Maharashtra is the new focus of JSW Steel

 

Mumbai: JSW Steel Ltd is shifting its focus to its smaller steel plant in Maharashtra, which the company thinks is better placed to support its expansion plans, compared with its flagship plant in Karnataka, where difficulty in raw material sourcing has curtailed growth.

 

The 3.3 million tonne (mt) Dolvi plant in the Raigad district of Maharashtra, that came to JSW Steel from its acquisition of Ispat Industries Ltd in 2010, is seeing new investments, while the main plant in the Bellary district of Karnataka, with a 10 mt capacity, is still waiting to secure raw material via acquisition of iron ore mines. 

 

 

 

“The new mother plant will be Dolvi,” said a senior executive in JSW Steel, not wanting to be named since plans have not been publicly announced. “There is a lot of activity taking place there.” 

 

A capacity addition of 1.7 mt has been planned for Dolvi, which will push up the total capacity at the plant to 5 mt. A second company official, who also did not want to be named, said the plan is likely to be implemented in the next few months.

 

But the company’s head of strategy did not disclose the timeline.

“We will be expanding capacity of Dolvi plant in future as it a very good location for brownfield expansion. However, we have not yet decided the timelines,” said Prashant Jain, head of corporate strategy and development at JSW Steel.

 

 

The second official said that JSW had made new investments for a pellet and a coke oven plant, which are in trial phase and almost ready for production. The company has also invested in using flare gas—a by-product—to generate 25-30% of the power required by the plant. 

 

Other than the 1.7 mt expansion which is on the cards, there is scope for further expansion at Dolvi, which is spread across 1,200 acres, with an eye on the export markets from the port-based location, the two people said. The port, though in west India, can also ship in iron ore from Odisha on the east coast via the cheaper sea route. 

 

 

Sajjan Jindal-led JSW Steel is India’s third largest steel maker with a 14.3 mt capacity after Tata Steel Ltd and Steel Authority of India Ltd, yet it is considered to have the most aggressive strategy for growth. 

 

“I won’t be surprised if they work on their Dolvi expansion earlier than expected,” said Rakesh Arora, managing director and head of research at Macquarie Capital Securities (India) Pvt. Ltd. “The only problem if they do it too fast is that it can make their debt rise.” 

 

The consolidated net debt of JSW Steel stood at Rs.19,899.04 crore in the fiscal year ended March 2013 compared with Rs.17,468.62 crore in the fiscal year ended March 2012.

 

 

 

The company’s flagship Karnataka plant, set up in 1994, was rapidly expanded with modern facilities and the environmentally friendly Corex technology used for the first time in India, betting on the country’s rising demand for steel, but the expansion was risky because JSW Steel did not get any captive iron ore mines. 

 

Problems for the plant began around 2005, when China started importing large quantities of iron ore from India, including Karnataka that is the second largest iron ore producing state, to build infrastructure for the 2008 Olympics. The export of ore from India reduced the amount of raw material available for the steel plant in Karnataka

 

These problems were further compounded when illegal mining and environmental issues were highlighted, which led to a ban on iron ore mining in the state from 2010-2012, vastly shrinking the company’s iron ore supply. JSW itself has a Central Bureau of Investigation case pending against it. 

 

Now, even though iron ore mining has restarted in a limited way, it doesn’t fully meet JSW Steel’s needs.

Meanwhile, the cost of importing raw material into Bellary, which does not have a port nearby unlike Dolvi, is higher, which is why the company is now betting on the Maharashtra plant.

 

“Very soon the company will announce a turnaround in the erstwhile Ispat Industries plant,” said the first JSW Steel official, referring to an estimated Rs.9,000 crore in debt that the company took on at the time of Ispat’s purchase, according to a December 2010 Bloomberg story. 

 

Shares of JSW Steel have outperformed the S&P BSE Sensex and the S&P BSE Metal index over the past one year. 

 

The shares ended at Rs.869.20 each on BSE on Monday, down 0.55% from the previous close and up 16.23% from a year ago. The Sensex ended at 20,946.65 points, down 0.82% from the previous close and up 10.72% from a year ago

Rahul kumar Gupta

PGDM,1st year

Source:-Mint

P&G, HUL, Wipro, Godrej raise prices of soaps and detergents 

MUMBAI: Fast- moving consumer goods (FMCG) giants including Hindustan Unilever (HUL), Wipro, Godrej Consumer Products and Procter & Gamble (P&G) have increased the prices of some of its products to offset high input costs.
HUL, for instance, has raised prices of its Hamam, Lifebuoy Total and Dove soaps by 2-4% in the current quarter (JanuaryMarch), according to retailers. A 100 gm pack of Hamam soap now costs ` 25, compared with ` 24 earlier, while Dove 75 gm price has been raised to ` 45 from ` 44.
An HUL spokesperson couldn’t immediately provide details of the price increases.
A Wipro spokesperson said that the price of Santoor soap has been raised by an average 4.5%.

