Sunday, February 15, 2009

Hindalco Faces Fund Blues

The global credit crisis may cast a shadow over the greenfield projects of Hindalco Industries, the flagship company of the Aditya Birla group, as the aluminium maker is yet to conclude its debt-raising programme. The prolonged fund-raising plan is expected to delay some of the greenfield projects of the company, said informed sources.

“As Hindalco is planning to club the debt tie-up for this project with its other greenfield projects, negotiations with the banks may end up protracted, especially given the global credit scare,” said the report and it added that the management also felt that funding is a relatively "big risk" for the project than any other factors.

The global meltdown in commodity prices has put capex plans of over Rs 2 lakh crore by Indian steel and aluminium companies in jeopardy. Some big-ticket projects that were originally scheduled to go stream by 2012 are being pushed by two years.

Hindalco intends to fund its Utkal project through a debt-equity mix of 70:30. Of the equity contribution of Rs1,600 crore, the company has already infused Rs 750 crore until last December. The company has already made a commitment for additional Rs 3,000 crore, according to Hindalco website.

A spokesperson for Hindalco said, “There was a little delay in getting regulatory approvals and the projects are progressing as per schedule."

Hindalco’s other greenfield projects in the pipeline include Mahan Aluminium, Aditya Smelter & CPP, Aditya Refinery & Mines and Jharkhand Aluminium. The company executive has not disclosed the debt-raising programme of the new projects. The first metal from the Mahan smelter is expected by July 2011. Aditya Refinery is proposed to be mechanically completed by January 2013. The Jharkhand project is expected to be completed by June 2012. January 2011 is the targeted date for the mechanical completion of the Utkal plant and the first alumina is expected to be produced by July 2011.

Bartronics to set up 2000 kiosks

Hyderabad-based Bartronics India Limited has bagged Aapke Dwar, a project of Delhi Municipal Corporation to set up 2,000 G2C kiosks in the municipal limits of the national capital. The project, to be operated on a built-operate-transfer model, is for a period of nine years.

Bartronics is a provider of automatic identification and data capture (AIDC) and radio frequency identification (RFID) solutions.
The company estimates that the revenues from the project would be in excess of Rs 5,000 crore over the nine-year period considering the existing revenue models. It is expected that the kiosk infrastructure will be used to generate further revenue through other innovative means, a company release said on Sunday.

Besides transactional revenue, Bartronics also gets the rights to the advertisement revenues that would emanate due to the physical location of the kiosks and leveraging the network of kiosks.

The company estimates the project to generate a minimum of 6,000 jobs to the local populace. In addition, the Delhi Municipal Corporation will be paid a portion of the revenues as an annual licence fees towards use of the 2,000 selected sites, the release said.

Jet fuel price cut again

Today's price cut comes after most leading airlines more than doubled their lowest fares last week citing low passenger loads, leading to an investigation by the Monopolies and Restrictive Trade Practices Commission (MRTPC).

ATF prices in Delhi were slashed to Rs 29,158 per kilolitre, effective midnight tonight, an official of Indian Oil, the nation's largest fuel retailer, said.

The fuel used by airlines till today was priced at Rs 30,288 per kl. After today's Rs 1,130 a kl reduction, jet fuel prices stand at early 2005 levels.

For the 3.3 per cent increase in rates on January 16, jet fuel prices have been reduced for the tenth time today since September 1, 2008, when international crude oil prices started to decline.
In Mumbai, home to the nation's busiest airport, ATF rates were down by Rs 1,191 per kl to Rs 29,985 per kl today.

ATF prices had peaked to Rs 71,028.26 per kl (in Delhi) in August on international crude prices touching historic high of $147 a barrel. But they have since been slashed every month till October and twice in November.

State-run Indian Oil Corp, Hindustan Petroleum and Bharat Petroleum revise ATF rates on the 1st and 16th of every month based on the average international jet fuel rates in the preceding fortnight.

Govt May Peg Fiscal Deficit at 5% to Battle Slowdown

The interim Budget, to be presented by External Affairs Minister Pranab Mukherjee who is currently holding the charge of Finance Ministry, is also likely to announce short-term measures for exporters reeling under the impact of a global slowdown.

