BS: SAIL seeks takers from across globe for 3 loss-making units, invites EOI

4 July 2019: State-owned Steel Authority of India (SAIL) has made a global invitation for expression of interest for proposed strategic disinvestment of three of its special steel producing units.

The three units of SAIL are Visveswaraya Iron and Steel Plant in Bhadravati, Karnataka, Salem Steel Plant in Tamil Nadu, and Alloy Steel Plant in Durgapur, West Bengal.

Transaction advisor SBI Capital Markets Limited, via its preliminary information memorandum clarified that no debt taken for any of the units is proposed to be transferred to any of the divested units. For all the three entities, the debt has been raised by SAIL at the corporate level and the interest costs are allocated to the unit, it said.

A mail sent to SAIL remained unanswered till the time of going to press.

Of the three units, Visvesvaraya Iron and Steel produces alloy steel and pig iron, while Salem Steel makes high grade stainless steel. At full capacity, the three plants produce 1,400-1,500 tonne steel per day.

On financial performance, since the last five years between FY15-FY19, all the three units have been loss making.

In 2017, employees of the three units went on a day-long strike demanding the government give them one more year to show profitability.

The last date for invitation of queries through email or physical copy is scheduled July 18 with last date for submission of expression of interest physically on 1 August, 2019.

Intimation to the shortlisted bidders will take place on 8, August 2019, stated the memorandum.

Since the last few years, domestic steel industry has been in a consolidation phase with major acquisition taking place under Insolvency and Bankruptcy Code (IBC).

Large domestic primary steel producers such as JSW Steel and Tata Steel have been scouting for steel businesses in the country to increase its market share in a bid to be part of the steel production growth story where production target has been set at 300 million tonne by 2030.

The Business Standard reported

EQUITY UPDATE: 18 AUGUST 2012

INDIA

India’s PMEAC, an advisory body to the Government, revised growth to 6.7 percent from the projected 7.5 – 8 percent for FY2012-13. Inflation is to rise from forecasted 5 – 6 percent to 6.5 – 7.0 percent on higher food prices. Current account deficit could rise to USD 67.1 b, around 3.6 percent of GDP. Trade deficit could touch USD 181.1 b, i.e. around 9.7 percent of GDP. The PMEAC recommends that a price rise in diesel could mitigate higher expenditure on subsidies. The body also warned that India’s own credit rating could get downgraded if measures arent undertaken to prop up the economy. (Economic Times)

FII’s made gross purchases of INR 2,169.11cr and gross sales totalling INR 1,860.89cr. DII’s made gross purchases of INR 1,044.55cr and gross sales of INR 1004.36cr. (Business Standard)

According to India’s Coal Minister Sriprakash Jaiswal, the Comptroller and Auditor General (CAG) used an incorrect method of calculating the prices of the coal blocks under the scanner. He insisted that although the allocation was done on a transparent basis, private co.’s benefited from the auction as delays in the bidding process gave undue advantage to them. (Economic Times)

Ranbaxy Labs – The co. launched an authorized generic version of Takeda’s diabetes medicine in the U.S to be sold under the brand Actos. The co. would have a 180 marketing license with Mylan and Teva. (Economic Times)

Reliance Capital – Co. sold a 26 percent stake in its asset management and mutual fund divisions to Nippon Life for INR 1450 cr. (Economic Times)

Union Bank – PSU bank is expected to obtain a loan of around INR 950 – 1000 cr from the Indian Government. (Economic Times)

BHEL – Co. plans to construct a manufacturing facility in Maharashtra, India for about INR 159 cr. The plant is expected to manufacture tubular products to the western region of India. (Business Standard)

GMR Infra – Co.’s shares lost 4 per cent in intraday trade, as a CAG report highlighted that the Civil Aviation Ministry violated bid conditions, benefiting co. led DIAL by INR 3,415cr. (Economic Times/PTI)

Airlines Co.’s – According to the data released by the civil aviation ministry, domestic air passenger traffic fell to 45.37 lac in July from 51.08 lac in June. January – July domestic passenger at 354.52 lacs from 348.47 lacs in the January – July 2011. On a standalone basis IndiGo had the largest market share of 27 per cent, Jet Airways at 19.4 per cent, Air India at 18.2 per cent, SpiceJet at 17.8 per cent, JetLite at 7.2 per cent, Go Air at 7 per cent and Kingfisher Airlines at 3.4 per cent. (IANS/Yahoo)

Sail – Co. plans to raise at least INR 2.5b in funds through issuance of 5 to 10 year bonds, baring a coupon of 9.25 per cent. (Economic Times/Reuters)

INDIAN EARNINGS

Kamdhenu Ispat – Co. reported 1Q12-13 net profit at INR 95.24 lacs from INR 85 lacs in 1Q11-12. Turnover at INR 133.42cr from previous INR 113.29cr. (The Hindu Business Line)

EUROPE

According to the president of German BdB banking association, the ECB should supervise all banks across the euro zone. In related news German news paper Handelblatt reported that the ECB is to supervise all euro zones’ major banks, citing people familiar with the matter at the European Commission. (Fox Business)

According to a Spanish government spokeswoman, Spain to soon request for the first payment from the EUR 100b emergency eurozone line agreed in June. (Economic Times/AFP)

GSK – Co.’s clinical trial for its asthma drug ‘mepolizumab’ cut asthma attacks to nearly half, in people with severe asthma. (The Telegraph UK)

Qatar’s sovereign wealth fund is to purchase a 20 percent stake in BAA for GBP 900 m from Spanish infra co. Ferrovial. (Financial Times)

Aviva – Insurance co. has been approached by several US based PE firms as well as Guggenheim Partners, which have expressed interest in acquiring U.S unit of the firm. S&P also downgraded Aviva to its lowest level since 2001 on risks and costs to the co. The co. came down one notch to A -. (Financial Times)

