The first market of India- Retail Financial Services and Banking

ENERGY

Kirit Parikh report released today, recommends freer market pricing and a longer term solution for the Indian Oil Energy majors. The implementation and adoption by Pranab’s government of course is dependent on political and economic convenience.

The Oil Industry cannot support the burden of subsidies with the internal prices of Oil fluctuating in a wide band. Mr Parikh pegs losses at Rs 40000 Crs annually for the Oil companies. A Rs 6 increase in the price of Kerosene ( lower end derivative) is recommended. As losses on petrol are Rs 3 per liter, a price rise of Rs 4.70 per liter on Petrol and Rs. 2.30 per liter on Dieel are likely if free pricing is implemented ( State owned Oil companies)

ONGC and OVL to share the burden of subsidy with the government to the extent of early blocks granted by nomination and funded by the government

GAIL free from subsidy sharing formula because it has no production facilities

Rail Freight to catch on as the cost of diesel per Kilo Tonne per Kilometer is 20% of Road transport costs

KP recommends freeing of Petrol and Diesel Pricing at Retail

Also, Kerosene subsidy should be granted to families based on Smart Card and UID

AVIATION

Aviation major Jet negotiated a 11% stake in GMR MAS Hyd Airport Engg Company for fleet maintenance of Jet as per an MOU signed earlier in January

Jet Airways also improved Domestic yields by 24% in the final Quarter of 2009 and the industry is hoping for business and premium class demand revival in the coming two quarters. supply side controls and lower fuel prices also contributed to the increased yield

POWER / DIVESTMENT

NTPC issue pricing should flummox investors even as Power Grid and REC get in line. SAIL has got approval for a 10% Offer for sale and a 10% issue of new shares in the coming year and next. Steel Authority performance is no longer an industry benchmark, while NTPC’s lead in the Power sector is also likely in question as Power Distribution and Transmission become central to Policy.

MUTUAL FUND INDUSTRY

The Mutual Fund Industry's innovative Liquid Plus schemes that now constitute 40% of the Rs 735000 Crore ( INR 7.35 trillion) Industry may soon be switched out as Government takes cognizance of the differential tax treatment ( Individuals 14%, Corp 22%) vs. Liquid Schemes 33%. Also RBI had earlier challenged banks on parking excess cash in these money market schemes with Mutual funds as more than Rs 1.35 trillion is parked in such schemes.

RETAIL LIFESTYLE

ITC Fortune has reported 2000 new rooms planned under the budget franchise in the next 2-3 years. 9 new hotels are coming online in 2010, 25 by 2014 which will be close to 6000 rooms

Maruti Suzuki led a great Indian Auto revival bringing sales of 175000 Cars in January domestically. Adding at least 50 K in Exports from Hyundai and Maruti alone, the figure, if repeated through the year could finally break the hold of 2- 3 wheelers in economic reporting, lol

INOX bought 200 additional screens into its fold with a 43% investment in Fame Cinemas, each screen costing them between 1.3 to 1.7 crores or $300K much below the market cost of $500K of setting up a new screen. It is increasingly looking unlikely that PVR will complete its purchase of DT Cinemas.

We have tweeted and carried in-depth analysis of each of these deals, subjects and factors in India's new journey. Call us on 'hyperchat' if you need a breaking tweet.

Roadshow update

NTPC gets on the road for bidding (price INR 200- 220)

( WSJ>com, NTPC Secures Debt )

[ INR 100 billion = INR 10000 Crores ] [India's Current Total Power Capacity = 75 GW (Peak)]

NTPC Ltd. has arranged 450 billion rupees ($9.74 billion) in loans to help raise its power generation capacity to 45 gigawatts by March 2017 from the current 30.6 gigawatts.

The funds will be used to build new plants and to modernize existing ones, Chairman R.S. Sharma told Dow Jones Newswires late Friday.

He didn’t specify exactly how much the expansion will cost in total, but he said that 70% of the money will come from debt and the rest from the company’s cash reserves.

The company plans to invest 250 billion rupees to add 4.5 GW of capacity in the next financial year that starts April 1, up 41% from this fiscal year’s 177 billion rupees.

But NTPC will miss its target of adding 3.3 GW of generation capacity this fiscal year, and may end up adding only 2 GW, Mr. Sharma said.

“We have planned a little bit aggressively. There were slippages. But next year it will be 100%, no slippages are going to take place,” he said, speaking from New York.

NTPC’s capacity expansion plan is in line with the federal government’s aim to improve the nation’s infrastructure.

[tag India, India Infrastructure, IPO]

[category india]

..and india's aviation story

When Kingfisher introduced TV entertainment in its never before Kingfisher Class in 2005, it created a buzz and some great innovation in the industry. The first pioneer to go for a full service airline after Jet had nearly monopolised the Private Sector Airlines esp after the Sahara deal, Kingfisher even found an ally in its now next door neighbour's Deccan, which has now become the staple LCC fare at the airline.

The more than 30 awards, incl 6 Freddies as recently as 2008 mean that the Airline has been a pathbreaker and an iconic brand for India's global travellers. however, it never could break the barrier set by Jet Airways who continues to showcase profitability and professional management despite the industry's hiccups in most of 2008 when Oil prices were skyrocketing to 2009 when recession took its toll.

