Wednesday, June 29, 2016

Real estate developers pitch for easier lending norms in meeting with RBI
Realtor lobby CREDAI also reiterates its demand to allow banks to fund land purchase
Mumbai, Wed, Jun 29 2016: In a closed door meeting with Reserve Bank of India (RBI) governor Raghuram Rajan on Tuesday, realtor lobby Confederation of Real Estate Developers’ Associations of India (CREDAI) urged the central bank to ease lending norms for real estate projects, while reiterating its demand to allow banks to fund land purchase, according to two people aware of the development.

The hour-long meeting was attended by a few members of CREDAI, including chairman Irfan Razack and president-elect Jaxay Shah.

CREDAI declined to comment on the meeting, saying it was a private and confidential meeting with the governor.

Some of the key recommendations made by CREDAI to the governor include allowing an increase in bank exposure to the real estate sector, reducing risk weightage as well as allowing external commercial borrowing (ECB), according to the first person mentioned above.

CREDAI also pointed the need for funds at lower interest rates in order to build 20 million urban homes as part of the government’s ambitious “Housing for All” initiative by 2020, said the person.

The group also raised its long-standing demand to allow banks to fund land transactions. Currently, most of the land purchase are funded by non-banking financial companies and private equity firms at high interest rates, according to the second person quoted above.

In a shareholders’ letter on 26 June, Deepak Parekh, chairman of the India’s largest mortgage lender HDFC, said banks and housing finance companies should be allowed to fund land transactions, a move he believed can help lower the cost of land.

Parekh said that “merely reducing interest rates is not sufficient” and that one of the primary factors to improve housing affordability is to bring down the cost of land.

Besides, CREDAI urged the RBI to allow loan restructuring as well as increase priority sector lending to the real estate sector.

India’s real estate market has witnessed one of the longest slowdown that has lasted for more than two years. Slow home sales, rising inventory and long delays in completing projects for lack of funds have pulled down the country’s property market.

Courtesy: Live Mint
Real estate stocks surge; Unitech rallies 8%
Mumbai: June 29, 2016: Real Estate stocks ended higher on back of higher volumes.

DLF Ltd ended at Rs. 143.95, up by Rs. 10.45 or 7.83% from its previous closing of Rs. 133.5 on the BSE.

The scrip opened at Rs. 139.1 and touched a high and low of Rs. 147.7 and Rs. 139.1 respectively. A total of 47348340(NSE+BSE) shares were traded on the counter. The current market cap of the company is Rs. 23813.08 crore.

The BSE group 'A' stock of face value Rs. 2 touched a 52 week high of Rs. 142.9 on 09-Oct-2015 and a 52 week low of Rs. 72.5 on 12-Feb-2016. Last one week high and low of the scrip stood at Rs. 141.2 and Rs. 126.7 respectively.

The promoters holding in the company stood at 74.96 % while Institutions and Non-Institutions held 18.07 % and 6.96 % respectively.

The stock traded above its 50 DMA.

Unitech Ltd ended at Rs. 6.32, up by Rs. 0.46 or 7.85% from its previous closing of Rs. 5.86 on the BSE.

The scrip opened at Rs. 5.91 and touched a high and low of Rs. 6.4 and Rs. 5.9 respectively. A total of 124209451(NSE+BSE) shares were traded on the counter. The current market cap of the company is Rs. 1533.15 crore.

The BSE group 'A' stock of face value Rs. 2 touched a 52 week high of Rs. 8.31 on 02-Jul-2015 and a 52 week low of Rs. 3.43 on 11-Feb-2016. Last one week high and low of the scrip stood at Rs. 6.2 and Rs. 5.05 respectively.

The promoters holding in the company stood at 26.77 % while Institutions and Non-Institutions held 14.9 % and 58.33 % respectively.

The stock traded above its 200 DMA.

Indiabulls Real Estate Ltd ended at Rs. 88.9, up by Rs. 1.3 or 1.48% from its previous closing of Rs. 87.6 on the BSE.

