HDIL jumps 5% on fund buying

The stock so far has soared 7.4 per cent to touch a high at Rs. 113. 

Housing Development & Infrastructure (HDIL) has witnessed a surge in trade today after foreign fund bought significant stake in the company yesterday.

According to reports, Janus Investment bought 2.2 million shares of the company at Rs. 106.08.

The stock so far has jumped 7.4 per cent to touch a high at Rs. 113. Now, the stock is up 5.9 per cent at Rs. 112.

The BSE counter has seen trades of around 3.4 million shares, as against its two-week daily average volume of 4.7 million shares .

Highlights of media interaction with Dr. Raghuram Rajan

“The guidance remains what it was when we cut rates, that further action will be in the direction that was initiated and that it will depend on developments, in particular on developments on the fiscal front as well as a continuation of the disinflationary process.”

Dr. Raghuram Rajan assumed charge as the 23rd Governor of the Reserve Bank of India on September 4, 2013. Prior to this, he was the Chief Economic Advisor, Ministry of Finance, Government of India and the Eric J. Gleacher Distinguished Service Professor of Finance at the University of Chicago’s Booth School. Between 2003 and 2006, Dr. Rajan was the Chief Economist and Director of Research at the International Monetary Fund. Dr. Rajan’s research interests are in banking, corporate finance, and economic development, especially the role finance plays in it. He has co-authored Saving Capitalism from the Capitalists with Luigi Zingales in 2003. He then wrote Fault Lines: How Hidden Fractures Still Threaten the World Economy, for which he was awarded the Financial Times-Goldman Sachs prize for best business book in 2010.
 
Anil Mascarenhas of IIFL gives you the highlights of the media conference post the RBI policy where Dr. Raghuram Rajan says, “The guidance remains what it was when we cut rates, that further action will be in the direction that was initiated and that it will depend on developments, in particular on developments on the fiscal front as well as a continuation of the disinflationary process.”
 
Steps and guidance
 
Dr. Rajan: Given that we cut rate off cycle and given there has been no significant new development on inflation in the fiscal front since then, we have maintained status quo on interest rates. However, we have taken actions in a number of other directions... Many of these actions are intended to further the growth process and some are intended to enhance stability of the system. In terms of guidance going forward, the guidance remains what it was when we cut rates, that further action will be in the direction that was initiated and that it will depend on developments, in particular on developments on the fiscal front as well as a continuation of the disinflationary process. So our further actions will be driven by the data.
 
Dr. Urjit R. Patel: We are in the midst of the age of competitive depreciation and ‘beggar thy neighbour’ monetary policy. As you know, the Swiss National Bank abandoned its peg, Singapore eased its Monetary Policy on January 28 and its currency fell to its lowest level since 2010, and Central Banks have intervened heavily in the bond markets bringing yields down to historic lows. This reminds one of an African saying that when elephants fight, the grass suffers. And the Economist says that the ECB and Bank of Japan are printing money and devaluing their currencies while the US economy is growing strongly; anyone who stands in the middle risks getting crushed. I think this forms an important backdrop of our macroeconomic management as we go forward and face these quite unusual challenges.
 
Following are Dr. Rajan’s views on a range of topics
 
The real rate
 
Between 1.5% and 2% is a reasonable real rate given where we are in the business cycle. Now of course different people have different views. Dr. Rangarajan would like to see it closer to 3. There are some people who would like to see it closer to 1, there are others who mix and match and add in various risk premia and claim that the policy rate is now way into real territory. So we have to be a little careful. What we would like is the real risk pre-policy rate to be about 1.5% to 2%.
 
New GDP series
 
We do need to spend more time understanding the GDP numbers and we will be watching February 9 releases with great care and delve in deeply into what we see there. At this point, it is premature to take a strong view based on these GDP numbers. Most of the data that we have seen for 2013-2014, except inflation which was very strong, give us a sense that there was lack in the economy. I think the chief economic advisor has pointed to the fact that imports, non-oil imports were coming down substantially, but there are other factors including for example auto production which is a fairly clean number which were coming down over this period. So we find it hard to see the economy as rollicking in 2013-2014. However, we must understand better why those numbers kick up and it could be that it is not manufacturing but services which were stronger during that time. One of the interesting factoids that you see is that India is moving more towards consumption of services, away from consumption of manufacturing. So it could play a bigger part in consumption but I do not want to say anything about the numbers till we understand them better. Let me say that our view will be formed only in part by numbers; it will be also other indicators that we look at on the strength of the economy.
 
Need to nudge banks?
 
