BS: Coal India’s production declines on overburden removal constraints

3 June 2019: Owing to a delay in the finalisation of overburden removal contracts and land issues, Coal India’s production during May this year, fell by 1.1 per cent to 46.59 million tonnes (mt) as the miner was able to produce around 1.5 mt of coal daily.

Overburden removal refers to the removal of top-soil to expose the coal seams making them ready for mining. Any delay in this process impacts the future-readiness of the company to sustain output levels. 

In March this year, the state-owned miner was to register a daily output of 2.55 mt, which declined to 1.46 mt in April, primarily on account of a lack of exposed coal seams.

“Last year, many overburden removal contracts couldn’t be finalised which has now impacted production. However, the issue has been addressed and output is likely to increase in the coming months”, a company executive said.

Sources suggested that the reverse auction mechanism may be the primary reason why such contracts couldn’t be finalised on time. Except Western Coalfields, nearly all other subsidiaries of the company were plagued by this problem.

Although Coal India took it upon itself to carry on overburden removal activities as contract finalisation took time, it wasn’t enough.

During March-May 2019, Coal India’s spend on stripping activity, a true reflection of removing the top-soil, went down by 11.15 per cent to Rs 2,201.69 crore.

Signs of this looming problem first surfaced in the latter half of last year when it was found that while opencast production grew at around 11 per cent, overburden removal dropped by 3.4 per cent.

Since over 90 per cent of Coal India’s production comes in from opencast mines, overburden removal needs to be kept proportionate to production to sustain growth.

Plagued by such lack of stripping activities, land and labour issues, South Eastern Coalfields (SECL), the company’s largest subsidiary, registered production decline by 14.7 per cent at 11.90 mt.

However, despite this crucial problem, , the Maharatna firm’s second most important subsidiary, upped production by 12.3 per cent at 11.64 mt, while Northern Coalfields increased output by five per cent at 8.87 mt.

The production rise in these and other important subsidiaries is on account of sorting out land acquisition issues. In April this year, Coal India spent Rs 143.06 crore to acquire 632.93 hectares of land after employing 50 displaced people and compensating another 59 as one-time settlement.

Although company officials noted that the problem has been resolved, it is faced with another challenge – the monsoons are knocking at India’s doorsteps.

While company exectives acknowledge that mining is a seasonal business and production usually takes a hit during the rains, it is also unproductive for the company to expose the coal seams to downpour. Not only does it risk accidents, but such exposure can also lead to deterioration of the coal quality if it is left bare to the showers.

On the other hand, the world’s largest coal miner also registered a decline of 1.4 per cent in shipping coal to the consumers on account of lack of rakes availability.

The company, in association with the Indian Railways, is in the process of procuring its own railway rakes which, Coal India thinks, will help it ship greater amount of coal to its consumers and free up some of the railway rakes to make them available to other sectors.

The Business Standard reported

BS: Coal India posts record 362.46% rise in Q4 profit; net revenue jumps 7.53%

30 May 2019: A drastic reduction in employee benefit expenses apart from other operational efficiencies backed by higher price realisations, helped Coal India post a record increase of 362.46 per cent in its net profit at Rs 6,024.23 crore for the quarter ended March 31, 2019.

The coal monolith earned a net profit of Rs 1,302.63 crore during the corresponding quarter of the last fiscal year. The company’s net revenue also jumped 7.53 per cent to Rs 28,546.26 crore as against the earnings of Rs 26,547.58 crore during the fourth quarter (Q4) of FY18.

Employee benefit expenses, during the quarter under review, came down by 35.74 per cent at Rs 10,700.79 crore as against Rs 16,651.20 crore posted in the Q4FY18.

Sector analysts reasoned that the sweeping fall in employee benefit expenses was primarily on account of the payment of one-time increase in gratuity settlement of Rs 7,384 crore.

Taking this into consideration, the total employee benefit expenses rose by 15.47 per cent during the quarter and the pre-tax profit of the company stood at around Rs 1,508 crore during the last three months of the last fiscal year. In the January-March period of the 2017-18 fiscal year, the pre-tax profit stood at Rs. 1,163.35 crore.

“Better average realization in both coal, Fuel Supply Agreement (FSA) and e-auction sales coupled with operational cost control propelled the company to its best ever financial performance. Importantly, coal quality variance was under control and we have been able to arrest the grade slippage to large extent”, a company official said.

