Precious Metals push up as diminishing tendencies get relief

The reversal of the trend in precious metals which was highly likely, after the 5 1/2 month lows was observed today. Traders did some value buying in the futures leading prices to pull back from the bearish tendencies. Gold for August delivery has spurred by $3.70 to trade at $648.50 an ounce on NYMEX.

Worries of rising Treasury yields and high interest rates, and the guaranteed returns that were tempting investors away from the futures were set off a bit today.

Treasury prices rallied on Wednesday after a report showing U.S. orders for durable goods, including a key gauge of capital spending, were weaker than expected in May. Meanwhile, July silver broke its losing streak and was quoting 0.196 cents up at $12.525 an ounce when last seen.The carry trades direction is also the key driver of the market since the beginning of this week. The yen rallied across the board as investors unwound short yen carry trades. Yen was quoting at 122.98 against the greenback while Dollar was 1.3464 against EURO when last seen.

MCX Silver recovered from the bearish patterns as some buying emerged at the lower levels. Silver July expiry is trading at Rs 16966 per 10 gms up Rs 174. Open interest in the contract was 4.3% down at 10942. Resistances for the contract are at 16994. Gold August expiry which closed the session at Rs 8622 per 10 grams, down Rs 15 is now trading at Rs 8646 per 10 grams.



S&P launches Pan Asia Shariah Index

Standard & Poor’s has launched S&P Pan Asia Shariah Index, for Islamic investors. The index has a total of 71 companies with an adjusted market capitalisation of $810.83 billion.

The index includes 11 Indian companies which include Bharat Heavy Electricals (Bhel), Bharti Airtel, Infosys Technologies, and Reliance Industries among others.

Apart from the 11 Indian companies, the index includes 12 companies from Taiwan, 9 from China, 8 each from Singapore and Korea, 7 each from Hong Kong and Malaysia, 4 each from Indonesia and Thailand and one from the Philippines.

Information technology companies represent approximately 35% of the index, followed by telecom services (17%) and energy (15%).




Bharti-Wal-Mart set to sign deal next month

Bharti and Wal-mart seem to be inching closer to finally sealing their partnership. The formal agreement is likely to be signed "as early as next month," Sunil Mittal said in London.

"There has been a delay, as there are multiple agreements and legal issues we have to deal with, but I don't see it taking longer than that," he said. "This also has had no impact on the work in progress. We are hiring people, locations are being identified and work is on through Bharti. We are also working on finalising the formal agreements at the same time," Mr Mittal said. Sunil Mittal, who as president of CII is currently leading a CEO delegation to the UK for talks with industry and government, is being labelled by the local media here as the 'other' Mittal -- the man who's brought Wal-mart into India.

Wal-Mart and Bharti are expected to enter into a joint venture for the cash and carry segment, which will involve selling to wholesale consumers, mostly small shop owners. For selling to retail consumers, Wal-Mart is expected to enter into a technology transfer agreement with the Bharti Group. The two are also expected to collaborate in terms of sharing processes and best practices as well.

Close on the heels of Tesco's recent statement about a "frenzy" being whipped up in India against foreign retailers, and reports of the Indian government re-examining franchisee arrangements, Mr Mittal and his team were often in the firing line about the whole FDI in retail question. Talking to UK newspersons, Mr Mittal came out strongly in favour of allowing large organised retail in FDI – "In this case, I would tend to bat on your side. The issue is not about foreign and Indian, the debate is about big versus small. If large Indian retailers like us, and Reliance, and the Birlas are allowed, then we would say that more competition is better, and large foreign retailers should also be allowed." The team had to repeatedly clarify that Indian regulations bars FDI only in multi-brand retail, and that too largely in the food and grocery segment.

"This debate (of organised retail versus mom-and-pop shops) is going on even in developed countries, and I believe in India we will have to go through this debate, but we will not take as long as many other countries," he said. In the UK, Tesco's rising 'size' and 'domination' of the market squeezing out competitors, suppliers and gaining an 'unhealthy' influence is a recurring theme for public discussion; Wal-mart in the US has also had to deal with the same accusations. Mr Mittal clarified that a lot of the public opinion is against large organised retail, and Indian organised players are having to face the same debate – and it's not necessarily directed against any foreign entrant.