NORTH AMERICA

The Thomson Reuters/University of Michigan Consumer confidence index rose to 73.6 in August vs 72.3 in July vs expectations of 72.2, suggesting that household spending could rise in the coming quarter. Rising payrolls, increasing retail sales show that consumers have gradually increased spending to set the tone for the third quarter. (Bloomberg)

The Conference Board’s measure of economic outlook for the next three to six months rose 0.4 percent in July vs a revised -0.4 percent in June. Factors such as an improving housing market and lower hirings contributed to the data. There is optimism that the consumer spending activity would increase along the coming few months. (Bloomberg)

 

 

 

 

 

EQUITY UPDATE – 10 AUGUST 2012

ASIA

China’s Industrial output for July rose slower than expected by 9.2 percent to near three year lows, adding to concerns that the country is slowing in its recovery process. Inflation in the county declined for the fourth consecutive month in July to 1.8 percent vs 2.2 percent a year ago. On a m/m basis, inflation rose 0.1 percent vs -0.6 percent previously. (Bloomberg)

The Bank of Japan kept benchmark interest rates unchanged at 0.10 percent, in line with expectations. The bank stopped short of lowering its monetary policies and kept its asset purchasing fund at JPY 45 t (USD 573 b) and the lending fund at JPY 25 t. Stimulus measures would only come into force if the yen appreciated significantly against the US dollar. (Bloomberg)

South Korean central bank The Bank of Korea (BoK) kept its benchmark seven day repo rates unchanged at 3.00 percent which was unanimously taken by the members. The central bank would give more focus to propping up domestic demand. (Reuters)

Sale of passenger vehicles in China for July rose slower than forecast on a m/m basis on slowing demand and buyers postponing purchases on expectations of stimulus measures from the government. Deliveries of vehicles incl. multipurpose and utility vehicles rose 11 percent to 1.12 m units vs expectations of 1.16 m units. Sale of mini-commercial vehicles saw the biggest decline which could impact logistic operations in the country. Sale of vehicles incl. trucks and buses rose to 1.38 m units, a 8 percent m/m rise. Customers who held back on purchase are due to expectations of various subsidies and other incentives to be offered by the government. (Bloomberg)

INDIA

The Reserve Bank of India has transferred surplus profit of INR 16,010cr in 1Q12-13 (vs. previous INR 15,009cr) to the government of India. (The Hindu Business Line)

Fitch has downgraded India’s 2H12 outlook on the retail sector to negative. The rating agency cited sustained deterioration in discretionary spending ability and its unlikely recovery in the short term. Fitch revised FY13 and FY14 real GDP forecast to 6.5 per cent and 7 per cent from the earlier 7.5 per cent and 8 per cent respectively. (The Hindu Business Line)

Reliance Industries – Co. has slashed its natural gas reserves in its KG-D6 gas field by 70 per cent to 3.10tr cubic feet due to unforeseen geological surprises. (Business Standard/PTI)

Infosys – IT firm secured a USD 700 cr deal with India’s Department of Post for provision of core banking and insurance services across various post offices in India. It will also assist in installing ATM’s in these post offices. (Economic Times)

JSW Steel – Co. and other steel co. that depend on iron ore from Karnataka could face closure due to severe shortage of iron ore, if mining did not resume in the state. The state’s steel industry, whose 21m ton output accounts for 25 per cent of the national production, is operating with just a 45-day supply of iron ore. According to JSW Steel’s management it would be difficult to operate its plants if mining operations didn’t resume. JSW Steel has purchased about 14m ton of iron ore sold at the e-auctions. (Business Standard)

Sail – Co. to outsource the development of its two virgin iron ore mines in Chatisgarh and Jharkand. The mines will have a capacity of 14m tons per annum and 15m tons per annum respectively. (Business Standard/PTI)

INDIAN EARNING

HPCL – Co. reported 1Q12-13 net loss at INR 9,248 cr.vs previous INR 3,080 cr. Net Sales of the co. rose to INR 44,076.5 cr. vs INR 40,795 cr on a YoY basis. (Moneycontrol)

Tech Mahindra – Co. reported 1Q12-13 consolidated Profit After Tax (PAT) at INR 338 cr vs estimated INR 310.73 cr. Sales for the firm increased by 8.7 percent  on a QoQ basis and 19 percent on a YoY basis to INR 1,543cr vs estimated INR 1,539 cr. EBITDA margins increased by 38.66 percent on a q/q basis to INR 330 cr vs estimated INR 295 cr. (Moneycontrol)

Jindal Stainless – Co. reported 1Q12-13 net loss at INR 231.41cr vs. previous 1Q11-12 net profit at INR 85.79cr. Net sales at INR 2,206.69cr vs. previous INR 1,976.93cr. (MoneyControl)

GE Shipping – Co. reported 1Q12-13 net profit at INR 181cr vs. previous INR 162.59cr. Income from operations at INR 802.42cr vs. previous INR 680.53cr. (MoneyControl)

Eicher Motors – Co. reported 2Q12 net profit at INR 75.96cr vs. previous INR 76.31cr. Income from operations at INR 1573.05cr vs. previous INR 1,268.75cr. (MoneyControl)

EUROPE

According to the ECB governing council member Christian Noyer, ECB was ready to intervene in secondary bond markets very soon, to bring down the excessive borrowing costs of Spain and Italy. (Reuters)

U.K Trade Deficit for 2Q12 ended June increased to GBP 28.3 b vs GBP 25 b in the previous quarter on lower exports. The ongoing euro crisis saw lower demand for Britain’s goods which declined 4.9 percent on a q/q basis while imports also lowered by 0.5 percent. The trade deficit for June came in higher than expected at GBP 10.119 b vs a deficit of GBP 8.364 b previously vs estimates of a deficit of GBP 8.73 b. Exports to Germany declined by GBP 525 m, while Netherlands trade declined the most to GBP 819 m. Exports for June declined 8.4 percent over May and imports fell 1.2 percent for the same period. (Bloomberg)

