MPs put pressure on Raghuram Rajan to cut rates

Photo: Economy Lead

11 Dec, 2014:  RBI Governor Raghuram Rajan on Wednesday faced calls from members of Parliament to cut interest rates, adding to pressure on the celebrated economist, who has emphasised the central bank's independence since assuming office in September 2013 and has steadfastly refused to cut rates till the battle against inflation had been squarely won. 

Finance Minister Arun Jaitley said he agreed with the call for lower rates but added that the final decision was for the monetary authority, the RBI, to take.

"I am grateful that he (Saugata Ray, TMC MP) agreed with me, that now time has come with moderate inflation to bring down the rates. If you bring down the rates, people will start borrowing from banks to pay for their flats and houses. The EMIs will go down," Jaitley said. 

"I am sure that the authorities who are competent to deal with it are fully seized of this view notwithstanding the balancing exercise between inflation management and growth which they have to do," he added.

The FM has in the recent past often emphasised the need for a lower cost of capital but has always added the caveat that the final decision was up to RBI. Jaitley, who was replying to the debate on supplementary demand for grants in the Lok Sabha, was responding to comments by Ray and Congress leader Veerappa Moily charged that the government was insensitive to the problems of agriculturalists, industry and the manufacturing sector.

"In spite of (WPI) inflation easing to 2.82 per cent so far, interest rates have not been cut. There has been no spurt in manufacturing activity. I suppose, Mr Jaitley is helpless in the face of an economist governor of the Reserve Bank of India," Ray had said in his intervention. 

Moily also spoke in the same vein. "So far as interest rates are concerned, now it has become mature to reduce the interest rates. You agree that you have given statements in a number of places. Even the RBI governor agrees that it deserves it. Japan has done it and has reduced the interest rate. China has reduced the interest rate. Everybody has done it. But you refused to do that," he said.

RBI held interest rates steady in its mid-quarterly monetary policy review on December 2. While this outcome was widely expected by the market, some government officials had privately called for a cut in rates on the ground that wholesale inflation was below 3 per cent while retail inflation is below RBI's target of 6 per cent by January 2016. Further, GDP growth in the second quarter decelerated to 5.3 per cent from 5.7 per cent in the previous quarter.

Courtesy: The Economic Times

Retail Inflation Likely Fell to Record Low in November

[Editor: This implies that the RBI might go for a Repo rate cut before the scheduled. The traders can start picking up rate sensitive stocks and also thee shares of those companies, which have high debts on their books. It is because these companies, might replace their high cost debts with low cost ones]

December 10, 2014: Bengaluru: Indian consumer inflation probably fell to a record low in November, dragged down by falling food and fuel prices, while growth in core industries nudged factory output up in October, a Reuters poll showed.

The latest survey of 36 economists forecast that retail inflation cooled to an annual rate of 4.50 percent from October's 5.52 per cent.

That would make it the lowest since the government started releasing the data in 2012. Official retail inflation data will be released on Friday.

Wholesale price inflation was forecast to slow to 1.41 per cent in November from 1.77 per cent in October, making a new five-year low. The data will be released on December 15.

"Continued steep declines in food and fuel prices, as well as subdued core pressures, mean that consumer price inflation is likely to have dropped to a record low in November," wrote Shilan Shah, Capital Economics' India economist, in a note.

While expecting some acceleration in inflation during coming months, partly due to the unwinding of a favourable base effect, the Reserve Bank of India raised hopes at a policy review last week that it would cut interest rates once it becomes more sure that inflationary pressures are waning.

The Reuters poll also forecast that production at India's factories, mines and utilities rose an annual 2.80 per cent in October compared to 2.50 per cent in September.

Data last week showed annual infrastructure output, which accounts for more than a third of overall factory production, accelerated to a four-month high of 6.3 per cent in October.

The uptrend in industrial production will probably continue, according to a private survey earlier this month which showed strong demand meant factory activity expanded at its fastest pace in nearly two years in November.

The positive data suggests the economy may be gaining momentum after losing some steam in the July-September quarter.

"A recovery is certainly underway. Its sustainability depends critically on the continued efforts by the government to resolve the issues surrounding stalled projects," said Rupa Rege Nitsure, chief economist at Bank of Baroda.

Courtesy: NDTV Profit

WINNING STROKES: THINK DIFFERENT

Suzlon Energy Ltd today touched Rs.14.85 in the NSE before closing at Rs.14.80 or near the day's high--up 4.59%. This scrip should be accumulated on all declines. If you remember I said the same thing when the stock was trading around Rs.6-10 ranges. After that it raced pass to touch Rs.36.80 in the BSE. The same history will soon repeat, as the company comes up with Q1FY16 results on May, 2015. Will it  not be nice, if your money gets double in 9-12 months time frame? So, where is the harm to hold the share? The stock is already above its 21D and 50D SMA and 21D, EMA. The  next short term targets are Rs.16.30 and Rs.19.70.

Allied Digital Services Ltd today touched Rs.22.10, before closing at Rs.21.15, up 2.14%. This is another turnaround story, after ARSS Infrastructure Projects Ltd (Rs.39). 

Reliance Capital Ltd moved to Rs.540.90, before closing at Rs.538. This is the 2nd time the scrip rose to this level after it was recommended a couple of weeks back around Rs.500. I had earlier given a target of Rs.570 for the scrip. 

