Sunday, June 26, 2016

“Bracksies”: how Brexit could wind up not actually happening...
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June 25, 2016: Fun fact: Brexit, the United Kingdom’s narrow vote to exit the European Union, is not actually legally binding.

The Prime Minister, be it David Cameron (who has resigned but could remain in office until October) or his successor (almost certainly pro-Brexit former London mayor Boris Johnson) can simply decide to ignore the result. 

In practice, it’s hard to see that happening; the voters have spoken, and politicians are loath to overturn the express will of the people.

But Cameron still hasn’t done the one thing he needs to do to ensure that the UK actually exits: invoke Article 50 of the Treaty on European Union. And until he does, there are still ways he could keep Brexit from happening.

What is Article 50?
Here is the meat of Article 50, which establishes the procedures for a member state to withdraw from the EU:

1. Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements.

2. A Member State which decides to withdraw shall notify the European Council of its intention. In the light of the guidelines provided by the European Council, the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union. That agreement shall be negotiated in accordance with Article 218(3) of the Treaty on the Functioning of the European Union. It shall be concluded on behalf of the Union by the Council, acting by a qualified majority, after obtaining the consent of the European Parliament.

3. The Treaties shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification referred to in paragraph 2, unless the European Council, in agreement with the Member State concerned, unanimously decides to extend this period.

No country has ever invoked Article 50 before, so it’s still a little unclear how the whole process will work. But it appears that the order of operations is as follows:

The Prime Minister informs the European Council — the EU body comprising the heads of state/government of its member nations (Angela Merkel, François Hollande, etc.) — that the UK intends to leave.

The Council would then meet amongst itself and agree on a framework for the United Kingdom’s withdrawal.

Using that framework, the European Commission (the appointed executive branch of the EU, led by former Luxembourgish prime minister Jean-Claude Juncker) negotiates the precise technical terms of exit with the UK.

Once the deal is reached, it enters into force if the Council and the European Parliament both agree.

This whole process is supposed to take no longer than 2 years; after that period of time, if no deal has been reached, the UK automatically exits the European Union without any special deal letting it retain trade preferences or other benefits. However, the Council and UK can unanimously decide to extend that two-year period if they like.

Does this mean Brexit could just, like, not happen?

Absolutely — as long as Article 50 isn’t invoked. "Once Article 50 is invoked, the process is irreversible," Slate's Joshua Keating notes. "The UK can't back out."

But there’s no requirement that the UK invoke Article 50 in a timely fashion. Indeed, both Cameron and Johnson have said they think it’s appropriate to dawdle; Cameron says he’ll leave the decision to invoke to his successor, and Johnson has said there’s no rush.

It wouldn’t be tenable for the government to just completely ignore the vote forever, even though that is legally permissible. That said, there are some more plausible, clever ways that the government could get around actually exiting.

Scenario 1: Let Scotland save you. Under the Scotland Act 1998, it appears that the Scottish Parliament has to consent to measures that eliminate EU law's application in Scotland. At least that was the conclusion of a report on Brexit released by the House of Lords, the upper house of Britain’s parliament:

Jo Murkens, an associate professor of law at the London School of Economics I spoke with about this, told me that this isn’t actually an iron-clad veto. The Scotland Act was passed by the UK parliament, and parliament can amend it on its own to reduce the Scottish parliament’s powers.

To exit the EU and avoid a binding Scottish veto, "Parliament would have to repeal the European Communities Act 1972 (by which it became a member) and would also have to amend the devolution legislation pertaining to Scotland, Wales, and Northern Ireland," Murkens said. "That strikes me as technically easy, but politically difficult."

If the Conservative Party is insistent on Brexiting and is willing to overturn decades of law giving Northern Ireland and Scotland (both of which voted overwhelmingly to stay in the EU) local control over their affairs, then it can totally do so.

But, as Murkens also noted, such a dramatic action could risk a huge backlash. Scotland is already planning to hold another independence referendum, and seeing devolution curtailed would make its success much more likely. Northern Irish republicans would be emboldened to call for unification with the Republic of Ireland, which could occur, or they could just reignite the Troubles after decades of peace.

If the overriding objective of Conservatives, however, is to "preserve the integrity of the United Kingdom as a state," Murkens said, "the objective of keeping NI and Scotland in the United Kingdom would turn them into veto players … Scotland and NI have voted to remain and the cost of not listening to them would be to split the UK."

