Infrastructure firms seek senior executives after two-year lull

 Firms seek to reduce debt, turn around projects and win new ones from an expected pick-up in infrastructure growth

The Narendra Modi-led government’s plans to build a high-speed train network, 100 smart cities, dedicated freight corridors and airports in smaller towns are expected to help infrastructure firms, which are beefing up manpower for growth. Photo: Pradeep Gaur/Mint

Mumbai, July 21, 2014: After two years mired in a slowdown, top and mid-tier infrastructure firms are looking to hire senior executives, as they seek to reduce debt, turn around projects and win new ones from an expected pick-up in infrastructure growth. Officials at executive search firms said they have been mandated to find suitable candidates for GMR Group, KEC International Ltd, Larsen & Toubro Ltd (hydrocarbon business), L&T Infrastructure Finance Ltd and SREI Infrastructure Finance Ltd, which have interests in power, roads, water and ports. 

Search firms like Executive Access Ltd, RGF Executive, EMA Partners International and ABC Consultants each have at least five mandates to hire senior-level executives with ‘entrepreneurial skills’ to support expected growth in the sector. 

The Narendra Modi-led government’s plans to build a high-speed train network, 100 smart cities, dedicated freight corridors and airports in smaller towns are expected to help infrastructure firms, which are beefing up manpower for growth. 

“Last two years was a phase of consolidation and we did not see profit growth. But we are geared for growth now,” said Hemant Kanoria, MD, Srei Infrastructure Finance Ltd, which is looking to add about five senior executives for its water, power, special economic zones and road businesses. 

Infrastructure was among the worst-hit during India’s economic slowdown, so much so that a March report by International Monetary Fund (IMF) attributed the slowdown largely to infrastructure delays. Delayed clearances, heavy debt, high interest rates and a slowdown in demand had all contributed to stagnation. 

As a result, senior-level hiring almost came to a standstill over the last two years and some companies even let people go, said headhunters and company executives, who did not want to be identified. 

Compensation also remained flat across the sector. “Executives were given phenomenal compensation, but over the last three years, with the slowdown, there have been very slight salary increases and very little incentives for the senior level, says Anandorup Ghose, Rewards Consulting Practice Leader at Aon Hewitt India. 

Last year, while the average salary increase across sectors at the top management was 8-9%, infrastructure executives saw lower salary increases of 5-7%, said Ghose. However, firms are now re-booting. KEC, part of the RPG Group, created a new role and hired Rakesh Amol as president of its infrastructure business in April, where he would be responsible for railways, water and any future infrastructure verticals the company may get into. 

“We wanted someone who had the entrepreneurial trait of capturing and leveraging all opportunities. In the past, while we looked at people with leadership skills and project execution capabilities, this time, our focus was on someone with strong entrepreneurial capabilities,” said Arvind Agarwal, president, corporate development & HR for RPG Group. Headhunters agree. “Earlier, senior executives held a more maintenance role, but now, they are looking for stronger execution skills coupled with the ability to identify opportunities and deliver faster turnaround on projects,” said Ronesh Puri, managing director, Executive Access. 

The ability to deleverage balance sheets is also sought after, at a time when most infrastructure companies are burdened with debt. “Infrastructure companies are heavily debt-laden and what they seek is expertise in financial turnaround skills and not just raising capital,” said K Sudarshan, managing partner of EMA Partners, who has mandates to hire 10 senior level infrastructure executives, including at the CEO and CFO level. 

“As part of the preparation for new projects in the coming year, we are looking at augmenting our talent pipeline in select and niche areas where specialized skill-sets are required for developing large, complex infrastructure projects and asset management, said Sanjeev Sahi, president, human resources, GMR Group. 

Hiring by infrastructure firms is driving business for search firms, making it one of their fastest-growing segments. “Business in this sector has more than doubled as there is a real war for talent,” says Puri.

Courtesy: Live Mint

PMO to take stock of infrastructure projects this week

NEW DELHI, Jul 22, 2014: For the first time, the Prime Minister's Office (PMO) will this week take stock of the targets set by each infrastructure ministry after the Narendra Modi government took charge.

The Planning Commission, which has been tasked to prepare the presentation for all infrastructure sectors, has sought details from all departments. Sources said the first such umbrella meeting on targets for this financial year is crucial since the Prime Minister has already gone through individual presentations by each ministry and department.

They added that ministries are likely to stick to their earlier targets, though a final call will be taken by PMO considering the achievable targets.

Government officials said the road ministry is likely to submit that NHAI and the ministry would be able to award 8,500 km including 3,500 km on build, operate and transfer (BOT) mode despite the first set of three BOT projects not getting a single bidder. All these projects — Delhi-Meerut Expressway, Varanasi-Sultanpur and Varanasi-Ghaghar bridge stretches — were cleared by the new cabinet.

On the construction front, the target is likely to be 6,300km, out of which NHAI would build about 2,000km.

Meanwhile, the PMO has also sought details of projects and programmes run by all the departments within a week. "Though the communication does not detail the reason behind this, we feel the intention could be to get a complete picture of the activities and to find out which all have been successful and what all have failed," said a senior government official. 

Courtesy: The Times of India

Market Mantra

Today's call: Genera Agri Corp Ltd (BSE Code: 590133)  at Rs.6.58-6.59 hit the buyer freeze, in the mid-afternoon trade. The scrip has a book value of Rs.74.27 and EPS of Rs.3.11.  The stock is expected to hit some more buyer freezes on the way to Rs.9. 