Average realisation per tonne of coal in the FSA saw an 8 per cent increase to Rs 1,348 during 2018-19 from the previous level of Rs 1,243 during 2017-18. The overall average realisation per tonne of coal went up to Rs 1,529 during 2018-19 compared to Rs 1,398 on a year-on-year basis.

During the quarter, Coal India sold 142.42 million tonne (mt) of coal via the FSA route which helped it earn Rs 20,794.15 crore while another Rs 4,602.64 crore was earned by selling 16.71 mt of coal via the e-auction route.

Contractual expenses, the second-largest cost overhead, also fell by 1.38 per cent to Rs 3,838.56 crore benefiting the company post higher profits.

A company official said that for the full 2018-19 fiscal year, all the subsidiaries of Coal India had managed to earn a profit.

The Business Standard reported

BS: NCLAT quashes NCLT order against ECL

14 February 2019: The National Company Law Appellate Tribunal (NCLAT) has set aside the National Company Law Tribunal (NCLT) Kolkata bench’s order to start insolvency proceedings against Eastern Coalfields (ECL), a subsidiary of Coal India, said an official on Thursday.

The state-run miner had moved the NCLAT challenging the order. 

“The NCLAT has set aside the NCLT order and it has released us from all the rigour of law. We are allowed to function independently through our board,” an ECL official told IANS. 

THe NCLT’s city bench, in December, admitted an insolvency petition, filed by the Gulf Oil Lubricants India, against ECL under Section 9 of the Insolvency & Bankruptcy Code, as it allegedly refused to pay the interest amount at the rate of 18 per cent on the original debt to the operational creditor.

ECL had already paid the Rs 84.71 lakh principal sum to the creditor.

At the hearing, the counsel appearing for the operational creditor, accepted that the principal was paid prior to the admission of the insolvency application.

“That the parties have settled the matter prior to the constitution of the committee of creditors and the adjudicating authority has failed to notice that the principal has been paid and original plea of the corporate debtor was that no interest was payable in terms of the agreement/contract, we set aside the impugned order dated December 19, 2018 passed by the adjudicating authority,” the NCLAT bench said.

–IANS

The Business Standard reported

WEEKEND EQUITY UPDATE: 18 AUGUST 2012 – 19 AUGUST 2012

ASIA

Prices of new homes in China rose in 49 of the 70 cities in July over the previous month’s data. The cutting of interest rates, improved sentiment and incentives for new home buyers weighed in on the data. Prices declined in nine cities and were unchanged in twelve. (Bloomberg)

INDIA

FII’s have infused a total of USD 11 b in Indian equities in 2012 on a YTD basis. USD 1 b alone came in the month of August as the government could put in a fresh round of initiatives and reforms to stimulate the slowing economy. (Economic Times)

The combined market capitalization (m-cap) of top ten co.’s rose by INR 17,658 cr for the week ended 17 August. Reliance Industries contributed the most with gains of INR 10,696 cr followed by ONGC, Coal India, Infosys while TCS, HDFC Bank, ITC and NTPC saw their m-caps decline over the week. (Economic Times)

ONGC Videsh Ltd – OVL, the overseas arm of ONGC, is planning to invest in oil fields in Russia, mostly in the Arctic Ocean with joint-ventures. The co. is to form JVs with ExxonMobil and ENI. (Business Standard)

Tata Steel – Co.’s Ferro Alloys and Mineral Division to add 1.1 lac tons of ferro chrome and silico manages production capacity by 2012 at its Odisha plants.  (Financial Express)

Reliance Power – Co. refuted allegations made by India’s Comptroller and Auditor General (CAG) that the firm benefitted from the auctions of the coal mines. The co. is alleged to have made benefits of INR 29,000 cr by diverting its surplus coal output for its operations in Sasan, MP, India. The co, has stated that the allegations are erroneous and the co. did not receive any undue benefits. (Economic Times)

Lanco Infratech Limited – Co.’s management plans to increase the coal out to 5.5m tons per annum but March 2014 at its Griffin coal mines located in Western Australia. The Griffin coal mines are expected to hold total reserves over 1.1b tons and co. is expected to secure various clearances by the end of the current financial year. (The Hindu Business Line)

United Bank of India – Co. expects to recover INR 400-500cr in cash in this financial year, as gears up to fasten its recovery process, according to co.’s Executive Director Deepak Narang. (Business Standard/ PTI)

