Reliance gets BP to sign the dotted line. FDI charts up to $30 bln despite a thanda 2010 http://india.advantages.us/a-tired-nation-awaits-with-open-arms-indias-e-0

BHEL with new Partners , livemint.com

zyakaira notes: BHELs another JV with NTPC is in hot water because of some Intellectual Property concerns. Their going public with a stake sale will definitely help their plans get to an on ground reality. However, I believe Hydro power is not the way forward despite some of its advantages and all UMPPs are thermal – which also is among BHEL supplied goods, and their IPO vluation is unlikely to suffer for that. However at a valuation of 60000 crores ( ballpark based on current sales and some drop in market share – BHE remains an only provider in some underdeveloped markets) or $ 12 billion ( less than half of the Indian Banks’ investment in cash mutual funds in June July and August!)

From Livemint: State-owned Bharat Heavy Electricals Ltd (Bhel) will partner private construction firms to build overseas hydropower projects and is in talks with companies including Patel Engineering Ltd. “We are looking at getting EPC (engineering, procurement and construction) contracts overseas through this approach,” K. Ravi Kumar, chairman and managing director, Bhel, said. “While we will take care of the electro-mechanical work, the civil work will be done by our selected partner.”

“We have a tie-up with Bhel in India to execute projects in Andhra Pradesh on a similar model. It will be mutually beneficial to both the companies,” said Ashwin Parmar, deputy director, business development, Patel Engineering. For starters, India’s largest power equipment maker is eyeing a $250 million (Rs1,198 crore) contract to build a 72MW project in Katande in the Democratic Republic of Congo. Civil construction usually comprises 60% of the cost of a hydroelectric power plant and such a partnership would help Bhel share the project risk.

Hydropower projects are more complex to build and need specialized technology and design than thermal power plants. “Partnering with a contractor who has done civil work for a hydro project will help Bhel in the pre-qualification stage,” said Girish Solanki, a Mumbai-based research analyst at Angel Broking Ltd.

“There is an immense opportunity in Africa to tap as there is a power shortage there.” “This will be the first of the three project orders we are looking at in Congo. There are a few Indian firms that have shown interest in partnering with us, including Patel Engineering, for the Katande project,” said a Bhel executive who declined being named. “The Congo government also wants us to take up the 70MW Semlika project and partner in the Inga dam project.” Other companies that work on hydroelectric projects in India include Jaiprakash Associates Ltd, Hindustan Construction Co. Ltd and Gammon India Ltd.

Bhel is looking abroad for contracts as it fears that its domestic market share may decline to 50% from the current 60% in five years due to increasing competition from local and foreign companies. Of Bhel’s order book position of Rs1.25 trillion, global orders account for around Rs7,500 crore. West Asia, Africa and Central Asia are the primary international markets for Bhel, which plans to raise exports to Rs10,300 crore by 2012.

Bhel posted a net profit of Rs3,039 crore on revenue of Rs27,505 crore in the fiscal year ended 31 March. It aims to become a $10 billion-plus firm by 2012. Bhel has an annual capacity of manufacturing power equipment that can produce 10,000MW of electricity. The company says it plans to raise this to 15,000MW a year by December.

Insurance Dropzone – Part II

Depression has changed a few facts in Insurance

New players like Reliance and old alike like LIC and ICICI Prudential, Axis planning IPOs ( rules require 10 yrs of Operations) _TYY4 less than 10 seconds ago from web

New players like Airtel have been non-starters _TYY4 3 minutes ago from web

Other players falling behind include quasi Asset management peddlers like ICICI Prudential and WL players like New York Life _TYY4 4 minutes ago from web

LIC held 40% share in the new business in 2007 and 56% in 2009 _TYY4 5 minutes ago from web

Shikha Sharma has joined Axis Bank as MD and ICICI wants a unified holding company alongwith SBI to manage as part of the bank!!