Western India Shipyard today moved to Rs.2.29, before closing at Rs.2.10--up 6.06%. Once the mining starts in Goa, in full form, the scrip would cross two digits--till then you should have patience to hold. It is from the reputed ABG Shipyard group.
Jaiprakash Power Ventures Ltd closed flat at around Rs.12.63, after moving upto Rs.12.79 intra-day. A chartist long ago mentioned the level of Rs.12.60. It reached this level--it is because these days, the stocks are being manipulated to the hilt by those sitting in front of TV Cameras. The Resistance, Support and other parameters are mental equations, which these marketmen sitting in media rooms use, to the hilt. There is nothing called "VALUATION" in stock market--a scrip will rise as long as investors want it to buy; plain and simple. Another one, Jagannadham Thunuguntla, the Chief Strategist and Head of Research at SMC Global Securities  has already spoken to sell the scrip even though, the Business Standard, writes on 17 November, 2014 that its Asset sale to bring down debt/equity ratio to 2.6x. The report also said, "The Street believes that the deal appears to be a good one prima facie and should substantially ease the financial pressure on the company". So, why is this SELL CALL in front of TV Cameras???!!! It is an irony that that the general investors/traders,  do not think that these marketmen can also make "Grave" mistakes. Did you evaluate some of the BLUNDERS of Rakesh Jhunjhunwala? Anyway, SEBI, should stop this new menace, called "Media Manipulation", instead it is bringing in some RIDICULOUS LAWS, to throttle the voice of the common investors and traders.

Today, as expected, and as was mentioned in the morning report to the Premium Group Members, the market got support, at around 8300 of Nifty. Today, FIIs were buyers of 5.39 Cr of equities, while DIIs were net sellers to the tune of Rs.519.05 Cr. Unless this "Directionless NDA Government", hammers out correct policies, even a stable government (as we have today), will  not be able to bring in more and more FII money. We have a Prime Minister, who is busy hopping from one country to another, like his direct jump from Gujarat to New Delhi. He is good in giving lectures, which are liked by the common man, but he lacks the quality of Mr.L K Advani or Mr.A B Vajpayee or even Smt. Indira Gandhi. He is the kind of "Salesman" who will say and do anything to get votes. Hope he reads my posts and brings in some changes in his style of functioning. Already, I had appreciated his bringing of Mr.Suresh Prabhu and giving a ministry to Babul Baral (Suprioyo), in his recent shake-up. I have spoken umpteen number of times in my Facebook posts to bring Mr.Prabhu, who I strongly feel is a pragmatic man with a brain. 
On the flip side our Prime Minister is talking of spending more and more money in defense preparedness, when world is speaking of "Peace".  Indian Military Expenses, cut away a large portion of tax-payers money....but our Prime Minister, is busy on a spending spree. Army (Defense) officers are already given hefty pay-packages as compared to their qualification and work. Am I right? Tell  me in how many jobs hosted by the government of India, a simple graduate gets around Rs.40, 000 per month, after 10-15 years of work, as a commissioned officer. What I want to say is that Army or Navy or Air Force officers are not doing anything out of "Charity" for India or Indians. What is their work during "Peace Time" ? Now if I say this many of my friends in the Indian defense might get irritated with me. But kindly brood over what I have said. Anyway, we have not heard of any "defense kick-backs' till now in the media--however, I don't know what is happening behind the scene. 

Winds of change at Suzlon, focus on solar energy

Within a year, we will build, commission and sell solar projects: Tulsi Tanti

Photo: India Today

December 10, 2014: After wading through the troubled waters of debt and falling revenues, Suzlon, India's first and the world's fifth largest wind turbine energy maker, is bracing for a leap of faith, on several fronts. From investing in solar energy to repowering of old sites to the second generation of the Tanti family taking charge of different business, the company is reorienting.

Suzlon, the leading Indian player in the wind energy business, is now looking to expand its portfolio by venturing into solar power. "We have to consolidate, achieve more growth and invest in technology so as to bring the cost of energy down. We do not require any acquisition, but we are now focusing on the need for solar energy. No company in the Indian market is providing end-to-end solutions in solar power. In the next financial year, we will begin offering our customers both wind and solar parks," Tulsi Tanti, founder and chief executive officer of Suzlon, told Business Standard.

The company's executives said four sites across Gujarat, Rajasthan, Maharashtra and Madhya Pradesh had been identified. Solar power projects of 50 Mw each would be built at these sites. "Within a year, we will build, commission and sell solar projects," said Tanti.

The second generation of the Tanti family is taking up active roles in the company's management after being involved in different business worldwide. According to the market buzz, Tanti's son Pranav and daughter-in-law have taken up assignments in the group. Pranav is looking after the supply chain and logistics, while his wife Sayogeeta Agarwal is managing infrastructure for Suzlon. Daughter Nidhi Tanti, by her father's own admission, is working with him in business affairs as an assistant general manager. The change of gears is visible on all fronts of the company. Satara, 115 km from Pune, houses Suzlon's first and oldest wind power plant of 201 Mw set up in 1999. Since a wind turbine's life is 25 years, preparations are on to repower the site. Old wind turbines that are nearing their expiry age will be replaced with better and efficient ones.

"We are also establishing three manufacturing bases in Madhya Pradesh, Andhra Pradesh and Rajasthan to make the next generation two Mw turbine called S111. This turbine has a 120 meter tower and 111 meter rotor, and will provide over 30 per cent plant load factor," said Tanti. The National Democratic Alliance government is asking wind power producers to ramp up the annual installation of wind power plants to 10,000 Mw annually. For solar power the plan is to achieve 1 lakh Mw in five years.

"If we address issues of land, power evacuation and provide financing for 20 years, then it is possible to achieve the 10,000 Mw target by 2018-19. We have a system problem, not a capacity problem. The state and central governments and financial institutions need to work together and facilitate funding, availability of sites and grid infrastructure," said Tanti.

After a lull of two years, Suzlon's revenue jumped by 16 per cent in the first half of 2014-15 over the same period of the previous year and volumes grew by 96 per cent in the Indian market during the same period. Things are looking up for the company, which went through a corporate debt restructuring programme of $1.8 billion in 2013.