Mr Mittal dismissed fears that the Indian government would back-track on the franchisee regulations. Pheroze Vandrevala of TCS, who is co-chair of the Indo-British Partnership initiative and also on the delegation, pointed out that India does not have a track record of rolling back policy changes




RBI to transfer SBI's stake to govt tomorrow

The government will on Friday buy Reserve Bank's entire stake in the country's largest lender SBI for over Rs 35,000 crore, but need not borrow from the market owing to buoyant tax collections this month.

The Centre does not need any additional market borrowing for taking over RBI's 59.7 per cent stake due to buoyancy in tax collections this month, a Finance Ministry official said.

Till June 27, the government has mopped up Rs 43,576 crore from direct tax collections as against Rs 28,241 crore during the corresponding period last fiscal. The government had earlier raised Rs 5,000 crore outside the scheduled borrowings from the market to part-finance the deal.

"With direct tax collections going up by as much as 54.3 per cent to over Rs 43,000 crore in addition to indirect tax collections, government is in a comfortable position to pay the cheque to RBI," the official said.

The government will pick up 31.43 crore equity shares of RBI with a face value of Rs 10 each on June 29 for a cash payment of Rs 35,351.33 crore, official sources said.

SBI shares closed at Rs 1,470.35, up Rs 23.15 or 1.6 per cent, on Bombay Stock Exchange today. In comparison, the Centre is buying at a lower price of Rs 1,124.7 per share.

In Mumbai, SBI Chairman O P Bhatt said government equity would be brought down to 51 per cent once necessary transfers of RBI'share in SBI to the government are completed.

The Government had promulgated SBI Amendment Ordinance 2007 on June 21 to amend State Bank of India Act 1955 for buying RBI's entire shareholding in SBI. The move to buy RBI's stake is aimed at enabling the central bank to concentrate on its core function of banking regulator.

The deal will not have revenue implications for the government since RBI is expected to transfer the surplus to the Centre during the first half of August.

As per the normal procedure, a bill will be moved in the coming session of Parliament to replace the ordinance.

Sources said the Finance Ministry had to push for an ordinance as a bill to amend the SBI Act is pending with a Parliamentary standing committee.

The Ministry wanted to insert a clause enabling it to buy RBI's stake when it came back to the House, but in the absence of the standing committee report, it pushed for an ordinance to close the transaction on time.




IPI pipeline unclogged, India Pak sign pricing pact

Iran sought last-minute changes in the agreement on pricing of natural gas that it is to supply India and Pakistan through a $7.4 billion pipeline even as New Delhi and Islamabad reached an agreement on transportation charges.

At the tripartite official level talks here, Tehran sought insertion of a clause for revision in pricing formula every three years based on international fuel prices and energy mix, a stipulation that was opposed by India and Pakistan, a source said.

India and Pakistan had agreed on the price formula proposed by Iran, according to which gas would be priced at 4.93 dollars per million British thermal unit, and wanted it to remain the basis of pricing of natural gas for the entire 25 year duration of the supply contract.

The official level talks, possibly the last before a ministerial meeting next month for signing a final deal, will continue tomorrow.

The source also said India and Pakistan reached an agreement on the principle of computing the transportation charges payable to Islamabad for wheeling the gas through the 1,050-km section of the pipeline in that country.

But the issue of transit fee, payable to Islamabad for allowing passage of the pipeline to India, was not resolved as the officials decided the issue may be best left for the political leadership to discuss.

While the transportation tariff was purely an economic issue related to the cost involved in transmission of gas, transit fee was more of a political goodwill issue and the charges, many times waived, depend on agreement between the nations.

The source said the transit fee issue would be decided when oil ministers of India and Pakistan meet just before the tri-nation ministerial conference in second half of July.

Petroleum Secretary M S Srinivasan and his Pakistani counterpart Ahmad Waqar led discussions yesterday evening and in the pre-lunch session today on the rates to be paid to Islamabad for allowing the passage of the pipeline, security and other technical parameters.

In the post-lunch session, they were joined by Iranian officials to discuss among other things the delivery point, delivery schedules, framework agreement, legal and financial provisions in the contract and safeguards.

The proposed pipeline will initially carry 60 million cubic meters of gas, split equally between Pakistan and India. The delivery point would be at the Iran-Pakistan border.

Pakistan was previously seeking a transportation tariff of 0.70-0.75 dollars per million British thermal unit (mBtu) while New Delhi is willing to pay no more than 0.55 per mBtu (220 million dollars annually). India decided to go with the Pakistani number, the source said.