Indian Insurance Market: DLF to get out of Insurance when buyer is available- AIG, Prudential turned down _TYY421 minutes ago from HootSuite

Apna Bharat Mahaan – More India Trends:: Swine Flue catches Twitter http://tr.im/vIg0about 1 hour ago from TweetDeck

RT @mashable TWITTER PURGE: Top Twitter User Unfollows 106,000 Peoplehttp://bit.ly/3IMizabout 1 hour ago from TweetMeme

Trends in apna bharat mahan – It happens for Twitterindia Bank strike – Twitter Searchhttp://ow.ly/jfp1about 2 hours ago from HootSuite

Trends in “Apna Bharat Mahaan” Twitterindia speaks for Inflation down – Twitter Searchhttp://ow.ly/jfoJ (DON’T TOUCH BIT.LY) about 2 hours ago from HootSuite

I think someone shd check the bit.ly bug: they don’t shorten the complete url on search.twitter about 2 hours ago from HootSuite

Last but not the least Twitter India speaks on the RIL RNRL gas dispute http://ow.ly/jfnJ about 2 hours ago from HootSuite

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Insurance Tweets (India) :: Midweek Dropzone

1. New players like Airtel and HSBC have been non-starters _TYY4less than 10 seconds ago from web

ICICI Bank has lost its mandate

ICICI Bank Q1 net up 21 pct | Financial Services, Reuters

India’s No.2 lender, on Saturday beat forecast with a 20.6 percent rise in net profit helped by higher trading income.

zyakaira notes: Axis Bank and SBI results were superlative in comparison, even Kotak did a nice job. Despite assurances, Chanda Kochchar’s stamp of return to old ways of significant bank intervention in all subsidoary businesses like investment banking and private equity and conservative underwriting practices along with slow moves in rural infrastructure and micro credit would mean a very slow H2 2009 and H1 2010. The current freeze in personal lines will continue to impact spread as well.

Net Interest Income is Down, and the bank is artificially holding Interest rates at ransom? Provisions are up almost 33% and NPAs are up to 2.33% from 1.81% – a result of malpractices across operations, cabalization and induction of criminals in its personal lines. I would like to think I’m being logical and not just posting a rant. Also, ICICI Bank considerably weakens India’s competitive position vis-a-vis MNC players and even the bellwether stock HDFC Bank which is otherwise only serving the small shopkeeper community instead of planning any rural distribution.

HDFC Bank results this week have been spectacular with a Net Profit growth of 30% compared to a meagre 21% for ICICI Bank. As insiders would say, ICICI Bank has lost itself in the melee they called growth but as markets would make obvious, ICICI Bank misused its mandate and has shown the potential to ignore any sensible advice from any quarter and proceed much like a drunk junk trawler on the high seas than like a responsible corporate leader.

HDFC Bank NIM is 4.1% compared to just 2% for ICICI Bank, even though they are not aggressively courting suspect business anymore. Deepak Parekh is retiring and Aditya Puri has spent 15 odd years at the helm of the bank but HDFC Bank has stayed with SME business and not ever been in the same league as ICICI after it outgrew its initial discipline and rigor in the mid 90s. ICICI’s CASA at 30.9% is a cause of concern for the bank agast 45% for HDFC Bank the only worthy direct competitor. But now, ICICI Bank is likely to lose the ball to PSBs like SBI after their consolidation exercise and even Axis Bank. HDFC Bank Net Income increased 25% while fees and commission helped Non Interest Income increase by 75.9% HDFC Bank (1416 branches in 550 cities) Balance sheet has increased to INR 186115 Crs ($3.8 billion) and Retail lines are 58% of the overall advances with CAR at 15%

ICICI, which grew loans by a third in the past few years by boosting retail, personal loans and credits, has changed tack to concentrate on the safer corporate and housing loans. India bank loan growth has slid to 16 percent in June from nearly double that in the year to March 2008 as demand for credit fell in a slowing economy.

Having backed these two banks earlier in my career, it has been excruciating to watch them take the nation down in the last few years and hopefully, the PSBs and the Yes Banks would obviate the need for these megaliths much like we outgrew Indian Financial institutions in the mid 90s..