Following the same business model as in wind energy, Suzlon will introduce feed-in tariff in solar power sales, where power is sold at a cost-based rate decided in the power purchase agreement with the procurer for the whole life of the project. Apart from Gujarat, all state and central level project tenders in solar epower are based on competitive bidding, where the lowest bid rate is favoured.

RE-ENERGISING

• Suzlon will set up four solar power plants of 50 Mw each in Gujarat, Madhya Pradesh, Rajasthan and Maharashtra.
• Will launch three new manufacturing facilities in Madhya Pradesh, Andhra Pradesh and Rajasthan.
• Repowering of 25-year old wind farms to start in next two-three years.
• Process will begin with the Satara wind power plant.

Courtesy: Business Standard

Stalled infrastructure projects set for a big push

The Securities and Exchange Board of India is considering changing rules to allow Indian banks to convert a larger portion of their loans into equity at less than the six-month average price of the stock in listed companies whose projects especially in the infrastructure sector are being restructured.

This is part of a wider effort by policy makers led by the Reserve Bank of India (RBI) to get these projects back on track.

Following talks between Sebi and RBI, a proposal is underway seeking to provide a special dispensation only for banks to convert part of their loan exposure to troubled or stalled infrastructure projects at a price lower than the market.

This may be allowed only if the restructuring has the explicit or implicit approval of the central bank, senior officials said. The RBI had approached the capital market regulator to seek a new pricing formula as it reckons that some of the projects are valuable resources.

As current rules allow conversion of loans into equity only at a price higher than the prevailing market price given the Sebi norm of  a six-month average, banks have lost money in a few cases, notably Kingfisher Airlines. This has prompted a review of rules now.

Banks can now own only upto 10 per cent of the equity in a restructured project.

The capital market regulator is broadly in agreement with this provided the projects are those which form part of a scheme for stalled infrastructure projects or is vetted by the central bank, senior officials said. The difference between the lower price for such conversion and the market price will provide some flexibility to banks which have been hit by rising bad loans.

“We don’t want the price to be too low… then the value gets transferred from minority shareholders. We don’t want the value to be too high, then the value gets transferred from the banks, “RBI Governor, Raghuram Rajan had said last week after the monetary policy review. Bankers have been complaining that the six-month average price was a major road-block in the restructuring process.

Figures compiled by the finance ministry show that 371 projects with a investment Rs 18,47,266 crore are pending for resolution with the Project Monitoring Group (PMG) of the government.

This has also led to a fall in new project investments in the country. State-owned banks which funded these projects predominantly are already saddled with Rs 2,43,043 crore of bad loans — which is 5.32 per cent of their advances.

In an inter-action with a select group of print media journalists last week, Rajan said that many of these projects are in deep trouble and will need new infusion of funds. “ Unless the capital structure is remedied, there won’t be any new infusion… even to complete the projects. You will have to restructure the capital structure,” he said.

The RBI is keen to introduce adequate safeguards. “The question we have to ask  ourselves is: can we build in enough safeguards that we don’t have misuse of this process? We are trying to create some flexibility with enough safeguards. If the project succeeds, you have a big chunk of equity which will give a big upside,” Rajan had said last week. The safeguards that he hinted at could be because of past experience when such conversion of loans into equity was perceived as an attempt to mask bad loans.

In the case of loans to Kingfisher Airlines, banks which converted their debt at a price of Rs 65 a share are sitting on huge losses. The Kingfisher stock is now being quoted at Rs 1.34, — a massive loss of 98 per cent in the value of banks’ equity holding in the company. This was when the loan conversion was done in line with the Sebi formula of six-month average price.

Following misuse of the restructuring mechanism, the RBI had, in May 2013, restricted conversion of loans into equity by banks to 10 per cent of the restructured debt.

The RBI now also plans to allow banks to use the 5/25 norms for infra loans — now available only to fresh projects — for existing projects. What that means is banks can give loans to new infra projects for a 25-year period and refinance them every five years provided these projects do not become a non-performing asset.

These loans would not be classified as a restructured asset — which attracts a higher provisioning of 5 per cent — but categorised as standard.

SPECIAL WINDOW FOR BANKS

#  A proposal is underway to let banks to convert part of their loan exposure into equity at a price lower than the market

# Current rules allow conversion of only at a higher price given the Sebi norm of a six-month average

# Due to this restriction, banks have lost money in a few cases, notably Kingfisher Airlines, which has prompted a review of the rules.

Courtesy: The Indian Express

FIIs/F[Is were Net Buyers Today

Today, many of the mid and small caps went in for huge correction in tandem with the key indices. This is basically due to the fact that FIIs were net sellers on last Friday. But the market overlooked the fact that on last Friday, DIIs were net buyers. 

Those who bought the shares today, would be having smiling their way to the bank tomorrow. Suzlon Energy Ltd (Rs.14.80) could hit the upper circuits tomorrow. The latest book value of the company is Rs.8.83 per share (which rose from around Rs.6). Suzlon Ltd was recommended today at Rs.14.10, for the short term target of Rs.15.70.

Nifty closed at 8,438.25 down 100.05 points at the end of day. However, there is no cause of panic as the market is on a secular uptrend. The traders and investors are suggested to buy good small and mid cap counters and keep holding. Don't run after TIP-PROVIDERS. If you think a scrip is good for investment after  your research, then kingly go for it or else ignore. 

WINNING STROKES: THINK DIFFERENT

Today's recommendation, Suzlon Energy Ltd moved to Rs.15.45, in the NSE before closing at Rs.14.80. The stock has moved up after a long consolidation phase. There was good delivery based buying in the BSE and even better in the NSE. The scrip today moved up with huge volume. By the way, one request to the NSE officials, please make your website, user friendly like that of BSE. Also, it would be better if  you do not put so many images on the front page. 