The Reserve Bank is not the owner, is not in any way involved in the day-to-day running of the banks. That is a decision that the owners and management have to take. So we cannot nudge them. We can only comment on the fact that despite a fall in long-term interest rates, substantial fall, treasury rates have come down a significant amount over the last year and a half and corporate bond rates have also come down substantially. There has been some adjustment in rates but in general, base rates have not changed. Of course when you talk to banks, they are very happy that we cut rates. At some point, my guess is transmission has to take place so you have to look at that also.
 
A couple of banks have in fact cut their base rate. Some banks are I presume worried about the fact that if they cut their base rate, it impinges all borrowers, not just new ones. Given how weak credit growth for the banks has been and overall financing has been quite strong because they have gone out- large corporations are going outside the banks. I think banks at some point will have to start lending again and to get that lending they will have to be more competitive which means they will have to cut their base rate. Now we did revise our directions on how they calculate base rate to make it a little more transparent, but I am hopeful that it is a matter of time before banks judge that they should pass it on. Many have been relatively quick to cut their deposit rates but not so quick to cut their lending rates and I presume some are hoping that they can get the spread for a little more time to repair bank balance sheets. Eventually competition is what matters.
 
Forex market intervention
 
We do not intervene to try and target a particular level for the exchange rate. Where we do intervene is to reduce volatility and we have intervened in both directions in recent months and weeks, so we both buy and we sell. So it is not in any way an attempt to go one directional. I think we are perfectly comfortable with where the rupee is but it is a risk that we have to keep in mind going forward with the massive amounts of quantitative easing that are going on in the rest of the world that there are possible dangers of us becoming uncompetitive on that dimension.
 
Assessing changes in the fiscal space. 
 
I think the Finance Minister as well as all the Ministry officials have reiterated their desire to stick to the budgetary target for this year, but also there is a lot of anticipation about the fiscal path over the next few years. It is not that we are locked to into a specific number or a specific path, but it is the overall package whether it makes for serious high quality fiscal consolidation over time that clearly will impact inflationary forces that we are most worried about. So it is all aspects of the budget that we will be looking at and that are eagerly awaited. I think the government has the intent of producing a solid budget.
 
Spillover of competitive quantitative easing 
 
First, I am not sure that we know fully the process that Federal Reserve will follow. It will depend to some extent on developments on the dimensions that you talked about. As you know, the Federal Reserve introduced a phrase on the international situation in its statement this time. So I have no doubt that the exports as well as the part the dollar will play some role in their future deliberations. As far as India’s position goes, we have made important strides on at least three out of four macro variables and I am hopeful that the fourth we will also move. On growth we never plunged as low as some of our comparative countries. Of course if we take the new statistics that is there, we were already up to 6.9%. I do not want to over emphasize that because we need to understand that but that is one of the highest growth rates in the world. If we stick with our projection of 5.5%, we are still doing pretty well for this year. The second element that has improved considerably is our current account deficit which we project to be 1.3% this year and perhaps even lower next year because of the lower oil price, so long as it stays low. The third element has been inflation. After all investors are worried about the value of the rupee that has come down, considerably the inflation has come down which is one of the reasons the rupee has remained so stable. The fourth element is the fiscal deficit. We have made some strides there, some important strides and this is where the budget will be an important factor in establishing the continued confidence that our macro actions are all in the right direction. A secondary aspect which is important to help us is the build-up of reserves. Our reserves are substantially higher even net of forward positions which today are positive rather than negative last year and therefore I think we are in a much better position. Will we be immune from volatility, then the answer is no. I think everybody is affected by volatility but after the first wave of volatility when market participants stop to think, I am hopeful that we will look much better than perhaps comparative countries.
 
NPAs and revival 
 
I think we should not attribute stigma to an NPA and this is a misconception that is both amongst producers as well as lenders. The producers think if their account is labelled NPA, it means they are at fault. It just means that account is not paying and there could be very legitimate reasons why it is not paying because of policy inaction, because of legal complications, etc. and accounts will stop paying or changes in world prices. So the fact that an account is an NPA is an accounting statement, it is not a statement about blame or reputation, etc., that is number one. Second, even an account which is an NPA, banks can lend to it and in fact with the new loans, so long as they are being serviced and there could be a moratorium on those new loans also, that loan is not considered an NPA. Our regulations do not label it an NPA. So projects that are halted because of their NPA can be restarted with new loans from the banks. There is nothing that prohibits that. What is important is the banks make a calculation that these new loans are necessary to restart the project and the package is going to be NPV positive for the banks because it has already made loans which are in trouble, the project needs to go forward to pay off, here it is a little more to ensure working capital needs are met or the final construction phase is done. That is okay and that is important actually at this time that in such situations they take a considered decision. I am not going to micro manage the decision from here but I am going to say if those loans are made, they are perfectly appropriate and they will not be considered NPA. In fact the rules say until fresh loans into an NPA situation are not necessarily NPA so long as they perform.
 