NORTH AMERICA

According to estimates, the trade deficit in the U.S for June narrowed to USD 47.5 b vs USD 48.7 b in May on lower oil prices reducing the country’s imports. The lower oil prices are attributed to low demand emanating from the global crisis. (Bloomberg)

U.S Non farm productivity rose 1.6 percent on an annualized basis for the 2Q12 period vs exp advance of 1.3 percent vs prv rise of 0.7 percent. Co.’s and businesses expanded their operations but still saw hourly work rate output rise by just 0.4 percent. (Bloomberg)

U.S Initial Jobless claims for unemployment benefits declined by 6000 applications to a seasonally adjusted number of 361,000 for week ended 3 August. Expectations came at 370,000 and prv period’s claims were revised to 367,000 applicants. The four-week moving average for fresh claims rose by 2250 applicants to 368,250. Nonfarm payrolls rose by 163,000 in July, but the unemployment rate rose to touch 8.3 percent. (Reuters)

Moody’s downgrades of US municipal bonds issuers hit a 10 year quarterly high in 2Q12. The rating agency cited stressed budgets and weaker liquidity. (Reuters)

Google Inc – Co. is to pay Apple Inc a total of USD 22.5 m in settlement charges for bypassing the privacy settings of customers who used Apple’s safari web browser. (Reuters)

Research in Motion – A US judge has overturned the USD 147.2m for patent infringement in favors of co. (Boston.com/AP)

COMMODITIES

OPEC forecasted FY 2012 oil demand at 88.72m barrels per day vs. previous estimate of 88.68 barrels per day in July. FY 12 demand forecasted at 89.52mbpd vs. previous estimate of 89.50mbpd in July. (MoneyControl)

EQUITY UPDATE – 7 AUGUST 2012

ASIA

China Vanke Co. – Property developer reported 1HY12 profit to RMB 3.73 b (USD 585 m) vs RMB 2.98 b a year ago. EPS came in at RMB 0.34 a share vs RMB 0.27 a share a year ago. Revenues rose 54 percent to RMB 30.72 b as co. cut its property prices by 10.6 percent on average to increase sales in a market under strict government regulations. (Bloomberg)

Taiwan Semiconductor Manufacturing Co. – Co. will infuse EUR 1.11 b (USD 1.4 b) in ASML Holding NV for a 5 percent stake to develop technology in lithography. TSMC would join Intel Inc which has already acquired a stake in the co through a USD 4.1 b investment. (Bloomberg)

According to a report by UBS AG, China’s stock index is expected to rise 20 percent by the end of FY12. The firm also expects another rate cut by the central bank to stimulate the economy. (Bloomberg)

HTC Corp – Taiwan based smartphone manufacturer saw its stock price decline almost 7 percent to NTD (New Taiwan Dollar) 258.50 as it forecasted lower than expected revenues for the 3Q12 period. Estimates came in at NTD 70 – 80 b vs expectations of NTD 87 b. The co.’s One Series is expected to face stiffer competition from Samsung’s Galaxy phone which could be one of the reasons for the lower estimate. (Reuters)

INDIA

According to Fitch, the outlook on the Indian real estate sector will continue to be negative in second half of 2012. The rating agency cited the persistence of sluggish demand, high construction costs and liquidity pressures. High property prices and elevated inflation to keep demand sluggish. Further to this Fitch said that, real estate companies will continue to face margin compression from high construction costs for building materials and labour. (Financial Express)

The rating agency Fitch, downgraded its outlook on the Indian retail sector to ‘negative’ from ‘stable’. Fitch cited sustained deterioration in discretionary spending, which was unlikely to improve over the short-term. In addition to this, the funding requirement of most retailers were likely to increase, due to store expansions and possibly higher inventory-holding periods. Also private final consumption expenditure was the weakest in last seven years. (Business Standard/PTI)

FII’s made gross purchases of INR 1,738.14cr and made gross sales of INR 1,182.41cr. DII’s made gross purchases of INR 876.85cr and gross sales totalling INR 881.08cr. (Business Standard)

According to Bank of America Merrill Lynch, the worst was not over for rupee, as it stuck to it September end forecast of USD /INR at 57. The bank believed global risk flows and uncertainty over reforms will keep confidence fragile. (Yahoo/Reuters)

ICICI – ICICI ventures to sell its property in central Mumbai, according to sources. The deal is expected to fetch around INR 180cr. (MoneyControl/CNBC-TV18)

SAIL – A consortium of firms led by SAIL plan to make an investment of USD 75 m in the Hajigak iron ore mines in Afghanistan. (Economic Times)

INDIAN EARNINGS

DLF – Co. reported 1Q12-13 net profit at INR 292.79cr vs. previous 1Q11-12 net profit at INR 358.36cr. Consolidated income from operations at INR 2,197.71cr vs. previous INR 2,445.82cr. (Financial Express)

Essar Shipping – Co. reported 1Q12-13 net profit at INR 53.90cr vs. previous 1Q11-12 net profit at INR 18.83cr. Revenue at INR 925.18cr vs. previous INR 670.31cr. (Financial Express)

EIH – Co. reported 1Q12-13 net profit at INR 9.45cr vs. previous INR 15.45cr. Total income from operations at INR 241.55cr vs. previous INR 231.37cr. (Business Standard/PTI)

Uttam Galva – Co. reported 1Q12-13 net profit at INR 10.24cr vs. previous net profit at INR 9.10cr. Net sales at INR 2,057.72cr vs. previous INR 1,533.21cr. (Business Standard/PTI)

Cadila Healthcare – Co. reported 1Q12-13 net profit at INR 194.79cr vs. previous 1Q11-12 net profit at INR 229.82cr. Net sales from operations at INR 1,516.10cr vs. previous INR 1,173.51cr. (Financial Express)

Wockhardt – Co. reported 1Q12-13 net profit at INR 377.97cr vs. previous INR 193.96cr. Consolidated net sales at INR 1,425.82cr vs. previous INR 1,053.21cr. (Economic Times/PTI)