The government in the last Budget has fixed the fiscal deficit for the current fiscal at 2.5 per cent of GDP, which is likely to be raised to 5 per cent for the next fiscal, primarily on account of higher allocations towards the government's flagship schemes like the Bharat Nirman and the National Rural Employment Guarantee Scheme.

To provide focus on urban infrastructure, the government may expand the ambit of the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) to include more districts. At present, the scheme is operational in about 60 mission cities.

The other focus of the Budget is likely to be on rural development which may witness allocations going up to more than Rs 55,000 crore from Rs 39,000 crore, an increase of over 40 per cent.

With the government announcing two stimulus packages and revenues not forthcoming due to slowdown, the fiscal deficit has already crossed four per cent till December and may be revised to over six per cent of GDP for this fiscal, going by the indications.

The interim Budget may also provide a token allocation of Rs 100 crore for kick starting the Unique Identification (UID) scheme to provide a specific number to every citizen.

In addition, the infrastructure finance company IIFCL may be authorised to raise money through tax-free bonds, while three state-owned banks -- Central Bank of India, Uco Bank and Vijaya Bank -- are likely get fresh funds.

According to indications, IIFCL could be allowed to raise around Rs 30,000 crore of tax-free bonds, the three PSU banks would get additional capital of Rs 2,150 from the government.

The allocations for the agriculture, textile and tourism are likely to be retained at the current levels, though in case of flagship schemes the outlays are likely to be raised to Rs 1,23,000 crore from Rs 90,000 crore in the Budget for 2008-09.

The total gross budgetary support (GBS), which represents the expenditure towards Plan schemes and transfer of resources to states, may be increased to Rs 2,85,000 crore from Rs Rs 2,43,000 crore in the current year.

The GBS for the current year is likely to be revised to Rs 2,74,000 crore mainly on account of stimulus packages and transfer of resources to the states.

NSE VS Financial Technologies

They have been locked in fierce competition to gain supremacy in the nascent market for currency futures trading. But the battle between the National Stock Exchange (NSE) and Financial Technologies (FT) is now being fought in the courts too, and has taken many other forms — from blocking technology access to predatory pricing, and more

NSE fired the first salvo by hitting FT where it hurts most. First, it bought stake in a software company called Omnesys, developed its own technology called NOW, which is similar to ODIN, and offered it to brokers free for three years. Critics call this predatory pricing, but an NSE spokesperson said the exchange has always tried to reduce costs to its members. “Our NEAT software given to members is also free and providing NOW (free) is in line with that policy,” he said.

Second, it put ODIN on its watch-list and rejected FT’s application for any new installations or licences.

FT, however, was quick to hit back and moved the court, saying NSE acted with mala fide intentions of stifling competition.

The first round of the court battle has gone in favour of FT, with the court saying, "the allegations in respect of malafides have considerable substance", but without giving an opportunity to NSE to reply "it is not proper to decide as to whether the compliant regarding the defective software ... is reasonable" and whether NSE's approach is "rather malafide" towards FT.
The court also observed that NSE can’t use its whims and fancies to pick and choose vendors.”

In another order dated January 30, the court ordered a systems audit and said NSE should not deny approval for the product for new users, and existing users should continue using it.

NSE has appealed against the order on systems audit and said putting FT on the watch-list was in good faith based on deficiencies in the software reported by trading members. The court later allowed KPMG to carry out the audit of FT's software.
ODIN is just one of the many battles in which the two exchanges are locked. On currency futures transactions, the fight is over transaction fee.
NSE, for example, has kept zero transaction fee on currency derivatives — a practice that MCX has criticised.

“NSE is cross-subsidising its currency futures business through its income from the F&O segment. This is against the concept of a level playing field,” an MCX-SX spokesperson said.
NSE, however, says this is not unusual because any new product requires some efforts in market development. Typically, during that period, NSE does not levy transaction charges. This has been the case in most product launches such as Mini Nifty, Nifty Junior, CNX 100, Defty, etc.

The fact is NSE can afford to keep transaction fees at zero because it has a substantial income from other segments such as derivatives and equities.

On the other hand, MCX-SX’s income is entirely dependent on the transaction fee from the currency segment. So it is in a classic Catch- 22 situation: it will not be able to compete with NSE if it imposes a transaction fee. But if it doesn’t levy a transaction fee, the exchange’s financial viability will be in question.

