some recent developments in the markets that will bring down the home loan interest rates in the near future
• Most banks have not reduced their prime lending rate (PLR) to the extent the Reserve Bank of India (RBI) has cut the rates. Therefore, analysts expect home loans rates will go down as more clarity comes on the issue.
• The government is exerting pressure on public sector banks to reduce their lending rates by reducing their spread. Once these banks reduce the rates, private banks are also expected to follow suit thanks to the competition.
• Liquidity conditions have not improved much even after cutting the cash reserve ratio (CRR), statutory lending rate (SLR) and repo rate. Foreign institutional investors (FIIs) are still taking large amounts of money out from the domestic markets. Experts believe that another rate cut by the RBI is imminent, and hence, it will result in lower home loan interest rates.
• The inflation rate has come down drastically during the last six weeks. This is another indication for the government and RBI to go for a softer monetary policy.
• The GDP growth rate is slowing down due to lower demand and negative consumer sentiments. Lower rates will stimulate demand and result in better growth. Therefore, the industry and experts are exerting pressure on the government and RBI to cut interest rates.
• Many large manufacturing companies have announced a production cut. This will lead to lesser requirements of money from corporates. This will have indirect effect on consumer loans, including home loans.
• The demand for loans has reduced significantly due to negative sentiments in the light of the global slowdown. Banks are offering incentives such as lower interest rates to fresh borrowers.
• Many large countries are initiating moves to control the damage due to the global slowdown. Relief packages and lower interest rates are being announced.
Home Loan - Tenure, Interest & EMI explained
The repayment of a loan taken to buy a house is made through EMIs (equated monthly instalments). EMIs are the fixed instalments which a borrower needs to pay over the tenure of the loan to repay the debt as well the related interest for the period to the bank.
Usually, the EMIs remain constant over the tenure of the loan. The loan amount plus the interest for the loan tenure, divided by the tenure of the loan (in months) gives you the EMI. The amount of EMI to be paid depends on and varies with the amount of loan, tenure of loan, and rate of interest. One of the important parameters governing the EMI is the tenure of the loan. Nowadays, you can avail loans for various tenures - between five and 20 years, and in a few cases upto 25 years as well.
Arriving at tenure
Here are two most significant factors that determine tenure:
Age: If you decide to borrow early, you can opt for a longer tenure loan - 15 to 25 years. This way, your monthly EMI payment would be less. Although the amount of interest paid would be higher as compared to other options, you can have the benefit of availing the loan for a longer period of time. However, if you are borrowing towards the end of your career, you may have to opt for a shorter tenure.
Income: This means both the present as well as the future income. You should be able to repay his EMIs without compromising drastically on your quality of living. The cash flows available after payment of EMIs should not entail a dent in the living standards. As such, a judicious planning of cash flows is required.
Tenure and interest
The longer the tenure, higher will be the interest rate. This is because of the increased risk the bank has to take. Also, the interest amount in absolute terms is higher, because of the longer tenure. However, the EMI is lower because the loan and interest are spread over a longer span of time.
The shorter the tenure, lower will be the interest rate. This is because of the relatively lower level of risk the bank takes. Also, the interest amount in absolute terms is lesser, because of the shorter tenure. However, the EMI is higher because the loan and interest are to be repaid over a shorter span of time.
Tax benefits
You should try to avail the maximum tax benefits available under the Income Tax Act. Presently, interest upto Rs 1.5 lakhs per annum paid on housing loans is deductible from the taxable income of a borrower. You should structure the housing loan amount and tenure so that your annual interest component paid in the near future is Rs 1.5 lakhs per annum. Of course, this would be contingent on other factors as well, like your annual income and savings potential.