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OIL India Ltd – The India Energy Demand solution

India’s energy situation in short is that it needs four times more oil than it produces, and thus domestic production has been a focus in India’s Infrastructure story since 2005

The OIL IPO band at Rs 950-1050 just ensures an IPO size of Rs 5000 Crores ($1.02 billion)  from 11% new shares and 10% sale of existing stakes of the Government, thus brining the post issue government stake to 78%, very close to the ideal target of 75% promoter stake for listed companies and allowing the government to take down further ownership at a later stage based on market determined prices. The government will further sell another 10% of its stake to IOC (5%), BPCL and HPCL.  The IPO monies would thus finance the company’s Cpex requirement for the next 2 years across its exploration contracts in Assam, Rajasthan ( new fields in management contract with Cairn – the first Production Sharing Contract) and even its overseas bids in Libya and Venezuela, not the ones in Nigeria.

OIL is the newest entrant in India’s energy story, following on the footsteps of ONGC Videsh and ONGC while it has purportedly on paper, more market friendly organization values and has reserves of $500 billion in the new NEPC VI fields.  However, It has relinquished interest in North Cachar and other Assam fields award in 2004.

In keeping with India’s Infrastructure story’s imperatives and as per the ever increasing financing gap of $384 billion at 2005 prices and $475 billion at current prices (as per EGOM estimates, India Infrastructure Report 2008, IDFC, 3i network) the issue has been super-sized. Unfortunately SEBI has still not uploaded any revised prospectus/offer document since the last one was filed for an issue half the size in December 2007. Since then, while India’s Oil subsidy bill has soared to over INR 100000 crores for both 2008 and 2009, OIL has managed its exploration and distribution activity safely to become profitable and is looking to fund the completion of its exploration projects through this issue. 

OIL will be critical to the FTSE India Infrastructure 30 index introduced in 2007 and ETFs around the same will be in high demand once the listing of these shares is completed as Institutional appetite for Indian public sector infrastructure stories will continue to be robust for the more than $10 billion to be raised in the six months since July 2009 and another $20 billion that may be raised in 2010. 

With Oil prices currently ruling at $70-75 and OPEC targeting an increase to $100, we are back in an inflationary situation where exporting 20% of our domestic reequirment though cash accretive is still not enough to bring down our costs, while increasing our domestic production remains slow and torturous. OIL remains immune to the imbalance however and will be free to purchase and sell at market prices using more efficient trading mechanisms than currently practiced by the consequent coalitions and thus its financials are likely to be strong. However, they are unlikely to be on par with a private sector Cairn Energy or Reliance in terms of these efficiencies.  OIL does share the subsidy bill as under recovery, but it is still likely that because of it being a new corporate, itwill suffer only minor losses on the said account and IOC and HPCL wil maintain primacy with regards to paying the bills

The LNG/LPG situation however in the market today can be easily capitalized by OIL, where neither $4.20 or $2.34 is a fair price, global markets ruling currently at $3.45 ( mid-August 2009) It has reserves of 77 billion cu. mtrs of Gas including contingency reserves primarily in the Rajasthan basin

Also, it had initially suffered losses in production in the Dikom fields with 2007 production being 2.23 million barrels, less than half of its 1999 production. Still, in the face of global competition it has secured 21 of the 46 fields awarded by the government till date under NELP. The Rajasthan fields that it operates under PSC cover nearly 4000 sq. kms. They are a first step in diversification of OIL’s over dependence on Asssam and the single 1220 km pipeline from the terrorist infested areas there in. Of its last known turnover of $1.2 billion, costs include 20% royalties for crude oil and 10% royalties for natural gas and offshore oil, and underrecovery from crude supplied to public sector refineries which is 80% of the company’s revenue. they also pay approx 5% of this revenue to the Assam government in taxes on oil bearing land. Apart from owning the pipeline from Assam ( 44 million barrels in 2007)  it also owns 26% in NRL and 10% in BCPL refineries. the current Capex includes exploratory wells and 2D and 3D seismic data acquisition in the fields being developed of the 38000 sq kms awarded to OIL till date ( 75% thru NELP )

[Tags India, India Infrastructure, IPOs, OIL, ETF, EEM, Emerging Markets, Russia, China, Energy]

[Category India, India Infrastructure]

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SBI, PNB results

State Bank of India and Punjab National Bank both effectively proved size does matter. Their growth absorbed a growth in deposit rates ( 38% for SBI) effectively absorbing the stimulus and passing on rates by RBI unlike their MNC and private bank counterparts that have ‘managed’ their deposit rate cost by instantly cutting rates early and then keeping credit down, almost artificially probably as they waited to be sold off for pennies by the head offices. I am almost sad and apologetic at sounding like a parochial small trader / farmer but the facts on ground are now out for everyone to see.