Godrej Consumer Products had increased prices by 4-5% in January due to high input costs rising from a depreciating rupee and increase in global crude oil prices, Vivek Gambhir, MD, had told HT in an interaction.
Aprt from soaps, HUL and P&G are also learnt to have taken selective price hikes in detergents. Prices of HUL’s Wheel and Surf Excel Easy wash detergents have been raised by 2-5% and P&G’s Tide detergent is now dearer by 3-4%.
“Increase in input costs amid the slowdown has led to companies taking price hikes in large categories,” said Antique Stock, broking analyst Abhijeet Kundu.
“FMCG companies will try to achieve the balance; absorb some cost inflation and pass on the rest to consumers,” said Gautam Duggad of Motilal Oswal Securities
                                                                                                        NAME HIMANSHU CHAUDHARY
                                                                                                                        PGDM 2 SEM

 

Taqa to buy two Jaypee Group hydro-power plants 

 

Abu Dhabi: A consortium led by Abu Dhabi National Energy Co. PJSC has agreed to buy two operational hydro-power plants from the debt-laden Jaypee Group by investing Rs.10,320 crore, the latest instance of a local firm selling assets to cope with an economic slowdown.

 

The Abu Dhabi firm, also known as Taqa, will buy a 51% stake in Karcham Wangtoo (1,000 megawatts, MW) and Baspa II (300MW) hydroelectric power plants in Himachal Pradesh. Canada’s Public Sector Pension Investment Board will purchase a 39% stake, with IDFC Alternatives Ltd, the private equity arm of infrastructure finance company IDFC Ltd, buying the remaining 10%.

 

The funds raised from the sale will enable the Jaypee Group to repay some of its Rs.50,000 crore debt, according to Mint research. The transaction will also help hasten consolidation in India’s beleaguered power sector, burdened by debt, delays in project approvals and fuel shortages.

Slowing economic growth has hit power demand from industrial consumers in some parts of the country. The economy grew less than 5% for the seventh consecutive quarter in the three months ended 31 December as manufacturing output contracted.

 

“Taqa is pleased to add these two high-quality hydro-power assets to our growing India business and to support India’s economic growth,” Frank Perez, chief executive officer and head of global power and water at TAQA, said in a statement on Sunday.

 

“The equity invested by the consortium in the acquisition of the two hydroelectric plants will amount to approximately Rs.3,820 crore ($616 million), of which 51% is from Taqa,” the firm said in a statement. “The consortium will also acquire the assets’ non-recourse project debt.” The debt component amounts to some Rs.6,500 crore, a person directly involved with the deal said, requesting anonymity.

 

The acquisition is expected to be completed in 2014 after regulatory approvals. The investment will be recognized at the second meeting of the United Arab Emirates-India high level joint task force, co-chaired by Sheikh Hamed bin Zayed Al Nahyan, chairman of Abu Dhabi Crown Prince Court, and India’s trade minister Anand Sharma, which is scheduled to be held in Mumbai on Monday.

 

A Jaypee Group spokesperson did not respond on Sunday to phone messages and emails.

The Jaypee Group is close to selling two of its hydroelectric projects to a group led by Taqa, Mint reported on 24 December, citing two unnamed persons. Consulting firm EY, earlier known as Ernst and Young, was the adviser to the Jaypee Group, while Vaish Associates and Bansi S. Mehta were the legal advisers, said the unnamed person cited earlier.

 

Taqa, which means energy in Arabic, is no stranger to India. Apart from holding a majority stake in Nagarjuna Construction Co. Ltd’s Himachal Pradesh power plant, the company also operates a 250MW lignite-based power plant in the Neyveli region of Tamil Nadu and wants to scale it up to 500MW. The latest acquisition will make Taqa the largest private operator of hydro-power plants in India, its statement said.

 

“The biggest challenge with the large hydro-power projects is the execution. Once completed, these projects have stable cash flows with relatively lesser risk and hence are ideal for investment from sovereign, pension and large infrastructure-focused funds,” said Sandeep Upadhyay, senior vice-president, infrastructure solutions group, at Centrum Capital Ltd, a brokerage. “I see deal activity picking up on similar acquisition deals for operating power assets in the near future.”