EUROPE

According to a German weekly magazine report, ECB is considering setting interest rate thresholds for any purchases of struggling euro zone country’s bonds so that it would buy such bonds if their interest rates exceeded a certain premium over German bonds. In other news the weekly magazine also reported that, Greece will likely need to cut additional EUR 2.5b in spending over the next two years to meet the requirement for financial aid. Der Spiegel cites an interim report by the troika. (Economic Times/Reuters)

Spain’s Economy Minister Luis de Guindos stated that the bank bailout fund would take care of restructuring and recapitalizing the banks. The funds received from the EU will be put up for approval by the Cabinet by 24 August. The non-performing assets of the bad banks will be transferred into the FROB fund to access loans. (Bloomberg)

Germany’s Finance Minister Wolfgang Schaeuble dismissed talks of providing a fresh round of funding to Greece even though the state of country remains in a difficult situation. The nation has received two rounds of funding worth EUR 240 b since the onset of the crisis. With GDP expected to contract at a slower pace in the next two years on the funding, Germany is aware of the additional constraints on the EU and other nations if the funding were to continue. (Bloomberg)

The U.S Justice Department have started investigating Deutsche Bank to understand its possible role in the transactions linked with Iran, Sudan and other nations currently facing international sanctions. (Reuters)

NORTH AMERICA

Rating agencies Moody’s and S&P are to face lawsuits filed by investors for falsely assigning inflated ratings to debt backed by subprime mortgages. Morgan Stanley sold the notes during the 2008 crisis incl. The Abu Dhabi Commercial Bank. (Bloomberg)

Caterpillar – Heavy equipment manufacturer stated that the uncertain outlook of the global economy was worse than the state during the 2008 crisis. Lower demand in the construction and infra sector on account of the slowdown has affected the co in terms of lower orders. (Financial Times)

 

 

 

 

 

 

EQUITY UPDATE – 13 AUGUST 2012

INDIA

According to RBI Governor D. Subbarao, domestic factors could have accounted for the economic slowdown in India. The varying severity of the global crisis meant that the central bank had limited options at its disposal to respond. Declining investments in the nation were also a worrying situation for the nation. (Economic Times)

Sun Pharmaceuticals – Co. has agreed to buy the remaining stake in Taro Pharma, a U.S based firm for USD 580 m. Sun Pharma already owns a 66 percent stake in the co. (Financial Times)

According to data by the National Housing Bank (NHB), home prices rose by an average of 10.5 percent in 16 cities in India for the 2Q12 period out of 20 countries covered. Pune saw the maximum price rise followed by Bangalore, Mumbai saw its prices rise by 3.7 percent as compared to others. (Economic Times)

Reliance Communications – Anil Ambani led RCom plans on investing a total of INR 1500 cr to expand its network and data services. (Economic Times)

Go Air – Budget airline firm has entered into a 10 year parts supply and maintenance programme with Lufthansa Technik. (Economic Times)

ONGC Ltd – Oil exploration firm would set up a urea manufacturing plant in Tripura, India in a joint-venture operation which is expected to have an outlay of INR 5000 cr.

INDIA EARNINGS

Tata Steel – Co. saw its 1Q12 profit decline almost 89 percent to INR 597.88 cr on a y/y basis vs estimates of INR 670 cr.  Sales rose 1.89 percent y/y to INR 33547 cr. The co. was affected by weak demand for steel and lower commodity prices in Europe. (Business Standard)

Coal India – Coal mining firm saw its 1Q12 profit rise 8 percent y/y to INR 4469 cr vs expectations of INR 4440 cr.  Sales rose 15.5 percent to INR 18572 cr on a y/y basis vs exp. of INR 16650 cr. The co. plans to hit a target of 470 m tonnes of coal supply in FY2012-13. The co. is also under pressure from the government of India to supply coal compulsorily to state-owned power generating firms. (Business Standard)

EUROPE

British Petroleum plc – Co. is to sell its stake completely in its oil refinery in California for USD 2.5 b. The co. acquiring the refinery is Tesoro Corp. BP is in the process of selling many of its oil refineries incl. the Carson and Texas city refinery. It plans to cut its downstream operations and focus on the more profitable segments. The co. is also under pressure to divest assets to raise cash to fund expenses from its Deepwater Horizon oil spill. (Financial Times)

Greece reported its 2Q12 GDP data which contracted 6.2 percent vs a fall of 6.5 percent in the prv quarter. The minor improvement still did not convince the markets that Greece would turnaround the corner. (Financial Times)

NORTH AMERICA

Google Inc – Co. plans to cut around 4000 jobs at its Motorola Mobility unit to focus more on production of high-end smartphones. The loss making division was acquired in 2011 for USD 12.5 b. (Financial Times)

Julius Baer – Co. is to purchase wealth management operations of Merrill Lynch outside the U.S for USD 840 m. (Financial Times)

WEEKEND EQUITY UPDATE: 10 – 12 AUGUST

In a shortened trading week in the Indian markets on account of Independence Day on 15th August, key events to watch out for are:

1- India Inflation data

2 -Earnings: Tata Steel, Hindalco, Reliance Infra and Coal India among the major firms reporting their 1Q12 numbers.