So here’s what Cameron or Johnson could do, in three steps:

Announce they are respecting the terms of devolution and allowing the Scottish, Northern Irish, and Welsh parliaments to vote before invoking Article 50.

Wait for one of them to vote against leaving. The Scottish and Northern Irish parliaments would be under a lot of pressure to do so, due to their constituents’ views. The Scottish National Party, which has the biggest bloc in Scottish parliament, could want Brexit to go forward to build support for Scottish independence, but it would be hard for them to vote that cynically. 

The Northern Irish Assembly’s biggest party, the Democratic Unionist Party, was pro-Brexit, but it could understandably flip if it fears that actually leaving the EU could lead to Northern Ireland leaving the UK. The Welsh Assembly is led by the Labour Party; Wales voted to Leave, but Labour could vote its own position and shoot down exiting.

Once one or more of the subnational legislatures votes to reject Brexit, the Prime Minister announces he’s not invoking Article 50 after all, using the regional veto to save face.

Again, Cameron or Johnson doesn’t have to do any of this. But it’s a plausible way to avoid leaving.

Scenario 2: Dawdle on invoking Article 50 by having another referendum. This would be a bit odd so soon after the first one, but there’s nothing preventing the government from calling a do-over, and there might be political willpower for it.

For one thing, there have been anecdotal reports from numerous Brexit supporters saying they didn’t realize their votes would actually count, and that they regret voting to Leave now that the results are in. Searches like "what does it mean to leave the EU?" and "what is the EU?" surged after the referendum. And more than 2 million have signed a petition calling for a second referendum.

It would require a monumental act of political courage for Cameron, or especially Johnson, to call for this — not least because Cameron ruled out a do-over before the referendum was held. But Cameron’s political career is over anyway, and could reverse himself for the good of the country.

Scenario 3: Dawdle on invoking Article 50 and have an actual general election. "There's a reasonable case to be made that this should go to an election given that the prime minister resigned," Adam Posen, president of the Peterson Institute for International Economics and a former member of the Bank of England's Monetary Policy Committee, told me in an interview. Then, if either the Labour Party (which strongly opposes Brexit) or a split-off faction of the Conservatives that opposes Brexit were to win the election, they could claim that as a mandate to cancel the results of the referendum.

The problem here is that there’s little reason for the Conservatives to want another election, especially since they have yet to actually split. If they don’t split their leader will probably be Johnson, who supports Brexit and whose election would not exactly be a mandate to overturn the referendum result. Unless they call an election, the Conservatives are safely in power until 2020, and calling an election to get Brexit overturned would not just risk a Labour victory, it would probably only work if Labour won.

"There's a very good incentive for the current Tory [Conservative Party] government to not call an election they'll lose, or which would make them have to share power with the UK Independence Party or the Scots," Posen noted.

But each of these three scenarios requires the current Tory government to do something drastic. Without Cameron or his successor’s buy-in, no effort to stop Brexit can succeed.

Courtesy: Vox.com
Is Unitech Ltd, a BUY?
Please Click on the Photo to Expand
After announcing the Q4FY16, result an upbeat MD of Unitech Ltd (Rs.5.43), Sanjay Chandra, said: “Balance expected receipts from (these) ongoing projects combined are sufficient not only to meet the remaining construction expense but to also to service the debt, if any, against these projects. Apart from improving collections, company is also mobilizing funds from banks and financial institutions".

From a peak valuation of $11 billion in 2007 (Rs.74,756 Cr), life has come a full circle for Ramesh Chandra, the Unitech founder, with his company reporting losses till Q4FY16 and the market cap plummeting to around Rs 1,420.65. 

So, will it be good to buy the shares of Real Estate behemoth Unitech Ltd at Rs.5.43, which is available at the price of penny? 

In one word, it would be YES, it is because like most of the major builders in India, Unitech Ltd plans to raise funds and at the same time it is selling off its non-core assets to cut its burgeoning debt. Not only that the company is looking to raise funds, through private placement to ward-off its tight cash flow conditions. 