 State Bank of India’s quarterly profits grew 42% and restructured loans upwards of Rs 11000 Crs in time. While ICICI plans a paltry Rs 1500 Cr restructuring while NPAs kept rising at the private sector banks and are expected to rise further into the 3%+ zone, PNB and SBI NPAs are controlled and have fallen consequent to the restructuring. SBI has also managed to attract huge deposits in this period reflecting higher confidence in the behemoth ( also true for PNB) while Income from advances has grown at a lower 23%. Net Interest Income had earlier grown in FY09 to Rs 17000 CR ( USD $3.4 billion) while Consolidated Net Income climbed by 33% to INR 23000 Crs ( $460 million – $480 million at current FX rate ) beating the Bloomberg survey by 20%

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Indian Banking Businesses – Whither growth?

I wonder how any bank with a brand like Yes or Kotak can today crack open the expat market which has a few relatively unknown niche players ( Geojit, recently acquired by HSBC) It would need key leadership experience to realise a valid entry point. One option however, at the barest minimum requirement, is to go for a PSB or a local bank in UK and Australia or the Middle east. That requires capital but any other option leaves you with a performance like ICICI Bank which has managed only rep offices in all its overseas expansion and have not been able to generate the required trust without a retail presence on the ground, leaving the field seemingly open for players like ING and HSBC. They do have some presence now in London.
 
Regulatory level liaison with developed markets would sadly continue to maintain the respectable disconnect that exists as emerging markets can barely acknowledge their requirements of the day as they are seamlessly extended to the rest of the world. It remains to be seen if that home brewn recipe of the Basel and BoE would ever land in some drifting current and be taken care of. A way must be found for India to spare the cash and show their value in the developed world and invest in these international markets before much more will come out to bear on market shares of all the players. This is not to belittle current efforts from either side but I didn’t see it on the agenda in these last few years at work. It is never too late to start?
 
All the PSB scrips remains a good buy in Indian exchanges and I look forward to even more QIP issuance from YES Bank. But sooner than later the investing denizens will realize our SME status in the global market and unlike China, here Private Enterprise is free to make its own market rules, which is not something we have made good use of till now.
 
The other priority and now a key priority is of course our spreading into the hinterland as we strengthen distribution and support the microcredit revolution and the farmers. This spread would require immediate action by the banks as the government has al but given the keys to the treasury for the banks to lend and spend and while Corporate credit may be lukewarm, the hinterland beckons.
 
Last but not the least, the banks are key to the Indian consumer treasure now that it is all about lifestyle and disposable spending. While unsecured credit would not be remunerative, as we cannot go beyond the current systemized and sometimes too painfully detailed back office ops required to support the credit.
 
As a banker I probably wonder why the boom did not last, but then nothing lasts forever and as far as emerging markets are concerned , it remains a s good as it gets as Class B towns and Metros keep growing incessantly and people continue to spend on retail, lifestyle and entertainment. Infrastructure financing will attract the big bucks and the retail lifestyle spending will grow as fast as ever within the next 12 months, the magic being in access and prompt delivery by the banks.
 
Predictions: Interest rates are headed lower and Treasuries are going to be fatter and richer but still incomparable to the riches in the global markets
 
[Category India]
[Tags India infrastructure, Banking, Bank stocks, Wealth, Retail Lifestyle, Amitonomics, Lifestyle Economy, India, Economy, Finance]
 
Amit Mittal
mittalster@gmail.com
 
Amit Mittal
Mob: 919972442877
amit.mittal@me.com
MD, Advantage Research Pvt Ltd
@Innovative Film City, Bidadi 562109
On the web Advantage ‘zyaada’ http://advantages.us/zya
http://astore.amazon.com/mmmzyaada-20

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YES BANK – What plans?