Britannia Industries – Co. reported 1Q12-13 net profit at INR 43.45cr vs. previous INR 41.80cr. Net Sales at INR 1,221.62cr vs. previous INR 1,102.97cr. (Financial Express)

EUROPE

The standoff between the ECB and the European Union over the provision of a bailout package to Italy and Spain could see a breakup of the eurozone, said Italian PM Mario Monti. The leaders of Spain and Italy will await the ECB’s plan of action on government bond purchases as they fear that a request for a full fledged bailout package could mean imposition of ECB’s strict conditions and austerity measures. (Bloomberg)

Greece and the troika of the European Commission, ECB and IMF have reached an agreement on the need for stronger policies to stabilize the economy. The discussions follow two weeks of talks to determine whether the nation would continue to receive international funding worth EUR 240 b from the rescue funds designed for the crisis. The country would have to reduce its budget for 2013 and 2014 by EUR 11.5 b in order to receive international aid. (Bloomberg)

Siemens AG – Co. won a INR 1988 cr supply contract from India-based miner NMDC. The project, which involves the construction of a steel plant in Chattisgarh, India, is expected to be completed by HY2015. (Economic Times)

Standard Chartered plc – Co. could have its U.S unit suspended over allegations that it conducted over USD 250 b worth of transactions with Iranian entities which violated money laundering laws. The imposition of sanctions on Iran saw most banks curtail or stop its funding or lending activities to Iran. (Bloomberg)

NORTH AMERICA

According to Federal Reserve Chairman Ben Bernanke, broader economic data, which may point to a recovery in the U.S, the economy could still witness subdued consumer spending and business activity. He stated that the financial conditions in the country had still not improved as individuals and businesses continue to witness lower demand. (Reuters)

Lending by banks in the U.S rose to its highest since June 2009 to USD 7.1 t for week ended 25 July 2012. New auto loan issuance saw a 56 percent rise to USD 134 b for the Jan-Apr period on a y/y basis over 2009. Easier regulations to access credit for buyers of automobiles could have contributed to the higher lending data amongst other reasons. (Bloomberg)

Best Buy Co. – Co.’s founder Richard Schulze has offered to purchase the co. at USD 24 – 26 a share valuing the deal at around USD 8.5 b. Schulze could finance the deal with USD 1 b in equity contribution from the stake sale in which he owns 20 percent. The rest of the funding would be through PE firms. (Bloomberg)

Knight Capital Group – Electronic trading firm received funding worth USD 400 m in cash through sale of convertible securities. The sale of these instruments is due to make do for the huge losses it suffered due to software errors during a trading session on 1 August 2012. (Bloomberg)

SAIL 1Q12 PROFIT DOWN AT INR 6.96 b vs exp INR 10.79 b vs prv INR 8.48 b

Sail – Co. reported 1Q12-13 net profit a INR 6.96b vs. estimated INR 10.79b vs. previous 1Q11-12 net profit at INR 8.48b. sales at INR 106.41b vs. previous INR 108.26b. Forex loss widened to INR 2.57b vs. previous INR 116.6m due to weak Indian rupee. Other Income declined 40 percent to INR 2.784 b. However, EBITDA margin increased by 190 basis points YoY to 13 percent. (FoxBusiness/Dow Jones Newswire)

WEEKEND COVERAGE : 21 JULY TO 22 JULY

ASIA

China’s 3Q12 GDP growth could slow to 7.4 percent on a y/y basis, as stated by an advisor to China’s central bank.  A short term deflationary period could also be posed to provide problems to the economy. (Bloomberg)

INDIA

According to economic think tank CMIE, the agricultural sector would perform well in FY2012-13 but major crop production is expected to decline 0.5 percent. The drop is due to decline in production of soyabean, cotton and rapeseed. Livestock, fisheries and forestry products are also expected to rise marginally by 4 percent, with agriculture industry expected to rise 2.4 percent. Delayed and insufficient monsoon is also expected to affect crop output. (Business Standard)

The market capitalization of top seven co.’s on the Sensex reduced by INR 14,931 cr for the week ended 21 July 2012. Major co.’s such as TCS, which led the losses by INR 5207 cr, saw ONGC, Infosys, ITC, SBI, HDFC Bank and NTPC post in loss of m-cap. However, Reliance Industries, Coal India and Bharti Airtel saw their market cap gain marginally over the week. (Economic Times)

FII’s have lowered their exposure (stake) in stocks of the co.’s under the umbrella of Reliance, owned by Anil and Mukesh Ambani. FII’s sold a total of INR 1500 cr worth of shares in Reliance industries owned by Mukesh Ambani and in four listed co.’s owned by Anil Ambani. Other investors which reduced their stake include offloading shares worth INR 500 cr, taking the total to INR 2000 cr. FII’s offloaded stakes on a marginal basis. (Economic Times)

Funds based in Mauritius which invest in the Indian equity markets will be under the purview of SEBI and RBI for possible transfer of illegal wealth of Indian and non-resident Indian’s back into India. Many funds have been identified as part of market regulator’s investigations. (Business Standard)

Sail – A proposed merger of SAIL and Neelachal Ispat Nigam will not go ahead as the government does not want to retain complete stakeholding in the co., as opposed to its earlier stance of divestment. Meetings with the Ministry of Commerce revealed its message of not going ahead with the merger. NINL is the largest producer of pig iron and divestment talks were on about the merger for over seven years. (Business Standard)

Sail/Nalco/JSPL/Monnet Ispat/MECL/Others – Co.’s to bid for developing copper deposits in Afghanistan. (Economic Times/PTI)

Maruti Suzuki – According to co.’s management dispatch operations to continue from the stockyard of Manesar plant, which has a inventory of about 26,000 units

Tata Power – Co. expects its hydel power project in Bhutan to commence operations by FY2013-14 period. The 126 megawatt Dagchu project accounts for USD 200 m in which Tata Power has a 26 percent stake. (Economic Times)