The scrip opened at Rs. 88 and touched a high and low of Rs. 91 and Rs. 88 respectively. A total of 14183347(NSE+BSE) shares were traded on the counter. The current market cap of the company is Rs. 4429.48 crore.

The BSE group 'A' stock of face value Rs. 2 touched a 52 week high of Rs. 105.25 on 30-May-2016 and a 52 week low of Rs. 42.25 on 12-Feb-2016. Last one week high and low of the scrip stood at Rs. 97.4 and Rs. 77 respectively.

The promoters holding in the company stood at 47.63 % while Institutions and Non-Institutions held 19.07 % and 33.22 % respectively.

The stock traded above its 50 DMA.

UK voted for Brexit – but is there a way back?
Several scenarios could see the vote overturned, involving either a Labour or Tory prime minister. But all are speculative
Wednesday 29 June 2016: The British public have voted to leave the EU in an advisory referendum – but there have been voices in business, diplomacy, politics and European polities desperately asking if the issue can be revisited. Is that feasible?

The short answer is yes, just about, but many forces would have to align.

How prepared was the government?
The referendum, for instance, has thrown up big constitutional questions for Britain.

Oliver Letwin, who was appointed by David Cameron, the outgoing prime minister, to oversee the process of withdrawal, is now at the helm of an expanded European secretariat at the Cabinet Office. But it is clear that very little preparatory work has been done. One of the first questions he will face is the future role of the British parliament in Brexit.

The British government has not yet said how parliament should implement the decision to leave. It is not clear, for instance, if and what laws would have to be passed to put the referendum decision to leave the EU into effect.

Could parliament stop Brexit?
At present, there is not a majority for Britain to leave the EU in either the House of Commons or the House of Lords. Indeed, given a free vote, the unelected Lords would probably reject Brexit by a margin of six to one.

One issue that will arise for the next prime minister – be it Theresa May, Boris Johnson or another – will be what happens when they try to push Brexit through a parliament that can delay the process at every turn. This has been described as a “reverse Maastricht”, a reference to the way in which Eurosceptics caused hell for John Major by blocking passage of the Maastricht treaty into UK law.

Could the referendum be treated as advisory?
The Commons might, for instance, seek to prevent the prime minister from triggering article 50, the clause of the Lisbon treaty that provides the framework of an EU member state’s exit from the union. David Lammy, MP for Tottenham, has had opprobrium heaped upon him for suggesting the referendum should be treated as merely advisory in law, and so ignored. It would seem unlikely that a majority of MPs would be willing to disregard the clear majority of the British people who voted for Brexit. 

More plausibly, the Commons might set conditions on the renegotiation, including access to the single market, membership of the European Free Trade Association or the preservation of the union with Scotland. The opportunities to filibuster and delay are innumerable. It is, for instance, disputed whether triggering article 50 requires the authority of parliament. Most legal opinion suggests not, but political necessity may require the endorsement of parliament. 

It may also be the case that parliament will wish to be more than simply informed of the government’s negotiating objectives. Those objectives will be at the heart of the Conservative leadership election. The foreign secretary, Philip Hammond, has put the choice well: in essence, there is a trade-off to be negotiated between the degree of access to the EU single market (the concern of UK business) and the degree of free movement of labour (the concern of politics). In the leadership contest both Johnson and May will have to say how much they will make free trade or free movement of people their primary objective in negotiations.

The candidates would also have to explain whether they believed the settlement at some point, in outline or detail, should be subject to some further democratic test, possibly in a spring 2017 election. 

Scenarios for a second referendum
There is also pressure to hold a second referendum. Few UK politicians – fearful of challenging the verdict of an already angry electorate – will articulate such an argument in public. But Jeremy Hunt, the health secretary, has boldly made the case for a second referendum or another general election on the negotiated terms of exit. Robin Butler, the former head of the civil service, has suggested the same.