Usually, the EMIs remain constant over the tenure of the loan. The loan amount plus the interest for the loan tenure, divided by the tenure of the loan (in months) gives you the EMI. The amount of EMI to be paid depends on and varies with the amount of loan, tenure of loan, and rate of interest. One of the important parameters governing the EMI is the tenure of the loan. Nowadays, you can avail loans for various tenures - between five and 20 years, and in a few cases upto 25 years as well.
Arriving at tenure
Here are two most significant factors that determine tenure:
Age: If you decide to borrow early, you can opt for a longer tenure loan - 15 to 25 years. This way, your monthly EMI payment would be less. Although the amount of interest paid would be higher as compared to other options, you can have the benefit of availing the loan for a longer period of time. However, if you are borrowing towards the end of your career, you may have to opt for a shorter tenure.
Income: This means both the present as well as the future income. You should be able to repay his EMIs without compromising drastically on your quality of living. The cash flows available after payment of EMIs should not entail a dent in the living standards. As such, a judicious planning of cash flows is required.
Tenure and interest
The longer the tenure, higher will be the interest rate. This is because of the increased risk the bank has to take. Also, the interest amount in absolute terms is higher, because of the longer tenure. However, the EMI is lower because the loan and interest are spread over a longer span of time.
The shorter the tenure, lower will be the interest rate. This is because of the relatively lower level of risk the bank takes. Also, the interest amount in absolute terms is lesser, because of the shorter tenure. However, the EMI is higher because the loan and interest are to be repaid over a shorter span of time.
Tax benefits
You should try to avail the maximum tax benefits available under the Income Tax Act. Presently, interest upto Rs 1.5 lakhs per annum paid on housing loans is deductible from the taxable income of a borrower. You should structure the housing loan amount and tenure so that your annual interest component paid in the near future is Rs 1.5 lakhs per annum. Of course, this would be contingent on other factors as well, like your annual income and savings potential.
Planning to Buy A House?
Everyone dreams of owning a home. It is a major decision. At one time, people used to buy a home only close to retirement when they had sufficient savings. However, the scenario has changed quite a bit in the last decade or so. Nowadays, people buy a house in their mid to late 20s. In some cases, even before marriage. This could be attributed to many factors. A rise in the earnings of the middle income group, easy financing, aggressive marketing of properties and tax rebates provided by government to promote infrastructure development are some.
Here are some tips to help you buy that dream home as soon as possible:
Planning and research
This is the first step in buying a property. You need to decide on the locality, space-cost factor, flat or independent house etc. It is ideal to make enquiries and research each of these thoroughly. This validates and refines your thinking, and helps in taking the right decisions.
Planning finances
Buying a property is a major financial decision. Often, it happens once in a lifetime. It is always advisable to go in for a housing loan. These loans are easily available and the government offers tax relief to home loan borrowers.
If you are planning to buy a property in the near future, you should plan your finances for an upfront payment too. Usually, a property buyer has to pay 10 to 15 percent upfront from his own resources. A loan covers the rest of the amount. Therefore, it is important to plan and arrange for such an amount if you are planning to buy a property in the near future.
People who are planning to buy a property 2-3 years down the line can look for slow and steady savings through market instruments - mutual funds, systematic investment plans, investing in blue chip stocks etc. However, people looking at buying a property in the next few months should save in debt instruments which safeguard capital.
Loan eligibility
A housing loan disbursement was quite easy a couple of years ago. Housing finance companies have tightened the process a little now due to the slowdown in the economy. However, there is no dearth of options for buyers who plan well. Usually, banks scrutinise these documents to arrive at the loan eligibility of a borrower. People planning to buy a property in the near future should keep them in mind and plan accordingly, to sail through the process of loan disbursement easily.
Documents that go into arriving at loan eligibility:
Tax returns:
Last three years' income tax returns or Form 16 are checked for consistency in earnings. Large variations in income go against the applicant.
Bank statements:
Usually, banks like to verify the last 3-6 months' bank statements. This is to identify various monthly cash outflows of the borrower. People planning to take a loan in the near future should avoid any unnecessary transactions.
