Shake-out of ferrochrome industry overdue

[Editor: The demand for ferro alloys is driven by steel production, which in turn depends on growth from the infrastructure, housing, automobile and consumer durable industries. The ferro-alloy industry is at cross-roads now, with the new NDA government coming in New Delhi. I have already recommended Rohit Ferro Tech Ltd (Rs.9.63) pivoted on the source based information that the company's Captive Power Plant of 67.5 MW and 33 MVA Furnace are about to start operation within a very short time]

October 27, 2014: India's ferroalloys producers have built capacity of 5.25 million tonnes (mt), including 3.2 mt of manganese alloys and 1.75 mt of chrome alloys, anticipating much faster growth in domestic production of carbon, alloys and stainless steel than is actually the case. As a result, every segment of the ferroalloys sector has considerable idle capacity. The sector's attempt to beat overcapacity blues through exports has seen limited success in the face of oversupply of ferroalloys in the global market, thanks largely to Chinese dumping.

Ferromanganese is used for desulphurisation and strengthening of carbon steel, while ferrochrome imparts non-corrosive properties to stainless steel.

Bansidhar Panda, chairman of Indian Metals & Ferro Alloys (IMFA), says "the chromium sector is at a crossroads, buffeted by rising costs, stagnant prices" and China's overbearing presence in both ferrochrome and stainless steel sectors. Overcapacity is hitting non-integrated producers here, without ownership of chrome and manganese ore mines and captive power plants, the hardest. Such units in the chromium segment are never sure of securing the required supplies of chromite from the Odisha government-owned Odisha Mining Corporation. Grid power is expensive, as it is highly irregular. For ferroalloys plants without captive power, the electricity bill alone accounts for about 35 per cent of the overall production cost. Therefore, it isn't surprising that standalone units, which have to buy chromite and electricity, are in dire straits. Only a few, with toll smelting assignments from mines-owning ferroalloys groups, are able to keep their heads above water.

A shake-out of the sector is overdue. Integrated manufacturers still left with appetite for expansion will have a chance to buy furnaces and other equipment of closed units and those on the verge of closure at bargain prices. Ferroalloys Corporation (FACOR) says "acquisition" will remain one of the options for capacity growth.

But what is leading Tata Steel to build large new ferrochrome capacity when the sector is reeling under overcapacity in every ferroalloys segment? According to Odisha government officials, Tata Steel's new ferrochrome facilities are to be housed at Gopalpur, where it has large tracts of land. In 1995, the company acquired the land to build a steel plant, which didn't happen because of water scarcity and local agitation. Not only will Tata Steel make ferrochrome and roll steel at Gopalpur, it is also to play the role of an anchor in securing investments from southeast and Far Eastern countries in a variety of sectors. That the company has flagged off investment in two industries will inspire others in the multi-product Gopalpur special economic zone (SEZ). The presence of a soon-to-become all-season port nearby will underpin the SEZ's success. The capacity of the deep-sea port, capable of handling of up to 125,000-tonne vessels, is being raised from 3.5 mt to five to mt.

Being the most ideally integrated ferroalloys producer in India, with access to rich deposits of all required minerals, Tata Steel is in a vantage position to risk investment in new ferrochrome capacity. Not only does the group's large production of steel provide a major outlet for in-house production of ferrochrome and ferromanganese, it has "maximised profits by judicious allocation of ferroalloys products to profitable geographies". An important tenet of Tata Steel's ferroalloys marketing strategy is entering into long-term supply contracts with foreign steelmakers. The signing of a long-term contract with Nucor of the US for sale of ferrochrome will be followed by the attempts to get buyers in Japan and South Korea to increase sales tonnage.

Some other producers, including IMFA and FACOR, have also taken recourse to this route for long-term offtake assurance in the case of ferrochrome in a global market awash with Chinese material. Going a step further, IMFA is running a ferrochrome joint venture in Odisha, in partnership with Posco of South Korea. In all such supply arrangements, ferrochrome prices are revised periodically. Sustainability of the domestic sector, however, demands internal use of ferrochrome grows at a rapid pace. Much will depend on how quickly Indian per capita consumption of stainless steel, now 2.1 kg, approaches the world average of five kg. Continuing large imports from China are standing in the way of local stainless steel producers making better use of their capacity.

Courtesy: The Business Standard

Steel exports soar as domestic demand weakens

Photo: The Telgraph

30 October, 2014: Steel exports soared 39.3 percent year-on-year to 65.34 million metric tons in the first nine months of 2014 as domestic demand remained soft and prices fell, the China Iron and Steel Association announced on Wednesday.

In comparison, China imported 11 million tons of steel, up 5 percent year-on-year.

"The Chinese government has never encouraged domestic steel companies to export since the industry is a large energy consumer and its priority is to meet domestic demand," said Zhang Changfu, vice-chairman of the association.

China exported 8.52 million tons of steel products in September, up 9.8 percent month-on-month.

For the first three quarters, the average steel export price was $783 a ton, down $74 a ton compared with the same period of last year.

Exports are mostly going to Asian countries, which account for about 70 percent of the total. China also exports high-end steel products to the European, United States and African markets.

The CISA estimates that China's full-year steel exports will surpass 80 million tons, accounting for about 10 percent of the national output. In previous years, exports only accounted for about 2 percent to 3 percent of total output.

Large volumes of low-end steel exports "will generate more trade friction, and will affect future exports. Thus, the authorities will adjust export policies accordingly," Zhang said.

Faced with a domestic economic slowdown and price gaps between local and foreign steel markets, however, Chinese steelmakers are increasingly turning to exports to raise their profits.

Wang Yingsheng, director of the market research department at the CISA, said that large steel mills such as Hebei Iron and Steel Group, Shagang Group and Baosteel Group, all have growing exports.

"China is no longer exporting just crude steel. Instead, Chinese companies' high-end steel products for the vehicle and shipbuilding industries are sold abroad at competitive prices," Wang said.

For the first nine months of this year, medium-sized and large steel producers reported an aggregate profit of 19.28 billion yuan ($3.15 billion), up 71.3 percent year-on-year.

However, Zhang said the profitability of steel companies is generally still low. The improvement in profit mostly reflected lower raw material costs.