Hammond, the foreign secretary, has said the new prime minister will need to think about the democratic legitimacy of the terms of Brexit. At one point even Johnson, and Dominic Cummings, the director of the Vote Leave campaign, made the case for a second referendum on the terms of a Brexit.

Despite the Fixed-Term Parliament Act requiring a parliament to last five years, it is possible for an early election to be called if enough politicians support this.

For the sake of simplicity, three scenarios could then follow. In the first, Johnson wins the election, negotiates the terms of the UK’s departure, puts them to a referendum and they are endorsed. Some form of access to the single market and some deal on free movement – the two central issues – are agreed. It is a bespoke British deal. Britain remains outside the EU but only just.

The Labour option
The second scenario is that Labour, under a new leader, offers itself as a pro-European party, but promises to seek a new deal on free movement of workers within the EU.

A change on free movement is the chief route back to its evaporating working-class vote, as Yvette Cooper, the former shadow home secretary, pointed out in a speech on Tuesday. For this to happen, the EU would need to offer an “emergency brake”, something Angela Merkel, the German chancellor, has steadfastly refused in her talks with Cameron. But many in the Foreign Office hope she would relent, or would be forced to do by the French and Italians.

In its manifesto for a 2017 election, Labour said it would give the British people a second referendum on the precise terms of the negotiations.

Labour would seek to capitalise on a potential new deal on immigration with the EU, the buyers’ remorse of leave voters regretting their decision, evidence of the real world economic chaos created by the prospect of Brexit, and a Labour leader with appeal on the doorstep.

If an election result then returned a second Commons with a pro-EU majority, this could prevent the UK leaving the union. A mandate for a second referendum on the terms of Brexit, or staying in, would have been provided.

Scottish consent
The third, simpler scenario involves the Scottish Nationalists.

The first minister, Nicola Sturgeon, has already said she would tell her MSPs to refuse “legislative consent” if and when the Scottish parliament was required to ratify the UK’s withdrawal from the EU.

Speaking to the BBC, she said: “If the Scottish parliament was judging this on the basis of what’s right for Scotland then the option of saying ‘look, we’re not to vote for something that’s against Scotland’s interest’, of course that’s got to be on the table.”

The constitutional implications of Scottish politicians withholding consent are only now being explored. 

All these scenarios, however, are inherently speculative – and require an accumulator bet coming good – but if you think it is not being discussed in Whitehall and Westminster, you are mistaken.

Courtesy: The Guardian
Today's Recommendations
(i) Rotla India Ltd seems to have formed a temporary bottom around Rs.63. Its consolidated net profit has grown 64.4 per cent to Rs 59.21 crore for the quarter ended March 31, 2016. The company had posted a net profit of Rs 36.01 crore in the same quarter last year. 

However, Rolta's total income from operations dipped to Rs.846.04 crore in the reported quarter as against Rs 946.14 crore in the year-ago period. 

The stock is slowly moving up after the company gave progress report on the future defence project. Rolta India Ltd had informed the stock exchanges that it has done significant expenses “on a very prestigious and time-bound defence project”, which required considerable ongoing investment. Rolta management is diligently working on addressing the overall situation in a comprehensive manner in consultation with its bankers and strategic advisers. The aim is to arrive at an acceptable solution in the interest of all stakeholders and the Company will be informing all stakeholders at the earliest possible opportunity and is committed to finding a viable resolution. Moreover, since Rolta India Ltd derives most of its operations from the domestic operations, hence it will not get affected much due to Brexit (if any). 

Last month, the company announced that it has won seven year, multi-million pound contract from UK Power Networks to manage and update their spatially-enabled network asset information. UK Power Networks is a major utility company that delivers electricity to London, the South East and the East of England.

The company last year announced that it had won Smart City and 3D Mapping with city modelling projects in the West Asia, for a combined value of around US $ 15 million.

Last year, the exclusive consortium of Bharat Electronics Limited (BEL) and Rolta India Limited were selected as a development agency for a more than Rs 50,000 crore Battlefield Management System (BMS) project by the Defence Ministry.