Look at the case of Lodha Developers Pvt. Ltd, India’s largest unlisted developer which has the highest cash flow among all real estate companies in India with collection of over Rs.6,200 crore in 2015-16. Its land bank was valued at over $11 billion by Knight Frank in 2014. However, after  Moody’s Investors Service downgraded the corporate family rating due to high debt, the company has started evaluating a couple of significant private equity transactions and have already raised Rs.425 crore in May, to fund its ongoing projects. 

In the same way, HDIL (which I recommended at Rs.67 and which rose to Rs.100 plus), plans to further reduce its debt through a couple of transactions by selling additional floor space index (FSI) in its projects to other developers. 

Similarly, Bengaluru based developer, Prestige Estates Projects Ltd (Rs.178.45) which has Rs.5,500 crore in debt, aims to repay debt from the cash flows, generated from its yielding assets. 

Moreover, some of the fund management companies are offering preferred equity transactions, where they don’t charge interest or principal repayment for the first few years, giving developers some breathing time. Some of the real estate companies are even issuing warrants to promoters to reduce debt. Therefore, the sector as a whole is looking good after a long time. 

Unitech Ltd at present has a debt of around Rs.7,165.70 crore and land reserve of 300 mm sq.ft, as compared to 276 mn sq.ft of land bank and Rs.22, 202 crore debt of DLF Ltd, 5,500 acres of land and Rs.13,00 crore of debt of Lodha Developers Ltd and Prestige Estates Projects Ltd with Rs.5,500 crore of debt and 42 mn sq.ft of land bank. For more please look at the Figure above.  

This obviously makes the shares of Unitech Ltd, very attractive to buy at the CMP of Rs.5.43 in the BSE and Rs.5.45 in the NSE for short term targets of Rs.9.50-13-15.50. 

Saturday, June 25, 2016

JSW Energy reopens talks with Jaypee Group for buying three power assets
Jun 24, 2016: Months after initial discussions fell through, Sajjan Jindal-controlled JSW Energyis said to have reopened talks with the Jaypee Group on acquiring three power assets. The two sides are in advanced negotiations for a deal involving two power generation units and a majority stake in a transmission joint venture for an enterprise value of about Rs 5,500 crore, two people aware of the development told ET. 

The two utilities are Bina Thermal Power in Madhya Pradesh with an installed capacity of 500 MW and the 400 MW Vishnuprayag Hydro Power in Uttarakhand. Bina can be ramped up further and its capacity trebled. The third asset is a 74 per cent stake in Jaypee Powergrid, a 74:26 joint venture with Power Grid Corporation of India Ltd. All three assets are held by Jaiprakash Power Venture Ltd (JPVL), a majority owned subsidiary of Jaiprakash Associates, and an acquisition agreement could be reached shortly, said the people cited above. 

JSW Energy denied that a deal was in the works. "Your query is completely speculative and baseless," a spokesperson said. "As a policy, JSW Energy does not respond to such speculative market rumors which may lead to misleading information in the market." 

A Jaypee Group spokesperson declined to comment. "We would not like to respond to market speculations," the executive said. 

Jaypee Powergrid has built a 214 km transmission line to connect the Karcham-Wangtoo project in Himachal Pradesh with the northern grid at Yamunanagar in Haryana. JSW had entered into a binding agreement with the Jaypee Group last September for Bina Thermal Power but they couldn't agree on valuation. The Vishuprayag project was part of an earlier buyout discussion but was damaged in floods in 2013 and needed to be repaired. In this case too, the two sides couldn't agree on a price. 

Under the terms now being discussed, a deal will primarily mean the transfer of debt to Jindal since the equity value would be about Rs 400 crore for the three assets. "Jaypee will transfer a combined debt of about Rs 5,100 crore," said one of the persons cited above. 

Jaypee Group has been looking to reduce its Rs 60,000 crore debt burden by selling assets. It has raised about Rs 15,000 crore from the disposal of units since 2013. In addition, it has already entered into a binding agreement to sell cement assets to Ultratech Cement for Rs 15,900 crore. If the deal takes place, this will be the second major acquisition by JSW Energy from the Jaypee Group. In September 2015, it bought the Baspa II unit Karcham-Wangtoo unit for Rs 9,700 crore. 

CourtesyThe Economic Times
Get REITs Right
Photo: Outlook Money
Jun 19, 2016: Ever since the idea of Indian Real Estate Investment Trusts (REITs) emerged, the capital market regulator has been putting in efforts, including the changes proposed in the week gone by, to attract REIT proponents and to make it work. Along with SEBI, it’s time now for state governments and tax authorities to make a cohesive attempt for the same.