It seems the correction in IVRCL Ltd is over, and the scrip should move up after forming a double bottom. The book value of the shares of the company is Rs. 47.33, which is likely to improve in the coming days, as the company's CDR package has been approved and the government of India has decided to give more impetus to the Infrastructure (especially construction of roads and highways), sector. 
Allied Digital Services Ltd is slowly inching towards the 1st target of Rs.25. Today it touched Rs.21.45 and is now trading at Rs.21, up 2.92%. 
Resurgere Mines and Minerals Ltd (BSE Code: ) hit the buyer Freeze in NSE at Rs.2.20 and is slowly moving towards Upper Circuit in the BSE too; which is placed at Rs.2.27. The CMP in BSE is Rs.2.23.

Sebi draft norms for infrastructure trusts

[Editor: To encourage infrastructure development, RBI exempted long term bonds from mandatory regulatory norms like CRR and SLR if the money raised is used for funding of such projects. In other words, "Banks can issue long-term bonds with a minimum maturity of seven years to raise resources for lending to long term projects in infrastructure sub-sectors," the Reserve Bank said. The central bank said it intends to "ease the way for banks to raise long term resources to finance their long term loans to infrastructure". To say it in simple terms: Reserve Bank of India (RBI) said banks would not have to maintain cash reserve ratio (CRR) or statutory liquidity ratio (SLR) and will not have to meet priority-sector lending targets for funds raised through bonds for extending credit to these sectors. Meanwhile, the Planning Commission secretary Sindhushree Khullar is scheduled to make a presentation this week on the performance of infrastructure sector in 2013-14. Secretaries from the ministries of power, road transport, shipping, civil aviation, coal, petroleum will also be present during the presentation. As many as 189 highway projects with a cost of Rs.1,80,000 crore are stuck due to various hurdles. Therefore, the time has come to invest in the infrastructure stocks, like IVRCL Ltd at Rs.23.35 and keep holding. It is to be remembered that the corporate debt restructuring cell (CDR) has approved an almost Rs.7,000-crore debt recast proposal for IVRCL Ltd. The company is also coming up with a Rights issue]

MUMBAI, Jul 18, 2014: In an attempt to meet the long-term financing needs of the infrastructure sector, Sebi on Thursday issued draft guidelines that would pave the way for launching infrastructure investment trusts in India. These trusts will invest public money only into completed and revenue generating infrastructure assets, and under-construction projects. The units issued by these trusts, just like mutual funds, will also be compulsorily listed on the bourses thus providing liquidity to investors.

Banks, international multilateral financial institutions, foreign portfolio investors (FPIs), including sovereign wealth funds, can come in as strategic investors in infra investment trusts.

Infra investment trusts are proposed to "provide a suitable structure for financing/refinancing of infrastructure projects in the country," Sebi's draft guidelines said. These trusts will invest in "infrastructure projects, either directly or through SPVs. In case of PPP projects, such investments shall only be through SPV," it added.

According to Sebi's draft rules, an infra investment trusts which will invest at least 80% of the corpus in completed and revenue generating Infrastructure assets, will be allowed to raise funds only through public issue of units and the minimum subscription size and trading lot for such units will Rs 5 lakh. The balance 20% of the corpus may be invested in under construction infrastructure projects (subject to maximum of 10%) and other permissible investments.

An infra investment trust that aims at investing more than 10% of the corpus in under construction infrastructure projects, will be allowed to raise funds only through private placement from institutional players and body corporate. The minimum investment and trading lot for such units is fixed at Rs 1 crore. "Such (trusts) shall mandatorily invest in not less than one completed and revenue generating project and not less than one pre-COD project.

The draft guidelines said that the proposed holding of an infra investment trust in the underlying assets should be at least Rs 500 crore and the offer size of the trust shall not be less then Rs 250 crore at the time of initial offer of units. The rules also said that the total borrowing of such trusts and the underlying SPVs should not exceed 49% of the value of the trust's assets. However, this may exclude any debt infused by the trust in the underlying SPV. Further, for any borrowing exceeding 25% of the trust's corpus, requirement of credit rating and unit holders approval will be mandatory.

Source: The Times of India

Mining lease cancellation: Govt moves SC for transfer of cases

The illuminated building of
the Supreme Court of India

New Delhi  July 18, 2014: The Centre today approached the Supreme Court seeking its direction to transfer before it all cases arising out of mining licence cancellation that are pending in various high courts. 

Agreeing to hear the Centre's plea, a bench headed by Chief Justice R M Lodha issued notice to all the companies which have filed petitions in the high courts. 

The Supreme Court sought response from Corporate Ispat Alloys Ltd, JWS Energy Ltd (Jindal Thermal Power Company Ltd), Bhushan Power and Steel Ltd, Sainik Mining and Allied Service Ltd, Ultratech Cement Ltd, Jharkhand State Mineral Development Corporation, Jayaswal Neco Industries Ltd and Bihar Sponge Iron Ltd on transfer petition filed by the Centre.

Courtesy: The Business Standard

Domestic and Indian Gold Rally Strong In H1 2014

Domestic and Indian Gold Rally Points to a Strong Second Half by Frank Holmes

July 17, 2014: Earlier this week we reported that gold, defying expectations, is one of the best-performing commodities of the year so far.

And now we’ve learned that gold bullion imports by India climbed a stunning 65 percent last month after the country’s central bank allowed more investors to buy foreign bullion. Imports rose to $3.12 billion in June from $1.89 billion this time last year.

India is the world’s second-largest consumer of gold after China, accounting for approximately 25 percent of all gold consumption. Gold is the country’s second-largest import item after oil.

This news comes closely on the heels of the recent election of Prime Minister Narendra Modi, whose Bharatiya Janata Party (BJP) seeks to loosen import restrictions and other government regulations that tend to stifle economic growth. The rally also coincides with the Indian wedding season, which typically ends on July 7 and 8.