The BMS project, categorised as a "Make" programme under the Defence Procurement Procedure (DPP), will be one of the largest solutions to be indigenously manufactured for the the country's defence, BEL, a Navaratna PSU, said.

Therefore, Buy Rolta Ltd at Rs.63.50, T: Rs.71, SL: Rs.61.40 (strict). There is not much downside in the counter. 

(ii) Unitech Ltd (Rs.6.25), should be added on intra-day declines. The stock is on an uptrend and soon we will see it touch Rs.12-13. The scrip recently came to the news more due to wrong reasons, though its fundamentals are improving. The Real Estate sector is also expected to see a turnaround in 2016-17. 

(iii) Today there was a block deal on the the stock of Jaiprakash Associates Ltd (Rs.7.83) at Rs.7.80. Yesterday. there was high delivery based buying (41.40%). The company is hiring a consultant to for a quick turnaround. Also, the company would be a major beneficiary of the RBI's new directive on stressed assets. At present there is not much negative news in the counter. One should accumulate, on intra-day dips.

(iv) Lanco Infratech Ltd (Rs.4.70) is one of the companies, who could also get benefited from the RBI's latest move regarding stressed assets. Besides this, the company itself is taking a lot of measures to streamline its debts. You should buy the scrip for a short term target of Rs.9.5-10. This scrip would make new 52-week high soon.

(v) The stock of Adani Power Ltd (Rs.30.50) is also on an uptrend in tune with my earlier recommended Adani Enterprise Ltd (Rs.83). Hold the scrip for a target of Rs.33-34, in the short term.   

(vi) Vedanta Ltd (Rs.127) has almost doubled from my recommended price of Rs.64.40. The stock is on an uptrend and one can hold the scrip with a SL of Rs.121. 

(vii) Union Bank Ltd (Rs.129), today made an intra-day high of Rs.129.50, and hit my 2nd target. One can book partial profits and hold the rest with a SL of Rs.127, for a target of Rs.131-132. 
Winning Strokes: Think Different
Unitech Ltd (Rs.5.86), continued its upward journey even yesterday, as the stock made an intra-day high of Rs.5.91 in the BSE before closing at Rs.5.86; with a whooping volume of 170.01 lakhs. According to my close sources, the company is taking various measures to bring it back to track. The stock is expected to double in the next 30-45 days. The Wikipedia says: "Unitech Limited is India's second largest real estate investment company, and has recently claimed to be the largest real estate builder in the country". Moreover, there are hopes that the capital market regulator, the SEBI will consider proposals for relaxed norms for the REITs and an easier set of compliance rules for foreign fund managers keen to relocate to India.

The scrip of Jaiprakash Associates Ltd (J P Associates Ltd) today moved to Rs.7.65, before cooling down at Rs.7.51, in the BSE. The stock would have closed near Rs.7.57-7.59 ranges, however, late selling pulled the price down.  The total loans of Jaiprakash Associates, the real estate and infrastructure company, stand at Rs.58,250 crore against a market capitalisation of less than Rs.2,000 crore. The RBI recently came up with Sustainable Structuring of Stressed Assets, a system that allows banks to partly own borrower companies. Most of the analysts have pointed out that many lenders may be forced to opt for a “haircut” or forego part of their principal and interest rates to prevent these loans from turning bad - - this is indeed music to the shareholders of J P Associates Ltd. The promoters holding in the company stood at 39.38 % while Institutions and Non-Institutions held 27.02 % and 33.59 % respectively. All time high of Rs.308.86 on 4 January 2008. Today the percentage of Deliverable Quantity to Traded Quantity was whooping 41.40%, indicating huge accumulation, by the prudent investors. Moreover, the formation of Doji, with a long upper shadow, indicates that bullishness in its share price is likely to continue, for more time. Therefore, the investors are suggested to buy the scrip in every decline; as it is likely to test Rs.10.5 - 14 soon.

Jaiprakash Associates Ltd has withdrawn itself from some of its cement markets in north India as part of streamlining its operations even as lenders continue to prod the firm to shed assets and pare debt.