Resurgere Mines and Minerals Ltd today hit 20% upper circuits at Rs.177 before closing at Rs.1.66 up 12.16%. The circuit limit of the scrip has been revised to 20% from 5%, few months back. 

Pipavav Defence Ltd today hit the UC in the BSE at Rs.46, before closing at Rs.45. The scrip if you remember was recommended at Rs.35--35.50, last week. It might go for some consolidation phase before showing, next round of upmove. 
The Indian markets went in for huge correction today, after FIIs turned net sellers on last Friday; but overlooked the fact that DIIs were net buyers on that day. We cannot expect the FIIs to be net buyers everyday. Isn't it? Today, the  Nifty closed below the psychological barrier of 8500-8460 levels. However, did you see the FII buy figures? Yes just have a look at it in my  next post. Those who sold the shares today out of panic will definitely lament tomorrow. 

MARKET MANTRA

Photo: www.archiexpo.com

Resurgere Mines and Minerals Ltd is up around 18% as the stock touched Rs.1.77, intra-day. I had mentioned a couple of days back, that the current NDA Government is making SINCERE EFFORTS efforts to ease the environmental  rules (guidelines), which has been providing serious impediments to the growth of the mining sector in India; though many environmentalists are worried that the new approach will go beyond cutting red tape and will do away with effective regulation altogether. However, it is definitely a posiitve news for the mining and infrastructure sectors, which off-late has been plauged by various government policies. 

Today's Call:  Buy Suzlon Energy Ltd at Rs.14.10, for a target of Rs.15.70 in the short term. Recently, there were media reports that, Senvion SE, a wholly-owned subsidiary of Suzlon, the world's fifth largest manufacturer of wind turbines, has erected the prototype of the Senvion 6.2M152 with the largest rotor diameter in te product range on Dec. 3, 2014. Meanwhile, Suzlon Group Chairman and Managing Director Tulsi Tanti seems to be “100 per cent sure” that Suzlon Energy will make a net profit in 2015-16. “We have a clear plan of reducing our debt and interest costs,” Tanti said in a chat with BusinessLine recently, without getting into details. For the six months ended September 30, Suzlon reported consolidated net loss of Rs.1,385 crore on revenues of Rs.10,051 crore, after incurring interest costs of Rs.1,065 crore. Suzlon will launch a new wind turbine, the 2.1 MW machine named ‘S 111’, in April 2015, said Tanti. Combined with the company’s newly-launched 120 metre hybrid tower, the machine is projected to give 20 per cent higher yield. He said the new machine will make a critical one-percentage-point difference to the investor’s return (IRR), to 15 per cent. The machine would also open up hitherto unviable sites for putting up wind farms. He cited Suzlon’s upcoming wind farm in Rajasthan as an example. All these augurs well for the company.

Pipavav Defence and Offshore Ltd, today nearly touched, the short term target of Rs.47, as it made an intra-day high of Rs.46.05. You can book some profits in the counter as the stock seems to be finding difficulty to cross Rs.46-47, ranges. 
ARSS Infrastructure Projects Ltd today touched Rs.42.75, in the BSE is presently trading at around Rs.42. This is a turnaround story and the investors are suggested to buy the scrip on all declines. 
My recommended J P Power Ltd (Rs.13) and Allied Digital Services Ltd (Rs.22) are doing well in the morning trade--both the scrips are expected to give good returns to the patient investors. 
Meanwhile, the Nifty had witnessed a monthly gain of 266 points in November, alone. Now, with this the total gain from its intermediate low of 7724 comes to around 893 points. Therefore, there cannot be a 2nd opinion that the Indian markets are on a SECULAR UPTREND. However, the the resistance of 8600-8630 is putting pressure on the Bulls on the upper side. Today, since morning, the Nifty is carefully, holding 8500 levels. With the absence of any major negative news the Nifty is likely to trade range-bound, throughout the day. The traders are suggested to buy small and mid-cap counters in bulk, as the Nifty meanders around Rs.8500-8630 levels. 

KILBURN ENGINNERING LTD

~~Hemant K Gupta

Again another company with dismal track record. Although company has reported much better profits on stagnant turnover in H1, there is no surety that same momentum will be maintained in coming quarters.

Kilburn Engineering Ltd (CMP: Rs.45.30) fundamentally is definitely overpriced. It may be mentioned that fundamentally above scrips are overpriced. 

However, this author does not guarantee that their shares prices will fall immediately and/or sharply. Because voice of operators and vested/selfish interests is more widely heard in media and in market to trap gullible investors.

Defence stocks rally upto 10% as DIPP clears industrial licences

Mumbai, 5 Dec, 2014: Shares of defence related companies are up for second straight session after the Department of Industrial Policy and Promotion (DIPP) licensing committee cleared several industrial license proposals stuck since 2012.

According to reports, of the 34 licences considered by DIPP, seven came from Pipavav Defence; two were from Punj Lloyd Aviation and one proposal each by Tata Motors and Piramal Systems and Technologies.

It has also recommended licenses for 10 defence and explosives manufacturing firms. These include Bharti Shipyard, Aveo Helitronics, Spectrum Infotech, Dusoft Fabrication, Premier Explosives and Shiva Explosives India.

Defence stocks have been rallying for the past few sessions on the back of positive newsflow. The government recently notified FDI limit in the sector to 49 per cent from 26 per cent.

The government also revoked ban on foreign institutional investors' (FIIs) in the sector. The RBI has issued a notification allowing FIIs to invest up to 24 per cent of the equity capital of the defence companies. 

Courtesy: The Economic Times

Sebi Tightens Surveillance; Over 25 Listed Firms Under Scanner: Report

Photo: Live Mint

New Delhi, December 04, 2014: In a major crackdown on listed companies suspected to be existing 'only on paper', Sebi has initiated action against more than 25 such firms amid concerns they could have been set up to route black money or evade taxes.

