JSW Energy Ltd: Buy

CMP: Rs.80.35

A meeting of the Board of Directors of JSW Energy Ltd will be held on July 21, 2016, interalia, to consider the Unaudited Standalone & Consolidated Financial results of the Company for the quarter ended June 30, 2016.

Recently, there were media reports that, JSW Energy Ltd has got fair trade regulator CCI's approval to acquire 1,000 MW power plant in Chhattisgarh from Jindal SteelBSE -0.62 % and Power Ltd (JSPL).

Meanwhile, ICICI Securities has come out with its first quarter (April-June) earnings estimates for the Power and coal sector. The brokerage house expects JSW Energy   to report a 33.1% growth quarter-on-quarter (up of 46.5% year-on-year) in net profit at Rs.406.4 crore. 

Sales are expected to decrease marginally by 3.1% Q-o-Q (up 23.3% Y-o-Y) to Rs.2598.7 crore, according to ICICI Securities. Earnings before interest, tax, depreciation and amortisation (EBITDA) are likely to rise by 5.0% Q-o-Q (up 46.2% Y-o-Y) to Rs 1194.5 crore.

The Economic Times wrote on 24 June, 2016:

Months after initial discussions fell through, Sajjan Jindal-controlled JSW EnergyBSE 0.00 % is 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 IndiaBSE -0.43 % Ltd (PGCIL). 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. 

Therefore, buy the shares of JSW Energy Ltd at Rs.80.35, for short term targets of Rs.88-91. Please keep a SL of Rs.79, for any short term trade.  

Lanco Infratech Ltd: Buy

CMP: Rs.5

Photo: The Economic Times

Lanco Infratech Ltd's Kondapalli expansion, the gas-based plant, which was being developed in a phased manner, is located near Vijayawada in Andhra Pradesh. The company. informed in January, 2016, that its subsidiary, Lanco Kondapalli Power Ltd, has successfully declared the Commercial Operations Date (COD) for its expansion capacity of 371 MW (Phase III B Project) with effect from January 9. It is at present operating at ~30% PLF, because of gas allocation under present gas pooling mechanism.

Besides, the company said its Amarkantak Unit 2 (300 mw) restarted power supply to Chhattisgarh from April 17, 2016. 

Its EPC order book consisting of power, solar and others stood at Rs.27,079 crore, 80% of which is internal projects. Lanco Infratech Ltd, is present in EPC, conventional and solar power generation, coal mining and infrastructure and property development  

The EPC sector and the power sector together contributed to 87% of the gross revenues. EPC and construction sector contributed to 37% of the gross revenue.

The company has a total outstanding receivables of Rs.17,81.6 crore from various state electric utilities as of March 2016. “Based on internal assessment and various discussions with the customers, the management is confident of recovery of receivables,” the company said.

Better performance by operational assets helped Lanco Infratech recover from losses in the earlier quarters. The Gurgaon-based company had recorded a consolidated profit of Rs.137 crore during the quarter ending December 31, 2015 bringing down its cumulative loss for the first nine months by 95% to Rs.65 crore against Rs.1,412 crore in 2014-15.

The company posted a consolidated net profit of Rs 98.98 crore in the Q2FY16 after a gap of three years. In a statement accompanying the results, the group said approved CDR scheme and additional funding to the company and the lenders approvals of the cost overrun proposals for the projects under construction and the effort to bring strategic investors, disposal of assets, would also bring in the additional cash flows into the system.

Moreover, resolution of pending issues at both Anpara and Amarkantak is expected to improve cash flows and recovery in financials is expected to be gradual, due to the inherent asset value.

The Economic Times wrote on 12 July, 2016: 

Lanco Infratech's promoter L Madhusudhan Rao has found a white knight in fellow utility operator OP Gupta to bail him out of the Rs..41,000-crore loan mess even as bankers want to split the business into three — power, EPC and other businesses such as road and gas — which would also involve conversion of a majority of loans into deep discounted bond. 

The engineering procurement and construction, or EPC vertical, would have a loan of Rs.2,300 crore on its book but the debt burden would be reduced as the company has proposed to convert 90% debt into equity. Interestingly, the new promoter Gupta, who is brought on board by the company, will get majority stake by investing Rs.150 crore.

A further 90% of Rs 5300-crore debt will be converted into deep discount bonds, known as Optionally Convertible Redeemable Preference Shares (OCRPS), with a five-year tenure offering 9.75% interest rate. The company management informed lenders that Gupta has two power plants — a 313 mw plant in Tamil Nadu and another 400 mw plant in Gujarat.

As per the proposal, Lanco Infratech will be the holding company for all three verticals in which Rao's stake will be reduced to 26% from 70% at present, while lenders would have 57% equity stake. The company has also sought an additional loan of Rs 4,000 crore from banks to complete some of its existing projects. Speaking to ET, two senior bank officials said that they are disappointed that the new promoter will own majority stake in the company by infusing "just about Rs 150 crore". 

Meanwhile, after recording profit for two consecutive quarters, due to the improvement in performance of some of the subsidiaries (providing better business outlook) Lanco Infratech a reported loss of Rs.200.7 crore for the quarter ending March 31, 2016 as against a loss of Rs.563.2 crore in January-March 2015. 

The company managed to reduce its yearly loss too due to better performance of its EPC and construction business. It reported loss of Rs.265.6 crore last financial year as against loss of Rs.1,975.3 crore for 2014-15. The company said it would continue to look at sale of assets and getting strategic investors for some of its businesses.

There were media reports in April, 2016 that lenders to Lanco Infratech were looking to rope in a strategic investor for the company’s 8,000 MW power portfolio. At the end of December, the company had 3,460 MW operational of power projects and 4,636 MW of projects under construction. 

Its 500 MW Teesta Hydro Power in Sikkim, the majority of which is now owned by a consortium of lenders (The consortium is led by IDBI Bank and members include Allahabad Bank, Andhra Bank, Axis Bank, Oriental Bank of Commerce, Punjab National Bank, ICICI Bank and State Bank of India (SBI) and its subsidiaries, among others), attracted three potential buyers that include at least one foreign company.