Oversupply and slowing demand have driven down international iron ore prices.

China imported 699 million tons of iron ore in the first nine months, up 16.5 percent. Last month alone, iron ore imports rose 13.1 percent month-on-month to 84.69 million tons.

The import price averaged $108.09 a ton for the first three quarters, down $21.66 a ton year-on-year, according to the association. Iron ore prices dropped below $80 a ton in late September.

As supplies of cheaper imported ore have increased, domestic iron ore mines have had to cut production or shutter capacity.

In September, domestic iron ore output fell 0.36 percent year-on-year to 137 million tons. For the first three quarters, output was 1.12 billion tons, up 7.24 percent.

Chen Kexin, chief analyst of the Beijing-based Lange Steel Information Research Center, estimated that China will import more than 900 million tons of iron ore this year with annual growth of 15 percent.

"In 2015, China is expected to import more than 1 billion tons of iron ore to meet domestic needs," Chen said.

"If the iron ore import price drops below $70 a ton, it is possible that imports next year may reach 1.2 billion tons."

Increasing iron ore imports will lead to closures of many domestic iron ore mines, he said.

Courtesy: Ecns.cn

  

MARKET MANTRA

Today my recommended Suzlon Energy Ltd at around Rs.11.99-12.10 touched Rs.13.60, intra-day. However, profit booking was suggested in the counter at around Rs.13.25-13.20, for the Paid Group Members and to those who trade through my brokerage terminal. 

Buy Rohit Ferro Tech Ltd at the CMP of Rs.9.65.9.70, for a target of Rs.12-13, in the short term. The short term traders can book some profits in Suzlon Energy Ltd at Rs.13.25 and enter Rohit Ferro. Rohit Ferro-Tech Limited was incorporated on 7th April, 2000 and is amongst India’s largest Ferro-Chrome manufacturing Company. The Company is engaged in manufacturing of chromium and manganese-based ferro alloys, such as High Carbon Ferro Chrome (H.C.FeCr), Silico Manganese (SiMn) and Ferro Manganese (FeMn) through Submerged Arc Furnace (SAF) route. The Company has three manufacturing facilities located at Bishnupur in West Bengal, Jajpur in Orissa and Haldia in West Bengal. The Company has commenced its commercial production of High Carbon Ferro Chrome (H.C.FeCr.) in October, 2003. Meanwhile, in a boost to cash-starved real estate industry, the NDA government yesterday relaxed rules for FDI in the construction sector by reducing minimum built-up area as well as capital requirement and easing the exit norms. This is expected to increase the demand for steel and other building materials in the coming days. The stock is near its 52-week low price of Rs.7.02 and is one of the safest bets. 
Tata Steel Ltd which was recommended around Rs.450, some days back, is near the first target of Rs.480, as intra-day it touched Rs.474.45 and is  now trading at Rs.471.
Resurgere Mines and Minerals Ltd today hit the buyer freeze at Rs.1.78 and is  now trading at the Upper Circuits. The company is carrying mining operations in the SOAPSTONE MINES in Rajasthan. It is also negotiating with the lease  holders to start mining in of its mines. 
Allied Digital Services Ltd hit the buyer freeze in the opening trade. The company is expected to come up with better numbers from Q3FY15. 
My recommended Country  Club India Ltd made a new 52-week high today as it touched Rs.18.44, intra-day. 

WINNING STROKES: THINK DIFFERENT

As expected, Sulon Energy Ltd hit the buyer freeze today at around Rs.12.70. The stock was yesterday recommended to the PAID GROUPS at around Rs.11.99-12.10. The  company has a massive order book of around Rs.43, 000 Cr and now less problem, for meeting its working capital needs. Meanwhile, the Hindu, on 27 October, 2014 writes: "The restoration of benefits such as accelerated depreciation (AD) and generation-based incentive (GBI) is expected to invigorate the domestic wind power sector.  Crisil Research estimates that 10,000 MW of capacity will be added during 2015-18, entailing investments of Rs.65,000 crore compared with 7,000 MW over the previous three years.GBI and AD (which expired in March, 2012) enable a quantum improvement in the economics of power projects, so it is understandable why capacity additions will go up with their restoration. Crisil Research estimates suggest that projects availing of AD (80 per cent depreciation allowed in the first year of operations) are economically viable at only Rs.3.80 a unit. In comparison, States such as Maharashtra, Rajasthan, Andhra Pradesh and Madhya Pradesh offer preferential tariffs ranging from Rs.3.90 to Rs.5.90 a unit, which make wind power attractive for developers in these States. The salutary impact of these incentives on capacity additions has been seen in the past too. AD propelled capacity additions until it expired in 2011-12; the share of AD in total installed capacity (21,693 MW as on March, 2014) is estimated at 65-70 per cent. That is not all. In States such as Maharashtra, Karnataka, Tamil Nadu, Andhra Pradesh and West Bengal, where industrial tariffs are high in the range of Rs.7 to Rs.7.50 a unit, wind power is an attractive option since generation costs are significantly lower, particularly in view of the restoration of AD". All these augurs well for Suzlon Energy Ltd. 

Pipavav Defence Ltd hit the buyer freeze in the opening trade at around Rs.45.20 before closing at Rs.44.30. There were media reports recently that the Indian government has cleared defence deals worth Rs.80,000 crores.  The scrip spurted on this news. 

Glodyne Tech Ltd hit another buyer freeze in the opening phase. The company came out with better set of numbers for Q1FY14, speaking sequentially. 

Nifty today closed above 8000, giving fresh ammunition to the BULLS. A weekly close above 8000 has resumed the uptrend once again, as the breakdown below 7800 proved to be short lived and false. The investors are suggested to go for the small and mid cap counters as November is approaching.

India’s Suzlon Energy Secures Orders For Wind Turbines Worth $200 Million

[Editor: There were earlier media reports that Indian government is planing to rapidly accelerate wind energy generation, adding an ambitious 10,000 MW every year, or five times the total new capacity that came up in the last fiscal. Wind energy, which had been overshadowed by solar projects in recent years, got a big boost in the current fiscal, as the government of India has restored key tax incentives that had helped India emerge as one of the top countries in the world in generating electricity from wind. The government feels that tax incentives coupled with conducive environment will rapidly accelerate wind energy. All these augurs well for the shares of Suzlon Energy Ltd (Rs.12.10)]

October 27th, 2014: The reintroduction of financial incentives for the Indian wind energy sector has led to a significant increase in the orders for wind turbines.