During its inspections, which began pursuant to 'alerts' generated by Sebi's surveillance department, Sebi found that some of these companies were not even physically present at their registered locations, while many of them do not have identifiable promoters, sources said.

The capital markets regulator has begun summoning auditors, compliance officers and key management personnel and officers of these companies, whose names exist on the documents submitted by them to the stock exchanges and other authorities to provide further details, they added.

While the probe is currently in initial stages, it is suspected that these companies (small and medium enterprise) might have been using the stock market platform to abuse the system for income tax avoidance and other money laundering related purposes.

These companies, which are listed on the stock exchanges and have been complying with all necessary disclosure norms by submission of financial and other details in time, caught attention of Sebi after a sharp spurt in their share prices during the ongoing bull run.

While their upward stock movements were not supported by the fundamentals and financial positions of such companies, further inspections by Sebi officers showed that they were not even physically present at their disclosed locations and turned out to be largely shell entities or 'only-on-paper' companies.

In a typical modus operandi, there are certain operators in these companies' scrips who create abnormal price rise after allotment of preferential shares to certain related parties. Thereafter, exit routes are provided at high price resulting in long-term capital gains.

The regulator, which has a very strong electronic surveillance mechanism, has been further enhancing its surveillance activities to adapt to changes required due to changes in marketplace and in light of the recent market movements.

The surveillance system throws alerts on a real time basis and they are then examined by Sebi to probe whether any attempts have been made for market manipulations.

The Securities and Exchange Board of India (Sebi) is also putting in place a comprehensive framework to deal with the listing and trading of only-on-paper companies and tackle this menace, while it has significantly strengthened its surveillance mechanism to catch any wrongdoings in the marketplace. .

The framework includes an objective criterion for selecting companies for inspection, while an indicative questionnaire for surprise inspection of such companies has also be put in place.

Typically, such entities set up a company and then make tall claims about their proposed business ventures. Then an exercise is undertaken to collect funds from investors, including through IPOs (Initial Public Offers) of shares and issuance of other securities.

However, their business plans remain on paper only and they later divert funds collected from investors for personal gains or for other purposes, while leaving investors in lurch.

In one such case under investigation, one company raised money through IPO for setting up a manufacturing plant in West Bengal a few years ago and later also announced expansion of this facility. However, it was found during an on-site inspection that the plant does not exist at the given address.

There are cases where such companies have remained listed on stock exchanges by making wrong periodic disclosures to meet the regulatory requirements, but it has been found that they did not actually carry out the businesses listed by them.

There have also been attempts to raise funds for second or third time by some entities, presumably to finance their tall claims about business expansion, but the money is again diverted for other purposes.

In some instances where Sebi and other regulatory or administrative authorities have issued notices to such entities, make-shift arrangements have been made by them to show at the time of inspection that they were carrying out their claimed businesses.

Typically, the size of funds raised by such companies are smaller in nature to avoid any immediate regulatory glare, while similar sets of entities have also been involved to follow the same modus-operandi to collect money multiple times by setting up new companies.

The issue came under the scanner after a probe into diversion of funds raised by various companies through IPOs and an analysis of trading pattern for shares of such firms.

Courtesy: NDTV Profit 

RICO AUTO INDUSTRIES LTD (Face Value: Re.1)

~~Hemant K Gupta

[Editor: If the money chases these kinds of stocks strongly recommended by SEBI registered analysts, then how will the shares of A-group companies like Jaiprakash Power Ventures Ltd (which is having temporary setbacks; CMP: Rs.12.94) or B-group turnaround stories like Allied Digital Services Ltd (Rs.21.20) or ARSS Infrastructure Projects Ltd (Rs.41.60), Rise-up? SEBI should look into these kinds of manipulations, which are generally the handiworks of SEBI's, "Yes Men"] 

Promoters are definitely not investor friendly. When auto segment in India is progressing so well, Rico Auto Ltd (Rs.47.35) continues to languish with stagnant sales and either minor/negligible profits or LOSSES. 

Company has made LOSS of Rs.2.79 Cr in H1. Do we need to elaborate more as to what type of rotten promoters are controlling Rico Auto. 

And investors are getting carried away by rumours being spread by known analysts/HNI investors and media. What justification of these valuations (Market price works out to Rs 473.50 on Rs.10 FV)? 

Company has horrible track record. Even if turn around in near future, company will distribute gold coins to its shareholders??? There is no dearth of promoters in India who treat public money as their private property. 

Power Sector in India

Photo: Equitymaster.com

The Government of India, having recognized the necessity to improve upon the existing archaic power transmission and distribution system concomitantly along with investment in generation of power in the country, has drawn up ambitious plans for connecting the whole country with a common power grid and to electrify all houses in the country by 2016-20. There are separate agencies and plans for translating the objects of the government into reality.

Government of India having addressed the issue of power generation, has begun serious efforts to reduce the T&D losses from its peak level of 19% to about 6.5% in the next 5 years. This ambitious target calls for revamping of the entire power distribution mechanism in the country, which includes increasing the transmission voltages and making the system more and more tamper proof. 

The country started upgrading its grid capabilities under the aegis of PGCIL (Power Grid Corporation of India) from the existing 132 / 220 Kv to 400 / 765 Kv to bring the country’s power transmission system at par with other nations. 

The plans are on anvil to create a national back bone with transmission capability of 1200 Kv in the next five year plan. This has resulted in a very bright business opportunity for the companies in this space.

The advent of Nuclear Power Era in the country, while addressing the demand for the generation of the power, is expected to open another market front. The power generation by nuclear plants call for massive power evacuation lines to transmit the power generated by these mega power stations to the country’s grid. This holds another exciting business opportunity for the power companies in India. 