The hydro project, with an estimated cost of over Rs.3,000 crore, has suffered several delays leading to an interest payment default by the promoter. The consortium of banks converted part of its debt into equity to hold 51% in the project under the strategic debt restructuring (SDR) scheme approved by Reserve Bank of India earlier last year. The total debt for the project stood at nearly Rs.2,200 crore while Lanco’s equity stood at about Rs.700 crore. Lanco had divested its 1,200 MW coal-based power plant in Udupi to Adani Power earlier last year.

Lanco’s loans were restructured by the CDR cell in December 2013 with a moratorium of two years from the cut-off date of April 1, 2013, and repayable in 30 quarterly installments starting from June 30, 2015.

Recently, there were also media reports that Piramal Enterprises, led by billionaire Ajay Piramal, is betting big on the infrastructure sector and the diversified company has entered the race to pick up a stake in debt-ridden Lanco Infra's thermal power portfolio.

Preliminary talks have been initiated between Lanco Infra which is looking at inducting strategic investors to reduce its debt & the structured investment group of Piramal Enterprises which falls under Piramal Capital. A few overseas distressed asset funds are also interested in the portfolio. On completion and on a fully operational basis, the enterprise value of the 6 power plants of Lanco Infra is estimated between Rs.42,000 crs to Rs.45,000 crores. 

As mentioned above, in the third quarter of FY 16, the company had Kondapalli Phase 1, 2 and 3a, Amarkantak Phase 1 and 2, Tanjore and Anpara power plants of capacity 3,025 MW under operation. Thus, its seems from above that the company is on the verge of a turnaround. Therefore, buy the shares of Lanco Infratech Ltd at Rs.5, for a short term target of Rs.9.

DO YOU KNOW?

The Shares of debt ridden companies should continue to do well as the new scheme proposed by the RBI will ease debt repayment period and ease the capital structure.

The RBI lifeline states that debt can be classified into ‘sustainable’ and ‘unsustainable’ parts. The former will be serviced by existing cash flows, while the unsustainable debt will be converted into equity or convertible debt. Accounts that are worth more than Rs.500 crore would be eligible for the new scheme.

Photo: Business Standard

Also, the rates at which the Gautam Adani-promoted Adani Group bagged land from the Narendra Modi-led Gujarat government for its port and special economic zone (SEZ) project — between Re 1 and Rs 32 per square metre — were much lower than other companies that set up units in the state. Concessional pricing apart, the group did not face land acquisition hurdles, as the state allotted non-agricultural government land for Adani Port and Special Economic Zone (APSEZ), the country’s largest multi-product SEZ spread across 15,946.32 acres (6,456 hectares) in Kutch district’s Mundra block.

Photo: Business Standard

Meanwhile, while the shares of JP Group companies and Unitech Ltd (Rs.8.10) gave huge returns in the short term, the Adani Group is yet to pick up steam. Besides, you can see from figure on the left, that Adani Enterprise Ltd has better D/E ratio, than the J P Associates Ltd.

Earlier there were even media reports that Mr.Prakash Javadekar, has waived a fine of Rs 200 crore fine for environmental fine to Adani Enterprises.

Therefore, buy the shares of Adani Enterprises Ltd at Rs.82 82.30, T: Rs.88-91-99, SL: Rs.78.

Once the shares of this group starts moving with full steam, Adani Enterprise Ltd could even cross Rs.100. Adani Ports and SEZ Ltd recommended earlier already gave good returns to the investors, over a short term.

Moreover, Adani Enterprises Ltd is being recommended in this blog, since a long time. And those who have already purchased it on my earlier recommendations, are by now sitting with healthy profits.

DO YOU KNOW?

The Shares of debt ridden companies should continue to do well as the new scheme proposed by the RBI will ease debt repayment period and ease the capital structure.

The RBI lifeline states that debt can be classified into ‘sustainable’ and ‘unsustainable’ parts. The former will be serviced by existing cash flows, while the unsustainable debt will be converted into equity or convertible debt. Accounts that are worth more than Rs.500 crore would be eligible for the new scheme.

Meanwhile, while the shares of JP Group companies and Unitech Ltd (Rs.8.10) gave huge returns in the short term, the Adani Group is yet to pick up steam.

Therefore, buy the shares of Adani Enterprises Ltd at Rs.82.30, T: Rs.88-91, SL: Rs.78. Once this group starts moving with full steam, Adani Enterprise Ltd could even cross Rs.100. Adani Ports and SEZ Ltd recommended earlier already gave good returns to the investors, over a short term.

Moreover, Adani Enterprises Ltd is being recommended in this blog, since a long time. And those who have already purchased it on my earlier recommendations, are by now already sitting with healthy profits.

Reliance Communications Ltd: Buy

CMP: Rs.50.55

Reliance Communications (RCOM) last month announced that RCOM and Maxis Communications Berhad (MCB) and Sindya Securities and Investments Private Limited (Sindya), the shareholders of Aircel Limited (“Aircel”) expect to sign binding definitive documentation and announce the proposed Transaction for the combination of the Indian wireless business of RCOM and Aircel very shortly.

Reliance Communications Limited, founded by the late Shri Dhirubhai H Ambani, is the flagship company of the Reliance Group.

The Reliance Group currently has a net worth in excess of Rs.91,500 crore (US $15.3 billion), cash flows of Rs 10,200 crore (US $1.7 billion) and net profit of Rs 4,700 crore (US$ 0.8 billion).

Reliance Communications is India's foremost and truly integrated telecommunications service provider. The Company has a customer base of over 118 million, including over 2.6 million individual overseas retail customers. Reliance Communications corporate clientele includes over 39,000 Indian and multinational corporations including small and medium enterprises and over 290 global, regional and domestic carriers.

Reliance Communications has established a pan-India, Next-Generation, integrated (wireless and wireline), convergent (voice, data and video) digital network that is capable of supporting best-in-class services spanning the entire communications value chain, covering over 21,000 cities and towns and over 400,000 villages. 

Reliance Communications owns and operates the world's largest next generation IP enabled connectivity infrastructure, comprising over 280,000 kilometers of fiber optic cable systems in India, USA, Europe, the Middle-East and the Asia-Pacific region.