Bajaj Auto – Co. expects that exports would account for almost 50 percent of its revenues in the next three years. Co. plans to explore markets such as Latin America, viz., Chile and Argentina. Its motorcycle sales are also expected to pick up in the said period, which accounts for 35 percent of their sales. (Economic Times)

JSPL – Co. is to acquire Canada-based coal firm CIC Energy in a deal worth USD 115 m (INR 600 cr). The co.’s will sign a binding agreement in the next few weeks. JSPL will get access to CIC’s 2.6 b tonne thermal coal plant for its power projects. (Business Standard)

EUROPE

According to Greece PM, Greece was in a ‘Great Depression’, similar to the one faced by the United States in 1930. The PM wants the budget below 3 per cent of GDP by the end of 2014 from the previous 9.3 per cent in of GDP in 2011. In related news, IMF is expected to cut off further rescue aid to Greece. (FirstPost/Reuters/FoxBusiness)

U.K’s 2Q12 GDP data, expected on 25 July, is expected to decline 0.2 percent, based on median estimates, deepening the double-dip recession. Previous quarter decline was 0.3 percent and 0.4 percent in 4Q11. (Bloomberg)

BP – Co. has proposed that its joint venture TNK-BP pay shareholders a USD 1b interim dividend. (Fox Business)

NORTH AMERICA

Argentina’s Factory output (Industrial Production) declined 4 percent in June, a second successive m/m decline. Slowdown in trade with Brazil affected Argentina in terms of exports of automobile and steel. Previous month decline stood at 4.7 percent and 0.1 percent drop in May. Estimates came in at a drop of 4.5 percent. (Bloomberg)

GEOPOLITICAL

According to Iran’s head of Atomic Energy Organization, Iran has sent a new batch of enriched uranium to fuel a medical research reactor in its capital. (Yahoo/ Reuters)

 

 

EQUITY UPDATE – 20 JULY 2012

ASIA

According to KPMG, China’s imposition of restrictions on borrowing through trust companies and property sales could affect property and real estate developers in the region. The report came on the back of data which showed a decline in new funding available to developers as loans declined to 5.7 percent for the 1HY12 period. Additionally, home sales also declined 6.5 percent as the government maintains restrictions on property prices and purchases. Funds channelled through real estate funds declined more than 50 percent to RMB 84.6 b. (Bloomberg)

Chinese President approved a USD 20 b to various African countries in the coming three years, to boost ties with nations in the continent. (Reuters)

Hong Kong’s government warned that unemployment would continue to rise in the near term , affecting more graduates, as the economic crisis begins to tighten its effect on the country.  Unemployment rate for 2Q12 period ended June was unchanged at 3.2 percent, below expectations of 3.3 percent. The government stated that inspite of the encouraging data, the rate would rise to 4 percent by the end of 2012. (Bloomberg)

Temasek Holdings and China Investment Corp and two other firms have expressed interest in RCom’s IPO which would be launched in Singapore. RCom’s undersea cable unit Global Telecommunication Infrastructure Trust (GTIT) is to be listed on the Singapore Stock Exchange. Investors have proposed to invest a total of USD 250 to 300 m in the IPO. (Business Standard)

Australia’s index of business conditions for the next three months declined to 5, its lowest since 2Q09 and its confidence index for the same period declined to -2. Near term optimism on business dimmed as analysts and managers expect the Reserve Bank of Australia to cut its benchmark cash rate by atleast 25 basis points. (Bloomberg)

INDIA

According to a Reuter’s poll, India’s gross domestic product is expected to grow 6.3 per cent during FY12-13 vs. previous estimate of 7.1 per cent and 7 per cent in FY13-14 vs. precious estimate of 8 per cent. (FirstPost/Reuters)

Based on provisional details, DII’s made gross purchases of INR 924.56 cr vs sales of INR 1153.40 cr, making them net sellers of INR 228.84 cr. Meanwhile, FII’s conducted gross purchases of INR 2021.60 cr vs gross sales of INR 1895.82 cr, making them net buyers of INR 128.78 cr. (Business Standard)

According to Barclays, the Reserve Bank of India to slash policy rates by 0.25 percent in the upcoming policy meeting. (FirstPost/PTI)

Exports of Indian garments to non-traditional markets such as Latin America and Africa rose by 16 percent to touch USD 3.15 b in FY11-12. Slowdown in demand from Europe and Asia made exporters look for newer markets, stated the industry body, Apparel Export Promotion Council. (Economic Times)

Maruti Suzuki – Shares of co. dropped 9 per cent as violence between workers and management erupted at its Manesar plant. According to co.’s management the plant has been shut down. (Business Standard/PTI)

Sail – Indian government has approved the disinvestment of 10.82 per cent in co.; which at current price of INR 93.40 would fetch USD 750m. (FirstPost/Reuters)

Indian Overseas Bank – Co. plans to raise around INR 1500 cr in capital from the Indian government. (Economic Times)

Cairn India – Co. stated that output at its Rajasthan’s oil fields could rise by over 70 percent if the government does not block or delay its investment approvals. Output could rise to 300,000 barrels a day, totalling 15 m tonnes annually vs current output of 175,000 barrels a day. (Economic Times)

INDIAN EARNINGS

Hero MotoCorp – Co. declared net profits of INR 615 cr vs INR 558 cr from a year ago for its 1Q12 earnings. Revenues rose 10 percent to INR 6351.7 cr vs INR 5775.5 cr on a y/y basis. Co. sold around 1640,000 units for the quarter. (Business Standard)

Dr Reddy’s Laboratories – Co. reported 1Q12-13 net profit of INR 335.98cr vs. previous 1Q11-12 net profit of INR 262.74cr. Net income at INR 2,541cr vs. previous INR 1,978cr. (Financial Express)

NIIT Technologies – Co. reported 1Q12-13 net profit at INR 57.5cr vs. previous INR 41.2cr in 1Q11-12.  Revenue at INR 496.6cr vs. previous INR 328.8cr. (Financial Express)