Low Cost Carriers like Spicejet (Modis of Spice, Bangalore) and Indigo have taken to the skies and made never before profits as on the ground new ticketing wars brought Cleartrip, Yatra and Makemytrip to fight over pennies in commissions. Such a cost conscious environment has now showed up Kingfisher for the troubled Dodo it is in the skies. Unable to take off, Fly kingfisher reported a $100m loss in the latest December Quarter concurrent with revenue losses of 5% Q-o-Q. A debt ticket of more than $1.5 billion makes its efforts at garnering Private equity partnerships even morelong-winded. The debate rages on and the airline's financial obligations keep mounting. Low cost Carrier Spicejet has published a $25 million profit for the most recent quarter

With the Force India F1 and the Bangalore Royal Challengers investments also causing heartburn with their performance on and off the field and the Kingfisher Calendar suffering in competition with the supermodels of the Continent, India's desi luxury lifestyle challenge needs to take a hard look at its options and the PE it finds will take the horse to water. Tough days ahead Mr Mallya!

However, not many have finally confused Indian Luxury Lifestyle with its latest icon and while Kingfisher tries to shake off the water from its back, the Indian Luxury goods revolution rages on and has a substantial chunk of India's Modern retail business. More on that later!

Each of his sporting businesses is worth over a $1 billion though on sentiment and in liabilities too. And that's the lucre. And because of his aviation, sports and lifestyle interests India's Beer Baron is known for a little more than his spirit today.

The PE Investors looking at Kingfisher also reflect those who see the fast life connection with India incl Abu Dhabi based Aabar investments and the more Bangalore centric Texas Pacific Group. One would do well to keep per share valuations at the low-end at this stage because this is going to be one very vertical roller coaster ride.

(Pls. note that all Advantage research notes carry a new approximate rate of Rs 40 henceforth for trend equalization and longer lasting predictions. Earlier 2010 notes and tweets mention the conversions at Rs 45 and Rs 42 for every dollar. Of course this assumes that Indian Exporters,e sp IT firms show enough skill in hedging to stay away from highly speculative Double or Quit options and also do not forego hedging which seems to be India's binary lot courtesy lineage as Satyam, ICICI and Wipro)

[Tag Bangalore, Bangalore Royal Challengers, Brand Valuation, Cricket, Delhi Daredevils, F1, Force India, India, India Cement, India Infrastructure, India Lifestyle, IPL, Jet Airways,Kingfisher, KKR, Kolkata Knightriders, Lifestyle,Lifestyle Brands, Lifestyle Infrastructure, Private Equity, Retail, Retail Lifestyle, Sport, Sports Marketing, Texas Pacific,UB, Vijay Mallya]

[Topic Retail, Retail Lifestyle, india, India infrastructure]

It's not the fog

GMR has emerged as a leader in aviation infrastructure space with commissioned projects in Hyderabad, Delhi and Turkey. Despite the recent L&T stake sale to GVK in Bangalore ( that probably GMR should also have bid) and with the opening of more than 20 mid tier airport projects plus another 5-6 metro airport modernisation projects, GMR cannot be choosy but also cannot afford to give away the farm. Each Aviation project Capital requirement will run into 2-3K Crores that’s a $500m each time. Even if it foots only 10-15% of its equity, it currently cannot afford to take any of its earler projects public and the infrastructure spending requirement is NOW.

After the Temasek deal for 10% of GMR Energy was announced yesterday, GMR has pulled a virtual second and third consecutive cheer, with the SBI Macquarie infra fund picking up $200m stake in the Aviation Infrastructure bids. 3i which earlier in the week announced its deal for toll highways has also flown in to GMR Airports with a $200m tab

 From ET: GMR want(ed) to sell a minority stake in the airport subsidiary to raise cash for investments in infrastructure and power. The airports business, which includes the Hyderabad and Delhi airports, account for 45% of the group’s revenues.

The bank is going in for a capital raising even as its capital adequacy ratio as on December 31,2009 was at 16.19%. According to Yes Bank MD & CEO Rana Kapoor, “We are expanding at a fast pace. Our loan growth is 71% while our deposit growth has been 62.8%. We want to maintain a 45% CAGR for the next two years and 35% for the next three years thereafter.” 

via ET - Earnings - Banks

GOI plans a French Auction from Feb 3-5 for the NTPC IPO. The FRench Auction will enable best price discovery but trading will be halted for the period because of government concerns about quality of FIIs and QIBs in the country. The Market Price ruling at 240, means the FPO could even take the bids higher, but unlikely as a common cut off is in place per the rules of the French auction to be announced on Saturday Feb 6. Retail Investors get a discount of 5% as last month in Jindal Energy. NTPC is one of the heaviest weighted Sensex scrips. In a separate development GMR got thru to investors for its Power unit's 15% stake. Again it looks as if we have short-sold the plot for less than 10000 Crs while disallowing retail investors frm participating. The volumes continue to be dry. 

The previous Budget document isn't very old yet. Those of you who still need to refer back may get a copy from us. those who got the analysis document from us last time are again invited to write in on Twitter and request the new one in six weeks from now.