 

The Canadian pension fund, the country’s largest, had $76.1 billion of assets under management on 31 March 2013.

 

India needs 15,000-20,000MW of fresh capacity every year to sustain economic growth, EY said in a 18 December report. To achieve it, $230 billion in investments is needed in the power sector in the next five years.

 

The Jaypee Group management has said that group company Jaiprakash Associates Ltd will try reduce its consolidated debt by Rs.15,000 crore by selling its cement business, thermal and hydroelectric power plants and land, Viral Shah, an analyst at domestic brokerage Angel Broking Ltd, said in a 12 February report.

 

“Going forward, we believe deleveraging the balance sheet through monetization of assets would help reduce the huge debt, which continues to remain an overhang on the stock,” Shah wrote.

On Friday, shares of Jaiprakash Power Ventures Ltd, which operates the two power plants, jumped 12.26% to Rs.16.57 on BSE, while the benchmark Sensex gained 0.63% to 21,120.12 points. Shares of Jaiprakash Associates Ltd rose 3.46% to Rs.41.90.

 

There are some signs of consolidation in India’s power sector.

 

JPMorgan Asset Management invested $150 million in the Bhaskar Group’s Diligent Power Pvt. Ltd (a 2,520MW power portfolio) in May last year. French energy company GDF Suez SA will acquire a 74% stake in a 1,000MW coal-fired power project owned by Meenakshi Energy and Infrastructure Holdings Pvt. Ltd in Andhra Pradesh.

 

In the past two years, Asian firms such as Korean Western Power Co. Ltd and Korea South-East Power Co. Ltd have also invested in the power sector. The former took a 40% stake in Pioneer Gas Power Ltd, which has a power generation capacity of 388MW, in March 2012, and the latter acquired a 600MW thermal-based power plant in February last year, according to an EY report.

 

Investment in hydro power is welcome, as it is capital intensive and not easy to finance locally in the current conditions, said Kameswara Rao, head of energy, utility and mining practice at consulting and

Rahul kumar Gupta

PGDM,1st Year.

Source:-Mint

We do not want to grow at any cost: Siemens’ Sunil Mathur

Mumbai: Engineering firm Siemens Ltd is being cautious on accepting new orders after seeing payment delays because customers, mostly building infrastructure, are stressed due to a faltering economy. Sunil Mathur, the German multinational’s new chief executive officer in India, said in an interview that there is much pressure on capital goods firms, but things will improve when India regains its growth momentum. Edited excerpts:

The Indian economy has been depressed for some time and the infrastructure sector has been one of the worst hit. What is your assessment of the situation?

If you look at the last year and a half, it hasn’t been easy for capital goods companies, and Siemens is one of them. We are convinced that the economy will turn around. The logic is very straightforward. You have a significant number of young people coming into the workforce. These people want job opportunities. If you want to generate jobs and drive economic growth in the country at 7-8%, infrastructure has to play a key role, including power, energy, transportation, manufacturing and healthcare. Siemens is present in every single one of these sectors. We believe we will be ready for the upswing. This is only a blip. We have been here for 140 years and know the Indian market. We are in a position to hand-hold our customers and partner in India’s economic growth.

 

What is your strategy to deal with the current situation?

 

Not too long ago, we were importing technology and equipment from Germany and selling it in the Indian market. This was tantamount to essentially trading. Over a period of time, we started competing with international players, who had more or less the same technology and also had an interest in the Indian market. To get that competitive edge, we started localizing it. But that was more to do with taking a factory in Europe and adapting it to Indian conditions, benefiting from arbitrage of low-cost labour and supply chain. But the competition catches up again. This time, the competition is local suppliers.

The only way to meet the challenge is to design, engineer, manufacture, source, deliver equipment in India for the Indian market. This is where we developed a strategy called SMART (developing products that are smart, maintainable, affordable, reliable and quick in time to market). These are products designed for the Indian market, competitive against other offerings in India. This could eventually help us protect or defend Siemens’s market share in the global market since many of our Indian competitors have global aspirations, and to protect your market share internationally, the first phase is to do it in your own home market.

 

Since the times aren’t good, are you getting your payments on time? 

 

There is pressure on the system, bad pressure. The stress on our customers is high. A lot of the customers are borrowing for their projects and funding is difficult to come by. Alternatively, if they have the money, they are sitting on it and passing the stress on to the food chain. And everyone’s perception is that since we are a multinational company, we have a lot of money. Multinationals and large companies like ours are the ones that get the third priority when customers have to make payments.