The process, which started much ahead of SEBI notifying the regulations in 2014, is yet to see any REITs going in for listing. It’s given that any new market or instrument development will undergo its own dynamics. But, all related authorities need to move in tandem to ensure that this works.

After starting in the US in 1960, REIT regime is well established now in over 30 countries including Singapore, Australia and Finland. In India, it is still work in progress and investors here may have to wait a bit more to get an opportunity to invest in real estate securities.

REIT proponents have been seeking rationalization of stamp duty, which falls under the state government’s jurisdiction, for long. According to current regulations, transfer of income-producing commercial properties from any special purpose vehicle to a REIT will attract stamp duty, in case of direct transfer of land, and it would vary from state to state. This, among other factors, remains a key challenge for any REIT listing.

In a bid to smoothen the process of REITs registration, the Securities & Exchange Board of India has now proposed allowing REITs to invest up to 20%, in under construction assets as against earlier limit of 10%. It has also proposed change in the number of sponsors and removing the restriction on the special purpose vehicles (SPVs), when it is REIT’s holding company to invest in other SPVs holding the assets.

Just a few months ago, the government had removed Dividend Distribution Tax (DDT) through a proposal in the Union Budget 2016-17. The pace with which the authorities are moving gives a clear indication of its intention to make REITs a reality here. And it’s time now, for other stakeholders to chip in to ensure REITs kick off to offer commercial developers a liquidity option and retail investors a chance to participate in office realty market's growth.

Courtesy: ET Realty
Reforms making India real estate investments attractive
Picture: Unitech Ltd
Jun 15, 2016: The real estate sector that suffered much pain in the past two years is moving towards a more rational regime where developers, having learnt from their mistakes, now focus on project execution and delivery. This year is expected to gradually move towards better home sales and see a spurt in launches in some locations. The year will also see the sector moving from an investor-driven to an end-user driven cycle.

The recent reforms in the real estate sector have made investments into this sector even more lucrative. The recent passage of the real estate bill wherein the investors can look forward to far higher transparency and ease of doing business with developers, has led to a lot of warming up of NRIs and other FDI money towards Indian real estate. Also, now with the government permitting NRI investments into domestic AIF (Alternate Investment Funds), the availability of foreign capital will naturally increase. Coupled with the DTAA benefits available to the offshore investors, especially NRIs, it is a very lucrative time to invest in Indian real estate.

Last year India saw around $35 billion in private equity of which around $5 billion was into the real estate sector. This year, realty funds in India have already raised $470 million since January 2016 as compared to $520 million raised in the entire last year. It is possible that just real estate itself will see over $1 billion in inflows in the residential segment itself.

Affordable housing, for sure, will continue to remain at the center of these funds inflow activity.

There is a huge demand in affordable housing in most parts of the country and it’s the only option available for a common man to buy a house. This segment is backed by the initiatives announced by the government in this year’s union budget like additional exemption of Rs 50,000 for first time home buyers and 100% income and service tax exemption for construction of houses up to 30 sq meters in fourmetro cities and 60 sq meters for other cities have been allowed. Both these measures will spur affordable housing and help increasing supply in peripheral areas of cities. Real estate funds like ours will target on lending to developers with focus on affordable housing. Foreign financial institutions have also started investing into affordable housing projects as well as developers who are focused on this area, thus aiding the funding scenario as well.

Affordable housing will continue to get high traction in markets like Mumbai, Thane, Pune, NCR, Bangalore, Hyderabad, Chennai, Kolkata and Ahmedabad. While the launches and demand are going to be range bound, the product and positioning will be aligned to end users segment. The average sizes of units are going to reduce further; though marginally. Certain micro-markets within these cities are witnessing rapid infrastructural development, leading to higher influx of the educated middle class home seeker in these markets. These markets observe a more realistic capital rate assumption than the highly developed zones, and thus receive higher attention from home seekers. The developers will focus more towards bringing back the confidence of the consumer by being more transparent and focusing on constructing as per the commitments. While the long term story for residential market remains strong the short term turbulence is expected to remain.