Work history:
This is another important aspect. A long stint with the current employer is seen as a positive sign. Similarly, a good reputation and corporate image of the employer creates a positive impact.
Loan history:
Any previous loan default is treated as a serious negative by banks.
Here are some tips to help you buy that dream home as soon as possible:
Planning and research
This is the first step in buying a property. You need to decide on the locality, space-cost factor, flat or independent house etc. It is ideal to make enquiries and research each of these thoroughly. This validates and refines your thinking, and helps in taking the right decisions.
Planning finances
Buying a property is a major financial decision. Often, it happens once in a lifetime. It is always advisable to go in for a housing loan. These loans are easily available and the government offers tax relief to home loan borrowers.
If you are planning to buy a property in the near future, you should plan your finances for an upfront payment too. Usually, a property buyer has to pay 10 to 15 percent upfront from his own resources. A loan covers the rest of the amount. Therefore, it is important to plan and arrange for such an amount if you are planning to buy a property in the near future.
People who are planning to buy a property 2-3 years down the line can look for slow and steady savings through market instruments - mutual funds, systematic investment plans, investing in blue chip stocks etc. However, people looking at buying a property in the next few months should save in debt instruments which safeguard capital.
Loan eligibility
A housing loan disbursement was quite easy a couple of years ago. Housing finance companies have tightened the process a little now due to the slowdown in the economy. However, there is no dearth of options for buyers who plan well. Usually, banks scrutinise these documents to arrive at the loan eligibility of a borrower. People planning to buy a property in the near future should keep them in mind and plan accordingly, to sail through the process of loan disbursement easily.
Documents that go into arriving at loan eligibility:
Tax returns:
Last three years' income tax returns or Form 16 are checked for consistency in earnings. Large variations in income go against the applicant.
Bank statements:
Usually, banks like to verify the last 3-6 months' bank statements. This is to identify various monthly cash outflows of the borrower. People planning to take a loan in the near future should avoid any unnecessary transactions.
Work history:
This is another important aspect. A long stint with the current employer is seen as a positive sign. Similarly, a good reputation and corporate image of the employer creates a positive impact.
Loan history:
Any previous loan default is treated as a serious negative by banks.
Sugar Sector - Snapshot to make investment decision
Top 10 sugar stocks in Indian Stock market where you can invest in. Companies considered from all three; Small cap, Mid cap and large cap segments of market.
LARGE CAP
SHREE RENUKA SUGARS CMP: Rs 52
In the midst of a weak pricing scenario over the past two years, Renuka Sugars continues to expand through acquisitions and greenfield projects. It will invest Rs 3.5 bn in a 2,000-tpd refinery in Mundra SEZ to be commissioned by 2010. This will take its refining capacity to 6,000 tpd. With sugar prices set to improve by end of 2008-09 crushing season, ongoing capex would boost sugar volumes.
Triveni Engineering CMP: Rs 38
Triveni Engineering (TEIL) is among the largest sugar producers in India with a presence in sugar and engineering segments. This makes the stock a strong play in the sugar cycle at relatively lower risk, given its additional presence in engg business. We expect the company to clock 21.9% revenue and 58.1% net profit CAGR over FY08-10E. Sugar prices will rise, given the domestic and global deficit situation.
MID CAP
BALRAMUR CHINI CMP: Rs 32
It reported its Q4SY08 (sugar year) results with a topline growth of 40% to Rs 416.7 crore from Rs 297.8 crore in Q4SY07, supported by volume growth and improvement in price realisations. It currently holds a large sugar inventory, in anticipation of higher sugar prices and it is well positioned to gain in such a scenario. However, disputes over pricing between the industry and the state pose concerns.