More importantly, what this news could portend is a stronger-than-normal second half of the year for the gold market. Data points going back 35 years confirm the probability of gold gaining strength in the second half, thanks largely to international celebrations such as Diwali, Ramadan and Christmas. This year in particular looks very promising indeed.

Keep your eyes on real interest rates

Recently I chatted with Daniela Cambone during my weekly Gold Game Film program on Kitco. I pointed out that, with the end of the Indian wedding season, we’re historically due for a slight correction in the gold market. But whereas last year saw a huge contraction and liquidation of gold around this time, the gold bullion exchange-traded funds (ETFs) around the world this year actually expanded.

Daniela and I also looked ahead at the gold market in the coming months. One of the points I shared dealt with the strong correlation between gold performance and real interest rates, which you arrive at after subtracting inflation from the nominal interest rate.

If we go back to when gold was at $1,900 [in August 2011], the negative real interest rates were 200 basis points. Then by December of last year, it went to plus 50 basis points. Now it’s gone negative again, and gold is rallying. And I think that that’s a key factor when we look forward, and I think we’re going to continue to have negative real interest rates. So when inflation starts to rise like it did in the ‘70s, [the Federal Reserve isn’t] going to be able to lift rates as fast as the inflationary rate because it will stifle the economy dramatically.

One last point I want to emphasize is our perennial suggestion to investors: 5 percent exposure to gold bullion, 5 to gold stocks, and rebalance each year for an overall 10 percent weighting in your portfolio.

Last year the stock market boomed, whereas bullion disappointed and gold stocks dramatically underperformed. Had investors taken their profits in the stock market and rolled it into gold, they would have done exceptionally well this year.

That continues to be our discipline here at U.S. Global Investors, and the recent gold rally, domestically and in India, substantiates this position.

Courtesy: Valuewalk

WINNING STROKES: THINK DIFFERENT

Nitin Goenka and Mahdeep Kapoor
Photo: www.sulekha.com

Allied Digital Services Ltd, recommended today, to the Paid Service Members, at around Rs.20.60-21, today hit the upper circuits, in the closing trade. The scrip could be hitting non-stop upper circuits during the next few trading sessions. 

Resurgere Mines and Minerals Ltd, after a brief correction has again bounced back, hitting upper circuits today, in the BSE. Later it turned out to be only buyer. The punters are probably taking positions in the scrip before the  much awaited start of operations in the company's bauxite mine in Maharashtra, post monsoon. If the mining really starts there, then the scrip would cross its book value of Rs.26.49. It is to be understood that in a BULL Market everything moves up, and I feel this scrip will also spurt ahead, considering that its peer group company SVC Resources Limited, with much worse fundamentals, is trading at Rs.22.60 (if we consider the face value of the scrip to be Rs.10, instead of Re.1). 

Rohit Ferro Tech Ltd, after a sell call at Rs.14.20, today fell further, and closed at Rs.12.76. The sell call was given on the source based news that the commencement of operation in its 67 MW captive power plant will get further delayed, due to tight liquidity conditions. The scrip could fall below Rs.12 in the coming days. 

The Nifty was given a buy today, and as expected it closed in the Green. The FII/FPI on 18th July, 2014 were net buyers to the tune of Rs.574.47 Crores. As long as 7650-7600 is not broken on the downsided, the longs are a hold. However, the action would now be concentrated in the small and mid cap counter, many of which are still trading near their 52-week low, eg. Goenka Diamond & Jewels Ltd (Rs.3.38).  Incorporated in 1990, Goenka Diamond & Jewels Limited is in the business of cutting and polishing of diamonds and manufacturing and retailing of diamond jewellery. Goenka's product profile includes rings, earrings, pendants, bracelets, necklaces, etc. which are manufactured using polished diamonds, precious and other semi precious stones which are set in gold. Company has its own diamond processing unit at SEZ in Surat and in Mumbai. Goenka Diamonds retail its diamond jewellery under two brands CERES and G WILD. Company retail high end diamond jewellery under the CERES brand targeting the top-end segment of the society while G WILD focuses on internationally designed diamond jewellery targeting the youth. It came up with an IPO in March, 2010 at an issue Price of Rs.135-Rs.145 per equity share (Face Value: Rs.10). According to Business Standard, 24 March, 2010: "The initial public offer (IPO) of Goenka Diamond & Jewels, which opened for subscription on Tuesday, was over subscribed on the first day with institutional investors putting in sizeable bids".  M. B. Diamonds, a Limited Liability  and Goenka Diamond & Jewels DMCC, Dubai. Goenka Dimond and Jewels Ltd's subsidiary, M.B. Diamonds, in Russia, is one of the largest diamond producers. This allows the company to source rough diamonds, its primary raw material, directly through diamond auctions held there, which reduces the raw material costs. The subsidiary also has a unit to polish diamonds. The entire output of the subsidiary — both processed and rough diamond — is sold to the company. Goenka Diamond & Jewels Ltd (Now its Face Value: Re.1 and not Rs.10) has now appointed a new company secretary, and a board meeting to declare, Q4FY14 results could be on the cards. 