BOC India Ltd – Co. reported 1Q12-13 net profit at INR 20.3cr vs. previous INR 27cr. (The Hindu Business Line)

EUROPE

France conducted an auction of about EUR 8.96 b (USD 3.68 b) at the top end of its target inspite of demand weaker than the previous period. Bond yields declined as compared to Spain’s auction, which saw a rise during their auction. Yields on French bonds due 2014 came in at 0.12 percent vs 0.83 percent previously. 4 yr BTAN’s yielded at 0.53 percent, down from 1.05 percent. 5 yr bonds had yields of 0.86 percent vs 1.43 percent previously. (Reuters)

Czech Republic auctioned around 6 b koruna (USD 292 m) of bonds due 2017 and 2021 for record low yields.  Yields on the 2021 nots declined to 2.316 percent vs 3.109 percent from its previous auction. Investors bid more than three times the amount offered. The effect of Moody’s previously upgrading the sovereign rating of to A1 boosted sentiment in the region saddled by nations with rising yields. (Bloomberg)

Credit Suisse – Co. to lay-off another 138 employees in the United States, co. said in its filings. (Reuters)

EUROPEAN EARNINGS

Nokia – Co. reported 2Q12 loss of EUR 1.41b vs. estimated EUR 654m vs. previous loss of EUR 368m. However co.’s sales of its flagship Lumia phone double to 4m units and also co.’s reserve cash improved by EUR 306m. (Fox Business)

NORTH AMERICA

Textron Inc – Co. an industrial conglomerate, would consider bidding for Hawker Beechcraft, to counter a deal proposed by China’s Superior Aviation Beijing Co. (Bloomberg)

Oracle Corp – Co. to acquire privately held Skire Inc for an undisclosed amount. (Yahoo/Reuters)

NORTH AMERICAN EARNINGS

Southwest Airlines – Co. saw its 2Q12 profits rise by 42 percent on record revenues offsetting the higher expenditure on fuel. Profit came in at USD 228 m vs USD 161 m a year ago. Earnings came in at 30 cents vs 21 cents a year ago. Adjusted earnings, which excluded USD 45 m in one time charges, came in at 36 cents a share, exceeding analyst’s forecasts of 33 cents. Revenues rose 4.7 percent to USD 4.62 b vs expectations of USD 4.59 b. The co. is monitoring the ongoings of the economy while it reported that demand hasn’t declined, it stated. (Bloomberg)

Freeport McMoRan – Co. reported 2Q12 net profit at USD USD 710m vs. previous 2Q11 at USD 1.37b. EPS at USD 74 cents a share vs. estimated USD 75 cents vs. previous USD 1.43 a share. Revenue at USD 4.48b vs. previous USD 4.43b. (FoxBusiness)

Fifth Third Bancorp – Co. reported 2Q12 EPS at USD 40 cents vs. estimated 1Q11 at USD 35 cents. Revenue at USD 1.58b vs. estimated USD 1.54b. (Fox Business)

BB&T – Co. reported 2Q12 EPS at USD 72 cents vs. estimated 1Q11 at USD 69 cents. Revenue at USD 2.47b vs. estimated USD 2.41b. (Fox Business)

COMMODITIES

Brent Crude Oil prices rose to USD 107 a barrel on crisis in Syria and Iran. (Reuters)

GLOBAL

Regulators in Sweden, Japan and South Korea are examining their respective interbank lending or benchmark borrowing rates amid concerns of them being susceptible to manipulation like the Libor. The main premise being that these rates are set based on estimations of banks rather than actual trade could make it easier to manipulate. (Bloomberg)

 

 

WEEKEND EQUITY COVERAGE – 7 JULY 2012 TO 8 JULY 2012

ASIA

According to China’s Premier Wen Jiabao, the country’s economy was currently in a stable state; however the economy faced downward pressures to growth.  The premier has called for aggressive steps to keep growth on track. (Telegraph UK)

According to Hong Kong’s Financial Secretary John Tsang, the government could revise its GDP forecast for FY2012 in the next month on deterioration in global economy. Slowdown in Hong Kong’s traditional markets, the U.S and Europe coupled with a slowdown in Asian markets could lead to the country revising its outlook. (Bloomberg)

INDIA

Private Equity deals during the 1HY12 period declined 39 percent to USD 3.6 b in India. During the same period a year ago, deals were valued at USD 5.9 b. The report by Ernst & Young (E&Y) attributed the decline to regulatory hurdles, taxation policies for investments in India. No major transaction or deals took place in India. Infrastructure sector saw the highest investment in 2012 till the period ended June at USD 533 m. Retail and Consumer products saw inflows at USD 529 m. (Economic Times)

Market capitalization of top 5 companies by volume declined by INR 20,600 cr for the week ended 6 June 2012. TCS saw its value decline by INR 6136 cr, Infosys lost INR 3370 cr, ONGC’s value was lower by INR 5176 cr. On the other hand, Bharti Airtel’s capitalization rose by INR 6266 cr followed by HDFC Bank at INR 4959 cr and SBI also gaining INR 3949 cr. (Economic Times)

According to officials at the Central Electricity Authority, delay in signing agreements to procure coal supply for short-term use has affected around 6000 megawatts worth of projects in India. It was also pointed out that around 14 power units across various states in India were affected by the delay in supplies. As per regulations of the Coal Ministry of India, coal co’s are directed to supply coal to power plants until 31March 2012 and those commissioned during 2012-13 period. But only 2000 MW of projects out of the proposed 8800 MW have been signed so far. (Business standard)