3-Monsoon Session of the Parliament: The ongoing session awaits some policy response from the Finance Minister P. Chidambaram to prop up the economy.

(Economic Times)

FII Data: Inspite of lower than expected monsoons this year, FII’s have infused a total of INR 4800 cr in the equity markets. News of expected reforms from the ongoing parliament sessions are one of the major reasons for the increased investment inspite of dismal macro data. For the 2Q12 period (Apr – June) ,these institutions have infused INR 10,273 cr vs withdrawal of INR 1957 cr.

On stock specific news, it is observed that FII holdings have increased in IT stocks on rupee depreciation. Apart from HCL, stocks such as Infosys, TCS, Tech Mahindra and Wipro saw FII’s increase their holdings. Other IT firms such as Hexaware, Oracle Finance Services and Mphasis also saw an increase in FII holdings. (Economic Times)

Jindal Power and Steel Ltd – Mining firm is to begin production of coal from its mines in Indonesia and Mozambique. The firm will source its supply of coal for its plants producing steel. (Economic Times)

Bank of England’s Governor Mervyn King stated that the euro region crisis would not end unless massive reforms are undertaken. The crisis weighed in heavily on UK’s economy but reforms on the banking sector could be a step in getting on the path to recovery. (Bloomberg)

Tuesday would see German and French GDP data come out. Germany’s GDP on  q/q basis is expected to fall 0.1 percent vs prv period’s 0.0 percent. On a y/y basis, it is expected to expand slower at 1.0 percent vs 1.7 percent previously. France could see its GDP contracting 0.1 percent as per expectations over previous period’s unchanged number. (Bloomberg)

 

 

EQUITY UPDATE – 9 AUGUST 2012

ASIA

Cathay Pacific Airways Ltd – Co. reported its 1HY12 results at a loss of HKD 935 m (USD 121 m) vs exp. Profit of HKD 490 m vs. profit of HKD 2.8 b a year ago, on lower freight traffic, higher fuel costs and decline in demand for premium travel. Slowdown in global trade led to declining volumes and intense competition from other airline firms reduced its profit margins. Stock price declined 4 percent to HKD 12.36 in trade and will not pay an interim dividend to shareholders. Cargo revenues declined 7.6 percent to HKD 11.9 b on 64 percent of luggage capacity, which was lower than the previous period. Sales rose 4.4 percent to HKD 48.9 b. (Bloomberg)

INDIA

According to a FICCI survey of 418 manufacturing units and associates, the July-September quarter is expected to register lower growth as compared to the previous quarter. (Business Standard/PTI)

FII’s made gross purchases of INR 2,751.60cr and gross sales of INR 1,637.39cr. DII’s made gross sales of INR 794.71cr and gross purchases of INR 928.83cr. (Business Standard)

Coal India – Co. to supply 8.8 per cent more coal in FY 12-13. The co. is expected to supply 470m tons of coal in the current fiscal compared to 432.94m tons in FY11-12.  (Yahoo/Reuters)

Maruti Suzuki India Ltd – According to industry body Assocham, the ongoing strike at the firm’s Manesar factory is expected to cost the co. upto INR 90 cr a day as the impending strike continues. The strike has affected around 650 units and could affect around 270 auto parts suppliers. (Economic Times)

INDIAN EARNINGS

Oil India – Co. reported 1Q12-13 net profit at INR 929.93cr vs. previous 1Q11-12 net profit at INR 849.61cr. Turnover up 8.22 per cent at INR 2,439.63cr. 1Q12-13 fuel subsidies at INR 2,015.52cr vs. previous INR 1,780.65cr. (Financial Express)

Mahindra – Co. reported 1Q12-13 net profit at INR 726cr.vs expected INR 625cr. Total revenue came in at INR 9248cr. vs estimated INR 9045 cr. M&M’s exports in 1Q12 were up by 37% to 7,845 units. EBITDA margin decreased by 150 basis points on a q/q basis to 11.80 percent for the 1Q12 period.  (Moneycontrol)