My another recommended counter, Lanco Infratech Ltd today made an intra-day high of Rs.4.79, before closing at Rs.4.73. The Economic Times, today wrote: "The government is mulling an additional Rs 25,000 crore allocation to roads, railways and power sectors over and above the allocation made to them in the Union Budget, potentially providing a mid-year boost to public spending". This stock will make new highs in this fiscal and hence add it on all declines. 

Meanwhile, the union Finance Minister Arun Jaitley participated in the First Annual General Meeting of Asian Infrastructure Investment Bank (AIIB) held at Beijing in China on last Saturday. Outlining Indias development paradigm, Jaitley said that India has undertaken reforms in FDI and initiated large investments in rural infrastructure, national highway, inland waterways, shipping, power sector and smart cities etc.

Speaking on the role of AIIB, the Finance Minister said: AIIB presents a much needed additional financing window dedicated to infrastructure projects and meeting the financing gap that may be beyond the capacity of the individual countries and the existing MDBs. India has a huge unmet demand for investment in infrastructure and is preparing basket of projects worth US$ 2-3 billion for AIIB funding in the areas of Urban Development (including Smart Cities), Energy, Urban Transport, Railways, Inland Waterways and Water Supply.

India’s infrastructure output grew an annual 8.5% in April, at its fastest pace in 17 months, mainly helped by a favourable base effect, government data showed.

The output expanded 2.7% for the fiscal year 2015/16 that ended on March 31, compared with a 4.5% growth in the previous fiscal year, the data showed on Tuesday.


Electricity production grew 14.7% and fertiliser output jumped 7.8% in March from a year earlier, the data showed.

In another significant development, highlighting that LIC's core focus would be infrastructure investment, the life insurer has decided to be a partner in India's first sovereign wealth fund earmarked for infrastructure sector, reported Press Trust of India. The Rs.40,000-crore National Investment and Infrastructure Fund (NIIF) will be owned by the government and other partners in a 49:51 ratio. 

The NIIF was set up to attract foreign and domestic investments into the infrastructure sector, and is effectively a government-owned investment manager.While an initial budgetary allocation of Rs 4,000 crore has already been made to NIIF, more funds will be allocated going forward, the government said in a release on Monday. The NIIF could soon operationalise initiatives along with the Qatar Investment Fund, the Abu Dhabi Investment Authority and JSC Rusnano of Russia.

The Economic Times, wrote June 29, 2016: The performance of the corporate sector has improved in the past year as the number of leveraged companies has fallen and the amount of debt in companies' books has also declined, Reserve Bank of India (RBI) said in its bi-annual Financial Stability Report (FSR). 

There is no stopping of Punjab National Bank and Allahabad Bank Ltd. Punjab National Bank made an intra-day high of Rs.105.50, before closing at Rs.104.20. The stock of Punjab National Bank Ltd, which recommended at Rs.79 and later asked to accumulate on all declines, is looking slightly overbought on the chart. 
Winning Strokes: Think Different
Unitech Ltd (Rs.5.86), continued its upward journey even yesterday, as the stock made an intra-day high of Rs.5.91 in the BSE before closing at Rs.5.86; with a whooping volume of 170.01 lakhs. According to my close sources, the company is taking various measures to bring it back to track. The stock is expected to double in the next 30-45 days. The Wikipedia says: "Unitech Limited is India's second largest real estate investment company, and has recently claimed to be the largest real estate builder in the country".