According to a report by Macquarie India, corporate loans worth INR 19,000 cr were part of the loans referred for restructuring in 1Q12 period, leading to a 30 percent rise in such cases.  The biggest loan restructuring activities were of co’s such as Visa Steel (INR 3000 cr), Tayal Group (INR 2811 cr) and Indu Projects (INR 2800 cr). The report also states that iron, steel and textile sectors saw the biggest restructuring activity. Rating agencies are of the opinion that debt restructuring activity could rise by a further 6 – 7 percent in 2012-13 period. SME’s and mid-sized co.’s have been the most affected by deteriorating loans. (NDTV Profit)

According to RBI data Indian companies raised USD 3.37b from overseas markets in May versus USD 2.73b in April. (The Hindu Business Line)

Indian foreign exchange reserves grew by USD 1.36b (vs. a previous decrease of USD 0.76b) to USD 289.992b (vs. previous USD 288.62b) for the week ended 29 June 2012. (Yahoo/Reuters)

India’s Chief Economic Advisor to the Ministry of Finance Dr. Kaushik Basu, is of a opinion that Indian inflation could come down below 7 per cent in September from present 7.5 per cent. He also expects the rupee to stabilise around the 50 mark. (The Hindu Business Line)

Steel Co.’s – According to the Steel Ministry report steel consumption for June quarter grew by 18.195 million tonnes versus the consumption of 16.72 million tonnes last year, registering a 1.5 per cent growth.

  • Finished steel production for the June quarter at 18.87 million tonnes versus 18 million tonnes in the previous year.
  • Finished steel imports at 1.99 million toned in the June quarter versus 1.41 million tonnes last year.
  • Exports at 1 million tonnes versus 1.18 million tonnes last year.

According to Sushim Banerjee the director-general of Institute for Steel Development and Growth (INSDAG) expects the offtakes for long products at 10 per cent and for flat products at 5 per cent. Further according to the chairman of SAIL, the Indian market has not been impacted by the fall in global steel prices and expects demand to be reasonable during the year.  (The Hindu Business Line)

Engineers India Ltd – Co. won INR 720cr contract from Bharat Petroleum to provided engineering consulting services. (Economic Times/PTI)

Natco Pharma – Co. begins sales of generic version of Nexavar in India. The generic version to cost INR 8,880 for a pack of 120 tablets versus INR 2.8 lakhs for original drug manufactured by Bayer. The co. is expected to add about INR 15cr of revenue from the product initially. (The Hindu Business Line)

EUROPE

Italian GDP to shrink around 2 per cent this year versus the previous forecast of around 1.5 per cent as forecasted by the Italian Central bank.  The Italian Central bank expects 2012 to be negative. (Economic Times/AFP)

Vedanta plc – Co. has expressed its interest in acquiring a stake in Cairn India’s refinery in Rajasthan. The Chairman Anil Agarwal discussed the matter with various government officials including Prime Minister Manmohan Singh to increase output at the Barmer oilfield in Rajasthan. (Business Standard)

Total SA – Co. has anchored an invest of USD 20b (vs. USD 22b in 2011) this and more in 2013 at the oil price of USD 100 a barrel, according to the co.’s CEO. (Business Standard/Bloomberg)

British Petroleum plc – Co. signed an agreement with JBF Petrochemicals, a subsidiary of JBF Industries, to supply purified terepthalic acid technology. JBF would utilize the technology in its 1.25 metric tonne plant in Bangalore, India. (Business Standard)

BAE Systems – According to the co.’s management, co. has emerged as frontrunner in supplying the US Air Force with 350 training jets. The contract is estimated to be worth more than USD 11b. (Telegraph UK)

NORTH AMERICA

The U.S Trade data is to be released on 11 July by the Commerce Department in the U.S. Economists polled by Bloomberg predict the trade deficit in May to narrow on cheaper prices of crude oil and lower demand, both of which contributed to reductions in imports. Forecasts are polled at the gap to decline to USD 48.5 b vs USD 50.1 b for April 2012. (Bloomberg)

Yields on 10 yr Treasury notes declined 10 basis points to 1.55 percent for week ended 8 July vs 1.65 percent a week ago. The decline is attributed to slowdown in the labour markets with lower than forecast employment growth which could prompt the U.S Fed to conduct quantitative easing. (Bloomberg)

According to Peter Schiff the CEO of Euro Pacific Capital, expects stock markets to collapse to the worst levels than previously seen in 2008. Schiff is of an opinion that US economy is in the middle of a phoney recovery and the US dollar and the Treasury securities were not as safe as conceived by the markets.  Further Schiff believes that increasing interest rates is a painful but realistic solution to the ongoing situation. (Economic Times/PTI)

Boeing – According to Co.’s CEO, co. is expected to do better as compared to Airbus, in the current year or the coming years.  In addition industry analysts expect co.’s 737 Max airplanes to be a tough competitor for the Airbus A320neo airplane, Airbus admitted early this year that it could keep up with the momentum for the A320neo.  (FirstPost/Reuters)

Heibei Iron & Steel Group – Co. received approval from regulatory authorities to invest in Canadian iron ore firm Alderon Iron Ore Corp. Heibei is expected to acquire a 20 percent stake in the co. for CAD 194 m (USD 195 m) in its plant located in Canada. (Reuters)

COMMODITIES

According to the head of Iranian oil exporters union Hassan Khosrojerdi, Iran reached an agreement with European refiners to sell some of its oil through a private consortium.  In accordance to the agreement around 20 per cent of Iranian oil is expected to go through the private consortium. (Business Standard/Reuters)

GEOPOLITICAL

The US Navy has increased its presence in the Gulf by deploying USS Ponce to help in the mine-clearing operations. USS Ponce will aid the four US minesweepers stationed in the Gulf that will ensure the safety of the oil shipping route. (MoneyControl/Reuters)

GLOBAL

According to a report by research firm Prequin, activity in the private equity deals rose for the April – June quarter in 2012 on a global scale. Deals rose to USD 48.5 b spanning over 145 PE fund investments vs USD 33.7 b over the previous quarter. On an average, the time taken by firms to close out a deal declined by 2 months over the 2011 period. PE markets remain constrained by the economic scenario while some sections of the industry have been successful in attracting funds. (Economic Times)

