IWAI receives bids for coal movement for NTPC's Barh project

Inland Waterways Authority of India (IWAI) has received only two technical bids for barge transportation of coal along the 1000-km long stretch (between Sagar Island/Haldia, West Bengal, and Barh, Bihar) of the 1620-km long National Waterway No 1 (NW 1). The bidders are Jindal ITF and a consortium of two firms, namely, M Pallonji & Company Pvt Ltd and Goa-based Sociedade de Fomento Industrial Pvt Ltd.

The bids, invited in April this year, were opened on Tuesday, after several extensions of last dates. The job involves transportation of three million tons of imported coal annually for a period of 10 years for NTPC’s Barh super thermal power plant still to start generation.

IWAI, inquiries reveal, is likely to invite price bids within a month or so. Once finalised, the bids will be placed before NTPC for the award of the contract to the successful bidder. If everything progresses as planned, the award of the contract, it is felt, should be possible by the end of the year.

The transportation has to start within three years from the date of the award of the contract, it is learnt. Hopefully, the Barh project will be ready by that time to receive imported coal by river route. The foundation stone for the project was laid in March 1999 by the then Prime Minister Atal Behari Vajpayee.

It might be noted that the contract for barge movement of coal between Sagar Island/Haldia and Farakka(560 kms and also on the NW 1) for NTPC’s Farakka super thermal power plant in West Bengal was awarded more than two years ago with the stipulation to start movement within two years. That has not happened. More than two years have passed since the award of the contract but the movement is yet to start.

There have been several postponements of the commissioning date. The trial run, it is understood, is now being planned in October. Jindal ITF has been awarded the contract for transporting by barges three million tons of imported coal annually for seven years.

Jaiprakash to sell Gujarat cement unit to UltraTech

Jaiprakash Associates Ltd has agreed to sell its cement plant in Gujarat to UltraTech Cement Ltd for around 38 billion rupees including debt.

UltraTech, the country's largest cement maker by production capacity, will issue shares worth up to 1.5 billion rupees to Jaiprakash and assume debts of about 36.50 billion rupees, the companies said on Wednesday.

Jaiprakash Associates, which also has interests in power and infrastructure, has been trying to sell the plant for more than a year and was in talks with several potential buyers, including Ireland's CRH(CRH.I).

Including subsidiaries, Jaiprakash has total debts of 550 billion to 560 billion rupees which it plans to cut by 150 billion rupees by selling more assets including cement and power businesses this fiscal year ending next March, Executive Chairman Manoj Gaur said.

"The contraction in the economy has brought challenges to everyone," Gaur told reporters, after the company announced the sale of the cement unit. "Now we are focussed on debt reduction across all business."

Jaiprakash, which currently has a cement production capacity of 36.8 million tonnes, will remain the country's third largest producer, the company said in a statement.

Rising input and energy costs have been squeezing margins at cement companies, while demand remains a worry amid a weakening economy and high interest rates, which have slowed housing and infrastructure development in Asia's third-largest economy.

This has put pressure on cement makers, especially those with debt that has become expensive to service due to a sharp fall in the rupee against the dollar and high domestic interest rates, forcing some to sell assets.

Shriram EPC Ltd last month agreed to sell its stake in Sree Jayajothi Cements Ltd to My Home Industries Ltd, owned by CRH, for 14 billion rupees to reduce debt.

Production capacity at UltraTech, part of the $40-billion diversified Aditya Birla Group, will rise to 59 million tonnes after the acquisition of the 4.8 million tonnes Jaiprakash unit, said Kumar Mangalam Birla, the billionaire chairman of UltraTech.

"Despite the prevailing muted growth of the industry, we believe the long term fundamentals and growth prospects remain intact. We will add more capacities in the coming years," he said in a statement.

UltraTech plans to raise its capacity to 70 million tonnes by 2015, he said.

Jaiprakash and UltraTech expect their transaction, which is still subject to regulatory approvals, to close in seven to nine months.

Standard Chartered Plc advised both UltraTech and Jaiprakash, the companies said.