India’s leading wind turbine manufacturers, Suzlon Energy, has secured an order worth $200 million for supply of 150 MW wind energy equipment. The company, which has evolved into an integrated wind energy solutions provider, is likely to set up the wind farms and also bag orders for service and maintenance following commissioning.

The cumulative order has been placed by more than four companies. The large order signifies the customers’ renewed interest in the wind energy sector following reintroduction of tax incentives for wind project developers, the company noted in its press release.

Suzlon Energy is looking for a comeback as it is facing millions of dollars of debt. The company has taken several measures to raise credit from various equity-linked routes but any sustainable turnaround can only come through large orders.

The company may draw comfort from the upcoming reforms in the wind energy sector. The government is set to launch the National Wind Energy Mission, which is expected to boost annual capacity additions from the current 2.5 GW to 10 GW. Additionally, the government is expected to launch a comprehensive offshore wind energy policy.

Last month, the Ministry of New and Renewable Energy announced the launch of a joint venture of public sector companies that will set up a 100 MW offshore wind energy project in Gujarat. Suzlon Energy has also announced that it will say up 300 MW offshore wind energy project in Gujarat. The company enjoys a technological edge over most of the Indian wind energy manufacturers, as it has access to high-capacity offshore wind turbines through its European subsidiary Senvion SE.

Courtesy: Cleantechnica

Fresh surge of wind power

Photo: The Economic Times

October 27, 2014: The restoration of benefits such as accelerated depreciation (AD) and generation-based incentive (GBI) is expected to invigorate the domestic wind power sector. Crisil Research estimates that 10,000 MW of capacity will be added during 2015-18, entailing investments of Rs.65,000 crore compared with 7,000 MW over the previous three years.

GBI and AD (which expired in March, 2012) enable a quantum improvement in the economics of power projects, so it is understandable why capacity additions will go up with their restoration. Crisil Research estimates suggest that projects availing of AD (80 per cent depreciation allowed in the first year of operations) are economically viable at only Rs.3.80 a unit. In comparison, States such as Maharashtra, Rajasthan, Andhra Pradesh and Madhya Pradesh offer preferential tariffs ranging from Rs.3.90 to Rs.5.90 a unit, which make wind power attractive for developers in these States.

The salutary impact of these incentives on capacity additions has been seen in the past too. AD propelled capacity additions until it expired in 2011-12; the share of AD in total installed capacity (21,693 MW as on March, 2014) is estimated at 65-70 per cent.

That is not all. In States such as Maharashtra, Karnataka, Tamil Nadu, Andhra Pradesh and West Bengal, where industrial tariffs are high in the range of Rs.7 to Rs.7.50 a unit, wind power is an attractive option since generation costs are significantly lower, particularly in view of the restoration of AD.

Likewise, GBI (Rs.0.50 a unit for a period not less than four years and maximum of ten years) is also estimated to reduce tariff required to earn equity IRR of 16 per cent to about Rs.4.50-4.70 a unit from Rs.5 a unit, depending on the plant load factor (PLF).

AD and GBI are not the only incentives coming the way of wind power companies. The Central Government provides a ten-year tax holiday (under Section 80IA), funding through the Indian Renewable Energy Development Agency (IREDA) at favourable interest rates (~100 basis points lower than bank finance), concessional custom duty and excise duty exemption on wind turbine components. The government also proposes to set up a National Wind Energy Mission to facilitate and promote capacity additions in the sector.

During 2015-18, capacity additions will be driven by Maharashtra, Madhya Pradesh and Andhra Pradesh, which offer attractive preferential tariffs that are determined by the respective State electricity regulatory commissions based on capital costs and PLF. Moreover, the power distribution companies (discoms) in these States are relatively stronger financially, which ensures timely payments.

By contrast, capacity additions in Tamil Nadu are expected to decline due to significant evacuation issues and a poor track record of timely payments.

In the past, the sector was largely driven by the OEM (original equipment manufacturer) model. OEMs such as Suzlon, Gamesa, Vestas, Regen Powertech and Inox Wind provide end-to-end solutions, including wind and site studies, land procurement, installation of turbines and operation and maintenance services. The OEM model was prevalent as SMEs, which have limited experience in executing power projects, dominated capacity additions to reduce tax outgo by availing themselves of accelerated depreciation. But, over the last two years, we have witnessed a gradual shift in project execution due to the entry of IPPs (independent power producers).

However, in future, Crisil Research expects both models to co-exist. The OEM model will be driven by restoration of AD coupled with the fact that OEMs have acquired sites with good wind potential. The IPP route will be led by the focus of players such as Tata Power, China Light & Power and NTPC on wind power, particularly due to issues such as limited fuel availability, delay in clearances and the like in the conventional power space.

Key challenges

Even though the sector’s prospects appear to be bright, there are certain challenges ahead. Notable among these are lack of enforcement of renewable purchase obligation (RPO), the weak financial health of State discoms, and inadequate evacuation infrastructure.

Some States such as Tamil Nadu, Kerala and West Bengal have revised their RPO targets downwards in the past. Also, States such as Maharashtra, Haryana and Chhattisgarh have been allowed to carry forward their RPO obligations. The poor compliance of States is reflected in the sharp increase in unsold renewable energy certificates (REC) to 10.1 million as on September 30, 2014, from 3.7 million against the previous year. The REC is a mechanism available for States with lower renewable energy potential to meet their RPOs through purchase of these certificates on the power exchange. Clearly, if States reduce obligations or are unable to meet them, investments in the wind power market could be affected.

The poor financial health of State discoms too remains a major concern, as it hinders their ability to offtake wind power at nearly Rs.5 a unit. Some States also do not have sufficient transmission infrastructure to evacuate power within the State. Land availability, delays in land acquisition and obtaining clearances are difficult in States such as Karnataka and Maharashtra, which can also slow down project execution, leading to time and cost over-runs. Overcoming these challenges is important if the full potential of the sector is to be realised.