Letters from Blog Readers

Hello SUMAN Sir,

                          I am PRASHANT from MUMBAI.I work for BHARAT PETROLEUM CORPORATION LTD MUMBAI REFINERY. I am your regular follower of your blog. Because of you I have gained good profit in UNITECH LTD. 

I am your sincere and religious follower. I had bought RASOYA PROTEIN 1 year before. Please guide me about RASOYA PROTEIN. I can hold for more period just need your valuable guidance. Waiting for your reply. My mobile numbers are 99**079949 (Whatsapp number) / 809**79949.

                                                           -----X----

Dear Investors, 

                         Thanks for following my blog posts and congratulations for your winning stroke in Unitech Ltd. For Unitech Ltd, the short term targets are still Rs.12-15. Yesterday, I spoke with the head of research of a Delhi-based brokerage house, for their view on Unitech Ltd and they are also positive on the scrip, because of the improved fundamentals of the real estate/construction sectors. 

Meanwhile, there is still NO positive news in Rasoya Proteins Ltd, as of n ow; however, since this year monsoon has been predicted to be good, we can look forward for a reasonably good soybean prices. As you must remember, high soybean prices is deterring the company to start operations in the new plant. The company's main plant is still closed, unless that is put in use, nothing much will happen in the counter. One positive is that GDR issue has been more or less solved. 

Tthe company is in contact with various financial institutions, to restructure its loan portfolio. So, at this stage, I would not ask you, NOT to put fresh funds in the scrip, unless some clarity comes. I am expecting some positives post, September, 2016. 

2ndly, since you are already trading through some broker and my well-wisher, I shall be obliged, if you join my brokerage company (www.bmawc.com), so that I make a little from your trading/s; this will help me cover up a part of the research cost. This is an appeal to all my ardent blog readers. 

Thanks and regards... 

Today's Recommendations

(i) The investors can take fresh positions in Reliance Communications Ltd at Rs.53 for short term targets of Rs.57-60-71. Its merger with Aircel is only a done only it is time that you need to wait for some wonderful gain from the CMP of around Rs.53. 

(ii) Fresh position can be taken in Adani Ports and SEZ Ltd at Rs.210, T: Rs.225, SL: Rs.207

PE investment in retail real estate at Rs 1,000 crore in Jan-May 

[Editor: Since the end of last year  (2015), the real-estate developer Unitech Ltd (Rs.6.95) has adopted a new strategy in its shopping malls: first lease to tenants before building the structure. The stock of Unitech Ltd is all set to cross Rs.10-12, in the coming days, due to improving fundamentals of the company and also at the same time a (positive) change in sector outlook. The interest cost  of Unitech Ltd, is likely to come down in the near future due to some drastic measures taken by it during the last few quarters. Meanwhile, my recommended J P Associates Ltd (Rs.12.20) has given wonderful returns to the share holders in the short term]
NEW DELHI: Indian retail real estate has become attractive again for global investor as private equity (PE) investment in this segment has reached $149 million in the first five months of this year and likely to break previous record of 2008, according to property consultant JLL. 

During the entire 2008 calendar year, PE investment in retail real estate stood at $267 million. 

"As of May 2016, the total PE investment into Indian retail real estate stood at $149 million or Rs 10 billion. This has beaten most industry experts' expectations," JLL India Managing Director - Capital Markets & International Director Shobhit Agarwal said in a report. 

The figure has exceeded investment attracted by the Indian retail real estate industry in the year 2007 and could very well cross the previous high seen in 2008, he added. 

"PE investment into retail almost dried out after 2008 until the year 2015, with 2012 being the only exception," Agarwal said. 

Stating that retail real estate has become attractive again for PE investment, he said investment by PE biggies into retail properties would continue in the next six months.

Courtesy: The Economic Times

PE investment in retail real estate at Rs 1,000 crore in Jan-May 

[Editor: Since the end of last year  (2015), the real-estate developer Unitech Ltd (Rs.7.95) has adopted a new strategy in its shopping malls: first lease to tenants before building the structure. The stock of Unitech Ltd is all set to cross Rs.10-12, in the coming days, due to improving fundamentals of the company and also at the same time a (positive) change in sector outlook. The interest cost  of Unitech Ltd, is likely to come down in the near future due to some drastic measures taken by it during the last few quarters]
NEW DELHI: Indian retail real estate has become attractive again for global investor as private equity (PE) investment in this segment has reached $149 million in the first five months of this year and likely to break previous record of 2008, according to property consultant JLL. 

During the entire 2008 calendar year, PE investment in retail real estate stood at $267 million. 

"As of May 2016, the total PE investment into Indian retail real estate stood at $149 million or Rs 10 billion. This has beaten most industry experts' expectations," JLL India Managing Director - Capital Markets & International Director Shobhit Agarwal said in a report. 

The figure has exceeded investment attracted by the Indian retail real estate industry in the year 2007 and could very well cross the previous high seen in 2008, he added. 

"PE investment into retail almost dried out after 2008 until the year 2015, with 2012 being the only exception," Agarwal said. 

Stating that retail real estate has become attractive again for PE investment, he said investment by PE biggies into retail properties would continue in the next six months.

Courtesy: The Economic Times

Reliance Communications Ltd: Buy

CMP: Rs.52.20

Reliance Communications is expected to complete the migration of CDMA to 4G LTE service by mid-August, as most of its customers have already opted for the offered upgrade to 4G LTE services.

Reliance Communications now has liberalized 850MHz spectrum on a pan-India basis and the 4G LTE upgrade will be done on a national basis. It has paid around Rs.6,600 crore for liberalizing its spectrum in 20 out of 22 circles.

In the other two circles (Assam and North-East), Reliance Communications already had liberalized spectrum (which allows telecom operators to use any technology to deliver mobile services such as 3G and 4G) in the 850MHz band, bought in the last auctions in March 2015.

Reliance Communications (RCom) and the promoters of Aircel are set to ink a "binding definitive" pact in around two weeks to merge their wireless businesses, which would create a strong No. 4 telco through India's first such pan-India deal. 

