Government accords investment approval of Rs.996 crore for capital projects of CPRI

                       In order to serve the growing needs of Research & Development in the Indian Power Sector including, development of advanced Testing Facilities, Government has accorded investment approval of Rs.996 crore for capital projects of Central Power Research Institute (CPRI). This will support augmentation of High Power Short Circuit Facilities as well as establishment of new test facilities in existing laboratories of CPRI, located at Bengaluru, Hyderabad, Kolkota, Guwahati, Noida and Nagpur. In addition, a new laboratory will also be established in Western Region at Nasik.

                       CPRI, with its headquarters at Bengaluru, is an autonomous society under the aegis of the Ministry of Power, Govt. of India. It was set up to serve as a National level laboratory for undertaking applied research in electrical power engineering, besides functioning as an independent test and certification authority for electrical equipments and components for ensuring reliability in the power system.

                       The main facilities proposed to be set up/augmented under the approved projects, include the following:

i. Short Circuit Test Facilities

ii. Transmission Tower Test Facility

iii. Facilities for Switchgear Testing & Development v iv. Facilities for testing of transformer oil

v. Relocation and augmentation of thermal research centre at Nagpur.

vi. Establishment of new unit at Nasikv vii. Establishment of Phasor Measurement Unit System and Smart Grid Research Laboratory.

                         On commissioning of the above mentioned facilities, CPRI shall be able to test Transformers and other Switchgears of higher rating equipments used for 400 KV and above. The Smart Grid Research Laboratory will provide necessary support for developing Smart Grid Devices needed for Indian Smart Grid Mission and Smart City projects. The Phasor Measurement Unit System will support the efforts towards Grid Security.

Deutsche Bank sees Sensex 20% up in 2015

MUMBAI: Expecting the government to shift gears and work towards addressing long-pending issues, Deutsche Bank sees the Sensex to rise nearly 20 per cent in 2015. The brokerage has set a target of 33,000 for the Sensex and expects the Nifty to move up to 9,936.

"In 2015, we see India harnessing its commodity pricing dividend to realign policy towards an investment-driven macroeconomic stabilization, which will not only drive economic growth higher but also reduce inflation and create jobs," the report said. 

"Returns on public spending accompanied by the organizational capacity to spend will have a significantly higher multiplier impact on the economy relative to spending on redistribution economics where leakages are extremely high," it added.

At DB's target of 33,000, the Sensex would trade at 18.4x FY16 EPS and 15.5x FY17 EPS, with earnings CAGR of 17.7 per cent over FY15-17. It is overweight on financials, industrials, and materials. 

Tata Coffee soars after fixing record date for stock split

Tata Coffee continues to trade on a gung-ho note on the BSE, after the company fixed 27 January 2015 as the record date for the proposed stock split.

The company board has decided to sub-divide equity shares from the face value of Rs. 10/-per share to Re. 1/- per share.

So far, the stock has jumped to a high of Rs. 980, and is now up 2.63 per cent at Rs. 975 on the BSE. 

The counter has seen trades of around 16,000 shares, as against the two-week daily average volume of 12,000 shares on the BSE.

PNB has no intention to reduce lending rates now: Ram Sangapure

                                  Punjab National Bank (PNB) is trading flat in wake of reports that Jet Airways' main promoter and chairman Naresh Goyal has pledged entire 57,933,665 shares constituting 51% holding in the airline effective 8 January to PNB with a “non-disposal undertaking”. Report said that the the deal may be valued at over Rs. 2,600 crore, to PNB.

                                   PNB is an Indian financial services company based in New Delhi, India and serves over 80 million customers.

                                   In an interview with CNBC TV18, Ram Sangapure, ED, PNB said that for the fourth quarter probably the deposit rates are not going to come down substantially, because the liquidity requirement in the fourth quarter is usually is higher for the banking industry. Talking about if the company expects rate cut after the budget, he said, "The rate cut may come only after Budget or may be around that time, definitely not in the month of January. I don’t see that the Reserve Bank of India (RBI) is inclined to take a call in the month of January itself. Given the volatility in forex markets and also the inflation rate which is now increasing slightly, not really much concern but probably RBI is not very keen at this point in time to take a call, change its stance of monetary policy at this point in time. RBI is concerned about changing the stance of the monetary policy rather than reducing once and again going up after a month or two giving mixed signals to the market; that probably RBI is trying to avoid".

                                   He mentions the fact that if RBI reduces the Repo rate then there are chances that most of the commercial banks will reduce the lending rates. "In the month of a June probably there could be a further decline in rate of interest on deposits, particularly term deposits. That we may visualise somewhere between 25 to 50 basis points in a bucket of one year, maybe 90 days to one year bucket. Probably we might see a decline from 50 basis points to 75 basis points", he added.