This a right time to invest in affordable housing segment as the projects are available at attractive valuations and demand is expected to boost in 2-3 years. India is a shining economy and with the favorable investment climate and correct steps at policy level will make it more attractive not only to onshore investors but also for offshore investors.

Courtesy: ET Realty
Policy amendments on REITs beneficial
Jun 25, 2016: The latest policy announcements made by the government has positioned India as one of the most open economies. The various announcements convey the government’s commitment to reforms and to making India a lucrative investment destination for corporates across the globe. With these structural shifts, apart from generating new employment opportunities, the country is here to witness rapid infrastructure development in the near future.
The measures announced by the government regarding FDI as well as Real Estate Investment Trusts (REITs) will facilitate investments into the country. Higher investment volumes are likely to result in greater inflow of foreign investments and encourage domestic players in sectors such as manufacturing with cutting edge technology, civil and defence aviation, food processing and retail, says Anshuman Magazine, chairman and managing director, CBRE, South Asia Pvt Ltd. The growth of these sectors will directly benefit the real estate market in India, especially office, retail, logistics and warehousing segments, among others.
With regard to REITs, the changes proposed by the Securities and Exchange Board of India (SEBI) are clearly indicative of the eagerness to allow investments in REITs on a priority basis. The announcement to allow 20% investment in under-construction projects is likely to lead to an increase in potential yield returns, necessary for a successful REIT listing in the country, he says.
Overall, these announcements by the government are a much needed step in the direction of boosting the overall economy of the country

The Brexit Quiver
The United Kingdom became the first independent nation to break away from the European Union, a 28-member block, in a referendum held yesterday. The said referendum was conducted on last Thursday, the 23 June, to decide whether the UK should leave or remain in the European Union. Leave won by 52% to 48%, dealing the biggest blow to European efforts at greater unity since the second world war. 

There are now fears the vote could set off a chain reaction of further breakaway bids by other EU members battling hostility to Brussels. There are also worries that the outcome could pave the way for the break-up of the UK itself after Scotland raised the prospect of another independence vote. 

Fortunately or unfortunately, highlighting the discord, a petition demanding a second EU referendum had gathered more than 550,000 signatures late on Friday.

The referendum turnout was 71.8%, with more than 30 million people voting. It was the highest turnout in a UK-wide vote since the 1992 general election. 

The US Federal Reserve, which had earlier said a Brexit could have "significant repercussions" on the economic outlook, sought to calm markets on Friday by saying it was ready to provide dollar liquidity. In India too, Dr.Raghuram Rajan had an identical view to deal with this situation.

Amid the turmoil, sterling hit a 31-year low in its biggest intraday percentage fall on record and Prime Minister David Cameron said he would step down by October.

The fallout started immediately: the pound collapsed, prompting recession fears, and by the end of the day Brexit panic had wiped $2tn off the world economy.

European leaders reacted strongly to the vote by insisting that Britain should start negotiations to leave immediately. The UK has also been told that its access to the internal EU market would be restricted – the “price”, it was said, for leaving.

Ratings agency Moody's said Britain's creditworthiness was now at greater risk, as the country would face substantial challenges to successfully negotiate its exit from the bloc.


Huge questions also face the large numbers of British expatriates who live and work freely elsewhere in the EU, as well the fate of EU citizens who live and work in Britain.

Political figures on both sides of the debate, however, insisted there was no need to rush through the process.

Once Article 50 is invoked, it could take Britain up to two years to actually leave the EU.

During the two-year negotiation period, EU laws would still apply to the UK. Moreover, once Article 50 is triggered, the terms of Brexit will be negotiated not by British politicians or diplomats, but by the other 27 nations of the EU.

Though, it is estimated that the official British divorce from Europe would take at least two years, but EU president Donald Tusk has warned that the whole process of negotiating trade and immigration deals with a non-EU Britain could take seven years in all.

The UK however, would continue to participate in other EU business as normal, but it would not participate in internal EU discussions or decisions about its own withdrawal. 

And, when the members are ready, they will present the British government with a departure agreement on a "take it or leave it" basis.

The British vote to leave the European Union has brought the British pound down to a 31-year low, meaning UK house prices are now cheaper for foreign investors, buying in foreign currency.

Property analysts in the UK, predict a slowdown in property price growth in the UK, and even a fall in nominal prices, with London to be affected the most. 

The foreign travel to the UK, might also become more cheap, boosting the bottomline of Tours and Travel companies.