The scrip of Jaiprakash Associates Ltd (J P Associates Ltd) today moved to Rs.7.65, before cooling down at Rs.7.51, in the BSE. The stock would have closed near Rs.7.57-7.59 ranges, however, late selling pulled the price down.  The total loans of Jaiprakash Associates, the real estate and infrastructure company, stand at Rs.58,250 crore against a market capitalisation of less than Rs.2,000 crore. The RBI recently came up with Sustainable Structuring of Stressed Assets, a system that allows banks to partly own borrower companies. Most of the analysts have pointed out that many lenders may be forced to opt for a “haircut” or forego part of their principal and interest rates to prevent these loans from turning bad - - this is indeed music to the shareholders of J P Associates Ltd. The promoters holding in the company stood at 39.38 % while Institutions and Non-Institutions held 27.02 % and 33.59 % respectively. All time high of Rs.308.86 on 4 January 2008. Today the percentage of Deliverable Quantity to Traded Quantity was whooping 41.40%, indicating huge accumulation, by the prudent investors. Moreover, the formation of Doji, with a long upper shadow, indicates that bullishness in its share price is likely to continue, for more time. Therefore, the investors are suggested to buy the scrip in every decline; as it is likely to test Rs.10.5 - 14 soon.

My another recommended counter, Lanco Infratech Ltd today made an intra-day high of Rs.4.79, before closing at Rs.4.73. The Economic Times, today wrote: "The government is mulling an additional Rs 25,000 crore allocation to roads, railways and power sectors over and above the allocation made to them in the Union Budget, potentially providing a mid-year boost to public spending". This stock will make new highs in this fiscal and hence add it on all declines. 

Meanwhile, the union Finance Minister Arun Jaitley participated in the First Annual General Meeting of Asian Infrastructure Investment Bank (AIIB) held at Beijing in China on last Saturday. Outlining Indias development paradigm, Jaitley said that India has undertaken reforms in FDI and initiated large investments in rural infrastructure, national highway, inland waterways, shipping, power sector and smart cities etc.

Speaking on the role of AIIB, the Finance Minister said: AIIB presents a much needed additional financing window dedicated to infrastructure projects and meeting the financing gap that may be beyond the capacity of the individual countries and the existing MDBs. India has a huge unmet demand for investment in infrastructure and is preparing basket of projects worth US$ 2-3 billion for AIIB funding in the areas of Urban Development (including Smart Cities), Energy, Urban Transport, Railways, Inland Waterways and Water Supply.

When the Smart City mission was launched in June last year, the Prime Minister had set a target of creating 100 Smart Cities by 2022 with an initial government investment of Rs 50,000 crore.


On the first anniversary of the Smart City mission this Saturday, PM Narendra Modi launched a slew of new proposals in Pune. The proposals range from plain slum rehabilitation, sewage treatment plants and plastic bottle recycling to new-age Information and Communications Technology (ICT) solutions such e-pathshalas, intelligent transit management system, intelligent street poles and multi-purpose smart cards across all modes of public transport. 

There is no stopping of Punjab National Bank and Allahabad Bank Ltd. Punjab National Bank made an intra-day high of Rs.105.50, before closing at Rs.104.20. The stock of Punjab National Bank Ltd, which recommended at Rs.79 and later asked to accumulate on all declines, is looking slightly overbought on the chart. 

In a spectacular move, one of my earlier recommended counters, ARSS Infrastructure Ltd (Rs.83.60), hit the upper circuits yesterday, continuing its winning run; after the company's JV won a Rs.44 crore order from the Indian Railways for earthwork in Odisha. The scrip had gained 20% in the previous session too.

Tuesday, June 28, 2016

Today's Calls: 
1. Buy Axis Bank Ltd at Rs.515, T: Rs.540, SL: Rs.507.
2. Buy Jaiprakash Associates Ltd (J P Associates Ltd) at Rs.7.58, T: Rs.10.5-12.40, SL: Rs.6.7 (on closing basis).  
3. Buy JSW Energy Ltd at Rs.80.40, T: Rs.91-97, SL: Rs.76.

The Economic Times, wrote today: 
The government is mulling an additional Rs 25,000 crore allocation to roads, railways and power sectors over and above the allocation made to them in the Union Budget, potentially providing a mid-year boost to public spending. 
All three ministries — road transport and highways, railways and power — are currently in advanced talks with the finance ministry to secure additional allocation. 
This is going to push up the demands for the stocks in the Infrastructure, Banking and Power Sectors. Those who are already holding the shares of J P Associates Ltd should further accumulate, on intra-day declines. 