Tata Power – Co. reported 1Q12-13 net profit at INR 312.30cr vs. previous INR 281.56cr. Total income from operations at INR 2284.10cr vs. previous INR 1,921.24cr. (Financial Express)

Abbott India – Co. reported 2Q12 net profit at INR 29.52cr vs. previous 2Q11 net profit at INR 17.10cr. Net sales at INR 402.83cr vs. previous INR 351.50cr. (Business Standard/PTI)

Puravankara Projects – Co. reported 1Q12-13 net profit at INR 50cr vs. previous 1Q11-12 net profit at INR 31cr. Revenue at INR 248cr vs. previous INR 191cr. (Financial Express)

United Breweries – Co. reported 1Q12-13 net profit at INR 1.32cr vs. previous 1Q11-12 net profit at INR 1.88cr. Net sales at INR 98.64cr vs. previous INR 70.03cr. (Financial Express)

EUROPE

Germany’s exports for June declined 1.5 percent vs May’s gain of 4.2 percent vs expectations of a gain of 1.3 percent. Falling demand in the euro zone, which is Germany’s biggest markets, contributed to lower exports. The trade surplus rose to EUR 17.9 b vs EUR 15.6 b in May. Current account surplus rose to EUR 16.5 b vs EUR 8.1 b a month ago. The data rose on account of rising wages in the country coupled with low unemployment levels. (Bloomberg)

Germany’s Industrial Production declined 0.9 percent in June on a m/m basis on lower output from the construction sector. Expectations came in at a decline of 0.8 percent. Factory orders declined more than twice as forecasted. Manufacturing output declined 1 percent, while capital goods saw lower output by 1.6 percent. Construction sector saw its biggest fall in June’s data to 2 percent vs 2.6 gain in May. (Bloomberg)

Bank of England’s Governor Mervyn King supported U.K Prime Minister’s budget curtailment plans as he stated that growth in the UK would be a slow process. He also lowered his GDP forecast for the coming two years that it would expand by 2 per cent , lower than his earlier forecast of 2.5 percent expansion in May. Lack of policies undertaken by the government could also substantiate this lower forecast. Bond purchases would continue for the same level and that interest rates could be reduced in the 2Q13 period. (Bloomberg)

According to the French central bank, French GDP was expected to shrink 0.1 per cent in the 3Q12. (Reuters)

Greece’s credit rating could be cut further from CCC by S&P on concerns that the nation would need more than expected financial assistance from the EU. The outlook on the credit rating was lowered from stable to negative. The nation is deadlocked in talks with the international troika of IMF, ECB and EC to decide on the funding available to the nation. (Bloomberg)

ArcelorMittal – Fitch downgraded co. to ‘BBB-‘ from ‘BBB’, citing challenging short-term outlook for steel markets, particularly in Western Europe. (FoxBusiness)

 

 

 

 

EQUITY UPDATE – 8 AUGUST 2012

INDIA

Rating agency CRISIL reduced it’s forecast for India’s GDP growth in FY12-13 to 5.5 percent from 6.5 percent. Rainfall deficiency and the worsening of the Euro zone crisis are the major factors which could affect GDP, it cited. The agency noted that it expects the Indian economy to attract lower foreign capital inflows compared to its earlier estimates. The rupee was also expected to settle around 53 to the US dollar vs 50 earlier.  The report also revised up its average WPI inflation forecast for 2012-13 to 8.0 percent from 7.0 percent. (Moneycontrol)

According to Dun and Bradstreet Indian CFO survey, macro-economic conditions in India are likely to remain ‘unfavourable’ or remain unchanged in the July-September quarter. Around 73 per cent candidates surveyed were pessimistic or neutral about the macro-economic outlook during 3Q12. (Financial Express)

The Micro and Small Medium Enterprise (MSME) Additional Secretary opposed IKEA’s plan to set up operations in India if it did not source 30 percent of its supplies from domestic industries. With IKEA lobbying for 100 percent FDI, it also was keen on avoiding compulsory sourcing from domestic markets on various investment and cost concerns. (Economic Times)

According to RBS private banking, Nifty index is expected to hit 5,700 level by December 2012. The forecast is based on investor-friendly policy reforms, a 0.50 per cent rate cut by RBI post-September, improvement in fiscal and revenue deficit and a third round of QE from United States. The report also highlighted that a stronger growth in developed world, an enhanced QE programme and a firmer domestic growth could take nifty beyond 6,200 mark. However in an opposite scenario, if US growth falters and disappoint on the QE front, and policy paralysis could take nifty to 4,900 levels. (Economic Times/PTI)