RBI lifts restrictions on FII purchase in IDFC

Reserve Bank of India (RBI) has lifted restrictions on purchase of shares of IDFC by foreign investors. The restrictions were lifted after the shareholding of foreign institutional investors (FII) and other category of foreign investors fell below the prescribed threshold limit as specified in the FDI policy.

The FII holding in the company stood at 52.19% at the end of the June 2013 quarter, down from 53.23% in the previous quarter.

IDFC is the country’s leading integrated infrastructure finance player providing end to end infrastructure financing and project implementation services.

Asia shares nose higher, dollar under pressure

Asian shares eked out small gains and the dollar remained under pressure on growing expectations that the U.S. Federal Reserve's impending stimulus reduction might be smaller than some had believed.

MSCI's broadest index of Asia-Pacific shares outside Japan managed a gain of about 0.1 per cent, while Japan's Nikkei stock average added 0.2 per cent.

One regional standout was New Zealand's currency, which jumped to a four-week high of $0.8150 after the Reserve Bank of New Zealand held its benchmark cash rate steady at 2.5 per cent as expected. It said it would likely hold interest rates for the rest of the year but that rates would start to rise by mid-2014.

"As these are the most hawkish comments that we have heard from a major central bank, investors could start to see the New Zealand dollar in a new light and drive the currency up another 3 to 5 per cent," BK Asset Management managing director Kathy Lien said in a note to clients.

The Federal Open Market Committee meets next Tuesday and Wednesday. While it is still widely expected to begin scaling back its $85 billion monthly asset-buying programme, Friday's disappointing jobs data prompted many to believe the reduction will be more modest than some had previously expected.

A Reuters survey earlier this week showed most economists see the U.S. central bank trimming its asset purchases by about 10 billion.

The dollar index slipped about 0.1 per cent to 81.474, having fallen as far as 81.445 on Wednesday, breaking below its 200-day moving average and losing more than 1 per cent from a seven-week high hit on September 5.

The waning likelihood of an immediate U.S. military strike on Syria also continued to undermine the dollar. The five permanent veto-wielding powers of the U.N. Security Council met in New York on Wednesday to discuss plans to bring Syria's chemical weapons under international control.

The dollar bought 99.80 yen, down about 0.1 per cent. It moved away from Wednesday's high of 100.60 yen, which was the highest since July 22, according to Reuters data.

The euro was slightly higher at $1.3315 after rising as high as $1.3324 on Wednesday, its highest since August 29.

Reduced expectations of Fed tapering have eased pressure on emerging market currencies that recently sold off amid fears of capital outflows. That buys some time for the central banks of Indonesia, the Philippines and South Korea, which have to consider the impact of eventual Fed stimulus reduction when they review their policies at meetings on Thursday.

Markets like Brazil and India, which must import capital to finance spending, will feel the effects of the reduction more than countries such as Mexico and South Korea, which are less dependent on foreign funds.

On the commodities front, copper rose 0.2 per cent to$7,183.50 a tonne, lifted by an improved outlook for China's economy and reduced risk of a U.S. strike on Syria.

Gold edged slightly down to up to $1,364.96 an ounce, after touching a three-week low of $1,356.85 on Wednesday.

Oil was slightly higher, with Brent crude trading at $111.54.

CARE revises rating of Mcnally Bharat Engineering Company’s Bank facilities

Credit rating agency, CARE has revised rating of Mcnally Bharat Engineering Company’s Long-term Bank Facilities worth Rs 3,904.20 crore, enhanced from Rs 3,779.80 crore from ‘A+’ to ‘A’ and Short-term Bank Facilities worth Rs 300.00  crore from ‘A1+’ to ‘A1’.

The rating agency has also revised rating of company’s Non-convertible redeemable preference share worth Rs 100.0 crore from ‘A’ to ‘A-’ and Short Term Debt (including CP) worth Rs 80.0  crore from ‘A1+’ to ‘A1’.

The revision in ratings of MBEL takes into account the deterioration in the financial risk profile of the company in FY13 and Q1FY14 marked by decrease in net profit margin, significant increase in debt level and elongation of the extended collection period along with high exposure to group & associate companies with net losses on consolidated basis.