On transit fee, Islamabad is seeking 0.493 dollars per mBtu while New Delhi has offered 0.20 dollars per mBtu




Kamal Nath invites US Cos to invest in India

Marketing India as a lucrative investment destination, Commerce and Industry Minister Kamal Nath has invited investments from US firms in sectors like agriculture, energy and civil aviation.

"A majority of US firms in India have been reporting double-digit year-on-year growth... There is immense scope to have greater trade, investment and technology cooperation between India and the US," he said adding that American investors need to avail the growing opportunities in India's agriculture, energy, tourism and civil aviation sectors.

Speaking at the plenary session on 'listening to one another-- the importance of a deeper trade relationship' of the Indo-US Business Council here last evening, Nath said US is India's largest trading partner and foremost export destination accounting for 16.83 per cent of India's export and around 6.34 per cent of its imports in 2005-06.

An official statement quoted Nath as saying that companies like Coke, Bank of America, Citibank and GE have been operating successfully in the country.

The minister also quoted a Goldman Sachs report predicting that productivity growth will help India sustain an over 8 per cent growth till 2020 and it would become the world's second largest economy by 2050.

US is the second highest foreign direct investor in India and since 1991 US companies have invested 5.9 billion dollars in the country. In 2006-07, FDI proposals from US amounting to 856 million dollars were granted approvals.

During April-February 2006-07, India's exports to us were 16.9 billion dollars while imports were valued at 9.2 billion dollars. Major items of Indian exports to us are gems and jewellery, RMG Cotton including accessories, machinery and instruments. India mainly imports goods like electronic items, machinery and fertilisers.




Tata Steel inks MoU with TN Govt

Tata Steel and Tamil Nadu government signed a Memorandum of Understanding to develop Titanium Dioxide (TiO2) Project in Tuticorin District of Tamil Nadu.

With a project outlay of about Rs 2,000-2,500 crore Tata Steel is expected to complete the Project in stages. The Government shall provide a four-lane road from the port.

The MoU was signed by Shaktikanta Das, Secretary of Industries and B Muthuraman, MD, Tata Steel in the presence of M Karunanidhi, Chief Minister of Tamil Nadu and Ratan Tata, Chairman of the Tata Group.

The project is based on the mineral sands deposit located in Tuticorin District of Tamil Nadu. The Project envisages mining and mineral separation, followed by value addition to Synthetic Rutile and TiO2 pigment.

Employment

The Project area falls in the rain shadow region, with negligible ground water potential and unavailability of river water, hence a seawater desalination Plant coupled with a power plant is being constructed as an integral part of the Project.

The TiO2 project is expected to provide direct employment to about 1,000 people and indirect employment to about 3,000 people. This project will have the potential to generate employment for about 10,000 local people if agro related activities are taken up in the reclaimed land.

Tata Steel, established in 1907 by its Founder J N Tata is the flagship company of Tata Group. Tata Steel currently has a capacity of around 26 million tonne per annum including its recent takeover of Corus.




Microsoft plans job portal in India

Microsoft Corp yesterday announced that it was in talks with partners in government and industry for a job search portal.

The company said that it plans to launch a job search service this year for the country's nearly 400,000 engineers graduating every year. Microsoft's job portal will compete with Info Edge (India) www.naukri.com and Monster Worldwide’s www.monsterindia.com, among others. Its online portal www.msn.com will provide educational content to students.

The company has also entered into an agreement with Advanced Micro Devices and Zenith Computers to make and sell personal computers in India.

The computers, priced at Rs 21,000, would be sold in 10 retail outlets each in Bangalore and Pune from July on a test basis for three months and will be expanded later on the basis of response.

"We don't see any gain in the short term. Our perspective is long term," Microsoft India chairman Ravi Venkatesan told reporters.

In 2006/07 the total installed base of PCs in India was 22 million, that is, a PC for about every 50 Indians, industry tracking body IDC said in a recent report.




PE players skeptical to invest in Indian aviation

The focus of Indian airline companies seems to be shifting from chasing consumers to chasing capital. Almost all of them are wooing private equity investors to rope in some money. And while PE players are more than keen to invest in the Indian aviation market, they are holding back.

Deccan struggeld for over six months to rope in private equity players, Go Air has been in the market for over a year. In fact, almost all airlines in India have been working hard to crack a deal with investors - but with little luck!