A decline in the value of the sterling could also be a catalyst for increased foreign investment in the UK due to attractive returns.


Also, the Indian Real Estate sector, would continue do well backed by policy reforms like RERA, apart from other factors.

On the flip side, India could provide the much needed stability, given the ongoing reforms at a satisfactory pace and that its inflation has remained controlled over the last few months. Also, given a normal monsoon forecast for this year, even food inflation could be kept in control in the near-to-medium term while triggering a healthy growth of agriculture and rural economy.

Given that BREXIT has happened, it is now a no-brainer to foresee, a delayed rate hike by the US Federal Reserve, which is positive for the emerging world, including India.


Apart from the real estate, infrastructure structure would also, do well. I have already recommended few stocks, like Unitech Ltd (Rs.5.43), Lanco Infratech Ltd (Rs.4.53), JSW Energy Ltd (Rs.79.95), etc sometime back. You can continue add the scrips on intra-day dips. 

However, avoid the shares of the real estate companies, who has bet big on London’s property market, like Indiabulls Real Estate Ltd (Rs.86.25), Sobha Ltd (Rs.303.25), etc, for any short term play.  These developers will now face multiple challenges including sluggish sales and a plunge in prices in the UK, say industry observers. 


The Global Research House, Nomura says: "Immediate priority for policymakers is to ensure sufficient USD and INR liquidity to keep markets well-oiled. We believe that the RBI would step up its open market operations and provide dollar liquidity through its FX reserves, if necessary".

I personally feel that it is the best time to accumulate beaten down stocks, from sectors, which have less exposure to the EU and UK (avoid Information Technology or IT stocks). 

Thursday, June 23, 2016

The dirty secret about the Brexit vote: It's all Sham
Either way the U K votes, skeptical Britain will remain as part of Europe
LONDON, 21 June, 2016 — The eyes of Europe and the world are fixed this week on Britain and its referendum on whether or not to stay in the European Union.

Poll numbers have caused violent swings up and down in financial markets around the world. Trillions of dollars ride on the outcome. Political leaders and financiers say the outcome will be momentous either way. A vote for Brexit could plunge the world into recession and crisis, some warn. It could cause the breakup of the European Union, say others. Or it could mark a heroic return to national independence and freedom for Britain, say still others.

But here’s something that everyone in power here knows, but no one is saying in public.

The whole thing is a bit of a sham.

The referendum result won’t change anything legally by itself. And the consequences will be far less momentous than anyone on either side wants to admit.

Even if Britain votes on Thursday to leave the EU, it’s dollars to donuts — or, more accurately, pounds to peanuts — that the government will instead craft a face-saving formula that gives the illusion of Brexit without much substance. Britain will end up striking deals with Brussels to stay within the single market. In return it will have to keep making contributions for access, just as it does now.

A highly placed political insider joked to me recently that Britain could end up retaining even the same voting powers in Brussels it has already.

There might be a few symbolic changes in order to placate the public and maintain a big show of Brexit. But in reality little would change.

Why should we be surprised? The British government and political classes are overwhelmingly in favor of the European Union. So, crucially, is the country’s powerful civil service. British businesses are closely intertwined with the European single market. Attempts to disentangle them could lead to chaos. And the British economy is propped up by huge inflows of foreign capital, buoying everything from industry to London house prices.

Furthermore, Thursday’s referendum has no constitutional standing whatsoever.

Great Britain has no written constitution. By convention, theory and practice, sovereignty actually lies in the parliamentary House of Commons. Britain could only leave the EU by an act of Parliament. And it would be entirely up to Parliament to craft the terms of Brexit, and the shape of whatever followed.

A strongly pro-EU Parliament would surely find a way to minimize the impact of a Brexit vote.

But pro-EU Remain voters shouldn’t be too smug either.

Even if Britain votes to stay inside the EU, the doubts that led to this referendum in the first place will still continue. Thursday is very unlikely to deliver a resounding victory or moral mandate for the European Union. Instead it will probably reveal the British are evenly divided. A majority of Prime Minister David Cameron’s ruling Conservative party is almost certain to vote to leave. A majority of England may do so as well.

The bottom line: The referendum is likely to result in a heavily euroskeptic Great Britain remaining inside Europe — no matter which side wins.