The author is Director, CRISIL Research.....

Courtesy: The Hindu

WINNING STROKES: THINK DIFFERENT

The bulls took a breather today amid the news of the disclosure of names of the alleged BLACK MONEY HOLDERS in the Honourable Supreme Court of India. Also, the uncertainity regarding the formation of the goverenment in Maharashtra, took its toll on the markets. However, as long as the level of 8000-7980 is held the bulls can still hope for a continuation of this rally. The focus is now expected to shift towards the small and mid cap counters as the broader market is likely to trade in a range till the F&O expiry on this Thursday. The traders are therefore, suggested to buy the scrips which has a story to tell and hold for few days to get some good returns,  as NOVEMBER-EFFECT draws closer. 

Glodyne Technoserve Ltd today hit another buyer freeze in the opening trade at Rs.4.11. The company came out with a slightly better Q1FY15 results, speaking sequentially. 

Today, the shares of Suzlon Energy Ltd were recommended, as BUY to the PAID GROUP MEMBERS, around the price range of Rs.11.99-12.10. After recommendation, the scrip touched a high of Rs.12.20 intra-day. The stock seems to have given both price and volume break out today. The next target according to my analysis should be Rs.16.50-17. Meanwhile, there were media report, this month that Suzlon Energy is planning to set up 2,000MW wind energy projects in Madhya Pradesh. The company will also establish supporting manufacturing facilities in the state for this purpose. Very recently, Suzlon Energy Ltd also announced that it has bagged contracts for wind power projects having total capacity of 150 MW, estimated to be worth about Rs.1,200 crore. The orders have been received from various entities including Malpani Group, Rajasthan Gum Group, KRBL, Sterling Agro Group and an assortment of Small and Medium Enterprises. There are repeat orders from existing customers including Malpani Group, Rajasthan Gum Group, KRBL Group, and Sterling Agro Group. Suzlon Group is the world's fifth largest wind turbine maker and has installed generation capacity of over 24,700 MW. Suzlon Energy Ltd is planing to list its German subsidiary Senvion on the London Stock Exchange through an initial public offer which is likely to garner close to Rs.7,000 crore. At the end of March this year, Suzlon Group's order book was worth about $7.2 billion (~Rs.43, 000 crore). The company is currently working on its business revival strategy and plans to raise about Rs.1,000 crore from sale of non-core assets in the current financial year (2014-15). The company is coming up with September, quarter results on 31st October, 2014.

Resurgere Mines and Minerals Ltd today hit another buyer freeze at Rs.1,72, before closing at Rs.1.71 in the BSE. The company is hoping to get approval of one of its mines in Maharashtra, after the new government has taken over. 

Pipavav Defence Ltd today hit the upper circuits at Rs.43.05 on the news that the government of India on Saturday cleared defence projects worth Rs.80,000 crore. Pipavav Defence and Offshore Engineering Company, a beneficiary from defence project announcements has put in bids of Rs.30,000 crore for new projects, as they claim to be well poised to secure and execute large government contracts, says company Chairman Nikhil Gandhi in an interview with a private news channel. 
Premier Explosives Ltd recommended at Rs.30.90 on Thursday, April 10, 2008, made a lifetime high of Rs.246.35 today. Congratulations to all bought the share and is still holding. 

India could allow commercial coal mining by foreign companies

Mr. Vikram Merchant, Manager India Representative office Rio Tinto Diamonds with Brand Ambassador Yaami Gautam at Nazraana Season Awards 2014

NEW DELHI, Oct 22  - India could allow commercial coal mining by foreign companies if they set up units in the country, opening the door for global giants like Rio Tinto to access the world's fifth-largest coal reserves, a source familiar with the matter said.

Prime Minister Narendra Modi's decision to open commercial coal mining to private players is a key step towards bringing order to the country's chaotic power industry and ending the chronic blackouts that impede its economic rise.

Nearly a quarter of a century after India embraced economic liberalisation, many businesses still rely on costly back-up generators for round-the-clock power and a third of its 1.2 billion people are still not connected to the grid.

As of now, only Indian power, steel and cement companies can mine coal for their own consumption. Commercial mining is dominated by state-owned Coal India Ltd.

But the government now plans to allow companies like Rio Tinto India to mine coal commercially after it completes the auction of 74 coalfields for the exclusive consumption of Indian companies' power, cement and steel plants, said the source, who did not want to be identified as he is not authorised to speak to the media.

In a 27-page executive order posted on the Coal Ministry's website on Wednesday, the government said any firm incorporated in India may be allowed to mine coal for their own consumption or sale, ending a 42-year-old ban. The document did not make any direct reference to allowing foreign firms.

Rio Tinto India Managing Director Nik Senapati declined to comment.

Other foreign players that may show interest in India are BHP Billiton and U.S. firm Peabody.

A Coal India official said it would be natural for the government to allow deep-pocketed foreign companies to mine coal, given the need to invest heavily and quickly raise output.

MODI'S REFORMS

Opening up the industry would ultimately boost production of a raw material that generates three-fifths of India's power supply, and it will pile pressure on Coal India to produce more.

"This is a first step but a very important one," said Manish Aggarwal, head of KPMG's energy and natural resources practice in India.

"What the government is really saying is that we will focus on domestic coal and on renewables to meet our energy needs... India needs the latest technology, the latest equipment and international expertise if it is to raise coal production."

As chief minister of Gujarat state before becoming prime minister, Modi prided himself on supplying uninterrupted electricity, and repeating that feat at a national level is one of his priorities.

It will not be an easy task.

India sits on the world's fifth-largest reserves, and yet Coal India, which has enjoyed a monopoly on commercial mining, has consistently failed to meet the rising demand of an economy that has grown rapidly since the reforms of the 1990s.

Instead, wretched inefficiency has turned India into the world's third-largest importer of coal.

Last month, the Supreme Court cancelled more than 200 coal block licences it ruled were allocated illegally in a case that has become emblematic of the dysfunctional nature of the industry.