Private equity investors say that in most cases, the valuation expectations of promoters are much higher than what the investors are willing to bring in.

According to industry estimates, the aviation sector as a whole requires investment of USD 20 billion over the next few years. And while private equity investors are keen to set foot in India, they are equally skeptical. Some do admit that external factors like fuel prices and infrastructure bottlenecks have contributed to the USD 550 million loss of the airline companies. But the numbers do not seem to be getting better

Navin Wadhwani, MD, NM Rothschild India said, “There is no clear indication on the path to profitability.”

PE players also say that managements of most airlines in India are not very conducive to attracting investments. Promoters of most airlines continue to be the single largest shareholder and active managers. There is also lack of professional management in most companies. And if these were not enough reasons, the laws of the land are turning investors away

Bill Franke, MD, Indigo Partners said, “The laws are difficult. The valuations are based on the public listed value.”

Some PE players also point out that most Indian airline companies opted for a public listing very early in their lives. Their poor performance on the bourses will now make it difficult for them to go back to the public. So it looks like Indian aviation can fly high only on the wings of private equity investors.




Small investors lukewarm to mega public offerings

There could be a retail nightmare in store for mega issues in the future. Retail investors are not enthused by the mega public offerings of India Inc with these issues failing to get enough response to the quota reserved for them. The muted response by retail investors has prompted a section of merchant bankers even demanding a change in the current quota system and more retail participation.

Consider these figures, ICICI Bank which floated a Rs 9,000-crore mega issue recently just managed to get the retail portion fully subscribed while the institutional investors’ quota was oversubscribed by nearly 22 times. DLF which also raised Rs 9,000 crore witnessed its retail quota getting subscribed only 98 per cent in a bullish market. Said Hemendra Kothari, chairman, DSP Merrill Lynch, “certainly we need more retail investor participation. I would say the retail response to the mega issues was satisfactory. But we will have to reach out to more retail investors in tier-II and III cities. That will also push up costs. We will have to watch the investor response in the next six months before coming to any conclusion or making changes.”

ICICI Bank was forced to give a discount of Rs 50 to retail investors and also offered a part-payment system to attract small investors to its follow-on issue. “Retail investors will go for follow-on issues only when the shares are available at substantial discounts. If the issue price is close to the market price, investors can always pick up the shares from the secondary market,” said Prtithvi Haldea, MD of Prime Database.

According to DR Dogra, executive director, CARE Ratings, it’s the big issues which are finding it difficult to get adequate retail investors. “Good quality small issues will get retail response... but big issues will need more investors, that too in large numbers,” he said.

“You can’t say retail response to the public issues was lacklustre. These were big issues. A Rs 10,000 crore issue getting full subscription is a big achievement than a Rs 50 crore issue getting five times subscription. Earlier companies used to raise Rs 20,000 crore in a full year from the market. Now they have raised this amount in a month,” Haldea said. The RPL mega issue was lapped up by retail investors with the quota oversubscribing 17 times while Cairn India issue got a lacklustre response.

In fact, qualified institutional buyers (QIBs) — which include FIIs, banks, FIs and mutual funds — have been bailing out some of the issues by bidding for excess shares. If there’s an unsubscribed portion in the retail quota, it can be offered to the QIBs. In the book-building method, 35 per cent of the issue is reserved for retail investors, 50 per cent to QIBs and 15 per cent to non-institutional high networth investors. Sebi has defined a retail investor as one who bids for shares up to Rs one lakh.

Said a senior official of a merchant bank, “one way to tackle the low investor turnout is to change this reservation system. Don’t earmark 35 per cent of the issue size to retail investors. It should be reduced to 25 per cent in mega issues of Rs 1,000 crore and above or make it a pure auction system. Issuers would be forced to shell out more sops to bring in retail investors.” As the Indian market is getting institutionalised, the role of retail investors is getting diminished.

One school of thought says after the IPO scam and the Sebi clampdown, the number of multiple applications has come down drastically. Though a parliamentary committee mooted the scrapping of the reservation system and introduction of the pure auction method, the Sebi was not keen on a change.




Is Indian retail heading for a shakeout?

Growing consumer spending may have brought about a retail boom in India, but property and logistics woes will push the industry toward a shakeout that will see several retailers, concepts and malls bowing out.