IVRCL Ltd today closed at Rs.24.10 down 2.03%. You should buy this scrip like Fixed Deposit and keep holding. Earlier, there were media reports that the Corporate Debt Restructuring Empowered Group of the Reserve Bank of India, at its meeting held, approved the debt recast proposal submitted by IVRCL. The restructured package covers Rs.7,350 crore. About 20 banks led by State Bank of India were involved in the restructure process. Under CDR, banks typically increase the repayment period of loans to stressed borrowers, offer a moratorium and reduce lending rates. “This is a significant development and comes in as a big relief. This will enable us to take off again by implementing various projects which were stuck due to funding issues. We have a strong order book of Rs.20,000 crore and will implement them as per plans,” R Balarami Reddy, Chief Financial Officer, IVRCL, said. Explaining the terms, he said the company will have access to a priority debt of Rs.175 crore, additional cash credit of Rs.200 crore, Rs.1,400 crore non-fund credit and Rs.300 crore of letter of credit. All of them will be interest-free from December 1, 2013, and have a moratorium of 28 months on term loans. The funded interest term loan is to be paid within eight years after the moratorium. It will carry an interest rate of 11.25%. The company’s interest burden had piled up and the cash flows were impacted due to slowdown in project execution. IVRCL was, therefore, forced to knock at the CDR cell. IVRCL had divested its stakes in three road projects in Tamil Nadu to a Tata group company Tata Realty and Infrastructure Ltd, and is in negotiations to divest stake in a couple of other projects, including a Chennai desalination plant and road projects. 
Accumulate Western India Shipyard Ltd at the CMP of Rs.2.37. as some good news is on the anvil. 

Market Mantra

Soha Ali Khan at the Goenka Diamonds' Launch
Photo: Pinkvilla

The markets moved in line with expectations yesterday, taking cues from strong global markets, and finding support 7440 levels. It closed with a gain of 72 points at 7526. Although it was a more or less choppy session yesterday, the last hour of buying pulled it to a  high of 7535. This definitely gave more ammunition to the bulls. 

The bounce back of Nifty the support level of 7440 and the closing above 7500 shows buying interest at lower levels. Stay invested in Bank and Infrastructure stocks. Nifty is now trading at 7610, which is far above the resistance of 7580. 

Today's call:
(i) Buy IVRCL Ltd at Rs.24.40, T--Rs.27.20, SL--Rs.21. Most of the infrastructure stocks will move up taking cues from the budget.
(ii) Buy Marg Ltd at Rs.17.50, T--Rs.24, SL-Rs.15.50. In the recent budget the FM, has talked about strengthening the Shipping Sector. Also, the Finance Minister Arun Jaitley has proposed to award the development of 16 new port projects in the current fiscal year. Presenting the Union Budget 2014-15 in the Lok Sabha, Jaitley said, "A policy for encouraging the growth of Indian controlled tonnage will be formulated to ensure increase in employment of the Indian seafarers. Development of ports is also critical for boosting trade."
(ii) Buy Goenka Diamond and Jewels Ltd (BSE Code: 533189, Face Value: Re.1), for a target of Rs.4.80.  Though small players in the Gems and Jewelry sector are disappointed over not inclusion of their demand of introducing turnover tax among others, but many have expressed satisfaction over rationalization of customs duty for semi-processed, half cut or broken diamonds and cut and polished and coloured gemstones. This development has till now been  overlooked by the market. Goenka Diamonds Ltd is an established name in this sector.
(iv) Book profits in Rohit Ferro Tech Ltd at Rs.14.25 and enter Marg Ltd at around, which is a much safer play both on the infrastructure and shipping sectors. 

Note: These calls were given to the Paid Groups, in the morning and yesterday, they were asked to book partial profits in Rohit Ferro Tech Ltd. The call on Marg Ltd was given yesterday at around Rs.16.50--17. I feel most of them have made money by now. 

Business Offer: Digital Business Solutions

Friends, it has been long that I have been associated with you, basically with regards to investments in Indian Stock Market, and other other miscellaneous issues. Since, 2006, this blog  has been active, in giving information in this direction only, apart from touching other hot current affair topics, too, from time to time. In between, I made lot of friends, both in India and in overseas--regardless of caste, creed and colour. 

The advent of technology has made this possible, forgetting the barriers of time and distance. As a result, I was fortunate enough to have well-wishers and clients all over the globe, cutting across continents. When some of  you call me-up on my cell and say, that "I have been following your Blog and Yahoo Group Posts, since the last 5-6 years"; it gives me immense satisfaction. 

However, I have now diversified into other fields too, apart from Stock Market and Real Estate. Hence, I would like all of you who are in Indian subcontinent or Europe or Africa (a growing sphere in the IT enabled service space) or Gulf or in North American countries or anywhere in the world, to join me in this new Information Technology Venture. 

Our company Webworkz Interactive (P) Ltd have got necessary infrastructure and wherewithals to cater to  your Digital Business Solutions, including Software Development. 

Webworkz Interactive is a digital business solutions firm, located in Mumbai (Bombay), helping enterprises achieve their revenue, market-share and customer loyalty objectives through the use of digital media. 

At Webworkz, we design, develop and deliver customized digital media solutions that focus on customer acquisition, audience engagement, community development & brand visibility. 

From display media and search to social media and e-commerce, Webworkz has the entire range of digital media expertise and it effectively combines these areas of expertise to deliver exceptional solutions for its clients. 

At Webworkz, we partner with a diverse and prominent portfolio of clients in Financial Services, BPO, Real Estate, B2B, Consumer Goods and Services sector including mid-sized organizations to top corporations and have a high client retention ratio. This speaks volumes about our solutions expertise and our servicing standards.

If you are a CEO or a Top Official of a company and need to outsource your products / services or want Digital Business Solutions for your organization, then you could look for our company Webworkz Interactive (P) Ltd (www.webworkzinteractive.com), Mumbai (Bombay), for  a Joint Venture. Even if you are an ordinary guy and can bring a minimum business for our company, you can join the team and work with us; from any part of the world. 

Moreover, since, I will be there, in this  collaboration, hence, you will not have to bother much as far as the quality of the work is concerned. Even then you would have direct access to me for solving any of your problems.   

In any business trust is an important factor. If you think you have confidence in me and my organization, kindly drop in a mail at: suman2005s@rediffmail.com. I will make arrangements, so that the concerned person of our organization speaks with you and finalize the deal. 