"RCOM and Maxis Communications Berhad (MCB) and Sindya Securities and Investments Private Limited (Sindya), the shareholders of Aircel the proposed transaction for the combination of the Indian wireless business of RCOM and Aircel very shortly," the Anil Ambani-owned carrier said. 

Meanwhile, RCom's customers of its erstwhile CDMA services will be able to start using 4G services starting with users in Mumbai from July 1 under the company's spectrum sharing agreement with Reliance Jio Infocomm. Customers in Delhi, Kolkata, Gujarat and Andhra Pradesh will gradually follow in the first phase. 

"It's a done deal. Just formal approvals are left to be tied up," said a person familiar with the discussions. "The deal should close in the next six to seven months." 

RCom will demerge its wireless business and merge it with the existing unlisted Aircel, with promoters of both sides owning 50% each in the new entity. 

Therefore, the investors can take position in the shares of Reliance Commuications Ltd at the CMP of Rs.52.20, for short term targets of Rs.57-60-66-71.

Adani Ports and  SEZ Ltd: Buy

CMP: Rs.215

The company in its meeting held on July 2, 2016 has accorded in-principle approval for exploring the acquisition of TM Harbour Services. 

TM Harbour Services is engaged solely in providing tug services to The Dhamra Port Company (DPCL), a wholly-owned subsidiary of the company. 

This acquisition will help the company provide effective and efficient marine services to DPCL. The acquisition is subject to due diligence, final negotiations between the parties and obtaining of requisite regulatory approvals.

The Union government has reversed a Rs.200 crore penalty along with several strict measures issued against Adani Ports & SEZ in 2012 for allegedly damaging the environment and violating green laws in connection with the construction of a port project in Mundra in Gujarat, the Business Standard reported.

In a statement, however, the Environment Ministry has said the Adani Port and SEZ Ltd may have to pay a larger fine than the one issued by the UPA government, and said the Rs.200 crore fine “was not backed by any law under the Environment Protection Act and not legally correct.”

If Rs.200 crore fine was not backed by any law, that means the Rs.200 crore penalty ceases to exist at this point of time. Meanwhile, Adani Ports & SEZ has denied all claims of wrongdoing while maintaining that the state government had supported the company.

Therefore, buy the shares of Adani Ports and SEZ Ltd at the CMP of Rs.215, for a short term target of Rs.229.

Real estate market may be on revival path, says report

In the first half of the year, home sales in top eight cities rose 6.6% from a year ago, unsold inventories declined 7%

Mumbai/New Delhi: 05 July 2016: The Indian real estate market, which has been in a slump for the past three years, could be on the path to recovery, property consultant Knight Frank India suggested, citing better home sales and lower unsold inventories in the first six months of 2016.

In the first half of the year, home sales in the top eight cities, including Mumbai, the National Capital Region (NCR) and Bengaluru, rose 6.6% from a year ago, while unsold inventories fell 7%, according to a Knight Frank report released on Monday.

During the period, 135,000 homes were sold, while unsold inventory fell to 660,000 units from 710,000 units recorded in the first half of last year.

Mumbai and Bengaluru registered the maximum growth of 23% and 18%, respectively.

The report also pointed out that new launches fell 9% in the six months to 107,000 units as developers focused on selling stock before bringing new inventory into the market.

“For the first time, after two successive H1s (first halves), we are seeing a point of inflection in the residential market. After two consecutive falls in H1, for the first time, in the all-India aggregate market, we are seeing an actual uptick happening. So the point here in question is: are we seeing the worst behind us and are we now on the path of sustained growth?” said Shishir Baijal, chairman and managing director, Knight Frank India.

Measures such as the Real Estate Regulatory Act (RERA), the recent amendments to real estate investment trust (REIT) norms, a correction in prices in most markets and a lowering of interest rates in the past six months have helped in improving the overall sentiment of both investors and homebuyers in the country.

However, NCR, India’s largest real estate market, continued to struggle.

During the period, home sales in NCR declined 3% while new launches fell a record 41% from the year-ago period.

According to the report, NCR home prices fell by 4% in the first half of 2016, the first time in three years.

The report attributed the price correction to cash-strapped developers, high inventories and a trust deficit among customers.

“NCR is an investor-driven market and investors are out of real estate because prices are not rising,” Omaxe Ltd’s chief executive Mohit Goel said, adding that in the next four years, real estate will be a clean sector.

Commercial real estate continued to show positive momentum during the January-June period, with transactions rising 12% to 20 million sq. ft, while average rental values across the top six cities rose 8% from a year ago.

The report also forecast that total absorption of office space is expected to touch 42.7 million sq. ft, up from 41 million sq. ft by the end of this year, led by manufacturing and information technology(IT)/IT-enabled services.

However, e-commerce companies which have lapped up office space in the last two years have lost steam, with transactions in the segment falling around 78% during the period.

Baijal said commercial real estate has grown from “strength to strength” and if the same positive momentum continues, “2016 is poised to become the best year after the global financial crisis in 2008”.

In the residential segment, while new launches in the Mumbai metropolitan Region (MMR) grew by 29%, sales saw a jump by 23% during the January-to-June period.

Unsold inventory in the city was also down by 20% in the last two years, with a few micro markets in the suburbs of the city like Thane and Navi Mumbai continuing to show significant improvement in sales, particularly in the mid-income and budget segments.

“The new draft development plan that was released recently has brought a lot of clarity for city-based builders. Plus, robust office space demand and enhanced infrastructure are boosting demand for residential real estate in Mumbai. We forecast a 16% growth sales in Mumbai in 2016 over 2015,” said Samantak Das, chief economist and national director at Knight Frank India.

Most developers remain hopeful of the real estate market picking up further with a good monsoon and more policy reforms kicking in over the coming months.

“We are very hopeful that with the monsoon and GST (goods and services tax) coming in, the real estate market is going to do better and, by Diwali, we should see a stable market. Homebuyers have also realized that this is as low as home prices can go. They are actually going forward and closing deals. The only thing is that they are choosy about the developers and the budget but the bottom line is that transactions have started happening,” said Getamber Anand, president, Confederation of Real Estate Developers’ Associations of India, a real estate lobby.