That’s not easy because our inventories build up. We are responsible for our own balance sheet and cash flow. The bigger strain is down the line. Our suppliers are all the small and medium enterprises (SMEs). These guys don’t have access to funding. The interest rates today are too high for them to afford. They live on working capital cycles of 30-50 days. So if the volumes don’t come and the customers don’t pay, they dry up very quickly. This is really the problem right now.

 

How are you hastening payment recovery? Are you leveraging your financial services arm to inject liquidity in the supply chain?

We do vendor financing. We try to support our suppliers to the extent possible. Some of our suppliers are working with us for years. It is in our interest to keep them afloat. At the end of the day, if I am not getting paid by my customers, there is only so much I can do for my suppliers. That’s part of the problem.

On the receivables side, there is nothing else to do but keep talking to your customers. It is also deciding which customers you want to take orders from. Out of anxiety, do we go out and take orders for the sake of taking orders? That is really the temptation at a time like this when the orders are few and far in between and competition is intense. Price levels fall and customers don’t pay on time. We are being very conscious and all the large orders are reviewed by my chief financial officer and I, before we actually go out and make an offer. The book can be small, but the quality has to be high. We do not want to grow at any cost. We want to grow profitably and in a capital-efficient manner.

 

Since cash is drying up and volumes are shrinking. Are you cutting costs?

 

There is no doubt about the fact that volumes have come down, as they have everywhere in the capital goods sector. The question is, how do you match your capacities and cost in that position? We want to be careful about this. There may be a blip for two-three years. But if in that period you throw out all your top people in your urgency to cut costs, you won’t be able to capitalize when the boom comes, which has to come back. Our cost structure, we believe, has reached the best it can. We now have to wait for the volumes to return. The time in between is the opportunity to skill our people, and equip factories and processes to handle the floodgates when they open.

 

pratima kumari

pgdm 2nd sem

Divesting the block deal: EGoM to price 10% IOC shares to be sold

 

New Delhi: Empowered Group of Ministers (EGoM) shall on Saturday decide the price at which 10% shares of Indian Oil Corporation are to be divested. The panel of ministers shall be headed by Finance Minister P Chidambaram. ONGC and OIL shall each buy 5% stake in IOC.

 

The 10% shareholding in IOC to ONGC and OIL shall be offered at a discount of about 10% to the current price. ‘The EGoM on IOC disinvestment will meet tomorrow to decide on price of sale to ONGC and OIL’, an official said.

 

Earlier this week, the board of PSU Oil India Ltd (OIL) approved the acquisition of a 5% stake in IOC at a discounted market price. At a 10% discount to the current price, the government's sale of 24.27 crore shares (or a 10% stake) in state-owned IOC would fetch over Rs. 5,400 crore.

 

On 16 January, the EGoM on disinvestment cleared the stake sale in the nation's largest oil firm through a block deal. IOC shares have gained more than Rs. 35 apiece since then. EGoM then cleared the stake sale at current market price, plus/minus 1%.

 

ONGC and OIL, however, wrote to the Petroleum Ministry saying they would each buy a 5% stake in IOC at the 6-month-average traded price and not at the current rate. ONGC currently holds an 8.77% stake in IOC.

 

Although the Cabinet had originally cleared the stake sale in IOC through an offer for sale, the Finance Ministry had to go in for the block deal route after opposition from the Petroleum Ministry.

 

A trade with a minimum 5 lakh shares or a minimum value of Rs. 5 crore executed through a single transaction on a separate window of a stock exchange constitutes a block deal. A block deal order for a scrip should be within a range of 1% from the ruling market price (last traded price).

 

The oil ministry had argued that IOC shares should not be sold through an offer for sale as the current price did not reflect the right valuation of the company.

 

IOC shares closed at Rs. 247.95 on the BSE on Thursday, up 0.20%, valuing the company at Rs. 60,201 crore.

 

LOVE KUMAR GUPTA

PGDM 2nd SEM

Global banks may have been manipulating gold yardstick

False glitter?

Bloomberg | Mar 2, 2014, 06.16AM IST

The London gold fix, the benchmark used by miners, jewellers and central banks to value the metal, may have been manipulated for a decade by the banks setting it, researchers say.

Unusual trading patterns around 3pm in London, when the so-called afternoon fix is set on a private conference call between five of the biggest gold dealers, are a sign of collusive behaviour and should be investigated, NY University's Stern School of Business professor Rosa Abrantes-Metz and Albert Metz, a managing director at Moody's Investors Service, wrote in a draft research paper.