                                     Commenting on the effect of reducing the lending rate in the books of the bank, he said, "The non-performing assets (NPA) position of most of the banks, the spread is a result of all these combination of even the NPA percentage. NPA percentage is gone up substantially during the last couple of quarters and the spread if you want to maintain then we have to tweak somewhere. If we reduce the lending rates at this point in time probably we may not be able to maintain our net interest margins (NIMS)".

Stainless steel industry requires govt support: Jindal

Jindal Steel chairman Ratan Jindal said that the lower capacity utilisation and competition with Chinese imports would impact the India's stainless steel industry.

During a media interaction in Ahmedabad on Monday, Jindal said that stainless steel sector requires government support in the form of encouragement for exports and import restrictions on finished or semi-finished goods.

Financial institutions have the bank exposure of about ₹30,000 crore to the sector.

Stainless steel has found applications in areas other than the utensils in recent years, Jindal added.

Market turns choppy

The market has turn choppy in morning deals.

As of 1044 hrs, the BSE Sensex and the NSE Nifty are flat at 27,423 and 8,299, respectively.

The India VIX (Volatility) index has soared 4 per cent at 17.1450.

The Midcap, Smallcap and Nifty Junior indices have gained 0.3 per cent each at 3,369, 5,331 and 18,758, respectively

Among sectors, the Metal index has dropped around 2 per cent at 2,501 and the Energy index has declined 0.3 per cent at 8,351.

On the other hand, the Auto index has advanced almost a per cent at 8,459.

The IT index has also added 0.4 per cent at 11,542.

The breadth is positive in morning session - out of 1,727 stocks traded on the NSE 778 stocks are advancing, while 596 stocks are declining.

Sesa Sterlite, Hindalco, ITC, Tata Steel and HCL Tech are the top losers in the Nifty space.

Whereas, Hindustan Unilever, Ultratech Cement, BHEL, ACC, Asian Paint and Ambuja Cement are the top gainers.

WPI inflation due, fiscal developments under scrutiny: DBS Bank

                             Following Monday’s CPI, WPI inflation is on the tap today. We expect December headline inflation to inch up to 0.2% YoY from flat reading in Nov. Downside pressure from easing global commodity prices is likely to be more pronounced in the WPI index given the higher weight age to tradables in the index. Non-administered fuel products account for ~9% of the index, which increases to a third when other commodity groups are also added. Modest uptick in the food price inflation can be expected, as reflected in the retail inflation gauge.
 
                              The Reserve Bank of India (RBI) prefers the CPI index as the main barometer for policy decisions. In this regard, despite the modest uptick in Dec’s print (see Daily note on 13 Jan), the trend is comfortably below the RBI’s FY15 inflation target. While this does pave the way for rate cuts, the decision to kick start the easing cycle in February or not is likely to be a close one.
 
                                In our view, the RBI will prefer to wait until after the end-February’s budget before taking action. While the pre-condition(s) of below-target inflation and easing inflationary expectations are likely to be met, fiscal developments war­rant attention.
 
                               Revenue targets look certain to be undershot this year, despite the seasonal spurt in the final quarter. In the last two years, March revenues have been more than twice the monthly average of Apr-Feb collections. Much onus thereby falls on the divestment plans, with domestic press reports suggesting lack of certain­ty on the proposed 10% stake sale in Coal India. In addition an estimated 20% reduction in plan spending allotments across ministries is also in the pipeline, ac­cording to the Business Standard. If this pans out, the revised plan expenditure will face the sharpest cut in the past three years.
 
                              Given the uncertainties, the RBI might prefer to monitor the content of the end-February’s budget and credibility of fiscal targets before easing rates. This suggests rate cuts might begin April 2015 onwards, with a small probability of inter-meeting cut in March.

Greece debt burden equals to 177% of GDP

Greek voters head to the polls Jan. 25 for a snap election.

The debt burden of Greece is equivalent to 177% of the country’s gross domestic product, according to a media report.

Syriza said that it wants at least a third of Greece’s total debt to be written off. 

The ECB and national central banks are owed €54bn, the report further said.

The ECB is unable to offer any relief, since it could constitute illegal monetary financing of national governments.

In any case, these loans are essentially interest free since the eurozone agreed to handover the profits from central bank holdings of Greek debt to Athens.

Govt. mulls stake sale in ONGC

                             As per news reports, government is planning stake sale in Oil and Natural Gas Corporation (ONGC) by March, and is also finalising the details of oil subsidy-sharing scheme.

The divestment would take place in all probability in March, and the amount is 5% which will earn the government nearly Rs, 15,000 to 18,000 crore. The price of ONGC's scrip will be a big deciding factor in ONGC's divestment.

Under the chairmanship of Bimal Jalan, a panel would submit the recommendations about the long-term subsidy roadmap in areas like food, oil and fertiliser.

Drop in the oil prices have been a big relief to the government at the center, as the fuel subsidy burden is reduced.