FII’s made gross purchases of INR 2,455.56cr and sales of totalling INR 1,639.61cr. DII’s made gross purchases of INR 1,234.50cr and sales totalling INR 1,179.26cr. (Business Standard)

Reliance Industries/British Petroleum plc – Co.’s received a conditional approval for over USD 1 b of investments in the KG-D6 basin to raise output at these fields. It was also asked by the management Committee to drill additional wells to confirm oil discovery at three wells in the Krishna Godavari basin. (Economic Times)

Coal India – Mining co. agreed to pay a penalty on its failure to provide adequate supply of coal to Indian power projects which resulted in a shortfall ranging from 1.5 percent to 40 percent. It would also negotiate with the Central Electricity Authority on combining prices of imported and domestic coal to market it to customers.  In other news, co. plans to import 20m tons of coal in the current fiscal to bridge the supply shortage. (Economic Times/Fox Business)

Jet Airways – Co. to hive-off its loyalty programme ‘JetPrivilege’ into a wholly-owned subsidiary. (Economic Times/PTI)

Lanco Infratech – Crisil downgraded the rating on co.’s bank facilities to ‘BB’ from ‘BBB’. The rating agency cited relative less time left to meet the debt payment of INR 700cr between October 2012 to January 2013. (Business Standard)

Kingfishers Airlines –  According to a source, co.’s pilots and engineers has decided not to report to work from tomorrow (8th August), due to non payment of salaries. (Financial Express)

INDIAN EARNINGS

Punj Lloyds – Co. reported 1Q12-13 net loss of INR 13.37cr vs. previous net loss of INR 12.25cr. Net sales of at INR 2,706.82cr vs. previous INR 2,248.31cr. (Business Standard/PTI)

Sobha Developers – Co. reported 1Q12-13 net profit at INR 45cr vs. previous INR 26cr. Total operating income at INR 433.2cr vs. previous INR 277.7cr. (Business Standard/PTI)

NHPC – Co. reported 1Q12-13 net profit at INR 669.81cr vs. previous INR 791.05cr. Total income at INR 1,729.53cr vs. previous INR 1,666.89cr. (The Hindu Business Line)

Bombay Dyeing – Co. reported 1Q12-13 net loss at INR 27.50cr vs. previous net loss of INR 39.79cr. Net sales at INT 465.73cr vs. previous INR 394.84cr. (Financial Express)

EUROPE

According to Eurogroup’s President Jean-Claude Junker, the exit of Greece from the eurozone would still be manageable inspite of the risks it posed to the citizens of the country. He ruled out an exit as early as autumn. (Reuters)

A Fitch rating’s investor survey showed that, European fixed-income investors expected eurozone to resist pressures and stay intact. Around 21 per cent respondents expected Greece and possibly one or two more countries to exit the EU. However, according to the rating agency, full break-up and demise of the euro was highly unlikely, because of the huge costs and the strong political commitment anchored to the EU. (Economic Times/Reuters)

Switzerland’s foreign reserves swelled to Swiss Franc (SFr) 406 b (USD 419.7 b) in July as its central bank purchased huge amounts of euros to prevent the franc from strengthening against it. The Swiss National Bank had targeted a rate of 1.20 to the euro as the ceiling exchange rate. Euro holdings of the bank rose to 60 percent of its total reserves in the 2Q12 period vs 51 percent in the 1Q12 period. With inflation still lower in the country, the central bank is expected to channel the euro funds into other currencies. (Financial Times)

Xstrata Plc – Miner reported 1HY12 operating profits at USD 2.5 b, a 42 percent decline on a y/y basis, but came above expectations of a decline of more than 50 percent. EPS excl items came in at 73 cents, down 25 percent on a y/y basis. The co. stated that it would cut down on various fixed costs as slowdown in the economy affected demand, which affected commodity prices. The co. saved around USD 105 m through various cost cutting measures. The co. would also postpone its planned USD 1 b capex plans on opposition from investors to curtail spending. Capex would now be reduced to USD 7.2 b. (Financial Times)