Moreover, both Unitech Ltd (Rs.5.85) and J P Associates Ltd (Rs.7.58) have good land reserves. Unitech Ltd has a whopping land reserves of 300 mn sq. ft or 30 crore sq. ft. Now if we put Rs.3000 per sq.ft  and then calculate the value of the land bank of Unitech Ltd, how much does it come? Just do it please... :)  
Today's Calls: 
1. Buy Axis Bank Ltd at Rs.515, T: Rs.540, SL: Rs.507.
2. Buy Jaiprakash Associates Ltd (J P Associates Ltd) at Rs.7.58, T: Rs.10.5-12.40, SL: Rs.6.7 (on closing basis).  
3. Buy JSW Energy Ltd at Rs.80.40, T: Rs.91-97, SL: Rs.76.

The Economic Times, wrote today: 
The government is mulling an additional Rs 25,000 crore allocation to roads, railways and power sectors over and above the allocation made to them in the Union Budget, potentially providing a mid-year boost to public spending. 
All three ministries — road transport and highways, railways and power — are currently in advanced talks with the finance ministry to secure additional allocation. 
This is going to push up the demands for the stocks in the Infrastructure, Banking and Power Sectors. Those who are already holding the shares of J P Associates Ltd should further accumulate, on intra-day declines. 

Moreover, both Unitech Ltd (Rs.5.85) and J P Associates Ltd (Rs.7.58) have good land reserves. Unitech Ltd has a whopping land reserves of 300 mn sq. ft or 30 crore sq. ft. Now if we put Rs.3000 per sq.ft  and then calculate the value of the land bank of Unitech Ltd, how much does it come? Just do it please... :)  
Axis Bank Ltd: Buy
CMP: Rs.515
Edelweiss maintains a buy rating on Axis Bank Ltd with a 12-month target price of Rs.585. 

The brokerage house says, even in a tough scenario, the bank will deliver a return on equity of 16-17%. The strong operating metrics and strengthened liability franchise also lend comfort.

Meanwhile, Axis Bank has sought approval of shareholders to raise Rs.35,000 crore through multiple instruments including green bonds and from overseas markets. The approval would be sought at Axis Bank’s 22nd Annual General Meeting of shareholders on 22 July. The funds, which would be within the overall borrowing limits of the bank, will be raised in one or more tranches on a private placement basis. 

The Reserve Bank of India (RBI) on 31 May 2016, notified that Foreign Institutional Investors (FIIs)/Registered Foreign Portfolios Investors (RFPIs) can now invest up to 62% of the paid-up capital of Axis Bank, from existing 49% under the Portfolio Investment Scheme (PIS). 

The central bank further notified that the total foreign investment from all sources i.e. Foreign Institutional Investors (FII)/Registered Foreign Portfolios Investors (RFPIs)/Foreign Direct Investment (FDI)/Non-Resident Indians (NRI)/ Persons of Indian Origin (PIO)/American Depository Receipts (ADR)/Global Depository Receipts (GDR) in the bank shall not exceed 62% of paid-up capital. The central bank has stated that Axis Bank has passed resolutions at its board of directors' level and a special resolution by the shareholders, agreeing for enhancing the limit for the purchase of its equity shares and convertible debentures by FIIs/RFPIs. The purchases could be made through primary market and stock exchanges, RBI said. 

Axis Bank is a high beta stock (1.16) and is trading well above its 50-day, 100-day and 200-day moving average of Rs.500.17, Rs.456.33 and Rs.460.02, respectively, as per data collated by ETMarkets.com. The stock is trading with a P/E of 14.89 and P/B of 2.29.
 

Monday, June 27, 2016

Reliance Power Eyes Rs 714 Crore From Tilaiya Procurers
[Editor: Buy the shares of Reliance Power Ltd at the CMP of Rs.48.80, for a short term target of Rs.53, SL: Rs.47.60.