Therefore, let us not waste further time and see, if we can make this effort a grand success. Let us join hands together for a great future, ahead. Thanks a lot for your continuous love and affection. 

FIIs and DII trading activity

Though today, also, FIIs were net sellers but chartically speaking, the good point is that, 7440 and 7500 were both held by the bulls. In the morning inputs to the Paid Group, it was mentioned that the market could bounce back, if and only if 7440 holds. At that time Nifty was trading at 7481.35, up 27.20 points.  The Nifty ended the day at 7,526.65 up 72.50 points. I hope the Nifty traders have money even today. 
Join the Paid Service or trade through my recommended brokerage house/s and be ahead of others.

India's infrastructure sector will receive a multi-year boost from budget, Fitch says

Photo: The Hindu

COIMBATORE, Jul 14, 2014: The infrastructure sector is set to receive a multi-year boost from the budget, Fitch Ratings has said.

"By carrying forward the previous administration's efforts to clear the country's infrastructure backlog, the new government has made it a policy focus to drive forward a new long-term capital investment cycle," it said.

"This means that fiscal and regulatory policy changes should be supportive of corporates in the infrastructure, construction, and real estate industries," the agency said. While Fitch expects them to have only a minimal impact in the short-term, they would have a positive effect on infrastructure over the medium to long-term.

Significant new urban development objectives and thousands of new kilometres of highways and gas pipelines were included in the budget, in addition to over Rs 60,000 crore in direct infrastructure investments, special economic zones, port and subway projects.

Stating that the direct project announcements and objectives were significant, Fitch said the measures to ease funding were particularly noteworthy and would be critical for driving the new investment cycle.

Banks would be allowed to raise long-term funds for infrastructure lending with minimum regulatory requirements. They are also being encouraged to extend loans to the infrastructure sector, with tenures of 25 years—far above the current norm of 10 years.

Further, REITs (real estate investment trusts) have been proposed and urban construction would be opened up to foreign capital. Tax incentives for investments in manufacturing— including an allowance of 15% for investments over Rs. 25 crore— would also support growth in the sector, Fitch stated.

Power and utilities also received supportive policy measures in the budget. Fitch views the government's plans to rationalise and improve coal supplies for power plants as particularly critical for improving productivity. "The extension of tax benefits for power generation companies for a further three years will also be supportive to their bottom line," the agency said.

The new infrastructure drive over the long- term would be positive for the steel, cement and capital goods industries, which would benefit from rising demand, it said.

Though the 0.5% increase in duty on coke is marginally negative for steel producers, the agency believes that the broader impacts from higher rates of growth will be sufficient to offset the rising operating costs.

Courtesy: The Times of India

WTO faults U.S. over duties on Chinese, Indian steel goods

Photo: News1st

Tue Jul 15, 2014: World Trade Organisation judges said on Monday the United States broke its rules in imposing hefty duties on Chinese steel products, solar panels and a range of other goods that Washington argues enjoyed government subsidies.

In a similar case involving U.S. methods in deciding when foreign imports are unfairly priced, another WTO panel ruled in support of some claims by India against tariffs on steel exports from three of its major firms.

Trade diplomats said the two cases, both under scrutiny for nearly two years by the separate panels, reflected a widespread concern in the 160-member WTO over what many see as illegal U.S. protection of its own producers.

In the $7.2 billion Chinese case, the panel found that Washington had overstepped the mark in justifying the so-called countervailing duties it imposed as a response to alleged subsidies to exporting firms by China's government.

Under the 1964 Marrakesh accords, which also set up the WTO, these duties can only be levied when there is clear evidence that state-owned or partially state-owned enterprises passing on the subsidies are "public bodies."

The panel found that Washington had produced insufficient evidence for this, and was also at fault in its calculations of the value of the subsidies to Chinese firms producing items like kitchen shelving, grass cutters and even citric acid.

And it told the United States it should adapt its measures to bring them into line with the WTO's agreement on subsidies and countervailing measures, dubbed the SCM in trade jargon.

SOME COMFORT

The ruling, which gave the United States some comfort in rejecting some aspects of the Chinese complaint, was welcomed in a statement from China's Ministry of Commerce distributed by Beijing's trade mission in Geneva.

"China urges the United States to respect the WTO rulings and correct its wrongdoings of abusively using trade remedy measures, and to ensure an environment of fair competition for Chinese enterprises," the statement said.

The United States said it was weighing its options.

U.S. Trade Representative Michael Froman said the decision to reject many of China's challenges was a victory for American businesses and workers.

"With respect to the other findings in the panel report, the Administration is carefully evaluating its options, and will take all appropriate steps to ensure that U.S. remedies against unfair subsidies remain strong and effective.”

Many other members of the organisation, including the European Union and Japan, declared themselves interested parties in the disputes, although they did not say if their sympathies lay with the United States or its challengers.

The ruling in the Indian case - which involves steelmakers like Tata, Jindal and Essar who are supplied by the state-run iron-ore mining firm, NMDC - was not so clear-cut.

It said the United States had "acted inconsistently" in terms of some provisions of the SCM agreement and had unfairly reduced Indian trade revenue. Washington should bring its measures into line with the pact, the panel said.

But it rejected many of the technical aspects of the Indian case.

Froman hailed the panel ruling while recognising it as a "mixed result."

"The panel's findings rejecting most of India's numerous challenges to our laws and determinations is a significant victory for the United States and for the (U.S.) workers and businesses making these steep products," he said.