The government will re-auction the coalfields to private firms within four months. For the first time, revenue from the concessions will be paid to the states where the blocks are located, creating an incentive to speed up project approvals.

"Modi wants to include incentives ... by giving the opportunity to coal-rich states to earn royalties," said a retired bureaucrat who helped Modi tackle power shortages in Gujarat.

NEXT STEPS

Boosting the supply of energy is only half the problem, industry experts say, and Modi is expected to now push individual states to reform the rickety distribution model.

India's installed energy generation - more than half of it powered by coal - has risen 20 percent in the last three years, and the peak power deficit fell to 5.1 percent in June from 9 percent in 2012, according to government data.

But cash-strapped distributors, their tariffs capped and facing rampant power theft, have invested little in new transmission lines. This has meant that, for all the extra power generated, not enough is delivered to consumers.

"This is not a complete solution... Fixing the transmission and distribution side is equally critical," said Aggarwal. (Additional reporting by Tommy Wilkes; Editing by Douglas Busvine and Ryan Woo).

Courtesy: The Reuters

PE investors bullish on organised jewellery chains

[Editor: Gitanjali Gems Ltd was already recommended around Rs.63, but those who are not holding the scrip can buy it at the CMP of Rs.58.15, for a target of Rs.71-72, in the short term. Recently, there were some media reports that, Imports of cut and polished diamonds trebled in August, 2014 on concerns on export markets. Traders are importing more for local sales if export demand doesn't match up. Meanwhile, the Diamond ornaments has become costlier by at least five per cent this festive season, on Indian diamantaires’ decision to pass on the rise in prices of rough diamonds (‘roughs’ in trade parlance) to consumers. Gold sales in India during the festivals of Diwali and Dhanteras celebrated this week rose by about a fifth, a senior official at the country's biggest gold trade group said on Friday]

On October 20, US private equity (PE) major Warburg Pincus announced its Rs 1,200-crore investment in Kerala-based Kalyan Jewellers for an undisclosed stake. This transaction lifted eyebrows, because the PE firm had reported a considerable loss in the same space in its previous investment.

Warburg competed with its peers Temasek, Apax Partners, Blackstone, Bain Capital and TPG Capital to pick up a stake in Kalyan Jewellers. Experts say these investors' interest point to the potential of branded retail jewellery chains in the country.

The domestic gems and jewellery sector had a market size of Rs 2.51 lakh crore in 2013, with the potential to touch Rs 5-5.3 lakh crore by 2018, according to a Ficci-AT Kearney report. Gold jewellery accounts for 30 per cent of this market.

About 80 per cent of the jewellery market consists of local and regional players. Such players, too, have been growing at 8-10 per cent over the past five years, according to industry experts. The domestic retail jewellery segment has seen a consistent year-on-year growth of 15-20 per cent and the sector will continue to expand at 20 per cent in the next few years, experts point out. It is this growth that has attracted PE firms.

Another factor attracting PE majors to the sector has been the gradual shift in jewellery retailing from the traditional way of retailing to the modern, organised way of marketing - both online and offline.

Before the Warburg Pincus-Kalyan deal, SAIF Partners had invested $13.1 million in Kolkata-based jewellery firm Senco Gold, early this month. In September, Ratan Tata, chairman emeritus of Tata Sons, invested an undisclosed amount in BlueStone.com, which in March had received about $10 million from Kalaari Capital, Accel India and Saama Capital.

In 2013, Progruss Investments invested $24.82 million in Shree Ganesh Jewellery and in 2012, Brand Capital invested in Gitanjali Brands. Since 2012, Caratlane.com has raised about $20 million from Tiger Global. Earlier, Credit Suisse PE Asia had made a 74 per cent return on its investment in Shree Ganesh Jewellery by making a part-exit during its IPO in 2010. Gitanjali Gems also raised some PE funding.

A media report quoted Vani Kola, managing director of Kalaari Capital, one of the PE investors in BlueStone.com, an online jeweller, saying the branded jewellery has tremendous growth potential. Consumers will continue to look for great designs and trust in quality. PE players will be interested in online and offline jewellers. "I think there is tremendous opportunity for both," she said.

"This investment by Warburg Pincus reinforces the trust in the Kalyan brand name and will act as a fillip to the entire industry," says S Subramanian, managing director at Axis Capital, which acted as a financial adviser to Kalyan.

"Warburg Pincus' investment in Kalyan Jewellers is the largest private equity investment into the jewellery segment in India, and is an acknowledgment of the company's highly-talented team, its pioneering role within the industry, and its commitment to the highest levels of customer service. We are excited to partner with the team at Kalyan Jewellers as they continue to grow the business going forward," Warburg Pincus said in a statement.

Currently, organised jewellery retailers in India (national and regional) command about 20 per cent share of the Rs 2.5-lakh crore domestic gems and jewellery market, according to global consulting firm AT Kearney. Further, rating firm ICRA expects the domestic gold jewellery industry to record a robust growth of about 15 per cent over the medium- to long-term, aided by the growing penetration of the organised sector.

India's organised jewellery market accounts for a mere eight per cent of the total market worth $45 billion. Leading organised gold retailers include Titan, Kalyan Jewellers, Tribhovandas Bhimji Zaveri, PC Jeweller and Gitanjali Gems.

Courtesy: The Business Standard

JAYPEE SPORTS INTERNATIONAL LIMITED (JSIL)

Photo: Land of Krishna

Jaypee Sports International Limited (JSIL) was incorporated on 20th October, 2007. It was allotted around 1100 Ha. of land for development of Special Development Zone (SDZ) with sports as a core activity by Yamuna Expressway Industrial Development Authority (YEA). This area is inclusive of 100 Ha of land to be used for Abadi Development. Its core activities are Motor Race Track, suitable for Holding Formula One race and setting up a Cricket stadium of International Standard to accommodate above 1,00,000 spectators and others.

The Motor Race Track known as Buddh International Circuit (BIC) was completed well in time and JSIL successfully hosted the three Indian Grand Prix held in October, 2011, October, 2012 & October, 2013. The success of the event was acknowledged by winning of many awards and accolades.