Finally, the cat is out of the bag. Yes Bank albeit a little late or cautious, has decided to step into the Institutional market. It will be asking investors to pick up a $250m QIP stake to shore up its capital. In the meantime, as reported earlier, they have also put on hold their diversification and market development plans on the board for the last 2 years now as they get into some serious consolidation in its core banking business. They have a good sleeping brand and their recent cost cutting efforts would also bear fruit. However, their focus on SME business might change now as the current ticket size is very unremunerative for them. There was some recent murmur when Rabobank announced its plans to enter the country directly, but that is a non-starter since Yes Bank would not go for the stake sale by Rabobank without making sure the house is in order as a deeper recession is equally likely in the next 12 months.  

Yes would need a little serious selling with big ticket business while continuing to present simple and generous options for retail and SME customers. Their non presence in asset management and broking would hardly raise any eyebrows as the business entirely survives on institutional volumes and even a Kotakstreet and a sharekhan are essentially struggling with their current “low” period. 

I wonder how any bank with a brand like Yes can today crack open the expat market which has a few relatively unknown niche players ( Geojit, recently acquired by HSBC) It would need key leadership experience to realise a valid entry point. One option however, at the barest minimum requirement, is to go for a PSB or a local bank in UK and Australia or the Middle east. That requires capital but any other option leaves you with a performance like ICICI Bank which has managed only rep offices in all its overseas expansion and have not been able to generate the required trust without a retail presence on the ground, leaving the field seemingly open for players like ING and HSBC. 

Regulatory level liaison with developed markets would sadly continue to maintain the respectable disconnect that exists as emerging markets can barely acknowledge their requirements of the day as they are seemingly extended to the rest of the world. It remains to be seen if that home brewn recipee of the Basel and BoE would ever land in some drifting current and be taken care of. A way must be found for India to spare the cash and show their value in the developed world and invest in these international markets before much more will come out to bear on market shares of all the players. This is not to belittle current efforts from either side but I didn’t see it on the agenda in these last few years at work. It is never too late to start?

The scrip remains a good buy in Indian exchanges and I look forward to even more QIP issuance from YES Bank.  

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Tweets from the Market – July 24, 2009

Do remember to validate picks at http://socialpicks.com/zyaadakairaada/portfolio $AMZN is down 8% as we speak

Facebook at 77 million visitors, Amazon 64 m, Craigslist at 47 m, WordPress at 26m and Twitter at 20m compared to Goog at 157m in June09

about 2 hours ago from TweetDeck

So $AMZN makes $1.75 bn per month from 64 million visitors

5 minutes ago from TweetDeck

That is more than $27 from every single visitor! $AMZN

3 minutes ago from TweetDeck

If Twitter made 10% of that they would have sales of $54million to start with ( based on June comscore)

2 minutes ago from TweetDeck

China’s new loans may surge to a record 11 trillion renminbi ($1.6 trillion) this year as the government refrains from tightening lending rules to protect economic growth

just now from Tweetdeck

Goldman /Blankfein paid a 23% return on the govt’s TARP investment, paying $1.1 billion for the warrantshalf a minute ago from TweetDeck
Also Buffet sold a third of his stake in Moody’sjust now from Tweetdeck

China’s state construction giant raised a $7.3 billion in IPO4 minutes ago from TweetDeck

(Green Shoots?) Both American Express (AXP) and Capitol One (COF) reported earnings that were quite weak (seekingalpha dot com)2 minutes ago from TweetDeck
$CIT looks in line to become smaller, selling its comml business and most likely losing its aviation lending and rail finance biz profitablyhalf a minute ago&nbs
p;from TweetDeck
BTW, we continue to be short on both $AXP and $COF and bullish on the market ( same as before act. results came out @zyakairahalf a minute ago from TweetDeck

<-> twitter @blrmoneytalkz

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