"A rapidly growing, but highly challenging retail environment will inevitably result in many losers as well as winners and two-three years down the road there could be a shakeout," Jones Lang La Salle Senior Manager (Strategic Consulting and Research) Abhishek Kiran Gupta said.

'India 50' - a study released on Wednesday by real estate consulting firm Jones Lang LaSalle Meghraj revealed that as more choices become available for the Indian consumer, a lot of malls and retail concepts will fail the test of time.

Moreover, most retailers will struggle to implement aggressive expansion plans due to a lack of sustainable and affordable property, inefficient logistics and shortages of manpower skills.

This simply means that most players will not be around when the real benefits start pouring in.

Yet, this shakeout will provide even greater opportunities for an elite group of visionary developers, owners and retailers who have scalability, the teams, the processes and the logistics required to flourish in the growing retail environment, the study said.

It said India's cities are witnessing a paradigm shift from traditional forms of retailing into modern organised sector; a transformation that will no doubt accelerate over the coming decade.

"Organised retailing in India's other main cities, such as Bangalore, Kolkata, Hyderabad, Pune and Chennai is growing rapidly, but such is the pace of change, that many smaller third tier cities are now firmly on radar screen of the retail sector and mall developers," it said.

After analysing socio-economic profiles of 50 Indian cities, JLLSM said it has identified five types of cities; each group is at a different stage in its market evolution and offers a different set of opportunities for retailers and property sector.

Currently, Delhi, NCR and Mumbai, which are considered as maturing cities, account for around half of all India's organised retail activity and would contribute over 40 per cent in 2008, but this proportion is expected to decline over the longer term as retailing opportunities grow elsewhere, Gupta said.

"Competition within the NCR and Mumbai will intensify as supply grows and there is risk of saturation in some market segments by 2008," the study said.

With around 50 cities of over one million population, many of which are still largely untapped, there are clearly substantial opportunities for the retail property sector.

The transitional retail cities of Bangalore, Kolkata, Hyderabad, Pune, Chennai and Ahmedabad are catching up as both retailers and developers tap into their large middle classes.

"By 2008, these transitional cities will account for one-third of the country's organised retailing on the account of increasing vibrant corporate sectors, high economic growth rates, above average incomes and large middle class," the study said.





Standard Life to hike stake in HDFC insurance JV

Deepak Parekh, chairman, Housing Development Finance Corporation (HDFC) expects interest raes to rise by another 25 to 50 basis points if RBI mops up liquidity through a cash reserve ratio (CRR) hike. Parekh was addressing the annual general meeting(AGM). HDFC has made a total profit of Rs 381 crore out of its five-year investment in Intelnet.

Recently the corporation had sold out 50% stake in Intenet to US-based Blackstone for a total consideration of Rs 445 crore. Parekh said that the UK- based Standard Life is all set to double its investment in HDFC Standard Life Insurance to 26 %. HDFC which has got a ROE of 31% from its investment in the HDFC Standard Life would receive a substantial premium while selling 12.22% to Standard Life. Responding to shareholders concern over that 80 % (69% foreign institutional investors and 11% foreign direct investment) of stake of HDFC being owned by foreigners Parekh said, some 475 foreign investors of different sizes own these stakes and don’t pose any threat on the existing management control.




Global Vectra to spend Rs 1.8 bn on fleet

Helicopter charter firm Global Vectra Helicorp Ltd plans to spend Rs 1.8 billion in 2007-08 to add 5 helicopters to its fleet to serve India's busy offshore oil explorers, a top official said on Wednesday.

"The company would need to raise less than a fifth of the funds as the balance would come from lease financing," Chairman S.J.S. Saighal said at a news conference.

"We will have enough internal accruals to meet the funding," he said.

"Otherwise we will look at fund raising," he added.

"Global Vectra, which has 18 helicopters serving Reliance Industries Ltd and BG Group and state-run explorer Oil and Natural Gas Corp, plans to take its fleet to 29 by March 2009," Saighal said.

Offshore oil exploration activity is rising in India as the country tries to tap domestic reservoirs to help offset its dependence on imports.

India has so far awarded 162 oil and gas blocks for explorations and about 100 of these are offshore.

Earlier, Global Vectra, which raised Rs 518 million through an initial public offer late last year, reported a net profit of rs 28.6 million on revenue of Rs 438.2 million in the January-March quarter.

Shares in the company ended 9.9 per cent down at Rs 256.10 in the Mumbai market.