Reliance Power reported 15.8% rise in consolidated net profit at Rs..20.16 crore for the fourth quarter ended March 31, 2015-16 on the back of higher power generation. It had posted net profit of Rs.276.47 crore in the January-March quarter of 2014-15.

The promoters holding in the company stood at 74.98 % while Institutions and Non-Institutions held 10.48 % and 14.21 % respectively. At Rs.48.80, the stock traded above its 200 DSMA.]
New Delhi. June 27, 2016: After pulling out of Tilaiya UMPP on a host of issues, Reliance Power is looking to secure a total of Rs 714 crore as bank guarantees and compensation from 18 procurers of the electricity project.

Of this, Rs 600 crore will be in the form of bank guarantees the procurers had offered to buy electricity and another Rs 114 crore as compensation for various expenses incurred by the Anil-Ambani led company.

The formalities with the 18 procurers in 10 states for the release of money are at final stage and the company hopes to achieve closure very soon, a person familiar with the matter said.

The power producer had in April last year given up the project, saying the host state, Jharkhand, had not co-operated in land acquisition, captive blocks and related infrastructure over the previous five years.

If it can get the bank guarantees of the procurers encashed, it would be a big relief for Reliance Power, which on June 21 was served a show-case by the Coal Ministry asking it to explain the reasons for delays in developing coal mines allocated for the Tilaiya project.

"You are called upon to show cause... as to why the delay in the development of the coal block should not be held as violation of the terms and conditions of the allocation of Kerandari B&C coal block and why the bank guarantee should not be deducted for non-achievement of milestones," the ministry said in the notice.

The Coal Ministry has a bank guarantee of Rs 208 crore for Kerandari B&C coal blocks allocated for the Tilaiya project.

Responding to the notice, Reliance Power has said it "terminated PPA for Tilaiya UMPP entered into with 18 procurers nearly 14 months ago. The PPA termination was due to prolonged delay in fulfilment of the procurers' development period obligations in respect of land for the power plant and coal mine for more than 5 years".

"The procurers led by the Lead Procurer, Jharkhand, Urja Vikas Nigam (JUVNL) have already accepted the termination in November 2015," it added.

The company further said the Power Finance Corporation (PFC), the nodal agency for ultra mega power projects (UMPPs), has also recommended PPA termination due to procurers' event of default and communicated the same to the Ministry of Power and the Ministry of Coal.

The company also added that it had replied to a similar notice from the Coal Ministry in January 2014 and there was no communication from the ministry on this thereafter.

A person involved in the settlement process said the procurers are in the last lap to acquire Jharkhand Integrated Power, the special purpose vehicle for Tilaiya UMPP, from Reliance Power.

In November 2015, the offtakers of Reliance Power's 4,000-mw Tilaiya UMPP in Jharkhand had agreed to terminate their power purchase agreements (PPAs) and compensate Reliance Power for costs and bank guarantees aggregating Rs 714 crore.

Reliance Power had bagged the project in 2009 through competitive bidding by quoting a tariff of Rs 1.77 per unit.

The company in April 2015 announced its exit from the project, citing a five-and-a-half-year delay in handing over of land for the project.

The project, which required 17,000 acres, was offered the Kerendari B&C coal block as a captive mine. The company had also said the project, which was to come up by 2015-17, would not be completed before 2023-24, given the prevailing status of land acquisition.

The termination of the PPAs will reduce Reliance Power's future capital expenditure burden by nearly Rs 36,000 crore, thereby avoiding an additional debt burden of nearly Rs 27,000 crore as well as an equity commitment of Rs 9,000 crore.

This fits in well with the parent Reliance Group's larger business architecture for future as it focuses on the capital-intensive defence manufacturing.

The group is also making efforts to lighten its financial load in telecom and other sectors. Reliance Power too has shifted its focus to renewable energy.

CourtesyNDTV Ltd

Sunday, June 26, 2016

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Saturday, June 25, 2016

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

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

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

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

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

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

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

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

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

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

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

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

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

Courtesy: ET Realty