 

EQUITY UPDATE – 4 JULY 2012

ASIA

Malaysia’s IHH Healthcare Berhad plans to launch its initial public offering of USD 2b simultaneously on the Kuala Lumpur and Malaysian stock exchanges. The shares are expected to be priced at Malaysian Ringgit (MYR) 2.85 (USD 0.9) a share on the Malaysian exchange and at Singapore Dollar (SGD) 1.18 (USD 0.93) a share. The co. will offer 2.2 b shares comprising of 1.8 b freshly issued shares and 434 m shares owned by Abraaj, a Cayman Island incorporated firm. (Financial Times)

INDIA

Nomura lowered India’s growth forecast to 5.5 per cent (from 6.1 per cent) in 2012 and to 6.6 per cent (from 7.1 per cent) in 2013, citing slowdown in monetary and fiscal policy and global financial service. Nomura also revised its WPI inflation forecast to 7.6 per cent from 7.1 per cent.  In another report Nomura said that Indian economy may enter into stagflation due to evaporating of demand and elevated inflationary expectations. (Economic Times)

Associated Chambers of Commerce and Industry suggested that Reserve Bank of India should lower interest rates by at least 100 basis points to spur economic activity. (The Hindu Business Line)

SAIL – Co. will sign an agreement with Kobe Steel in the next week for their joint-venture operations for a iron ore plant. The 50:50 JV will see an investment of INR 1500 cr. In other news Fitch rating affired co.s BBB- rating with outlook negative. (Economic Times)

Cairn India – LIC hiked its stake in co. to over 5 per cent. (Economic Times/PTI)

Educomp Solutions – Co. has sacked 800-900 employees and more may have to leave, according to a source. The source cited that existing employee’s salaries have been deployed. (Economic Times)

Ashok Leyland – Co.’s sales rose 27.9 percent in June at 10,244 units on the back of its light commercial vehicle range ‘Dost’.  For the April-June 2012 period, the co. sold 27,585 units vs 19,277 units a year ago, leading to a rise of 43.09 percent. (Economic Times)

Power Trading Co.’s – The government has allowed co.’s to supply power directly to smaller industrial units. (Money Control/CNBC-TV18)

EUROPE

Spain’s unemployment for June declined 2.1 percent to 4.62 m. No. of registered unemployed people declined by 98,853 on a m/m basis. On an annual basis, Spain’s unemployment rose by 493,468 citizens, the highest in the EU region. Youth unemployment, unemployment of people below 25 yrs, declined 7.6 percent. (Financial Times)

The IMF raised the forecast on Germany’s GDP to an expansion of 1 percent vs. prv. forecast of 0.6 percent. The IMF cited strong domestic demand on the back of a strong labour market would help the country manage structural reforms to mitigate the effects of the eurozone crisis. The country is expected to grow by 1.4 percent in FY2013. (Economic Times)

Portugal’s Prime Minister Pedro Passos Coelho stated that citizens of the country should look for employment abroad as youth unemployment (under 24 yrs) rose to 36.6 percent. (Financial Times)

Eon – Energy firm doubled its outlook for the FY12 period to EUR 4.1 – 4.5 b adjusted for one-off effects, from previous forecast of EUR 2.3 – 2.7 b. The forecast was raised as the co. reached a price concession deal with Gazprom on energy supply contracts believed to extend into the longer term. EBITDA was forecasted to touch EUR 10.4 – 11.0 b in the same period. The deal with Gazprom had positive impact on the stock price which rose 2.7 percent in afternoon trade at EUR 17.50 a share. (Financial Times)

Barclays Plc  – The Chief Operating Officer Jerry del Missier quit from co., becoming the third high profile person to exit the bank faced with charges of rigging the Libor rate. (Economic Times)

 NORTH AMERICA

Microsoft Inc – Co. recorded a USD 6.2 b write down on its online advertising business whose operations commenced five years ago. Microsoft purchased AQuantive, to compete with Google Inc, which strengthened its operations in the online advertising industry. In related news according to Nomura equity research co. could be willing to sell its online businesses, due to diminishing prospects and mounting losses. Nomura added that co. could be willing to sell its businesses if right partner like facebook emerged. (Financial Times/Reuters)

BlackRock – Co. is in talks to acquire Swiss Re’s private equity fund of funds unit at an undisclosed amount. The acquisition will see BlackRock’s assets in the private equity space double to USD 15 b. (Financial Times)

US Factory orders saw a rise for the first time in three months with a 0.7 percent gain in May vs a 0.7 percent decline in April. Median forecasts came in at a gain of 0.1 percent. Factory orders excluding transportation equipment saw a rise of 0.4 percent vs April’s revised number of -0.6 percent. Durable goods orders saw a 1.3 percent rise, which makes up over 50 percent of total factory demand. Factory inventories declined 0.2 percent in May. Shipments of equipment and products saw a 0.5 percent rise in May. (Bloomberg)

The International Monetary Fund (IMF) reduced its GDP forecast for the US economy to 2 percent vs prv forecast of 2.1 percent. Steep cuts in spending and increases in tax rates combined with the worsening of the euro crisis could see the US worse off by the end of 2012. (Economic Times)

JP Morgan Chase & Co. – Co. is under investigation on allegations of a potential manipulation of electricity contracts. The co. was questioned by the Federal Energy Regulatory Commission over bidding process leading to USD 73 m in improper payments. (Bloomberg)

Morgan Stanley – Investors, who filed a lawsuit against Morgan Stanley, claim that the co. successfully lured rating agencies S&P and Moody’s to give an investment grade credit rating in 2006 to over USD 23 b of subprime mortgage notes. The case pertains to notes issued by Cheyne Finance Plc, a structured-investment vehicle that filed for bankruptcy in 2007. (Bloomberg)

GEOPOLITICAL

According to Iranian media reports, Iran successfully tested medium-range missiles capable of hitting Israel.  (Yahoo/Reuters)