The current market capitalisation of ONGC stands at Rs 291,057.77 crore.The company has reported a standalone sales of Rs 20,361.14 crore and a Net Profit of Rs 5,444.89 crore for the quarter ended Sep 2014.

Fall in oil prices hurting cash generation; affecting investment decisions.

                            Fitch Ratings says that rated oil and gas production companies in Asia can comfortably operate under low oil prices for some time given their generally low cash production costs and strong liquidity. Fitch expects companies to further reduce capex if oil prices remain at current levels for a longer period.
 
                            The fall of oil prices below USD50 per barrel is hurting cash generation and affecting investment decisions of companies in the sector. However, the impact on operating cash generation varies across Fitch-rated companies. South-east Asian companies, such as PTT Public Company Limited (PTT; BBB+/Stable) and Petroliam Nasional Berhad (PETRONAS; A/ Negative) that produce more gas (60% or more of total production), will be less affected immediately compared with their north and south Asian counterparts that are more liquids-heavy. Liquids at companies like Petrochina (A+/Stable), CNOOC (A+/Stable), Sinopec (A+/Stable), Oil India Ltd (BBB-/Stable) and MIE Holdings Corporation (B/Stable) account for over 70% of total production in barrels of oil equivalent (boe) terms. Companies that hedged the prices of part of their oil production benefited from the protection in 2014, but they are likely to be exposed to market prices in 2015 because these types of hedges typically do not cover long periods.
 
                                 Low cash production costs and the largely conventional upstream projects of the rated Asian oil companies provide them with additional flexibility in today's low oil price environment. While all-in costs (cash production costs plus depreciation, depletion and amortisation, or DD&A) are important in the long run, the relatively longer production lives of conventional oil and gas wells provide additional capex flexibility during periods of low hydrocarbon prices. Lifting costs in US dollars per boe are typically in the teens for the rated companies in Asia. Lower production tax requirements stemming from low realised prices, especially in China, also reduce the net impact of the oil price rout on operating cash generation. Companies are also looking to reduce opex, which can squeeze margins of oil field services companies.
 
                                   Over the longer term though, with all-in costs exceeding USD35/boe for the rated Asian names, the economic viability of projects will be impaired if there is no meaningful increase in oil prices. At current prices, we expect certain high-cost projects to be delayed. These could include ventures in the Canadian oil sands and certain enhanced oil recovery projects on mature-depleting fields in Asia. Sponsor companies could also delay final investment decisions on some large projects with long lead times, such as some greenfield LNG projects, to preserve cash reserves.
 
                                      Capex flexibility also varies across the rated companies. CNOOC and PTT have relatively low developed reserve lives of around four years, which gives them less flexibility to curtail development capex for a long period. The state-owned companies are unlikely to cut domestic capex drastically because they are mandated by states to raise production to supply their growing economies. In addition, PTT has lagged considerably behind its Asian peers in reserve replacement, with several large acquisitions not yet adding to proved reserves. For most of the other rated oil producers, though, reserve replacement has been robust (near 100% or above) in recent years, adding further to their flexibility. We also see the prospect of reserve write-downs for some companies if oil prices do not meaningfully improve by the time reserve reports are updated over the next few months.
 
                                          Rated Asian oil companies, especially the state-owned ones, have very strong balance sheets, with low financial leverage and substantial cash balances. We expect these companies to have good financial flexibility arising from their good liquidity (large cash balances and strong access to capital). In India, we expect the government to reduce the substantial discounts (USD56/barrel) the two state-controlled upstream companies, Oil India and ONGC, have to provide to refiners, improving their cash margins under low oil prices. Malaysia's PETRONAS has a very strong balance sheet. However, the high dividends required by the Malaysian government remains a challenge, although the company is pushing to lower this burden.
 
                                             We also expect cash-rich companies to take advantage of attractive M&A opportunities, although their approach is likely to be measured to ensure their cash balances remain strong to deal with the uncertain oil price outlook. Asian companies are likely to focus on mid-sized assets that are producing or close to production that put less stress on their balance sheets.
 
                                              Smaller companies like MIE of China have less financial flexibility. While MIE's lifting costs of around USD10/boe are low, it has relatively weaker access to funding than its larger peers, especially when oil prices are low. However, MIE's cash on hand at end-September 2014 (plus expected proceeds in 4Q14 from some asset disposals) and unutilised credit lines provide adequate short-term liquidity, while its major debt maturities are several years away.
 
                                            Our approach with oil and gas companies is to rate through the cycle. While strong production, weak demand growth and high inventory levels put significant near-term pressure on oil prices, high global marginal production costs and capex cuts leading to reduced production should over time result in a more balanced market that supports higher prices for oil. While low oil prices and high capex requirements will dent the credit metrics of Asian oil producers, ratings of many of these companies, especially the state-owned companies whose ratings benefit from state linkages, remain resilient.