Courtesy: Live Mint

7th Pay Commission bonanza; 5-fold increase in equity investment cap to 75 per cent under NPS likely

Photo: India.gov.in

4 July 2016: Close on the heels of the 7th Pay Commission recommendations being approved by the Union Cabinet, Government employees could soon have the option to invest up to 75 per cent of their contributions to the National Pension System (NPS) in equities.

This would be a five-fold jump in the maximum equity exposure allowed for government NPS. Existing investment guidelines for government employees mandate investment in equity to a maximum of 15 per cent with the floor level set at 5 per cent. The rest has to be invested in fixed-income securities including government securities and corporate bonds.

“We have submitted our proposal to the for the government for approval of two new life-cycle funds under NPS. We want these additional choices available to the government sector NPS also. The proposal is under very serious discussion in the government. We expect some clarity soon,” Chairman, Pension Fund Regulator and Development Authority (PFRDA), Hemant Contractor, told FeMoney.

The two new life-cycle fund proposed by PFRDA has been called the 'Aggressive life cycle fund' with equity allocation of 75 per cent at age 35 and 'Conservative life cycle fund' with equity allocation of 25 per cent at age 35. The only life cycle fund that PFRDA offers at present provides equity allocation of 50 per cent at age 35. The equity component in all these funds reduce with age with a proportionate increase in fixed income investment to ensure safety of retirement funds.

The 7th Pay Commission had recommended that the government, in consultation with the PFRDA, provide different life cycle investment options with different investment mix under NPS. “The Commission recommends that the investment choices under NPS be calibrated on a life-cycle approach and the choices be offered in a simple manner to that any lay person can understand and act accordingly,” the Commission had said.

All central government employees who have joined on or after April 1, 2004, have to mandatorily invest 10 per cent of their salary and dearness allowance to NPS to create a pension corpus.

The PFRDA constitued G N Bajpai Committee on NPS investment issues too had proposed giving wider options. The Bajpai Committee had said that new life cycle funds should be considered “keeping the core principle of 'decreasing risk appetite with increasing age” intact with lower and higher ceiling in equity to cater to both conservative subscriber and subscriber with a higher risk appetite.”

Justifying higher equity allocation, the Bajpai Committee had said, “ The design of the mandated investment norms in vogue today with predominance of low-risk fixed-income securities, that too mainly Government securities, has lower tolerance for risk, but a high tolerance level for lower returns especially in case of the Government Sector employees. This is unfair for investors who may need a combination of low risk with moderate returns or even higher returns with higher risks. This is especially true for those in the early stages of their saving curve. There can be no denying that in the pursuit of risk-free investment, investors are getting the short shrift and are therefore revealing a preference for physical assets.”

The panel had also suggested harmonisation of investment guidelines between private and Government sector NPS to bring about a more unified pension regime in the country.

Courtesy: Yahoo.com

WINNING STROKES: THINK DIFFERENT

Rolta India Ltd recommended at around Rs.63.50, last week today closed at Rs.67.50, after making a high of Rs.68.65 in the BSE. The next target for the stock is Rs.71, which will be achieved in this week. The first target of the scrip has been reached. 

Allahabad Bank Ltd recommended at Rs.54 and Rs.57, today made an intra-day high of Rs.75.85 before closing at Rs.75.35. The investors should do well to book some profits in the counter and hold the rest with a SL of Rs.71.60. 

Union Bank Ltd, which was recommended around Rs.123 and Rs.117.50, today made an intra-day high of Rs.137.45, before closing at Rs.134.90. The investors should book some profits as the both the short term targets of Rs.129 and Rs.132, has been achieved. 

Unitech Ltd today closed at Rs.6.40, after some corrections, during the last trading session. The next targets are Rs.7.5 and Rs.8.30, which will be reached by next week, as the momentum in the counter is very strong. Today the percentage of Deliverable Quantity to Traded Quantity was 29.90% which was quite good. 

There is no stopping of Vedanta Ltd, as the scrip closed at Rs.138.65, which making an intra-day high of Rs.139.55. 

My recently recommended J P Associates Ltd today touched Rs.9.27, in the BSE before closing at Rs.9.08. The investors should wait for the scrip to close above Rs.9.20, before taking fresh positions. However, it will reach Rs.12-13, within a short time. 

Millions of voters didn’t want Brexit. Why should they lose EU citizenship?

Anti-Brexit campaigners gather outside
the Houses of Parliament 

Friday 1 July 2016: The EU Council has spoken on Brexit, but what did it decide? Nothing. No compromise, no pick and choose for the UK, and no need to reform. The EU stays as it is and anyone who does not accept this is wrong and thrown out. It’s a huge blow for Nicola Sturgeon and the SNP, who seem to be the only ones passionately defending the European project.

The downgrading of Sturgeon’s attempt to engage negotiations with the EU to an internal “British issue” – Donald Tusk and most heads of states refused to talk to her – is the best example of how deeply the EU’s representatives overlooked the key message of the Brexit vote: that the citizens, and not nation states, are sovereign. The framing of Brexit as a British problem is misleading. The idea of the European Union’s founding fathers was to build a democracy beyond nations.

The Scottish case proves what the French sociologist Pierre Rosanvallon last April dubbed “the lie on which the European Union was built”. Speaking in Warsaw, he argued that we are all paying a high price for that founding lie, anchored in the treaty of Maastricht, that the EU is a union of states and of citizens. Citizens do not have much say in the EU, despite the fact that – no matter how often states claim otherwise – citizens are sovereign. There is no state-independent citizenship of the EU – not for Englanders, not for Scots, not for anybody: the union of citizens is a fallacy. As a result, British voters were hostages of the British government and the Tories’ Eurosceptic wing. Now that the UK is leaving, Brits will lose their citizenship of the EU. The result is not national pride, but a rush for Irish passports.

Brexit is just another example of today’s Animal Farm EU, where some citizens are more equal than others, above all the Germans, who have benefited most from the single market and the euro without sharing. Or even the Dutch, who believe they alone have the right to vote over the EU’s Ukraine policy. A political project can never function like this and politics is what Europe lacks most.

