and sugar, and so on and so on.  None of this is happening ever, it seems.

Everybody’s babbling in the media about how crucial the February budget is going to be for the UPA because it will be packed with big ticket sops like the Food Security Bill. Remember game theory however. It is crucial to take your opponent’s reaction into account.  The Opposition also knows that the budget will be crucial to the UPA’s reelection chances ! Why then will they allow the UPA to present the budget at all. Especially when they have the numbers and the government is already on life support and in a minority. !!!

The government therefore, will, in all likelihood, fall in November-December, during the winter session of Parliament. Elections will take place in March-April as India needs the school system for a general election. This will allow the Opposition the chance to deny the government’s attempt to pass a budget full of sops and giveaways. The February budget will consequently be a vote on account.  This scenario will suit all parties except the Congress and hence it will happen.

Is the market discounting the possibility that in a few weeks, all these guys PC, Montek, etc. will be gone ? Is it discounting the possibility that this reform drive is a sham,  that will be exposed in a few weeks when the government falls ? Looking at the way its going up, I think not. 

The logical conclusion also is that this is the high point of the markets move this year. India has gone from having the most incompetent FM (Pranab) to the most cunning FM (Chidambaram). The later is deliberately doing all he can to talk up markets to implement his plan. There is little need to oblige him and his plans of using the stock market as a financing vehicle, by buying high and losing one’s hard earned capital.