McNally Bharat Engineering Company is one of the leading engineering companies. It provides turnkey solutions in areas of power, steel, alumina, material handling, mineral beneficiation, coal washing, ash handling and disposal, port cranes, civic and industrial water supply etc.

UltraTech Cement to acquire 4.8 mtpa Gujarat Cement Unit at enterprise value of Rs 3,800 crore

UltraTech Cement has received an approval for acquisition of the Gujarat Cement Unit of Jaypee Cement Corporation (JCCL), by way of a demerger, comprising of an integrated cement unit at Sewagram and Grinding Unit at Wanakbori. JCCL is a wholly-owned subsidiary of Jaiprakash Associates (JAL). With this acquisition of 4.8 mtpa the company’s current capacity increases to 59 mtpa. The board of the company at its meeting held on September 11, 2013 has approved for the same.

The enterprise value is Rs 3,800 crore besides the actual net working capital at closing. UltraTech will take over all the assets and the liabilities of the unit at closing and the net amount of enterprise value less liabilities taken over will be the consideration. Such consideration will be discharged by allotment of equity shares of UltraTech to the shareholders of JCCL, subject to a maximum value of such equity shares to be Rs 150 crore.

The combined capacity of both the divisions of the Gujarat Unit is 4.8mtpa of cement with 57.5 MW Coal based Thermal Power Plant, limestone reserves for over 90 years at current capacity and a captive Jetty at Sewagram.

The proposed transaction is subject to the approval of shareholders and creditors, sanction of the Scheme of Arrangement by the High Courts, approval of the Competition Commission of India and all other statutory approvals. The company anticipates the transaction to close in 7 to 9 months.

Standard Chartered acted as a Transaction Advisor for the company while Axis Capital acted as Independent Fairness Opinion. Amarchand & Mangaldas & Suresh A. Shroff & Company were Legal Advisor while Bansi S. Mehta & Company acted as Valuation Expert.

Sensex opens on a flat note

The Sensex and the Nifty opened the session flat on buying by funds and retail investors in select stocks amid mixed Asian cues.

At 9.15 a.m., the 30-share BSE index Sensex was up 23.47 points (0.12 per cent) at 20,020.92 and the 50-share NSE index Nifty was up 9.7 points (0.16 per cent) at 5,922.85.

Asia’s benchmark stock index swung between gains and losses after Japanese machinery orders increased less than expected and as investors await the outcome of the Federal Reserve’s policy meeting next week.

Japan's Nikkei fell 42.15 points or 0.29 per cent to 14,382.90, Hong Kong's Hang Seng rose 73.33 points or 0.32 per cent to 23,010.50 and Australia's S&P/ASX 200 was up 12.91 points or 0.25 per cent at 5,247.30.

No car loan if annual income less than Rs. 6 lakh, says SBI

 Individuals with annual income of less than Rs. 6 lakh will not get a car loan from State Bank of India (SBI) as the bank has tightened eligibility conditions for its four-wheeler loan scheme with a view to minimising possible defaults.

The eligibility limit for loan issuance to salaried individuals for car purchase has been raised from Rs. 2.5 lakh per annum to Rs. 6 lakh per annum, as per a recent circular by the bank. For SBI account holders, the limit has been raised to Rs. 4.5 lakh per annum.

SBI currently offers car loans at an interest rate of 10.45 per cent, as per the bank's website.

Giving the rationale for the increase in the eligibility criteria, a senior bank official said the decision to revise upwards the gross income limit is taken in view of the moderation in economy.

The official futher said that this is a preemptive step to ward off fresh slippages.

The bank's auto loan portfolio grew by 38.71 per cent to Rs. 26,411 crore at the end of first quarter of the current fiscal year as against Rs. 19,040 crore at the end of same quarter of the previous fiscal year.

Market share of the bank rose 2.91 per cent against 2.44 per cent in the same period last year.

Gross non-performing assets of the bank rose to 5.56 per cent as compared to 4.99 per cent at the end of the first quarter of 2012-13.