(Reporting by Robert Evans, with additional reporting by Krista Hughes in Washington, Editing by Angus MacSwan)

Courtesy: Reuters

FIIs and DIIs trading activity

Resurgere Mines and Minerals Ltd: Clarifications

It has come to my notice, some days back that some baseless rumors are being spread by vested interest groups, having some ulterior motives, in various message boards and discussion forums. I had earlier given my clarifications on the same, but it seems, the things are being stressed beyond tolerable limits. Below, I have tried to answer some of the most talked about questions, to the best of my abilities; after speaking with my sources. If you still have questions on this scrip, please do mail me at: suman2005s@rediffmail.com. 

Moreover, the difference of price of the scrip in the two exchanges, have probably confused the investors; who are finding it difficult to gauge the discovery rate of the scrip. It is natural that when a scrip trades with so much difference in two of the leading exchanges in India, the investors are bound, get perplexed. I had mentioned about problem, a number of times earlier in various forums including this blog, but unfortunately, it perhaps fell in the deaf years of the regulators. Hope the exchange authorities will soon, bring the price of the scrip, almost same, in the two trading platforms, by putting suitable circuit filters. Anyway, here is my take:  

Q.1. The CMD of the company Mr.Subhash  Sharma is drawing Rs.10 lakhs salary per month. 

Ans. Mr.Sharma is not taking any salary since the last one year, according to my sources. Moreover, the total employee cost for FY14, is shown to be only, Rs.62.56 lakhs. If Mr.Sharma had taken such high salary, then the amount would have been crores. Isn't it?

Q.2. The company does not have any mines. 

Ans. If the company is not carrying out any mining activity then from where Mine Development Expenses, shown in the result sheet, being written off as Rs.1137.76 lakhs came for the year ended 31st March, 2014 and Rs.2472.07 lakkhs occurred for the year ending 31st March, 2013? This will only come if the mining takes place, isn't it?

Q3. If the company had mandates to do mining, in Maharashtra, then why is the mining  not taking place now? 

Ans. Yes, the company do have the permission for mining in Mahalmiriya (Bauxite), Maharashtra. But Resurgere Mines and Minerals Ltd, has some problems with the lease agreement. According to my close sources, the company hopes to solve it at any time from now. However, mining can take place only post monsoon, which is natural in this business. This is also one of the reasons, why there is no mining taking place now. 

Q4. The company does not  have any Iron Ore mines.

Ans. The company has applied to the authorities to allow them to mine in  Satarda Mine, Maharashtra. The management hopes that with the new government taking lot of initiatives to revive the steel sector, such permission would be granted soon.  

Q5. Resurgere Mines and Minerals Ltd is a paper company with no sales and  no employees. No one knows what it does at present. 

Ans: Resurgere Mines & Minerals India Limited is a Public Limited Company engaged in the business of extraction, processing & sale of Ore and exploration & development of mining assets. Presently the Company is enjoying long term raising and purchasing rights for Bauxite Mine in the State of Maharashtra and mining rights for Soapstone in the State of Rajasthan. The Company has also 99.98 % equity holding in Shree Warana Minerals (India) Pvt. Ltd. having another bauxite mine in the State of Maharashtra through its wholly owned subsidiary i.e. Warana Minerals Private Limited.

It has an office in one of the prime locations in Mumbai (Bombay) and does have employees. However, since at present it is engaged in very small amount of mining, the company shed its employee strength; with an eye to save costs. When full scale mining will take place, which is probably after the monsoon, we could see an increase of employee head count. 

Q. Recently the promoters sold the shares of the company and made  money. 

Ans. The promoters did not sell any share, in contrast to one of the peer group companies, like SVC Resources Limited (Rs.2.48, Face Value: Re.1). If anything has been sold, it happened when pledged shares were invoked by the lenders.

Q. The company has no future, as the management, till now has failed to perform. 

Ans. The management, in order  to further their business, opened the followed subsidiary companies, but due to tight liquidity conditions it was not able fructify their idea. Subsidiary companies are: 

a. Warana Minerals Private Limited - Wholly owned Subsidiary Company.

b. Shri Warana Minerals (India) Private Limited - Subsidiary Company of Warana Minerals Private Limited.

c. Resurgere Sponge Iron Limited - Wholly owned Subsidiary Company.

d. Resurgere Ferro Alloys Limited - Wholly owned Subsidiary Company.

e. Resurgere Industries Limited - Wholly owned Subsidiary Company.

f. Resurgere International FZE - Wholly owned Subsidiary Company at UAE.

g. Resurgere Coal India LLP - Limited Liability Partnership Firm. 

In future the company hopes to start business in these companies too. With the present government taking, a balanced view of the mining sector; the things have started to look better again.  

Q. At Rs.2.28 the shares of the company are overvalued and should be exited.

Ans. The book value of the shares of the company is Rs.26.49, which is more than 10 times the current price of the scrip. It's share price fell from Rs.200 plus to the current rate. However, if the company is not closing down, then what is the need to sell the shares of the company, at this price, which is almost one fifth of its Face Value of Rs.10? Moreover, the market cap of the company is only Rs.45.34 Cr, which fell from Rs.1500 Cr in 2008. 

Therefore, when one is buying the stocks of such a company, it is given that there are inherent risks involved. If anyone is able to take such risks, they only should stay invested for high gains. This is a high-risk-high-gain scrip. 

Disclaimer: I hold a very small stake in the company, but many of the blog readers and followers, might have taken large positions, based on my recommendation. This clarification is basically for them; so that they do not get unnecessarily worried due to misinformation campaign, under-taken by a group of unscrupulous fellows. 

Budget 2014-15: Simplicity, transparency and thrust on growth in economy

~~Deven Choksey, MD K.R. Choksey Sec.Financial Solutions

Revolutionary Reforms:

Photo: Moneycontrol.com

1. Income Tax exemption: 21000 crores of money left in hands of individuals. This will boost savings and consumption in economy. 