"The structure of the benchmark is certainly conducive to collusion and manipulation , and the empirical data are consistent with price artificiality," they say in the report, which hasn't yet been submitted for publication . "It is likely that co-operation between participants may be occurring."

The paper is the first to raise the possibility that the five banks overseeing the century-old rate — Barclays Plc, Deutsche Bank AG, Bank of Nova Scotia, HSBC Holdings Plc and Societe Generale SA — may have been actively working together to manipulate the benchmark.

It also adds to pressure on the firms to overhaul the way the rate is calculated. Authorities around the world, already investigating the manipulation of benchmarks from interest rates to foreign exchange, are examining the $20 trillion gold market for signs of wrongdoing. The paper "is not a Moody's research report," Michael Adler, a spokesman for the firm, said.

Officials at London Gold Market Fixing Ltd, the company owned by the banks that administer the rate, referred requests for comment to Societe Generale, which holds the rotating chairmanship of the group. Officials at Barclays , Deutsche Bank, HSBC and Societe Generale declined to comment on the report and the future of the benchmark. Joe Konecny, a spokesman for Bank of Nova Scotia, didn't respond to requests for comment.

The rate-setting ritual dates back to 1919. Dealers in the early years met in a woodpanelled room in Rothschild's office in London and raised little Union Jacks to indicate interest. Now the fix is calculated twice a day on telephone conferences at 10.30am and 3pm London time. The calls usually last 10 minutes, though they can run more than an hour.

Firms declare how many bars of gold they want to buy or sell at the current spot price, based on orders from clients and themselves. The price is increased or reduced until the buy and sell amounts are within 50 bars, or about 620 kg, of each other, at which point the fix is set.

Traders relay shifts in supply and demand to clients during the call and take fresh orders to buy or sell as the price changes, according to the website of London Gold Market Fixing, where the results are published. At 3pm on Friday, the price was $1,332.25 an ounce. The process is unregulated and the five banks can trade gold and its derivatives throughout the call.

Bloomberg News reported in November concerns among traders and economists that the fixing banks and their clients had an unfair advantage because information gleaned from the calls provided an insight into the future direction of prices and banks can bet on spot and derivatives markets during the call. Abrantes-Metz and Metz screened intraday trading in the spot gold market from 2001 to 2013 for sudden, unexplained moves that may indicate illegal behaviour. From 2004, they observed frequent spikes in spot gold prices during the afternoon call. 

 

VIJAY KR YADAV

PGDM SEM-2

SOU- TIMES OF INDIA

Samsung Galaxy S4 price drops to Rs 30,000

In less than a week of Samsung unveiling Galaxy S5, the price of its predecessor Galaxy S4 has dropped nearly Rs 10,000.

NEW DELHI: In less than a week of Samsung unveiling its flagship smartphone Galaxy S5, the price of its predecessor Galaxy S4 has dropped nearly Rs 10,000, and it is now selling for about Rs 30,000 online in India.

The device was launched in the country at Rs 41,500 and is now available at best price of Rs 29,199 on ShopClues.com. The smartphone is also available at e-commerce majors like Flipkart, Snapdeal and Amazon.in for approximately Rs 30,000.

Though there is no official announcement of a price cut, Samsung India on Saturday announced a buyback offer for Galaxy S4, along with Galaxy Note 2 and S4 mini. Under this offer, Samsung will give minimum cash-back of Rs 10,000 for Galaxy S4 in exchange for older smartphones. Thus, buyers will have to effectively pay a maximum of Rs 31,500 for the device.

The South Korean giant has also tied up with HDFC Bank to provide EMI option to buyers at 0% interest. As part of the scheme, they will have to pay installments of Rs 1,750 for 18 months.

Samsung is offering minimum cash-back of Rs 4,000 and Rs 5,000 for Galaxy S4 mini (official price Rs 23,500) and Note II (official price Rs 28,500) under the same scheme. While there is no EMI option for Note II, buyers can purchase S4 mini with 18-month EMIs of Rs 1,028.

Since Galaxy S4 is available on e-commerce sites at Rs 30,000 without any exchange offer, its official price is also likely to be cut as the launch date of Galaxy S5 draws closer. Samsung has announced that Galaxy S5 will be launched in 150 countries, including India, on April 11. However, it has not shared any pricing details.

 

                                                                                                              NAME-

                                                                                            SARVESH KUMAR SINGH

                                                                                                      PGDM 2nd SEM

                                                                                        SOURCE- THE TIMES OF INDIA