Recently, Piyush Goyal, the Minister of Power, Coal and New and Renewable Energy, speaking at the World Economic Forum’s India Economic Summit 2014 said:

"Over the next five years, the Indian power sector would provide an investment potential of $250 billion of which $100 billion will come into the renewable energy sector and $50 billion for the transmission networks”. 

One of the biggest roadblocks facing the Indian economy has been the poor state of infrastructure in the country. It is said that lack of proper infrastructure shaves off about 2% of India's GDP growth every year. The power sector, which is the engine for growth in any economy, is facing a myriad of challenges and setbacks in India. Hence, it would be better if the current DIRECTION-LESS-NDA-GOVERNMENT, focuses more on the infrastructure sector. 

Modi, favoring growth in India, sweeps away environmental rules

Photo: Regent Plast Pvt. Ltd

VAPI, Dec 5, 2014: Factory owners in this city on the western coast of India have been fuming, railing, and arguing for years against a single troublesome number: the pollution index used by the ministry of environment and forests, which identified Vapi as an area so badly contaminated that any further industrial growth there was banned. 

They finally got some good news in early June, about two weeks after Narendra Modi was sworn in as Prime Minister. The new officials at the ministry told them that the pollution index would be revised — and in the meantime, Vapi's chemical and pesticide factories were again free to expand, and to snap at China's share of the global chemical export market. 

Rightly so, said Harshad Patel, standing outside the plant where he works. The air had an acrid-sweet smell, and reddish-brown effluent was gushing from a treatment plant down the road at a rate of 55 million gallons a day into the Daman Ganga River, but Patel looked untroubled. "Clean India is fine — we also like clean India," he said. "But give us jobs." 

Indian industries have often complained that convoluted environmental regulations are choking off economic growth. As a candidate, Modi promised to open the floodgates, and he has been true to his word. The new government is moving with remarkable speed to clear away regulatory burdens for industry, the armed forces, mining and power projects. 

More permanent changes may be coming. In a report made public last week, a high-level committee assigned to rewrite India's environmental laws assailed the existing regulatory system, saying it has "served only the purpose of a venal administration" seeking to extract bribes. 

To speed up project approvals, the committee recommended scrapping a layer of government inspections; instead, it said, India should rely on business owners to voluntarily disclose the pollution that their projects will generate and then monitor their own compliance, an approach the committee described as "the concept of utmost good faith." 

Environmentalists are worried that the new approach will go beyond cutting red tape and will do away with effective regulation altogether. 

"If you're building something like a brewery or a dam, faith is the last thing you want to think about," said Leo Saldanha, coordinator of the Bangalore-based Environment Support Group. "Do you have 'utmost good faith' in enforcing income tax, or corporate tax law? No. This is a territory on which the government wants to be weak — because they want growth." 

Modi's new government did inherit cumbersome regulations. The environmental activist Sunita Narain, in a recent article, described a system in which "the same project had to be cleared by five to seven agencies," not one of which monitored compliance. Industrialists complained that corrupt inspectors made the rounds with their hands out, and that corrupt bureaucrats sat on files that were lined up for approval, waiting for bribes. 

Modi's new environment minister, Prakash Javadekar, made it clear that speedy clearances would be the order of the day. The newly appointed National Board for Wildlife, which must approve projects in and around protected areas, plowed through 140 pending projects during a two-day gathering in mid-August. One member said they worked at a rate of 15 to 30 minutes per file. 

More significant, activists say, were the raft of regulatory changes and dilutions that followed. Smaller coal mines were granted one-time permission to expand without holding a public hearing; projects in forests will no longer have to seek the approval of tribal village councils; smaller mining projects of less than 100 hectares (247 acres) will no longer undergo ministry inspection. Several categories of projects will be allowed to proceed as soon as they receive clearances from state bodies. 

"We have decided to decentralize decision-making," Mr. Javadekar said. "Ninety percent of files won't come to me anymore." 

He said the new government was not phasing out important environmental protections, just "those which, in the name of caring for nature, were stopping progress." 

Environmental activists are alarmed at the plan to devolve power to state regulators, in part because state chief ministers have powerful incentives to support industry. "It would be a rubber stamp, because the chief minister would just call the pollution control guy and say, 'clear it,' " said Jairam Ramesh, who served as environment minister under the previous national government. "In the state, the chief minister is the king, he's the sultan." 

Few places embody the tensions between regulators and industry as starkly as Vapi, where around 800 factories — mostly small ones — produce dyes, pharmaceuticals, pesticides and other chemicals and employ about 80,000 people. For decades the factories simply dumped caustic byproducts and waste into open ditches; when pressure mounted in the 1990s to clean up the mess, they banded together to build an effluent treatment plant. 

But while the effluent plant has improved matters somewhat, Vapi is still polluted. Downstream from the plant, the riverbanks are abandoned and villagers said their old fishing grounds were useless. Acrid fumes settle thickly in the area early in the morning, making it difficult to breathe. Ask business leaders here about pollution, though, and they bristle, arguing that the government inspectors' sampling is faulty. "People talk as if you go to Vapi and you can't breathe, your lungs are damaged," said Rajju Shroff, chairman of one of India's largest pesticide manufacturers. "It's all lies. People are nice and healthy in Vapi. There is no problem at all." 

Regulators say it is nearly impossible to police the country's many small manufacturers. In frustration, Ramesh imposed a total ban in 2010 on industrial growth in 43 areas that the Central Pollution Control Board said were the most polluted in India. Vapi was at the top of the list. 

"That was the only way I felt I would get these guys to act," he said. "Enforcement was weak, the penalties were very weak, and there was no visible deterrent penalty for noncompliance." 