The treaties of the Levellers and the Putney Debates of 1647 elaborated on this concept of equal liberty, insisting that, within a political entity, all citizens must be treated equally in front of the law. The EU does not offer this.

The next European project must make a compelling offer to all European citizens, one that goes beyond nation-state affiliation. It must be based on the principle that all European citizens have political equality: in elections, before the law and in taxes. Cicero called this ius aequum. A government for the people and by the people. A nation state is not the only frame for a democracy.

It is what the EU’s founding fathers had in mind in postwar Europe: a real post-national democracy, with the autochthon, or tribal, European regions – Catalonia, Scotland, Moravia, Bavaria, Auvergne, Silesia or Brabant – as constitutional holders, to prevent the big nation states dominating the others, as Walter Hallstein, the first European president of the European commission, said in his inaugural speech in Rome in 1964.

The challenge is to define this European democracy and its parliamentary institutions, which, in contrast to the current trilogy of European council, commission and parliament, must be built on a real division of power: a legislative body that controls an executive body.

That such ideas sound like heresy in Brussels indicates just how far the EU has strayed from English political thinkers such as John Locke, Edmund Burke or Adam Smith. All were masterminds of modern parliamentary liberalism, and none could have imagined what appears self-evident in today’s EU: that a people can be governed by a single market, that deregulation is the goal and that anyone who proposes social controls of markets is a dangerous Marxist radical.

The question now is how to organise a Schumpeterian “constructive destruction” of the EU. Whenever in history sovereign citizens have embarked together on a political project, they have founded a republic based on that principle of political equality. This should be the vision and mission for Europe in the 21st century.

Courtesy: The Guardian

Buy Coal India Ltd at Rs.311

T: Rs.325 

SL: Rs.306

Triggers:

• After sluggish demand in April and May, June brought some good news for Coal India Ltd, as power plants started stocking fuel once again increasing coal off-take by 7-8%. According to sources, off-take for April-June period grew by 3% compared to the same period last year.
• The company recently announced signing two agreements with Solar Energy Corporation of India for implementation of solar power project in Madhya Pradesh. Coal India and Solar Energy Corporation of India (SECI) signed two agreements on 28 June 2016, for implementation of 200 megawatts (MW) solar power projects in Madhya Pradesh for the beneficial utilisation of solar power by Northern Coalfields (NCL) and South Eastern Coalfields (SECL) at an estimated cost of Rs.650 crore. NCL and SECL are subsidiaries of Coal India.
• There was a block deal of 500000 shares in Coal India at Rs.311.00 per share, valued at Rs.15.55 crore on BSE today. 
• Citigroup maintains a buy rating on Coal India with a 12-month target price of Rs.380. Round I of linkage auction concluded recently, and Round II to commence soon. Round I for sponge iron saw muted response while Round II for cement is likely to commence in a week.
• Coal India's consolidated net profit rose 0.2% to Rs 4247.93 crore on 0.1% fall in net sales to Rs 20759.45 crore. Coal India is an organized state-owned coal mining corporate. The Government of India holds 79.65% stake in Coal India (as per the shareholding pattern as on 31 March 2016).

'Our nation is in peril': Tony Blair urges calm in Brexit talks

Photo: The Telegraph UK

Friday 1 July 2016: Tony Blair has called for “serious statesmanship” in the talks with the European Union that will shape the future of the UK after Brexit.

The former prime minister warned “our nation is in peril” after the vote to leave the EU and the negotiations on the UK’s future relationship with the other countries would be of “extraordinary complexity”.

He urged the contenders in the Tory leadership race to act with “genuine patriotic regard” to the country’s future as he accepted his own party was “effectively disabled”.

In an article in the Daily Telegraph, Blair said: “There is going to be a negotiation of extraordinary complexity where there are a thousand devils in every detail. Those we used to call ‘our European partners’ are, unsurprisingly, divided and uncertain themselves.”

He said some countries wanted a quick divorce, while others favoured a delay in commencing the article 50 process, which starts a two-year countdown to Brexit.

“This needs serious statesmanship,” he said. “So before any formal negotiation begins, we need to get a high level sense of where the boundaries are going to be, the things that might be compromised, the things that are red lines.

“The psychology of the other 27 countries is crucial to feel and shape: they could decide that other secessionist movements should be deterred and so be disinclined to flexibility; or they could decide that the British view – especially on immigration – reflects something strong across Europe and have a measured response which tries to accommodate that sentiment.”

In a stark assessment of the task, he added: “Our nation is in peril. To allow us to come safely through this we need to be adult in our politics, to proceed with calm, maturity and without bitterness; because our future as a nation in the world and as the UK itself is at stake.”

The former Labour leader said that Britain “should keep all our options open” but went on to insist that “is not an argument for another referendum”.

He warned that Ukip leader Nigel Farage’s performance in the European parliament could damage the country’s ability to secure a favourable deal.

In highly charged exchanges in the wake of the Brexit vote, Farage was booed and barracked by MEPs as he accused them of being “in denial” about the failure of their single currency and their attempt to create political union in Europe.

The Ukip leader said he had been laughed at when he arrived in Brussels 17 years ago with a message that Britain must leave. And he told MEPs: “You’re not laughing now.”

Blair said: “Don’t underestimate the damage having Nigel Farage address the European parliament in that way does to our interests. Remember who has to agree any new deal for Britain: the European parliament.”

With David Cameron set to leave the stage, the next leader of the Conservative party will have the task of negotiating Brexit.

“On the leave side, there are some who are triumphalist and some more inclined to reach out,” said Blair. “Those leave leaders now so powerful within the politics of our nation should demonstrate they are in ‘reach out’ mode fast.

“With the Labour party effectively disabled we need the Conservative party to conduct its leadership battle with genuine patriotic regard for our nation’s interest.”

Courtesy: The Guardian

Unitech Ltd: Is it still a buy... ?

Unitech Ltd is one of India's leading real estate player. It has a diversified product mix in real estate comprising of commercial complexes, IT/ITes parks, special economic zones (SEZs), integrated residential developments, schools, hotels, malls, golf courses and amusement parks.