At the same time, net non-performing assets (NPAs) of the bank rose to 2.83 per cent as against 2.22 per cent at the end of June, 2013.

Snapping a nine-month streak of declines, domestic passenger car sales grew by 15.37 per cent to 1,33,486 units in August this year, compared to 1,15,705 units in the same month last year.

Industry body Society of Indian Automobile Manufacturers (SIAM), however, played down the feat saying the growth was mainly due to low base effect as a result of the month-long lockout last year at the Manesar plant of the country's largest car maker Maruti Suzuki India (MSI).

Jaypee plans to monetise assets to cut debt

In hunt for strategic partners too

Jaypee Group,with debt of Rs 56,000 crore, is planning to monetise its cement, and thermal and hydro power assets and is hunting for partners to reduce the debt to Rs 41,000 crore by the end of this financial year. Moreover, the company is looking at options to sell a good chunk of its land bank of 9,000 acres.

Jaiprakash Power was reportedly in talks with Abu Dhabi Water and Electric Authority to sell its 300-megawatts (Mw) Baspa-II and 1,000-Mw Karcham-Wangtoo projects in Himachal Pradesh.

“The deal with UltraTech is the first step towards our debt reduction. Though people talk more about the debt, we are sitting comfortably as a Group, as we have assets worth Rs 70,000 crore,” said Manoj Gaur, executive chairman of the Jaypee Group.

Through bulk land sale, the Group is looking to bring down the debt of Jaypee Infratech by about Rs 5,000 crore, from the current Rs 7,000 crore.

“The deal has brought down the debt of Jaiprakash Associates by Rs 3,600 crore,” he said. Jaiprakash Power Ventures is in the process of adding another 3,000 Mw in the next 14 months, through Nigrie project in Madhya Pradesh and the Bara project in Uttar Pradesh. Currently, Jaiprakash Power has 1,300 MW of hydel and 500 MW of thermal capacity.

“Our turnover has increased from a mere Rs 7,000 crore in 2009 to Rs 23,000 crore now. We are constantly looking for expansion. We are currently among the major players in cement, power and real estate. Hence, rising debt or the current difficulties can only be considered as part of the overall dip that the country’s GDP is seeing,” Gaur said.

Raghuram Rajan effect on banks: 'Cautious' rating to banking sector shares

The Raghuram Rajan-effect: The short-medium-and long-term plans. The short-term steps announced by the RBI (lower swap cost on FCNR and foreign currency borrowings), in the wake of new Governor Raghuram Rajan taking over top job at central bank, aim to address currency issues with negligible benefit to banks. The secondary effect of the recent move by the RBI on the bond market, if any, would be the key event to watch for. However, the medium-term (branch/bank licensing) and long-term plans (structural reforms) could have a positive impact, whenever they are implemented.

Short-term measures have negligible impact from an earnings perspective: The RBI has allowed two measures to boost dollar flows—(i) FCNR (foreign currency non-resident account) deposits can be swapped with the RBI at 3.5%, which would enable banks to raise dollar deposits at attractive rates (Libor + 400 bps + 3.5%) for lending in the domestic currency; (ii) banks can raise foreign currency borrowings up to 100% of tier-1 against 50% currently and swap with the RBI at a rate of 100 bps less than the ongoing swap rate. These two measures would have limited impact on banks’ earnings as (i) the landed cost of these deposits would be almost similar to term deposits and (ii) the ability to raise borrowings, at least, has been impacted in the current environment.

FCNR deposits have languished at $15 bn in recent years and CDS (credit default swap) spreads of large banks increased by about 200 bps in recent months, making it challenging to raise these funds. We note that large PSU banks like State Bank of India (SBI), Bank of Baroda, Bank of India and ICICI Bank would be direct beneficiaries as they have a large international presence.

Medium-term measures positive especially on branch licences: The two key medium-term measures—(i) RBI indicated that new bank licences would be announced by January 2014 and that it would constitute a panel headed by former RBI governor Bimal Jalan to assist in the screening process; (ii) “well-run banks” would have the flexibility to open branches.