2. Banks are exempted from CRR & SLR deductions on their infrastructure funds portfolios. This is a big booster as it will have few advantages:

(a) It will result in 34-35 bps savings in the margins of banks which could result in additional funds for lending. On ? 10 L crore portfolio, additional funds available with banks would be 3500 crores.

(b) Availability of funds for infrastructure will help revive stalled infrastructure projects. It would thus reduce NPA stress in the books of banks.

(c) It could pave way for faster expansion in economy, which would have positive impact on lending to infrastructure asset class in road, power sectors. It also holds promise to let banks grow faster.

3. Portfolio income of FII is being classified as capital gains vs business income would not only give greater clarity to global investors bout also would result in attracting higher tax compliance and more inflow of funds in India, under the transparent norms. Fine print reading of many other measures should reveal further growth. 

They are: (i) Increased allocation & spending by government of 50,000 crore has all the potential to kick start the mega investment program in the country.

(ii) For faster implementation of projects, thrust has been given on IITs or infrastructure investment

trusts & giving a larger thrust on REITs or Real Estate Investment Trusts means attracting more funds in economy.

(iii) Roadmap for fiscal deficit is made clear with intent to bring it down to 3% in 3 years from 4.5% currently. To bring down fiscal deficit, credit of 65000 crores has been taken from divestment, additional collection of 7500 crores from indirect tax and relying on growth coming from infrastructure spending measures which would eventually swell the collection kitty of the government.

(iv) FDI in defence and insurance raised to 49% from 26% which will result in higher inflow of foreign investments in the country. Defence import bill will eventually come down which also means that current account deficit equation will be taken care of now and also in future.

(v) Host of social and agriculture sector reforms has the character of transforming lives of masses and in turn give them large economic power. It could result into transforming rural lives and in turn higher spending by them could spur industrial growth.

Given the reform orientation covering rural to urban economy we think this budget should be given full marks. Fine print will help us analyse further and we will bring company specific impact analysis to you. 

Stay invested in cyclical stocks as they hold larger promise under the budgetary proposal

India's steel consumption inches up by 0.7% in first quarter

NEW DELHI, 13 Jul, 2014: India's steel consumption grew by a mere 0.7 per cent during the first quarter of current fiscal to 18.82 million tonnes (MT). 

The country had consumed 18.69 MT steel in the April-June quarter of last fiscal, showed data compiled by Joint Plant Committee (JPC), a body under the Steel Ministry. 

In recent months, the rate of growth in consumption was the fastest at 3.4 per cent in April. It was 0.3 per cent in May and 0.9 per cent in June. 

Production of finished steel grew by 1.5 per cent during the period at 21.86 MT over the same period last year. SAILBSE -6.06 %, RINL, Tata SteelBSE -4.01 % and other major players cumulatively produced 11.34 MT clocking a growth of just two per cent, the JPC said. 

Contribution of mini and small firms' production rose by 0.3 per cent during the period. 

India, which became a net exporter of steel in recent times, exported 1.34 MT of finished steel during April-June period clocking a 18.5 per cent growth over a year ago. 

Imports also went up. During the period, India's import of finished steel saw a growth of 11.8 per cent to 1.49 MT. 

India's steel consumption grew by just 0.6 per cent in the 2013-14 fiscal, the slowest in at least four years, to 73.93 MT. Exports grew by 4.1 per cent at 5.59 MT, while imports were down by 31.3 per cent during the period 5.445 MT. 

India is the fourth largest steel maker in the world with 81 MT of production in last year. The sector contributes about two per cent of the country's GDP and employs over six lakh people. 

The Steel Ministry estimates that the country's consumption may go up to 176 MT by 2025-26 if the economy grows by 6.5 per cent during the period between now and 2025-26.

Courtesy: The Economic Times

Govt mulls single-window system to boost steel, mining sectors

[Editor: I have been saying this since the last couple of months and I am happy the government has at last started to think in this direction. The biggest beneficiaries, apart from Steel and Mining space, would be Construction and Power  sectors]

The Environment Minister 

June 25, 2014: To boost sagging sentiments in steel and mining sectors, the government on Tuesday began the process of setting up single-window mechanism to fast-track clearances for various projects and create special mining zones to ensure raw material security for existing and upcoming steel plants in the country.

In the course of a three-hour-long meeting steel and mines minister Narendra Singh Tomar, coal minister Piyush Goyal and environment minister Prakash Javadekar said that there is a pressing need for a single-window clearance system and agreed to engage more stakeholders to take the process forward.

While there was a general agreement that such a system “cannot happen overnight as rules for different departments are not the same,” but creating such a dispensation also cannot be an endless process.

Currently, 44 coal projects, both opencast and underground, and at least six steel projects are awaiting environmental and forest clearances.

Considering that over Rs 4.4 lakh crore of investments are in the pipeline in the steel sector in Jharkhand, Orissa and Chhattisgarh, such a mechanism is likely to translate these investments on the ground. In response to the contention of steel ministry officials that the existing plants perpetually complain about raw material insecurity, Goyal told the meeting that some blocks can be auctioned specifically for the steel companies, while steel PSUs can continue to enjoy allocations through the government dispensation route.

Steel ministry officials had, in a presentation to Tomar last month, contended that the sector has been discriminated in allocation of captive coal mines despite the companies completing their end-use plants and investing heavily in mining. They told the minister that 44 captive coal blocks pertaining to steel and iron projects have been canceled notwithstanding their investments made.

“The three ministers said that like the special economic zones, certain big mineral bearing areas can be demarcated as special mining zones exclusively for meeting the demands of the iron-ore starved plants,” a source said. The erstwhile UPA government had set a target of producing 300 million tonnes steel per year by 2025 for which the nation would require nearly 350 MT of iron ore.