JSIL is trying its best to generate revenue by placing Buddh International Circuit (BIC) as one stop destination for various games, launching promotional activities like motor cars, bikes and other products. JSIL has also made significant progress in development of non core area planned for group housing, plots, multi storey flats, commercial area, institutional area, roads, open space and other social activities.

Jaiprakash Associates Merger 

[Editor: Recently, there were media reports, that Aditya Birla group firm Ultratech Cement is believed to be looking at possible acquisition of Jaypee Group's three cement plants in Madhya Pradesh in a deal that couldbe worth about Rs.5,500-6,000 crore. Meanwile, the Economic Times reported on 21st October, 2014, that Eighty-eight infrastructure and industrial projects, involving investment of nearly Rs 3 lakh crore - which is more than the Centre's budgeted income tax collections for the current financial year - have become operational over the past few months. Therefore, the share of Jaiprakash Associates Ltd, which is now trading at around Rs.30.10, is one of the best scrips to be bought, as of  now]

New Delhi, October 24, 2014: Jaiprakash Associates' proposed merger of subsidiary Jaypee Sports International Ltd with itself has got approved from National Stock Exchange (NSE).

Jaypee Sports International Ltd (JPSIL) set up the motor race track Buddh International Circuit at Greater Noida in Uttar Pradesh. Formula One Grand Prix in 2011, 2012 and 2013 were held there.

At present, JPSIL is a wholly-owned subsidiary of the diversified Jaiprakash Associates group.

The amalgamation is aimed at having "greater synergies" between the two companies by consolidating the businesses.

The exchange conveyed in a communication to Jaiprakash Associates on October 8 that it has "no objection" to the deal. This would be valid for six months.

"The validity of this 'Observation Letter' shall be six months from October 8, 2014, within which the scheme shall be submitted to the High Court," the bourse said.

As per the draft scheme, the merger would result in focused management attention, improvement in operational efficiency and business prospects as well as on Jaiprakash Associates' profitability, among others.

All these factors are likely to improve the valuation of Jaiprakash Associates' shares and benefit the shareholders, it added.

According to the draft scheme, the interest of the secured and unsecured creditors would remain unaffected. Among others, JPSIL is setting up a cricket stadium in Uttar Pradesh. It became a public company in 2010.

Courtesy: NDTV Profit

Winning Strokes: Think Different

Photo: The Economic Times

Yesterday, J P Power Ventures Ltd recommended around Rs.12.05--12.28, touched Rs.12.77 intra-day. The Indian government on 20th October, 2014, announced that it will auction 74 coal-mining licenses to private companies in the next three to four months after the Supreme Court last month canceled 214 coal licenses issued to private and public companies since 1993. The move came after the government freed diesel from price controls and increased natural-gas tariffs over the weekend to curb subsidies and cut the fiscal deficit. Moreover, the coal block auctions will reduce uncertainty regarding power generation companies that depend on the dry fuel--this augurs well for the shares of J P Power Ltd. 
Tata Steel Ltd which was recommended around Rs.450, some days back, yesterday touched Rs.461.90 intra-day. The company is scheduled to come up with Q2FY15 results on November 1, 2014.
My recommended Country Club (I) Ltd, at around Rs.7, yesterday made a new 52-week high as the scrip touched Rs.16.90. Congratulations to those who bought the scrip on my recommendation made money yesterday. 
A couple of days back J P Associates Ltd was recommended around Rs.29.70, for a short term target of Rs.35-37. The scrip yesterday touched Rs.30.45, before closing at Rs.30.10. A sharp cut in diesel price on Saturday, 18 October 2014, is expected to bring down freight rates which in turn could reduce consumer price inflation. Lower consumer price inflation (CPI) could  provide room for Reserve Bank of India (RBI) to cut interest rates. This might  in turn, bring cheers in the Realty, Construction, Banking and Auto shares. In between, there were media reports on September, 26, 2014 that, Jaiprakash Power Ventures (JPVL) had stroked a new deal to sell, three of its power assets to JSW Energy. JPVL signed a binding memorandum of understanding (MoU) with Sajjan Jindal controlled JSW Energy to sell three of its operating power plants with an aggregate capacity of 1,891 MW. The three power plants are Baspa II plant having 300 MW capacity, Karcham Wangtoo plant with 1,091 MW capacity and Bina thermal plant with 500 MW capacity. Jaiprakash Group has been trying to sell its assets to pay off its huge debt. Jaipraksh Group has a total debt of around Rs.60,000 crore on its books, which represents a debt to equity ratio of 6.8 times. It means against every one rupee of equity it has Rs.6.8 of debt. Its annual interest cost is 1.1 times its EBIDTA. However, the book value of the shares of J P Associates Ltd is Rs.56.69 and the company has a market cap of only Rs.7,321.70 Cr, which is almost half its FY14 earnings of Rs.13,327.02 crores. This gives much room for the appreciation of the share price, from the CMP of Rs.30.10.
Resurgere Mines and Minerals Ltd, yesterday hit another buyer freeze in the opening trade, at Rs.1.64. The scrip has a good future ahead--the investors need to have patience, to generate superb returns from the share.. 
The Reserve Bank of India (RBI) is scheduled to undertake its fifth bi-monthly monetary policy review on 2nd December 2014. The annual rate of inflation based on the combined consumer price indices (CPI) for urban and rural India eased to 6.46% in September 2014, from 7.73% in August 2014. Meanwhile, the Nifty_Spot, closed at 8,014.55 yesterday, which gives fresh ammunition to the bulls. The rally is  now expected to get more fierce in the coming days, till 8000 holds on the downside on a closing basis 

MARKET MANTRA

Today's call: Buy J P Associates Ltd at the CMP of Rs.29.70, for a target of Rs.35. The company is looking at the possibilities to reduce its huge debts. It seems the scrip has formed a bottom of sorts around Rs.29. 