Munich Re – German reinsurer saw its profits exceed expectations on lower outlays arising from claims. Profits for 2Q12 came in at EUR 808 m vs EUR 736 m a year ago. Gross premiums rose 5.5 percent to EUR 12.6 b, a reason which contributed to higher profits. The co. saw its 1HY12 earnings come in at EUR 1.60 b and hence raised expectations of exceeding its targeted profit of EUR 2.5 b stated earlier. EPS for the quarter came in at EUR 4.54 a share vs EUR 4.14 previously. (Financial Times)

Standard Chartered plc – Shares of the bank declined 25 percent in trade on charges of conducting illegal transactions worth USD 250 b with Iranian entities. The bank’s shares to GBP 1195 pence a share in trade and would have time until 15 August to respond to charges against it. Adverse consequences would mean that the firm could lose its license to operate in the United States. (Financial Times)

NORTH AMERICA

According to Fed’s Eric Rosengren,  has suggested that Fed should launch an aggressive open-ended bond buying program , which would continue until economic growth picks up and unemployment starts falling again. (WSJ)

Citigroup – Co. could have to take a writedown of USD 6 b during this quarter on the valuation of its retail brokerage unit formed with Morgan Stanley. Citi valued the joint venture business at USD 22 b while Morgan Stanley pegged it at USD 9 b. The two firms disagreed on the valuation of the brokerage business and a third party appraiser would be appointed to evaluate the outcome. (Reuters)

Facebook Inc – Social networking provider will provide online wagering games to users in U.K with games such as bingo and slot machine online games. Regulations would not permit the co. to start its operations in the U.S, where it generates most of its revenues from. (Financial Times)

GLOBAL

According to research firm Gartner, global expenditure on IT outsourcing projects is expected to rise 2.1 percent to USD 251 b in FY2012 vs USD 246 b a year ago. The advent of cloud computing, expected to grow 48 percent to USD 5 b vs USD 3,4 b prev, would make a significant contribution to outsourcing outlays. (Economic Times)

 

 

 

 

 

WEEKEND EQUITY UPDATE: 4 AUGUST 2012 TO 5 AUGUST 2012

INDIA

FII’s investing through the Mauritius route has exited their holdings in about 24 Indian companies in FY12 on a YTD basis. Co.’s such as Yes Bank, Axis Bank, Bajaj Hindustan all saw selling pressure from the FII’s who have exited their positions from these companies. The total value of the sale of shares is about INR 3000 cr. (NDTV Profit)

According to the Centre for Monitoring Indian Economy (CMIE), an economic research organization, profits of Indian firms are expected to rise by around 25 percent in the FY13 period on lower commodity prices and stable interest rates. FY12 saw profits decline by 0.6 percent. The organization also stated that firms would have incorporated the impact of the fluctuation in the Rupee as well as compared to the previous fiscal. (NDTV Profit)

Indian foreign exchange reserves increased by USD 1.3b to USD 288b over the week ended 27 July. Foreign currency assets at USD 256b, gold reserves 25.7b, drawing at USD 4.3b and reserve position at the IMF at USD 2.1b. (Business Standard)

The top eight companies on the Sensex saw their market capitalization rise by INR 35,882 cr for week ended 3 August 2012. NTPC gained the most by adding INR 10,926 cr with Reliance Industries following the firm. SBI, Infosys, ONGC also rose but Coal India and Bharti Airtel saw a decline in their values. (Economic Times)

Coal India Ltd – Co. has entered into a fuel supply agreement with 29 power plants in India to supply these firms with fuels for power generation, based on a directive from the Indian Government. The co. will also import around 20 m tonnes of coal to meet the supply shortage gap. (Economic Times)

Jindal Steel and Power – Co. is in advanced talks to plan an investment of INR 100,000 cr to expand output at its plants in Raigarh and construct new plants in Odisha and Jharkhand in India. The total expected output by 2020 is about 20 m tonnes per annum, as stated by Chairman Navin Jindal. (Economic Times)

Emami – FMCG firm has voiced concerns that rising costs of raw materials and a higher inflation could affect the firm in FY12-13 period. However, the co. plans to implement certain cost efficient measures and strengthen its distributor network to overcome these challenges. (Economic Times)

NTPC – India’s power producer would conduct capital expenditures of INR 138,000 cr on various power projects to increase its power output to 27,000 megawatts. A total of INR 95,965 cr would be funded from issuing debt securities. (Economic Times)

Maruti Suzuki – According to Haryana Chief Minister Bupinder Singh Hooda, expected co.’s Manesar plant to resume production shortly. However he did not provide a time-line for the plant to resume its activities. (Financial Express)