The moratorium did impose pain on businesses in Vapi, forcing abrupt cancellation of planned expansions. But it did not lead to any significant reduction in pollution levels, at least according to the control board, which renewed the ban last year. 

The general election in the spring, which replaced a Congress-led coalition government with Modi and his Bharatiya Janata Party, seems to have changed all that. 

During a recent visit, the Vapi Industries Association was an upbeat place. A copy of the magazine Corporate India was on display, with the headline "The Light at the End of the Tunnel." 

Shroff said he was sure that business owners would invest in the equipment necessary to monitor their own pollution levels, as envisaged in the government's new "utmost good faith" policy. Or at least, the ones who could afford it would. 

"The problem is, 90 percent are good, and 10 percent are difficult to convince," he said. "It is human nature to cheat, to do something to save the headache."

Courtesy: The Times of India

Global biggies bullish on India's mining revival 

Photo: India Water Portal

KOLKATA, 5 December, 2014: The government's move to revive the mining sector has evoked optimistic response from foreign mining companies, which are firming up strategies to grab a share of the opportunities likely to come up.

While the prime minister's call to `Make in India' seems to have found enthusiastic takers among overseas mining machinery companies like Germany's ThyssenKrupp and Korea's Hyundai, who want to make India their global manufacturing hub, large mining firms like Anglo American and Rio Tinto are also looking at their prospects here with renewed vigour.

"We are upbeat about the new scenario that is set to emerge in the mining sector. Be it coal, iron ore or any other mineral, if India has to realise its ambitious growth targets, productivity of mining investments will be crucial and technology will play a significant role in this. This is where we have a lot to offer in green and sustainable mining technologies," said N Sivasubramanian, managing director of ThyssenKrupp Industries India. The company is betting big on the value proposition of reduced energy cost and lower carbon footprint of its equipment like Integrated Skip Conveying Crushing Systems and MegaPipes, and pitching for business from new private blocks and companies like Coal India, Orissa Mining Corporation and Reliance Power. 

"The mood is upbeat at the CII's IMME and Global Mining Summit 2014 since the impasse in the mining sector has ended. India needs to develop its mineral base and private investment is the way forward," Sumit Mazumdar, executive chairman of Tractors India, said.

Hyundai Construction Equipment, which is in India since 2008, says it has identified mining as a strategic thrust area. " In the next 5-10 years, we hope to emerge as a full-service player in mining equipment and would look at both organic and inorganic routes to chart our growth.We are looking at a market share of 25%," Alok Jha, GM (sales and marketing) at Hyundai Construction, said.

Czech equipment makers, too, are bullish on India. Eleven of them are already here."We are hopeful that the new government's policies in mining will be friendly towards investors and the environment," Miloslav Stasek, the Czech ambassador to India, said. 

Pure-play mining companies like Anglo American are also keenly waiting for new prospects. "We would like to partner Indian firms in developing mine properties. They could also buy into a mine that we own in any other country," James Harman, group head (business development) at Anglo American, said.

However, when it comes to mining in India by foreign companies, a number of issues remain to be resolved. 

Courtesy: The Economic Times

Major defence deals set to be signed during Putin-Modi summit

Photo: Ekalavvya

December 3, 2014: In the run up to the summit, the two leaders have already reaffirmed that defence cooperation is an important pillar of bilateral strategic partnership.

Russian President Vladimir Putin will arrive in New Delhi, this month, for his summit with Indian Prime Minister Narendra Modi to further strengthen the “special, privileged strategic partnership” between the two countries. In the run up to the summit, the two leaders have already reaffirmed that defence cooperation is an important pillar of bilateral strategic partnership which will be high on the agenda of their talks. Over the past months, the two sides have been conducting talks to straighten the loose ends of some of the major pending defence deals to be timed for signature during the summit.

Following his assuming office of Prime Minister in May, Putin met Modi, for the first time, on the sidelines of BRICS summit in Fortaleza (Brazil), in July, and second time, at G-20 summit in Brisbane (Australia) in November. During both these meetings with the Russian President, Modi reiterated that he looked forward to working with Putin to further deepen the strategic partnership between Russia and India, especially in the field of military-technical cooperation. 

Recently, India’s new Defence Minister Manohar Parrikar said that as a policy, the country would stress on working on joint projects with his partners, such as Russia. In a way, Parrikar reemphasized the long-standing partnership between Russia and India in the field of state-of-the-art weapons, acquiring unprecedented importance now with increased diversified military-technical collaboration. In fact, the diversified defence cooperation between the two countries has become the need of the hour.

In 2013, India imported $6 billion worth of weapons, with the country turning into a big defence market. The new Indian government has also taken a crucial decision of opening the defence sector to foreign investments. No wonder that since the new NDA government came into power, the Western governments have frantically been trying to woo India to get multi-billion dollar deals. This makes incumbent on both Moscow and New Delhi to give bilateral defence cooperation a new direction by speedily implementing the agreements already signed within the prospective framework of joint research, development, designing and production.

In this connection, it is expected that during the summit, Russia and India may ultimately resolve several long-delayed agreements on military-technical cooperation projects between the two countries and sign them finally for their implementation. These agreements, above all, include joint Fifth Generation Fighter Aircraft (FGFA) project and joint development of Multi-role Transport Aircraft (MTA).

A final deal on FGFA for production has been delayed because the Indian Air Force (IAF) did not approve the design and work-share. Now Russia has reportedly agreed that the jet would be a two-seat design, not a one-seater. India’s work-share would also be increased from18 percent to 25 percent, and even up to 40-50 percent in the near future, in view of the steady development of the Indian aviation industry.

According to the agreement, India’s stealth air-to-air missile “Astra” along with Indo-Russian BrahMos supersonic cruise missile will be mounted on the FGFA.

