Worms digest 31 May 2013

Good Morning !!!

Sensex - 20215 (+0.3%), Nifty - 6124 (+0.3%)

Dow -15325 (0.1%), S&P - 1654 (+0.4%)

Nikkei - 13808 (+1.6%)

PSU Banks profitability to hurt from higher provisioning requirements 

• Reserve Bank of India increased the provisioning requirement for fresh standard restructured advances to 5 per cent from 2.75 per cent.
• For the existing restructured book, provisioning will be raised to 5 per cent in phases over three years starting June 1.
• From FY16 the concept is to be done away and all restructured assets will be classified as NPAs.
• However delay of one year for non-infra projects and two years for infra projects where the terms are unchanged without NPV loss will not be treated as restructured, thus allowing them a second restructuring without the compulsory NPA classification. This could limit the stress on profitability to a large extent.

Bharti becomes sensible - on deleveraging mode 

• Bharti is looking to monetize its DTH, fixed line and enterprise business over next 2 years.
• The first on the block would be DTH arm where it expects to garner USD250mn through a 25% stake sale
• The next in the line is fixed line business and its rumored to be valued at USD3bn and the last to go enterprise business is valued at USD1.2bn. 
• The amount to be raised through stake sale would depend upon how much stake the company is willing to pare though sources say it would like to keep control.
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M&M -  The baton passes to tractors for FY14 

• Driven by strong realisations in tractors M&M posted a strong 12% growth in sales to Rs10486crs which was almost Rs 500crs more than most analyst forecast. 
• Operating margins at 14.4% were also ahead of forecast and improved a great 240bps yoy.
• However going forward management sighted challenging environment for UVs which were stars for Fy13 with 30% growth. UV growth would slowdown to single digit in FY14. 
• The tractors sales seem to have picked up strongly and management expects same to be in the range of 6-8% for FY14 with an upward bias to estimate.
• Since the margins in tractors are almost double of autos FY14 would see 10-15% profit growth despite poor auto show. The auto business would see revival in 2015 when the company would launch new vehicles from 3 new platforms underway.

 PFC - shopping for bank license?

In an unusual move PFC has applied to Ministry of Finance to allow it to purchase stake in PSU banks substantial enough to allow it a board seat.

 Cyrus Mistry on a cleaning spree

After Tata Chemicals took a hit on it's European assets in light of falling demand, now, Indian Hotels took a Rs 439crs hit on account of fall in value market price of Orient Express which the company wanted to acquire first through hostile takeover and then through friendly negotiations.

 Maruti goes Singur way

Maruti's proposed plant in Gujarat would face major hurdle as 36 out of 44 gram sbhas have passed a resolution to oppose the use of agri land for industrial purpose for its plant.

 ONGC's aggressive growth plans

• ONGC has tied up with ConocoPhillips to explore and develop the Cambay, Krishna Godavari (KG), Cauvery and Bengal. ONGC is first copany in the country to hit shale gas reserves in a pilot project carried at  Raniganj (Ichhapur)and North Karanpura blocks of Damodar Valley. Of total 63 trillion cubic feet potential shale gas reserves within the country 34 trillion are from Damodar basin. Of this 8 trillion are revocable reserves.
• ONGC has started final negotiations to buy Videocon's 10% staken in Rovuma basin gas block in Mozambique. "If Anadarko is willing to sell its 10% stake to us, we would buy it as well", said ONGC chairman Sudhir Vasudeva. 

 Spencer's - back in growth mode, going hyper

• After shutting more than 60 stores in last 3 years and shunting its convenient stores format, Spencer has aggressive plans of spending 600crs  over ne5 4 years to almost triple it's Hyper store format to 80 stores from 26 as of now. 
• As of now, the company has 132 stores, including 26 hyper stores, 14 super market and 92 daily (convenient) stores

“As a speculator you must embrace disorder and chaos.”

....Louis Bacon

Worms Digest 30th May 2013

Good Morning !!!

Sensex 20066 (-0.4%) Nifty 6104 (-0.1%)

Dow 15303 (-0.7%) S&P 1648 (-0.7%)

Nikkei - 13933 (-2.3%)

• OECD slashes India's growth forecast to 5.3% for 2013 

• RBI has announced auction of inflation-indexed bonds worth Rs 1,000 cr on June 4. The new 10-year inflation indexed bonds will be reckoned as an eligible investment in government securities by banks for the statutory liquidity ratio purpose.

 Coal Regulator to curtail Coal India's freedom to price the coal

• Ministerial panel gave its nod of Coal Regulator and the proposal has been passed on to Cabinet for its approval. Though the regulator will not have any say in fixing domestic prices the ministerial panel recommended need for power to counter the methods and practices of a monopolistic player through guidelines for fixing and revising coal prices.   

RIL woes over...rerating ahead?