Jet Airways – FII holdings in co. increased from 6.70 per cent to 7.12 per cent during the 1Q12-13. (Economic Times/PTI)

Kingfisher Airlines – FII holdings in co. increased from 0.34 per cent to 0.98 per cent during the 1Q12-13. In others news, Airport Authority of India (AAI) has refused aircraft lessors to take back their aircrafts leased to co., as co. owes INR 300cr to AAI.  (Economic Times/PTI/The Hindu Business Line))

SpiceJet – FII holdings in co. increased from 2.61 per cent to 3.59 per cent during the 1Q12-13. (Economic Times/PTI)

EUROPE

According to Italian Prime Minister Mario Monti, the Italian Government did not require German cash to recover from its current situation. (Reuters)

The Spanish finance minister Luis de Guindos, the Spain had covered 70 per cent of its 2012 financing need and will wait for clearer guidelines from ECB, before requesting for aid. (FoxBusiness DowJones Newswire)

Yields on Spanish two-year notes declined 1.35 percent to 3.96 percent and 10 yr bonds fell below 7 percent on speculative news of the ECB buying short-term bonds to calm the bond markets. Spain’s bonds returned -6.3 percent while German debt provided returns of 4.5 percent and Italy with 6.5 percent. (Bloomberg)

According to the inspectors from IMF, the European Commission and the European Central Bank said that, Greece had made some progress in finding budget cuts needed to continue its bailout programme. However the international inspectors said that, not all work had been done and inspectors will return early September for a final verdict. Greece has a EUR 3.2b bond maturing in August. (The Telegraph UK)

Standard and Poor’s downgraded Slovenia’s long term credit rating to ‘A’ from ‘A+’; short term rating affirmed at ‘A-1’. Outlook: negative. (Economic Times/AFP)

Marks & Spencer – According to an Sunday Times reports, Bank of America Merrill Lynch have been assessing possibilities of providing debt financing for a speculative bid for co. Co. is been viewed as a GBP 6b bid target, as shares in co. have tumbled 50 per cent since 2007. (FoxBusiness/Sunday Times)

NORTH AMERICA

U.S Trade Deficit for June is expected to have lowered as the nation imported less oil  and slower growth reduced demand for U.S made goods abroad. Data due on 9 August forecasts deficit to come in at USD 47.5 b vs USD 48.7 b in May. Lower outlay on imports are due to lower prices of crude oil and lower exports due to slowing economies in Asia and Europe exhibiting lower demand for U.S made goods. (Bloomberg)

Boeing Co. – Airplane manufacturer secured orders to conduct the sale of 94 single-aisle 737 airplanes to Asian airline firms including 54 jet deal with Singapore Airlines Ltd. The deals are expected to touch USD 8.4 b. (Bloomberg)

 

 

DAILY MARKET REPORT – 2 AUGUST 2012

The markets ended lower in a range bound trading session on lack of any significant global economic data. As we covered earlier, investors would await the decision taken by ECB President Mario Draghi on benchmark interest rates. Yesterday, the U.S Fed left rates unchanged and with the Bank of England also sticking to not changing rates, it looks very much likely that the ECB could also follow suit. Will Draghi cut rates or not? Markets and investors are also waiting cautiously and hence the flat trading sessions today.

Coming back to the Indian markets, the Sensex closed at 17224.36 points, down 33.02 points or 0.19 percent on highs of 17246.01 and lows of 17157.28 points.

The Nifty closed at 5,227.75, down 12.75 points or 0.24 percent on highs of 5236.90 and lows of 5209.95 points in intraday trade today.

On the BSE, the Midcap Index gained 0.21 percent and the Smallcap Index rose 0.45 percent. The Oil & Gas Index was declined 1 percent, the Bankex fell 0.29 percent and Metal Index fell 0.28 percent. The Power Index rose 0.77 percent and the Capital Goods Index gained 0.64 percent.

On stock specifics, power giant NTPC rose 4 percent in trade after Coal India’s agreement this week to supply 80 percent of the coal needed to fuel new power projects eased concerns about supply of the key commodity. Tata Power gained 1.5 percent. Tata Motors declined 2 percent on lower sales numbers. NIIT Tech fell 6 percent to INR 280 as its promoters sold a 7.4 percent stake in the co. The rupee still hovers at 55.5 levels.

Summing up the session, the much touted Fed and BoE  decisions were non-events. All eyes on the ECB meet now.

Kindly check the Market Summary tab for further information on stock-related data.

(Economic Times, Bloomberg and Business Standard)