..........amidst a spew of litigation against Unitech Ltd, stood a company that was a shadow of its former self. From the wrong choice of domain or its misadventure into the telecom sector, to absence of big launches, to slow pace of project construction coupled with a high debt servicing cost, to cash crunch, to customer complaints, to sentencing of the promoters by Courts, et all - -the company has gone through all.... 

This doesn't factor in the absence of any return on the telecom investment the company made. Its biggest problem, though, is a huge liquidity crunch. 

In January 2008, the Unitech Ltd's stock had peaked on the BSE, at Rs.546.80; however, it closed at Rs.6.41 in the BSE, yesterday. 

Few years ago, in 2007-08, the company's net profit stood at Rs.1,669 crore. Today, it has slipped to a loss of Rs.275.62 crore for financial year 2015-16. 

However, the company Q4FY16, numbers were not too bad, as is made out to be......A quick look at the figure on the right will show that, the losses deepened in Q4FY16 primarily due to two reasons: 

(i) The increase in Other Expenses component to Rs.721.74 Cr in Q4FY16 from Rs.239.51 Cr in Q3FY16 and 

(ii) Increase in Interest Charges to Rs.142.70 Cr in Q4FY16, from Rs.84.56 Cr in Q3FY16.

Meanwhile, the company's management is taking all the measures, to decrease the debt on the books, apart from the new RBI measures, which speaks of converting a part of the unviable debt into equity.

At the time of announcement of results, Sanjay Chandra, Managing Director of Unitech said that the company's focus has been primarily on completing the ongoing projects and delivering the finished product to its customers. Balance expected receipts from these ongoing projects combined are sufficient not only to meet the remaining construction expenses but also to service the debt, if any, against these projects. The company has been taking various measures, such as creation of project specific escrow accounts, to boost customer confidence and improve conditions so as to generate liquidity needed for completing the ongoing projects. Apart from improving collections, company is also mobilising funds from banks and financial institutions. With these measures company is hopeful of completing the ongoing projects in the next few quarters in a phased manner, he added.

Over and above the good news for the company is that the problem with anemic results doesn't apply only to Unitech Ltd alone, but applies across the sector; thanks to bleak market conditions.

Another positive point is that the telecom fiasco is now almost over; though the old case is still pending. However, all the liabilities in the erstwhile telecom arm, have been taken care of by the company. 

Also, a source close to says that the management is making frantic efforts to reduce its debt through its operating cash flow. 

Hence, Unitech Ltd is far from being written off. It has the ability to rebound, admit many top industry executives. Its fairly substantial land bank is one of the reasons why these executives bank on its eventual recovery. 

The name of Unitech Ltd still figures among the best developers of India. Just focusing on its core real estate business should see it through. Besides, in India, when a company reaches a certain level, it naturally gets support from the system; despite the telecom mess, the Unitech brand has managed to retain retail confidence.

This is not the first time that Unitech Ltd is in the midst of a crisis. When real estate was down in the dumps in the aftermath of the global economic slowdown of 2008-09, it too, went through a rough patch; only to came out of it, successfully managing all odds. But some critics point out that this time Unitech Ltd's problems are much deeper and it will require a considerable effort to shed the baggage of the past, negotiate the slowdown and revive its business.

Apart from this, there were recent media inputs that the capital market regulator SEBI is likely to consider proposals for relaxed norms for REITs. Among the changes, the regulator’s board is looking to examine a proposal to make Real Estate Investment Trusts (REITs) more attractive to investors by allowing them to invest a large portion of funds in under-construction assets, sources said.

Regarding REITs, SEBI plans to remove the restriction on the SPV (Special Purpose Vehicle) to invest in other SPVs holding the assets, which in turn would allow REITs to invest in a holding company owning stake in SPVs.

Regarding the valuation of its huge pool of land all over India, I would like to say that Unitech Ltd’s 14 lakh sq meter plot of land in Noida had a reserve price of Rs.2,660.56 crore and that too at distress (half rate) rate. 

Now we are talking of whooping 300 million sq. ft of land reserves of Unitech Ltd....

Let us do some rough calculations: 14 lakh sq.meters is approximately equal to 151 lakh sq.ft or 15.1 million sq.ft. Right?

So, this gives the value of 300 million sq.ft of land as Rs.52,858.80 crore and that too at distress rates. Unitech Ltd's debt as of 31st March, 2016 is Rs.7,165.70 crore.

Moreover, selling of land by the lenders at distress rates will soon be a thing of past due to RBI's new policy guideline, on distress assets. Also, the pay hikes, lower interest rate trajectory and the recent data on the sector, raised hopes of a swift recovery in demand for the Real Estate sector. 
The Economic Times, wrote on 9 June, 2016: 

There are reports that the authorities in Greater Noida may soon implement an exit policy to allow builders to surrender surplus land. Authorities of Noida, Greater Noida and Yamuna Expressway will soon firm up a proposal on this and send it to the Uttar Pradesh government for approval, said Arun Vir Singh, CEO of Yamuna Expressway Industrial Development Authority (YEIDA), an ETRealty.com report said. 

But one should remember that raising money, in part, requires a reasonably solid reputation, and unfortunately for Unitech Ltd, the ghost of telecom will continue to haunt it for a couple of quarters. So, it remains to be seen how much the company is able to rake in fresh capital through Qualified Institutional placements.

However, Unitech Ltd has recently raised Rs.85 crore from Piramal Group and is in talks with two private equity players to raise more funds for the development of a land parcel in Noida and to repay the LIC loan.

Therefore, you can now take your decision, whether to buy the shares of Unitech Ltd at the dirt cheap price of Rs.6.41.....

7th Pay Commission approved by Cabinet; Real estate sector may get a boost, Bengaluru, Pune among best bets

June 29, 2016: Realty experts feel that the 7th Pay Commission will have a positive impact on the sector and provide opportunity to middle class government employee to own a house with increased disposable income.

Photo: Phoenix Real Estate

Wednesday proved to be an important day for central government employees as the Union Cabinet cleared the implementations of 7th Pay Commission recommendations, which is expected to benefit to over 1 crore government employees and pensioners. Realty experts feel that the 7th Pay Commission will have a positive impact on the sector and provide opportunity to middle class government employees to own a house with the increased disposable income. Hike in salary indicates an increased spending power and better economic growth. The government has approved rise in salaries and pension for public sector employees.