However, the steel ministry officials could not confirm whether such mining zones would be entitled to financial sops as enjoyed by the SEZs. Javadekar said that National Board for Wildlife (NBWL) will be reconstituted soon and matters pending for clearance of the NBWL will be thereafter be disposed off expeditiously.

Goyal, meanwhile, is learnt to have been firm in ruling out de-merger of Bharat Coking Coal Limited (BCCL) from Coal India and making it a stand-alone company, as demanded by the steel ministry last year.

The 12th Five Year Plan working group had suggested de-merging BCCL from Coal India to service the raw material needs of the steel companies steel industry which spends heavily in sourcing the fuel from abroad.

Goyal, who also holds the charge of power ministry, is learnt to have told the meeting that since Coal India is a listed entity, it would be imprudent to distribute its assets.

Courtesy: The Indian Express

Indian steel sector is upbeat on budget proposal to develop 100 smart cities

India is the biggest producer of sponge iron. Its production is set to jump 10 times in 20 years
Photo: Down To Earth

Sunday, 13 Jul 2014: The domestic steel sector is upbeat on the budget proposal to develop 100 smart cities, a move that is likely to generate demand for key building and construction materials like steel and cement.

Mr CS Verma chairman of Steel Authority of India Limited said that "The renewed focus on infrastructure viz. development of smart cities, ports, Pradhan Mantri Gram Sadak Yojna, power plants, plan for doubling pipeline grid, metro for tier 2 cities, industrial corridor, incentives for housing, and revival of SEZ etc. will go a long way to further consolidate growth and giving fillip to steel sector which has faced stagnant demand of late."

The increase in customs duty for stainless steel will provide the requisite protection at a time when the demand has slackened. Other measures such as reduction in customs duty for steel grade limestone and dolomite, as well as ships for breaking should also help the industry.

Mr Manoj Kumar Agarwal MD of Adhunik Metaliks, a maker of speciality steels said that "The move to develop 100 smart cities leading to infrastructural development will increase demand of steel and cement resulting in inclusive growth. Various sectors will be highly benefited by this infrastructural enhancement."

Mr Subhrakant Panda MD of Indian Metals and Ferro Alloys Limited said that "The Finance Minister's maiden budget is noteworthy for the statement of intent to revive manufacturing and infrastructure sectors while maintaining fiscal discipline. The government's mission of housing for everyone by 2022 and setting up 100 smart cities are bold moves which will go a long way in changing the country's landscape.”

He said that "These will not only help sectors like cement, steel etc but will also increase the employment opportunities. As far as the ferro alloys industry is specifically concerned, steps taken to encourage key sectors which in turn will boost growth will have a positive impact."

Mr Jayanta Roy Senior VP, Co-head, Corporate Ratings, ICRA Ltd said that "The long term impact on the steel sector is expected to be positive because of the policies on construction and infrastructure sectors, which generate around two third of steel demand in India.”

Mr Roy said that “Policies including increased tax incentives to individual home buyers and enhanced allocation towards affordable housing are expected to spur growth in the housing sector. Additionally, development of 100 smart cities, 15,000 kilometers of pipeline for the oil and gas sector, 8,500 kilometers of roads, and development of new ports and airports would provide a fillip to the construction sector.”

He said that also, the increase in custom duty on stainless steel flat products and reduction of customs duty on import of ships for breaking and steel grade dolomite and limestone are positives for the industry. The Government's intention to sort out the current issues in iron ore mining and a modification of the MMDR Act towards making it more supportive to the industry would be critical for the growth of the sector.

Mr Jaijit Bhattacharya, Partner, Infrastructure and Government Services, KPMG said that "We welcome the initiative which is the need of the hour for the Indian economy. Cities are the growth enablers and current Indian cities are choking with the economic growth in India. It is heartening to note that budgetary provisions have been made for modern next generation cities."

Mr Venkatesan Subramanian, Vice President & Global Leader, Metals & Minerals Practice, Frost & Sullivan said that "For the metals and minerals industry, the hike in export duty of bauxite and import duty hike on flat rolled products of stainless steel are positive as it is expected to boost domestic sales and bring additional investment into the sector in form of new projects and capacity expansion in these industries. The government policies in this sector points to the right direction of value addition for mineral ores fulfilling domestic demand through local production."

Courtesy: Steel Guru

Budget-2014-15: Power Sector

Photo: The World Bank

In the Union Budget 2014-15 presented on 10 July 2014, Finance Minister Arun Jaitley proposed Rs.200 crore for power reforms.

Jaitley also proposed a ten-year tax holiday to the power sector undertakings, which begin generation, distribution and transmission of power by 31 March 2017.

Further, the Finance Minister has proposed to allocate an initial sum of Rs.100 crore for preparatory work for a new scheme "Ultra-Modern Super Critical Coal Based Thermal Power Technology" to promote cleaner and more efficient thermal power.

Jaitley also announced comprehensive measures for enhancing domestic coal production with a stringent mechanism for quality control and environmental protection. Measures will be initiated to provide adequate quantity of coal to power plants which are already commissioned or would be commissioned by March 2015 to unlock dead investments.

To further improve rural life, the government will launch the Deen Dayal Upadhyay Gram Jyoti Yojana to augment power supply at a cost of Rs.500 crore.

To promote wind energy, Jaitley proposed to reduce the basic customs duty from 10% to 5% on forged steel rings used in the manufacture of bearings of wind operated electricity generators. Also, he proposed to exempt the SAD of 4% on parts and raw materials required for the manufacture of wind operated generators. Further, he proposed to prescribe a concessional basic customs duty of 5% on machinery and equipment required for setting up of compressed biogas plants (Bio-CNG).

Source: Capialmarket.com