Courtesy: MarketWatch
Adani Enterprises Ltd: Buy
CMP: Rs.77
T: Rs.87
SL: Rs.74 (no need to keep but still giving)
Triggers
  • Adani Enterprises is in the process of setting up a copper smelter project with a capacity of one million tonnes per annum at an investment of Rs.10,000 crore at Adani Port Special Economic Zone (APSEZ) in Gujarat. The project includes copper smelter, sulphuric acid plant, copper refinery, continuous cast copper wire rod plant, precious metal recovery plant, phosphoric acid plant, aluminium fluoride plant among others.
  • Maharashtra, has lost 500 big and small industrial consumers due to high power tariffs over the past few years. The figures were released in a report submitted by the Maharashtra State Electricity Distribution Company Limited (MahaDiscom) to the Maharashtra Electricity Regulatory Commission (MERC). The report proposes from 19% to 27% increases in power tariff for industrial, residential, farming consumers in the next four years, ending 2019-2020. An independent analysis of the proposal shows that consumers such as Raymonds, Bharat Forge and the Railways have, along with 500 industrial users, shifted to an ‘open grid’ access beginning 2012. Such a grid allows consumers with a large use of power — 1 megawatt (1 MW) and above — to buy cheaper power from other companies or suppliers in the market. This came after the Central government amended the Electricity Act, 2003 to allow a smooth transition for industrial users. Major players in the open grid are Mittal Processor Limited, Global Energy Private Limited and Adani Enterprises Limited. A positive development for the company. 
    PhotoBusiness Standard
  • Giving much relief to the debt-laden companies, especially those form the infrastructure, power and metals and PSU banking sectors, the Reserve Bank of India (RBI) has announced a scheme for sustainable structuring of stressed assets (S4A) for resolution of bad loans of large projects.  This development would not only strengthen the lenders' ability to deal with stressed assets, but would also put real assets back on track, benefitting both banks and the promoters of troubled entities. RBI said under the scheme, a portion of the debt will be converted into equity or other instruments under the supervision of IBA's overseeing committee. Basically, the scheme will cover those projects which have started commercial operations and have outstanding loans of over Rs 500 crore. This time RBI wants banks to segregate stressed loans into 'sustainable' and 'unsustainable' segments. Companies such as Jaypee Infratech, Adani Enterprises Ltd, etc, may get the benefit of RBI's sustainable structuring of stressed assets scheme.
  • Analysts said the new scheme was better than previous such attempts at tackling bad loans. “On the one hand, RBI has allowed leveraged companies to have a comfortable capital position to service debt and on the other, banks do not have to necessarily take significant provisions to effect this change. We still need to see how many projects meet the conditions but this appears to be a major positive step for banks to reduce their gross non-performing loans,” said analysts at Kotak Institutional Equities.Experts said the schemes will particularly be beneficial for companies with operating assets and a high portion of sustainable loans.
  • Adani Enterprises Ltd (AEL), flagship company of the $10 billion conglomerate Adani Group, registered a net profit of Rs.65 crore for the quarter ended March 31, 2016 where as the same was at Rs.72.80 crore for the quarter ended March 31, 2015, AEL said in its filing on BSE.
    The company's total standalone income for Q4 of fiscal 2015-16 was Rs.2,249.82 crore whereas the same was at Rs.3,597.23 crore for the quarter ended March 31, 2015.
    According to AEL, in view of the Gujarat High Court sanctioning the de-merger on May 07, 2015 of its port undertaking, power undertaking and transmission undertaking comprising the undertaking, businesses, activities, operations, assets (movable and immovable) and liabilities of AEL and transfer of the same to APSEZL, APL and ATL, respectively, the results of the fourth quarter and fiscal ending March 31, 2016 were not comparable with the previous period or year numbers.
    Commenting on the results, Gautam Adani, Chairman Adani Group, said: "Our portfolio of businesses across Mining, Renewable energy and Agro vertical benefits from vastly improved macro-economic and regulatory environment. Encouraging policy initiatives particularly in renewable space, enables us to explore new business opportunities in the sector."
  • Among its various businesses, AEL's mine development and operations (MDO) business at Parsa Kente saw the company extracting and supplying washed coal of 5.5 MMT to RRVUNL in FY'16 as compared to 3 MMT in FY'15.
  • Under its city gas distribution business, the project implementation work at seven cities under joint venture with Indian Oil Corporation Limited is progressing as per the schedule, the company stated.
  • AEL recently launched India's first Diabetic care oil under brand "VIVO" for specific target segment under its agro business.
    Axis Bank Ltd: Buy
    CMP: Rs.517
    Triggers