• S&P has upgraded RIL rating sighting that rating agency is now more confident about the growth prospectus of the company over next 3-4 years and is more confident about better deployment of hitherto unused cash. RIL plans to deploy USD30bn capex over next 3 years primarily on exploration activities which the rating agency expects to reverse the decline in output from KGD6. S&P also anticipate RIL margins to improve secularly - pet coke gasification to improve refining margins whereas petchem margins to improve through higher share of value added products and vertical integration.

ONGC misses estimates but underlying performance was strong

• ONGC profits for 4th quarter declined 40% to Rs 3,387 cr from Rs5644 crs last year despite 14% rise in sales to Rs 21,389 cr and lower subsidy burden of Rs.12,312 cr compared to Rs 14,170 cr last year. The lower profit is due to ONGC bearing more expenses on statutory levies, higher operating costs due to rupee-dollar fluctuations, dry wells (failed exploration) and depletion costs, among others. The company has raised capex from Rs 35,049 cr in 2013-14, up from Rs 29,503 cr last year. The worst seems to be over for ONGC's overseas arm, OVL and the same would be a key catalyst for ONGC's growth ahead. http://www.business-standard.com/article/companies/global-business-will-be-ongc-s-growth-vehicle-d-k-sarraf-113052900876_1.html

Tough time ahead for Maruti

• Hyundai to launch 4 new models to increase its domestic market share. This would include a sub 4 meter entry level sedan which would compete with Dzire and Amaze. Though sub 4 meter car would take some more time, a new sedan code named BA would get launched by September. The car would come with 1.1ltr diesel and 1.2ltr petrol engine options. Other 2 models are a compact SUV to fight gain share of growing pie of Duster & EcoSport (Maruti is also expected to launch a compact SUV in 2013-14) and an MPV which would be positioned against Ertiga.

 

Andhra Bank on expansion drive

• Andhra Bank in bid to go national from local has imitated a rebranding exercise. It plans to change its slogan from 'Andhra Bank, for all your needs' to 'Andhra Bank, Where India banks'. It will also open 100 branches outside state of AP during 2013-14.

 
Balmer Lawrie to acquire tour operator

• Balmer Lawrie & Co Ltd plans to acquire a domestic company offering tour operating services. Balmer Lawrie plans to invest close to Rs 500 crore over next two-to-three years in new projects including the setting up of a logistics hub near Kolkata and Vishakhapatnam and a steel barrel plant in Navi Mumbai. It will soon acquire 55 acres of land for setting up the logistic hub near Kolkata. The estimated investment on the project is close to Rs 150 crore. The company has also entered into a joint venture with Visakhapatnam Port Trust for developing another logistic hub at an estimated investment of Rs 200 crore.

 
TBZ profit triples 

• TBZ has tripped its net profit for the forth quarter of fiscal 2013 to Rs 25crs, the full year profit was Rs.85crs. Company has 26 showrooms across 20 cities. The board has declared a dividend of Rs.2.5 per share and approved proposal to merger its two wholly owned subsidiary Companies, viz. Tribhovandas Bhimji Zaveri (Bombay) Limited and Konfiaance Jewellery Private Limited with TBZ under the Scheme of Amalgamation.

TCS wins Rs1100crs DoP contract...to strenghten in US government business 

• TCS bags Rs1100 crs system integration contract from Indian Post which would lead to computerisation and electronic linkages of 160000 post offices across the country. TCS is also expanding its footprint in US government business http://www.business-standard.com/article/companies/tcs-forays-into-us-govt-space-113052900937_1.html

 IndiGo expands flights

• IndiGo has added 2 new routes to its network. The airline will operate its new daily direct flight between Mumbai and Jammu, and Chennai and Kochi.
• It would also launch second daily flights between Mumbai and Srinagar, Chennai and Thiruvananthapuram, Mumbai and Trivandrum, Jammu and Srinagar and third direct flight between Mumbai and Kochi, an official statement said.

Hypercity goes compact

• Hypercity’s new store in Bangalore is the first compact store in the hypermarket category with about 33,000 sq ft instead of the usual 55,000-60,000 sq ft. Mark Ashman, CEO, Hypercity, said, “30,000 sq feet is still a very big store, and we have taken out two categories that are more destination type. So, by default, this becomes more of a neighbourhood mall offer.”

”I’m only rich because I know when I’m wrong…I basically have survived by recognizing my mistakes.”

....George Soros

Worms Digest - 29 May 2013

Good Morning !!! 