Observers said the market regulator should look at enforcing either a minimum transaction fee or allow new exchanges to launch cash and F&O segments if it wants to ensure fair competition.

Sunday, February 8, 2009

Advanigi For Ram and Soft Secularism

In a bid to keep NDA allies as well hard-core cadres happy, BJP Prime Minister candidate L.K. Advani on Sunday did a balancing act -- reaching out to all sections, including Muslims and Christians, and promising good governance, development and security if voted to power. But he also added "we never gave up Ram" as he wound up the three-day conclave, after BJP chief Rajnath Singh reacted sharply to Congress chief Sonia Gandhi's criticism that "those who mobilise people on religious lines, mislead people in the name of Ram cannot become an effective force against terror".

Gandhi's attack on BJP for using the name of Lord Ram came at a Congress meeting in Delhi a day after Singh raked up the issue of building a Ram temple in Ayodhya. Singh responded to her by saying those who had Lord Ram on their lips were most capable of meeting any challenge.
The BJP did not discriminate on the basis on religion or caste, he added. Advani asked, "What's wrong in wishing for a grand temple at the birth-place of Lord Ram? Every one accepts that place.

Why does anyone think we are raking up the issue. We never gave up Ram.
We can say Jai Shri Ram only when we finish the task of build a magnificent temple where the makeshift one stands today." As he wound up the three-day conclave, Advani said the BJP's success was not on account of the secularism versus communalism debate but "because of those practising pseuo-secularism in the name of secularism.

" Advani said he wanted to tell Muslims: "You have been used by the ruling party to perpetuate itself without their doing anything for your welfare." Quoting BJP's Muslim face, Shahnawaz Hussain, he said the per capita income among Muslims was highest in the BJP-ruled Gujarat.
"We believe in the welfare of all our people. I tell Christians too that how can we neglect them when our party in its avatar as BJP was born on an Easter Sunday in 1980.

" Advani recalled RSS ideologue M.S. Golwalkar had rejected the idea that India could ever become a Hindu theocratic state even though the Partition had taken place on religious lines - Muslim-majority areas becoming Pakistan and Hindu-dominated areas forming India. Advani said the BJP's secular credentials were founded in the nationalistic movement of the RSS launched by its founder, Dr K.B. Hegdewar, in Nagpur in 1925.

The BJP was born of the RSS' concept of "India first" in which even the party and ideology came secondary to the interests of the nation. Advani, who praised the entire lot of second generation leaders, particularly Narendra Modi, Sushma Swaraj, Arun Jaitley, Venkaiah Naidu and Shivraj Singh Chouhan, gave a new slogan for the BJP - 'If the BJP wins, India wins'.

He said, "The victory we are seeking is not for Advani (to become the Prime Minister) but for the country to overcome its ills and set itself on a path of development, welfare and security." He asked BJP men to avoid self-goals by avoiding internal wrangling and intrigues.

The UPA's performance was so full of failures and betrayals "that its continuation in office constitutes a threat to the vital interests of the country and its people. The situation today casts a responsibility on us to ensure the NDA wins a decisive mandate.
We can certainly do it. We shall do it - with a positive agenda".

Will TRAI Okay New TelCos Asks ?

The telecom industry is divided into two camps -- existing operators vs new players -- on interconnection charges, in particular termination rates, with the former gunning for the maximum level possible while the latter doing away with it.

At present, mobile operators like Airtel, Vodafone and Idea Cellular charge 30 paise a minute from an operator on whose network the call ends.
"Removing Mobile Termination Charge would make calls made from (the new players') network and terminating on (another's) on a par (with) established GSM operators," a telecom player said.

Telecom regulator Trai is in the process of holding consultations with the industry, and ahead of open house discussion next week the new GSM players have urged that termination charges either be done away with or kept below 10 paise a minute to compete with the existing players.
According to new players like Datacom, Unitech, Swan Telecom, Shyam, Loop and Reliance Communications, they would be able to cut mobile tariffs by at least 50 per cent or more if termination charges are set below 10 paise a minute.

However, the existing operators have said that any drastic cut in charges would affect their rollout plans in the rural areas as this would reduce revenue.