    Wednesday, June 22, 2016

    JSW Energy Ltd: Buy
    CMP: Rs.81.50
    JSW Energy Ltd’s net profit for the March, 2016 quarter remained almost flat at Rs.305 crore against Rs 325 crore during the corresponding quarter of the previous year. The results were a little timid due to higher interest and depreciation expense incurred after the acquisition of hydro assets in Himachal Pradesh.

    The total income from operations rose by 22% to Rs.2,681 crore, against Rs.2,190 crore, driven largely by increased generation from the thermal plants and was supplemented by additional generation from the hydro plants. 

    JSW energy is an India based private power generation company. The company’s business segment includes power generation, power trading, power transmission, mining and equipment manufacturing. 

    Recently there were media reports that, the company is shortlisted to supply electricity to a Karnataka utility through a power purchase agreement (PPA). However, in a filing to BSE, the firm clarified that the bid requires several approvals for it to be finally clinched.


    The stock was first recommended in this blog at around Rs.67-68. You can still take fresh positions in the counter, for short term targets of Rs.87-91. SL: Rs.75.
    JSW Energy Ltd: Buy
    CMP: Rs.81.50
    JSW Energy Ltd’s net profit for the March, 2016 quarter remained almost flat at Rs.305 crore against Rs 325 crore during the corresponding quarter of the previous year. The results were a little timid due to higher interest and depreciation expense incurred after the acquisition of hydro assets in Himachal Pradesh.

    The total income from operations rose by 22% to Rs.2,681 crore, against Rs.2,190 crore, driven largely by increased generation from the thermal plants and was supplemented by additional generation from the hydro plants. 

    JSW energy is an India based private power generation company. The company’s business segment includes power generation, power trading, power transmission, mining and equipment manufacturing. 

    Recently there were media reports that, the company is shortlisted to supply electricity to a Karnataka utility through a power purchase agreement (PPA). However, in a filing to BSE, the firm clarified that the bid requires several approvals for it to be finally clinched.


    The stock was first recommended in this blog at around Rs.67-68. You can still take fresh positions in the counter, for short term targets of Rs.87-91. SL: Rs.75.
    DO YOU KNOW?
    1. Merger talks between Reliance Communications (R-Com) and
    Photo: Slide Share
    Aircel will be extended by a couple of weeks, as both parties are thrashing out the final contours of the deal with their bankers, reported Business Standard. On 22 May, both had decided to extend exclusive merger talks with each other by a month, a deadline that will expire on Wednesday. Lenders are putting their weight behind the merger and the State Bank of India is leading this consortium of lenders. Read more .


    The scrip of Reliance Communications Ltd, ended the day at Rs.48.50 in the BSE after touching an intra-day high of Rs.49.80.

    2. BREXIT: The whole thing is a bit of a sham, said the financial portal, Market Watch on 21 June, 2016..

    Therefore, for the time being you can stop fearing thinking about the possible negative outcomes from the BREXIT. 


    Photo: Infogr.am
    The promoters holding in the company stood at 70.55 % while Institutions and Non-Institutions held 4.97 % and 24.48 % respectively.

    Reports indicated that Tata Power Company, JSW Energy and Piramal Enterprises are among those who are interested in buying Lanco Group's power assets. A meeting of the joint lenders forum is scheduled to meet in the next few days to take a decision on the sale of the power business of Lanco Group. As per reports, Lanco Group, has power assets of about 8,000 megawatts (MW), and is seeking about Rs.4.50 crore per MW while buyers are bidding at about Rs 3 crore per MW. Lanco Group's power business' enterprise value is pegged at Rs.45000 crore inclusive of debt, reports suggested.


    This along with the new RBI rules, will  again help investors gravitate towards the scrip of Lanco Infratech Ltd (Rs.4.87). 

    4. Fixit: The First Post wrote on 21 June, 2016: 


    Therefore, sit back and enjoy the rally in the infrastructure stocks as it unfurls, in the coming days; since the government is likely to pursue a loose monetary policy following the Rexit.