April 1 deadline for classification of restructuring accounts into NPA
 
It is important we clean up bank balance sheets that we show the bank sheets what they actually contain. That will enhance confidence in the bank balance sheets and enable the banks to raise the much needed fresh capital. In order to build confidence in bank balance sheets, we have to come to an end of forbearance that we have to put banks on the right track. We have given enormous amounts of new flexibility in trying to put distressed projects back on track. But I do not think the answer is to pretend and extend or extend and pretend. It is to call a spade a spade, do what is needed including making new loans if necessary to complete the project but move on beyond that.

Gail India plunges 3% ahead of Q3 results

The stock has touched an intra-day low at Rs. 408 and a high at Rs. 422 so far during the day.

Gail India continues to trade on a feeble note on the BSE, on hopes of a weak show on the earnings front.

The company is scheduled to announce its earnings today.

Currently, Gail India has slipped almost 3% at Rs. 411. The stock has hit an intra-day low at Rs. 408 and a high at Rs. 422 so far during the day.

On the BSE, the counter has registered trades of around 83,000 shares, as compared to its daily average volume of 173,000 shares in the past two weeks.

Meanwhile, the BSE Sensex is down 26 points at 28,851 

Corporate Announcement TECHM

Three Ireland and Tech Mahindra officially open customer service centre in Waterford

Tech Mahindra Ltd has informed BSE regarding a Press Release dated February 06, 2015 titled "Three Ireland and Tech Mahindra officially open customer service centre in Waterford".

Tata Steel Q3 profit seen down 58% at Rs 210 cr: Poll

Tata Steel's third quarter consolidated profit after tax is seen falling 58 percent year-on-year to Rs 210 crore, according to the average of estimates of analysts polled by CNBC-TV18.



Tata Steel 's third quarter consolidated profit after tax is seen falling 58 percent year-on-year to Rs 210 crore, according to the average of estimates of analysts polled by CNBC-TV18. 

Total turnover may fall 4 percent to Rs 35,400 crore in December quarter from Rs 36,735 crore in the year-ago period. Operating profit is expected to fall 17 percent year-on-year to Rs 3,330 crore and margin may decline 150 basis points to 9.4 percent in the quarter gone by.

 Indian operations may struggle: -Sales volumes increased 3 percent Y-o-Y to 2.13 million tonnes in Q3 from 2.07 million tonnes. India’s EBITDA may be pegged back:
 a) 3-4 percent decline in domestic steel realizations due to pressure from imports and weak domestic demand
 b) Higher usage of purchased ore due to suspension of its iron ore mines during the quarter
 c) Suspension of ferro alloy unit 

Tata Steel Europe (TSE) -Sales volumes may increase 1-2 percent year-on-year (down 3 percent Q-o-Q) to 3.25 million tonnes
 -EBITDA/tonne may be at USD 40 per tonne against USD 32 per tonne in the year-ago period and USD 46 per tonne in Q2FY15
 -Lower scale benefit may be seen on account of festive quarter
 -EUR/USD movement could also be a positive 

South East Asian operations: -Margins may continue to suffer from low cost Chinese imports -On EBITDA per tonne could be back in the black from negative in Q2  

Banks in India feel squeeze of rock-bottom fees, despite big deals

Measly fees for advisory roles in government share sales are not unusual in India, but bankers say they are struggling now to justify the costs to shareholders

Foreign investment banks are showing signs they will be more choosy about bidding for roles to help manage government share sales after the country's largest ever equity offering of $3.6 billion left them splitting a fee of just one rupee. 

Measly fees for advisory roles in government share sales are not unusual in India, but bankers say they are struggling now to justify the costs to shareholders in the current environment of low interest rates and rising regulatory costs. 

Banks say state share sales - a key plank of New Delhi's efforts to trim its fiscal deficit – tie-up staff for months on end, leaving teams stretched and the advisers out of pocket. The low fees are also eroding their pricing power in private sector deals, they say. 

"The bitter reality is the government deals are the biggest deals in India. If you are not making money on them, how can you justify a rise in cost in India and hire more bankers?" said the investing banking head of a large European bank in Mumbai. The banker, who declined to be named, said that in the absence of being able to hire more staff, banks would pick and chose large government share sales to "get you some league table credit". 

"We are doing just that," he said, reflecting a view shared by other bankers. Late last week, seven banks, including four foreign ones, managed the Indian government's sale of a 10 percent stake in Coal India. 