Sensex 20160 (+0.65%) Nifty 6111 (+0.46%)

Dow 15409 (+0.69%) S&P500 1660 (+0.63%)

Nikkei 14325 (+0.1%)

• DoT has threatened to cancel 3G spectrum of telecom companies on the ground that the 3G roaming arrangements amounts to breach of contract for the giver of the spectrum. A big negative for telecom companies as I) it will slowdown the new 3G subscriber acquisition II) there could be hefty penalties even if license didn't get cancelled III) it brings back the regulatory concerns and uncertainties to the sector just when it appeared to be getting over IV) Payback for 3G investment would get even elongated if roaming is not allowed and could also lead to material asset impairment and valuation of these companies...not to mention the unnecessary diversion of management time, energy and money which could be otherwise focused on the business issues.
•  Honda Motorcycle and Scooter India (HMSI) has increased its two-wheeler production capacity by 15 per cent to 46 lakh units.  The company’s new plant in Narsapur, Karnataka will have a 12 lakh units production capacity in Phase I and further 6 lakh units in phase II. With the addition of the Narsapur plant, Honda will have a total of three plants including Manesar (Haryana) and Tapukara (Rajasthan).The Narsapur plant will produce Dream Yuga motor cycles and Activa scooters. 
• Gold Loan financing restrictions - Reacting to the bank’s circular, the Association of Gold Loan Companies (AGLOC) said gold loan NBFCs lend against jewellery of households only.Therefore, the move to forbid NBFCs from lending against gold coins, bullion, primary gold would have no impact on gold loan NBFCs, George Alexander Muthoot, President, AGLOC, said in a statement.
• SBI & associate bank merger - On merger of associate banks, Pratip Chowdhary, SBI chairman said that  the bank was actively pursuing the matter now as its capital has improved. He, however, did not reveal the identify the target for merger but said that he expects to consummate merger with one of the associate banks during the second quarter.
• Mahindra Satyam is planning to hire about 2,000 freshers during FY14. Beyond that, company will hire on just in time basis. The company has almost put a cap on the traditional campus hirings to take freshers in large numbers. The company employs 36,067 people as of March 31, 2013, a net addition of 2,714 when compared to the same period last year. But it is down by about 1,000 when compared to the figure in quarter ended December 31, 2012. The company is going to increase its investments on capacity expansion. “We spent Rs 122 crore in the quarter (fourth quarter) and added 500 seats. We are planning to spend Rs 500 crore this year to build 1,000-1,500 seats,” Vasanth Krishnan, Chief Financial Officer, said.
• Coal prices hike to boost Coal India revenues by Rs.2500 but consumers to feel pinch...captive to get hurt most - CIL has rationalised prices of thermal coal used in power generation. Prices of two premium grade (G-3 and G-4) coal were reduced by 12 per cent. The price of G-5 grade remains unchanged. And, prices of all inferior grades from G-6 to G-17 (2200-5800 kilo calorie per pg) were raised by 10 per cent, on an average.Captive power generation in steel, cement, aluminium and many other energy intensive sectors will get costlier, as thermal coal is sold at 35 per cent higher price (when compared to the regulated power sector) to sectors enjoying the benefit of market determined product pricing. According to Subhasri Nandi, Secretary General of Coal Consumers’ Association of India (CCAI), a quick estimate suggests generation cost of captive power units may go up by as much as 22 paise a unit. “Power consumers by and large using the inferior quality of coal will be adversely affected by such revision… It would affect specially the non-power utilities, already paying 35 per cent more (price for fuel) than the power sector,” she said.
• Management change at CESC - Sanjiv Goenka, Chairman of the RP-Sanjiv Goenka Group, was appointed as the new Chairman of CESC. Sanjiv, previously the Vice-Chairman of the company, succeeds his father, late R.P. Goenka. Sumantra Banerjee, Managing Director of CESC since 1992, will step down with effect from July 31. He will be replaced by Aniruddha Basu, who will take over on August 1. Basu is currently the Executive Director (Distribution Services). The first unit of the 2 X 300 MW Chandrapur (Maharashtra) project, Goenka said, will be on-stream next month. The second phase is expected to be operational in October. The 2 X 300 MW Haldia unit is under construction. The project will be operational between September and December 2014.With a 40 MW wind energy project operational in Jaisalmer (Rajasthan), CESC is looking for more opportunities in the wind-farm sector in Gujarat and Rajasthan. Spencer will be de-merged into a separate retail entity through a “mirror-level de-merger” followed by an initial public offering (IPO)
• American Tower Corporation to acquire Tower Vision who owns 8000 telecom towers for Rs 3,200 crore, a transaction that will enable the US company to significantly scale up its presence in India. ATC is offering Rs 40 lakh per tower, marginally lower than the Rs 46 lakh per tower GTL Infrastructure paid for acquiring Aircel's tower business. 
• Sun Pharmaceutical expects revenue growth of 18-20 per cent for FY14 and would spend 800crs on capex. Company would be filing 25 generic drug applications in US during FY14.

In this game, the market has to keep pitching, but you don’t have to swing. You can stand there with the bat on your shoulder for six months until you get a fat pitch

....Warren Buffett