A couple of days ago, a call was given on Tata Steel Ltd at Rs.450, today the scrip touched Rs.462.60, intra-day. The target for the scrip given to the Paid Members is Rs.480.
Resurgere Mines and Minerals Ltd, hit another upper circuits on the opening trade. The Resurgere Mines & Minerals Ltd (Rs.1.57), in 2011 decided to acquire an iron ore mine, at Satarda in Sindhudurg district of Maharashtra, having area of 96 acre. The Fe content in the ore body ranged from 54% to 60%. The estimated total reserve is 47.59 million tonne.But even after almost 3-yeas of UPA RULE under Dr.M M Singh and around 5 months of NDA Rule under Narendra Modi, the company is yet to get approval, for the same. In the process, not only the promoters and its employees, but lakhs of shareholders have suffered, as the price of scrip plummeted from above Rs.250 to the CMP of Rs.1.57 (...and much below this earlier). Is it the fault of the company or of the government in power...? Even the present Narendra Modi government's performance till date is unsatisfactory. 
Yesterday, the PAID GROUP members, were asked to hold on to their Nifty LONG POSITIONS. Today, the BULLISH view will even get stronger if the Nifty closes either above 8000 mark or near it. The breakdown of Nifty below 7800 proved to be short lived and the close above 7900, again brought the BULLS into action. It appears that the corrective phase is near to an end.

MARKET MANTRA

Nifty's bounce back to 7900 again, after a brief correction is a sign of strength. The breakdown below 7800 proved to be short lived. The Nifty has currently broken its immediate resistance at 3925 and is now trading at 7934, which tells volumes of the commencement of a pre-Diwali rally. What should the traders do at this time? Join the PAID SERVICE to get regular updates on the markets. 

My call on Jindal Saw Ltd yesterday touched its first target of Rs.82, as the scrip cross Rs.83, intra-day. The Paid Members were suggested to book profits yesterday. 

Yesterday's strongly recommended call J P Power Ltd is doing well, as the scrip is up more than 2 percent intra-day and is  now trading at Rs.12.25. The scrip is expected to touch Rs.17-18, very soon and hence this is a must buy scrip for every investor. 

Mumbai CCTV project attracts two bids

[Editor: Who will get this lucrative project (worth Rs.1,000 crore), in Mumbai is a big question. What about Allied Digital Services Ltd? Is it still in the loop or has withdrawn from the same? Allied Digital Services Ltd, is implementing a similar project (installation of CCTV Cameras) in Pune (Poona), Maharashtra. To get answers to such questions, you can either join the Paid Service or you can trade through my recommended brokerage house/s]

Photo: DNA India

MUMBAI, Sep 25, 2014: After three false starts, there are two new offers from technology majors to set up over 6,000 CCTV cameras across the city.

"L&T and Trimax have submitted bids and their technical evaluation is done," a home department official said. "Once the report of the technical scrutiny committee arrives, the financial bid will be opened by the high-powered committee led by chief secretary Swadheen Kshatriya."

IIT-Bombay professors are part of the technical scrutiny committee.

Previous tendering attempts had got stuck, with the last one in November stumbling because companies expressed difficulty in meeting the bid document conditions.

The official said the government had now made its revenue model more liberal.

Courtesy: The Times of India

PM Narendra Modi Launches Major Labour Reform Schemes: Top 10 Developments

[Editor: Narendra Modi says, "Shramev Jayate (labour triumphs) has the same power as Satyamev Jayate (truth triumphs) does for the development of our nation."Labour problems, "he said, must be seen through the eyes of the shramik (worker) not industrialists." So, are we talking of Narendra Modi suddenly becoming a COMMUNIST? Or he is totally confused, in this case too, like in many earlier instances? A person who is only interested in winning elections and getting votes by hook and crook, is bound to make this kind of one-sided comment. Meanwhile, FIIs have turned BEARISH on the Indian markets---today, i.e. on 16-Oct-2014, they were net sellers to the tune of Rs.1128.37 Cr. In fact the policies of Narendra Modi has been a total flop show, till now. After a series of overseas tours that took him to Japan and the U.S., he was was seen working overtime to canvass for his party in the states due for election. The question is: how would he get any work done for the country from his office in New Delhi?]

NEW DELHI, October 16, 2014:  Prime Minister Narendra Modi has unveiled long-awaited labour reforms, emphasising that "ease of business is essential to the success of 'Make in India,' his government's mega plan to turn India into a manufacturing hub.

• The measures announced today simplify employment rules and smooth the way for people to move social security funds when they change jobs. They also provide for an improved pension and minimum salary grade.
• The PM said, "Shramev Jayate (labour triumphs) has the same power as Satyamev Jayate (truth triumphs) does for the development of our nation." Labour problems, "he said, must be seen through the eyes of the shramik (worker) not industrialists."
• Archaic labour laws have strictly regulated hiring and firing, while an onerous "Inspector raj' or rule of inspectors has deluged employers with paperwork, discouraging them from expanding and taking on new staff.
• "Fifty types of departments chase them, 50 types of forms have to be filled in. The world has changed," Mr Modi said, adding that companies would now only need to fill a single form online.  A new website, managed by the labour ministry, will allow companies to fill forms online and raise their grievances.
• The change would chiefly benefit firms that employ just a few employees, he said. In 2009, 84 percent of India's manufacturing workers were employed by firms with fewer than 50 workers, research by the Asian Development Bank shows.
• Mr Modi also promised easier movement of accounts in the Provident Fund scheme by using a universal account number. The payroll-funded programme has 80 million members.
• Because transfers are so difficult, more than Rs. 27,000 crores ($4.4 billion) lie idle in such accounts. "I need to return this money to the poor," the prime minister said. "The world asks, 'What is Modi's vision?' They will see it in this effort," he said.
• Inspection of businesses will be made more transparent, with a computer lottery being used to pick the enterprises to be inspected and officials required to upload a report within 72 hours, PM Modi said. Right now, units for inspection are selected locally, without any objective criteria, allowing inspectors to harass unit owners and even exploit them in cases of violation of rules.
• The World Bank says India has one of the world's most rigid labour markets, but fears of a trade union backlash and partisan politics have deterred successive governments from reform measures. Business leaders have high hopes that Mr Modi, an advocate of smaller government and private enterprise, will change that.
• Industry body ASSOCHAM said it complimented the "government for initiating the labour law reforms as it will create a conducive environment for growth of trade and Industry and bring transparency in social security benefits to help workers."