The preliminary design agreement on FGFA had been signed in 2010 between Indian HAL and Russian Sukhoi Design Bureau to build the jet for the use by both countries. The final design contract was to be signed in July-August 2012. But the deadline has already passed.  According to the Indian media reports, under the programme, India is expected to build 200 fighter jets at the cost of $30 billion.

FGFA is not the only Indo-Russia joint project. The two countries also signed an agreement on the joint development of MTA in 2007, based on Il-214 Russian plane. The cost of the $600 million project is being equally shared by the two countries. The MTA, when developed, will have ready market for 205 aircraft - 45 for the Indian Air Force, 100 for the Russian Air Force, and 60 more for exporting to friendly countries. The international market for MTA is estimated at 390 planes. Under the agreement, thirty percent of the annual production of planes could be exported to third countries. 

The MTA was expected to go in service with the Russian and Indian Air Forces in 2015. But the project faced a number of problems, delaying the development of the MTA. The project  got into rough weather after India felt there was nothing much for Indian engineers and scientists to do in the design and development of the MTA. 

However, all the issues related to the project were resolved with the Russians when the HAL undertook to carry out design and development of its work-share of MTA at Aircraft R&D Centre at Bangalore. Russian Ilyushin Design Bureau and the Irkut Corporation and HAL are participating in the project. The first flight is expected to take place in 2017-18.  

The MTA would replace the AN- 32 aircraft being used by the IAF. It will be used for both cargo and troop transportation, para-drop and air drop of supplies, including low-altitude parachute extraction system.

Another key deal expected to be signed during the summit, is for the development of “BrahMos mini missile” by the Indo-Russian joint venture BrahMos Aerospace which manufactures supersonic cruise missile. BrahMos’ new CEO Sudhir Mishra recently said he was hopeful that a deal to develop the mini version of the missile will be signed during Putin’s summit with Modi.

“We are hoping to sign a tripartite agreement between DRDO, NPOM lab and BrahMos Aerospace during the planned visit of Russian President in December,” Mishra said.

He said that the new missile will have a speed of 3.5 mach and carry a payload of 300 km  up to a range of 290 km. In size, it will be about half of the present missile, which is around 10 metres long. The missile can be integrated with different platforms, including submarines and FGFA. It is planned to be inducted into service by 2017.

Courtesy: Russia and India Report

Market Mantra

My recommended Pipavav Defence Ltd hit the 2nd consecutive upper circuits today at Rs.41.95 in the NSE and Rs.41.85, in the BSE. The scrip was repeatedly recommended in this blog. I again reiterate, Pipavav Defence and Offshore Engineering Ltd is India's biggest private sector naval shipbuilder. Hence, you should be holding the shares of the company in your portfolio---this is a must.

ARSS Infrastructure Projects Ltd today moved to Rs.43.70 (BSE) and Rs.43.80, in the BSE. The scrip is moving up on the twin optimism: (i) Turnaround of the company accompanied by the government's initiatives in the infrastructure sector (ii) Improved health of Indian Railways, would help the company. ARSS Infrastructure Projects Ltd came up with an IPO in March, 2010 at a price band of Rs.450. ARSS Infrastructure Projects Ltd has earlier informed the BSE that an Extra Ordinary General Meeting (EGM) of the Company will be held on December 17, 2014. The scrip should be crossing Rs.50, within this month. Hence, the investors are strongly suggested to buy the stock and keep holding. CMP: Rs.41.70. 
Today NCC Ltd touched Rs.83, but what is the News? I do not think there is anything, worth talking about, except that a big Bull is holding the shares of the company. Some days back a well know Bombay based equity analyst wrote in a Financial Weekly: 

"Despite dismal results for H1, analysts and market men continue to recommend to buy NCC Ltd only because big bull is also one of the shareholders of the company". 

On a consolidated basis, NCC has posted a loss of Rs.3.16 crore for the second quarter this year against a loss of Rs.10.19 crore in the same period last year. Revenues during the period stood at Rs. 2,571.57 crore (Rs.1,706.79 crore). During the first half, NCC posted a loss of Rs.23.68 crore with revenues of Rs.4,400.11 crore against a loss of Rs.4.39 crore and revenues of Rs.3,345.67 crore. 
These days, there is no need of any fundamentals for a scrip to move up. What one has to do is to bring some marketmen in front of Television cameras and make them SHOUT: BUY!! BUY!! BUY or SELL!! SELL!! SELL!! The scrip will move up or go down--main aim is to create positive or negative sentiment around a counter. You look at the track record of those marksmen whom you see everyday on your Television Channel/s and see how they change their views so often. And then compare, their views with me. You will then understand what is the real GAME (going on)!! What the 24x7 Business Channels have done is to turn everyone into a day trader; which is most  unfortunate. These days it is becoming very hard to find long term investors, which we used to see in 1990 or even during 2002-07 period. Now, it seems most wants to buy building materials and see their houses being erected on the same day--there is no time.....Huh!! Also, on what capacity, the stocks are being recommended randomly on Television Channels in the name of "Game" or "Competition"--this is the biggest manipulation done, and should be stopped immediately.
Jaiprakash Power Ventures Ltd (Rs.12.95), should be accumulated on all declines, inspite of what all those TV-analysts say (positive or negative). The scrip has a great future and is from the reputed J P Group. 
As of  now the mid-cap index is down 82.15 points as against 29.45 points of Nifty. But the irony is that many mid-caps are undervalued as compared to the large caps. Hence, theoretically speaking the money should have moved out from a section of the large caps and  have entered in this space--but we are witnessing just the opposite. Why? One reason is: Stock Market Education among the Indians (traders/investors), is very low/poor. Hence, most traders will probably do what those sitting in front of the cameras would advises them....this is the real irony. The real fat is that: Most Indians, want to make money, but do not want do research.