The 7th Pay Commission recommendation will be effective from January 1 and the Cabinet will decide if the arrears for the six months have to be paid in one go or in installments.

The real estate sector is already reeling under pressure and revival looks tedious and a long drawn process. Developers are already offering discounts to get buyers back into the market. 7th Pay Commission’s is seen as a step that would boost the demand and home ownership sentiment.

“In 2015, the 7th Pay Commission’s decision to hike the salary of state as well as central government employees by almost 23.6% was seen to have a positive impact on the demand side of residential real estate, as it would boost sentiment for home ownership among a set of buyers who have traditionally been very conservative in matters pertaining to large financial commitments. The increase in demand would be uniformly seen across India’s more affordable cities. Pricier cities would not see much of an impact on this account, as this segment of potential home buyers will be looking primarily for budget homes, ” Ashwinder Raj Singh, CEO – residential services, JLL India said.

Endorsing Ashwinder’s thought, Ankur Dhawan, chief business officer – PropTiger said the 7th Pay Commission implementation will be a positive move and raise the affordability of the government employees. Dhawan further added that the developers would come up with schemes to bring in public sector employees to invest into realty sector after approval to the 7th pay recommendations.

Real estate is under huge stress with high unsold inventory across the country. However, along with 7th pay commission, the discounts being offered by developers is seen as another big step to attract the homebuyers. “With huge inventory lying unsold across the country and developers finding it difficult to offload the existing stock, the road to recovery looks tedious. Knowing that the developer community is focused on liquidating the existing inventory and that they are offering a plethora of discounts to get buyers back to the market, it is a good time to invest in real estate, ” Narasimha Jayakumar, chief business officer, 99acres.com said.

Dhawan said that cities like Noida, Pune – due to its proximity with Mumbai- and Navi Mumbai may attract the public sector employees to look for a house in the affordable sector after 7th pay Commission approval.

Jayakumar added, “One should look out for investing in cities that are witnessing a buoyant commercial and office space market. To this end, cities like Hyderabad, Bengaluru and Pune are the ones to look out for. Riding high on infrastructure wave with a number of connectivity links such as metro, elevated roads and flyovers in the pipeline, these cities are attracting IT/ITeS firms and start-ups to their shores. This, in turn, is befitting the residential landscape by propelling demand. Further, locations such as Noida, Gurgaon and Faridabad in NCR are also touted as investment hotspots, considering the fast-paced infra development, and expansion in retail and commercial sectors. However, anyone investing now should be prepared for a lock-in period of at least 4-5 years to reap healthy returns.”

Amit Modi, Director ABA Corp and V-P CREDAI western UP, said, “the 7th Pay Commission recommendation is an important milestone in the real-estate cycle as an increase in salaries of government employees is likely to boost the demand for home purchases. 

Housing sector is expected to be the biggest beneficiaries of the rise in income and spending capacity of government employees.”

Modi further added that over the last couple of years there has been government focus on “affordable housing”, and a public desire by the Modi government to provide housing for all, hence the affordable segment (sub Rs 50 lakh) continued to command the largest shares of total residential sales and more than 50 per cent of total sales in all four quarters of the financial year came from the segment. The segment is expected to see further traction.

He has listed Bhiwadi, Jaipur, Ghaziabad, Delhi (L-zone) and Faridabad as good real estate investment picks in North India along with Gurgaon, Noida, Jaipur, Neemrana and Lucknow. Thane and Navi Mumbai that gave investors maximum returns in the past four years will continue to give best returns to its investors.

Courtesy: The Financial Express

Retail real estate back in favour with PE investors 

BENGALURU / MUMBAI, Jun 29, 2016: India's retail real estate sector received $149 million or about Rs 1,000 crore of private equity investment in the first five months of 2016, according to a report by JLL India. This accounted for 8% of the total PE investment in India during the period, beating expectations of most analysts and marking a turnaround after the lack of investor interest since 2008 baring the singular exception of 2012. 

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With PE investment in the segment exceeding that in 2007, some experts said it might well cross the previous high seen in 2008. 

"India's growing reputation across the globe as an investment destination thanks to Prime Minister Narendra Modi's jaunts, coupled with the slowdown in China's economy, has led to an upswing in private equity investment flowing into the country," said Shobhit Agarwal, managing director, capital markets at JLL India. 

Experts said that the government's efforts to make real estate sector and various sub-segments of it more competitive and organised are yielding results. Infrastructure development around retail hubs will push the growth further and attract more funds inflow, they said. 

"With the simultaneous growth in quality real estate and infrastructure, Indian retail sector can prove to be a game changer, if developed in a planned manner. It is important that the development of organised retail is done in line with the infrastructural developments in that area, in order to maintain the much needed equilibrium, especially in urban areas," said Rubi Arya, executive vice chairman of Milestone Capital Advisors. 

Arya said the recent relaxations in FDI norms will attract many foreign retail brands, thus increasing the need for quality spaces. Access to public transport, parking facilities and closeness to upcoming residential zones will prove catalysts for retail to flourish, she said. 

Suresh Sunagaravelu, executive director retail, hospitality and new business at Prestige Estates Projects said, "There will be traction from private equity funds once real estate investment trust takes off in the country." 

The company, which operates malls under Forum brand, plans to have 3 million sq ft of mall space ready by 2018. 

One deal accounted for the investment received till May, with Singapore-based GIC investing $149 million in Sheth Developers' Viviana mall at Thane. Another major deal is in progress, with a US private equity fund looking to buy a large retail project in Navi Mumbai. 

The industry expects more investments to come in owing to improvement in consumer sentiment amid faster economic growth. 

"Coupled with economic stability, FDI policy liberalisation by the Modi government and improvement in the consumer sentiment are some of the factors expected to help global brands witness a very conducive environment for investment into Indian retail and retail real estate sectors," Agarwal said. 

Quality mall space coming up with strong pre-commitments indicates that retailers continue to remain bullish about the long-term India consumption story, he said. 

Courtesy: The Economic Times