New Delhi is also looking to hire banks to sell minority stakes in five other companies, which could raise a combined $3 billion based on current market values, as soon as this week. The government needs to raise $10 billion by the end of March to reach its fiscal deficit target. 

However, in the latest deal, no foreign banks submitted bids to manage the sale of a government stake worth about $900 million in state miner NMDC. The tender closed on Tuesday with four Indian banks bidding, compared to five sought, a government website showed. 

When the government sold a similar stake in NMDC in 2012, more than a dozen banks had bid for the business. Advisory fees on government share sales are not particularly lucrative globally, but India is probably the toughest market, said Tarun Kataria, chairman of advisory firm Cityspring Management in Singapore. "India is perhaps the only market globally where (government) deals are done for zero fees," Kataria said. 

"It's massively sub-optimal for the issuer since the bankers are not sufficiently incentivised to get the best possible price execution from global investors," said Kataria, who was HSBC's India head of global banking and markets until 2010 . "In addition, it reduces the banks' bargaining power in private-sector deals." Aradhana Johri, secretary in the government's Department of Divestment, did not respond to Reuters request for comment. 

UNDER PRESSURE 

Privately owned HDFC Bank hired nine banks, including Bank of America Merrill Lynch, JPMorgan and Credit Suisse, for its $1.6 billion share sale launched on Wednesday. The fee, say people with direct knowledge of the situation, will be 1.2 percent of the total amount raised, which compares with at least 2 percent typically seen a year ago. 

All in all, foreign banks are now reluctant to bid enthusiastically for government sales. "One would have taken pride in doing this a couple of years ago because of the league table credit you get, but today people are under huge pressure to show income," said the equity market head of a foreign bank, who worked on the Coal India offering.

Top corporate news of the day

Reliance Communications has signed a multi-million dollar deal with Avaya under which the technology solutions provider will transform the telecom major's existing call centre operations.

Kwality is going to enter the direct consumer business in a bid to become a major player in the fast-moving consumer goods sector. 

  Reliance Communications has signed a multi-million dollar deal with Avaya under which the technology solutions provider will transform the telecom major's existing call centre operations.

 Petronet LNG is one of the companies shortlisted to build a liquefied natural gas terminal in neighbouring Bangladesh.

   Ramco Cements is expecting its grinding unit at Vizag, which it is setting up at a cost of Rs4.75bn and it will be commissioned in April 2015. 

   Tata Motors-owned Jaguar Land Rover met the governor of Georgia, US to discuss setting up a new factory in the state.

   TVS Motor has decided to postpone new motorbike launches by one quarter. (BS)

   HDFC Bank raised Rs98.40bn by selling shares in the domestic markets and offering 22 million American Depository Receipts (ADRs) in the United States. 

  Dalmia Cement Bharat Limited (DCBL), a subsidiary of Dalmia Bharat Limited, has signed a co-operation agreement with the International Finance Corporation (IFC) to conduct resource efficiency assessments and mobilise investments at its manufacturing facilities. 

   Bharat Heavy Electricals Limited (BHEL) has commissioned a 270-MW coal based thermal power plant at Rattan India Power Limited’s (formerly Indiabulls Power Limited) upcoming thermal power project located at village Nandgaonpeth in Amravati district of Maharashtra.  

 Aurobindo Pharma Ltd plans to form a joint venture (JV) with the Hyderabad-based Tergene Biotech Private Limited, a vaccine development company, for developing pneumococcal conjugate vaccine (PCV). (BS) 

  Kirloskar Oil Engines Ltd (KOEL), the Pune-based engine and genset manufacturer, and Germany’s Rolls-Royce have signed a declaration of intent for exclusive cooperation on the building and commissioning of emergency gensets for nuclear power plants in India. 

   Indian mining giant Adani has said it will go ahead with its USD15bn mine, rail and port projects in Australia’s coal-rich Queensland state, amid speculation that the victorious Labor Party in the state may reverse the policy and create new trouble for the company. 

   Pfizer is buying Hospira for approximately $15.23 billion, saying it is a good fit with its global established pharmaceutical business. Hospira Inc., based in Lake Forest, Illinois, is a provider of injectable drugs and infusion technologies. Pfizer Inc. will pay 39% premium to Hospira's Wednesday closing price of USD64.80. The companies put the deal's enterprise value at about USD17bn.

   After witnessing the launch of the country's first mobile service in 1995, Kolkata is all set to become the country's first digital metro city with Reliance Jio subsidiary of Reliance Industries, unveiling its Wireless Broadband Access-based Wi-Fi services here.