Courtesy: NDTV Ltd

Infrastructure bars India’s growth path

[Editor: Narendra Modi is an over-inflated balloon, waiting to burst at any time. If it was not for Rahul Gandhi (...someone said his speech comes in POGO Channel) and the RSS (or say in short, "Sangh Parivar"), demagogues like Narendra Modi, would have NEVER reached Delhi. India should have a new Prime Minister and a Finance Minister, as both of them are totally flop till now. However as long as sycophants and blind fans are there, he could be assured of victory in elections] 

Whenever Air India cancels its flight to Delhi from Kullu Manali in the foothills of the Himalayas – as it often does – it leaves passengers facing a 600km journey over monsoon-damaged but unrepaired roads, which takes 14 hours. There are many conspiracy theories as to why Air India cancels the flight so often – and why a successful air taxi service from Chandigarh, halfway between the two points, failed to get its licence renewed. Most of these theories cite a blend of corruption and incompetence.

Many in India had hoped that the election of a new prime minister might bring about some rapid improvements in infrastructure investment – to the benefit of business that rely on it. But, less than five months after Narendra Modi’s stunning victory at the polls, hope is being tempered by harsh realities on the pockmarked ground. Already the stock market euphoria has faded into three straight weeks of market losses.

This year was supposed to be one in which fixed investment in the country began to rise again, after a virtually flat 2013. However, the investment climate remains inhospitable and the cost of capital way too high despite the exhortations from the prime minister’s office. Investment growth in the third quarter was up a mere 0.4 per cent while, in September, capital goods output fell 18 per cent, month-on-month, according to JPMorgan.

KKR, which has a big stake in Dalmia Cement (Bharat), is feeling the effects – or, rather, the lack of them. It reports no improvement in orders. And what is true for cement is true for steel and other industries that should be harbingers of a commitment to large-scale investment.

Mr Modi is right to aspire to expand the country’s manufacturing industry. Today, manufacturing as a percentage of Indian GDP is a mere 15 per cent – less than half what it is in China. Even in Indonesia, which has generally failed to move up the value-added chain, it is 24 per cent.

Unlike the rapidly ageing countries of East Asia, India does at least have a young population and low wages. In recent years, many of its people have also become more mobile, and able to migrate to major cities – especially Mumbai – from poorer states.

So, at first glance, India should be the biggest beneficiary of rising wages in China. But this does not seem to be the case, possibly for two reasons. One is the fact that the conditions that gave rise to the East Asian model of export-driven growth are radically different from those in India. But the other is that it may be too late for India to emulate that growth model, even if it wished to.

Both Japan and China kept the cost of capital artificially low to subsidise industry at the expense of consumption. India has been the antithesis of that model. Demand for cement and steel is depressed, capital goods production is falling – but sales of motor scooters and cars are holding up relatively well.

Perhaps most significantly, though, East Asia prioritised the infrastructure needed to make manufacturing possible.

When capital was cheap a few years ago, and the whole world had emerging market fever, India could have got its infrastructure act together – and cheaply. It failed to do so. Today, the roads are a disaster, but hardly the only disaster. Power remains in deficit for many states – including the mountain states where hydro power should be plentiful and cheap. Most infrastructure companies remain under pressure, their balance sheets overleveraged and the banks reluctant to extend more credit to them.

These companies are also operating in a world that is less benign. Global trade has been flat for some time, making exports more of a zero-sum game. If anything, there is too much manufacturing capacity, which is why the prices of manufactured goods are under downward pressure.

India has some competitive advantages, notably where there is a large component of engineering, say in manufacturing certain car parts. But the low wages of its workers aren’t enough to compensate for the high cost of capital, the low productivity, the impossible delays on the roads and at the airports, the lack of power, and the incalculable cost of corruption as many businesses shut down rather than pay off the bureaucrats and officials.

India is about to celebrate Diwali, the festival of light. But at the moment, as on the long drive from Kullu Manali to Delhi, the light remains disappointingly dim.

Courtesy: The Financial Express 

Market Mantra

Pipavav Defence and Offshore Eng Ltd is doing well today, with the stock almost hitting the Upper Circuits Intra-day. The scrip  touched a high of Rs.45.30 intra-day and is now trading at Rs.44.5. The momentum is very strong in the counter and I would not be surprised if the scrip hits another Buyer Freeze today also.
Gitanjali Gems Ltd have started to move up. Today it touched an intra-day high of Rs.62.95 and is now trading at Rs.62.30. We could see a rally in Gold based stocks before Deepawali. 
Etegra Ltd which was recommended to some of  my close friends, last week at around Rs.3.35, today high another buyer freeze at Rs.3.48, in the BSE. 

Today's call (to the Premium Groups): Buy J P Power Ventures Ltd at Rs.12.50, for a target of Rs.17. The scrip seems to have formed a base around Rs.12.10--12.40. Meanwhile, the Finance ministry officials will meet on Friday to explore ways to get stalled power projects back on track and to help prevent them from becoming non-performing assets for banks. Recently, there were also media report that, in its third attempt to strike a deal for its power assets, Jaypee Group inked a binding pact with Sajjan Jindal-led JSW Energy for selling three projects, including two hydel plants. The announcement came after Jaiprakash Power’s proposed sale of three hydro projects to Reliance Power had earlier fallen through. “JSW Energy Ltd (JSW) and Jaiprakash Power Ventures Ltd (JPVL), announced the signing of binding memorandum of understanding (MoU), for the 100 per cent acquisition by JSW of three operational plants of JPVL,” the companies had said in similarly-worded statements. The plants are — 300-MW Baspa-II Hydro Electric Plant, 1,091 MW Karcham Wangtoo Hydro Electric Plant and 500 MW Bina Thermal Power Plant, it added. 
The Indian Stock Markets are witnessing high volatility, near the crucial support of 7800--a rise above 8000 may trigger a fresh rally. Nifty is now trading at 7889, which is just above the immediate support of 7850. Share indices are trading in a cautious note ahead of Maharashtra elections, due tomorrow, i.e. 15th October, 2014. However, many analysts are not expecting too much downside from here, as data on India's consumer price index-based inflation hit a record low in September, 2014. Also, the much expected Deepawali Rally is on the cards.