Bajaj Hindustan CMP: Rs 41
Revenues are expected to rise by 47.4% QoQ to Rs 676.7 crore on account of higher sugar prices and strong growth in volumes. EBITDA margins are expected to improve to 31.4% QoQ on the back of higher sugar and rectified spirit prices. Net profit is expected to stand at Rs 58.5 crore from the loss of Rs 35.5 crore in Q3SY08. Key swing factors are firm sugar prices and the SC ruling on sugarcane prices.
SMALL CAP
DWARIKESH SUGAR IND CMP: Rs 28
It is a mid-sized sugar mfg company with operations across three units in UP. Its capacities for sugarcane crushing stand at 21,500 TCD, distillery at 30 KLPD and cogeneration at 56 MW. Its profitability will come primarily from its 56 MW (saleable) cogen power plants. This, coupled with firm sugar prices, is likely to boost cash flows.
INDIA GLYCOLS CMP: Rs 52
It is one of the leading manufacturers of glycols and ethylene oxide derivatives, which cater primarily to industries like textiles, agrochem, oil and gas, detergents and paints. In December 2007, it acquired Shakumbari Sugar and Allied Industries for Rs 47 crore, which gave it flexibility in making ethanol through molasses or sugarcane depending on their price cycles.
LARGE CAP
SHREE RENUKA SUGARS CMP: Rs 52
In the midst of a weak pricing scenario over the past two years, Renuka Sugars continues to expand through acquisitions and greenfield projects. It will invest Rs 3.5 bn in a 2,000-tpd refinery in Mundra SEZ to be commissioned by 2010. This will take its refining capacity to 6,000 tpd. With sugar prices set to improve by end of 2008-09 crushing season, ongoing capex would boost sugar volumes.
Triveni Engineering CMP: Rs 38
Triveni Engineering (TEIL) is among the largest sugar producers in India with a presence in sugar and engineering segments. This makes the stock a strong play in the sugar cycle at relatively lower risk, given its additional presence in engg business. We expect the company to clock 21.9% revenue and 58.1% net profit CAGR over FY08-10E. Sugar prices will rise, given the domestic and global deficit situation.
MID CAP
BALRAMUR CHINI CMP: Rs 32
It reported its Q4SY08 (sugar year) results with a topline growth of 40% to Rs 416.7 crore from Rs 297.8 crore in Q4SY07, supported by volume growth and improvement in price realisations. It currently holds a large sugar inventory, in anticipation of higher sugar prices and it is well positioned to gain in such a scenario. However, disputes over pricing between the industry and the state pose concerns.
Bajaj Hindustan CMP: Rs 41
Revenues are expected to rise by 47.4% QoQ to Rs 676.7 crore on account of higher sugar prices and strong growth in volumes. EBITDA margins are expected to improve to 31.4% QoQ on the back of higher sugar and rectified spirit prices. Net profit is expected to stand at Rs 58.5 crore from the loss of Rs 35.5 crore in Q3SY08. Key swing factors are firm sugar prices and the SC ruling on sugarcane prices.
SMALL CAP
DWARIKESH SUGAR IND CMP: Rs 28
It is a mid-sized sugar mfg company with operations across three units in UP. Its capacities for sugarcane crushing stand at 21,500 TCD, distillery at 30 KLPD and cogeneration at 56 MW. Its profitability will come primarily from its 56 MW (saleable) cogen power plants. This, coupled with firm sugar prices, is likely to boost cash flows.
INDIA GLYCOLS CMP: Rs 52
It is one of the leading manufacturers of glycols and ethylene oxide derivatives, which cater primarily to industries like textiles, agrochem, oil and gas, detergents and paints. In December 2007, it acquired Shakumbari Sugar and Allied Industries for Rs 47 crore, which gave it flexibility in making ethanol through molasses or sugarcane depending on their price cycles.
YES Bank Chairman found dead in Mumbai Attack
Yes Bank chairman Ashok Kapur was on Friday found dead in Mumbai's Oberoi (Trident) Hotel, which was under terrorists' siege for several hours since late Wednesday evening.
Body of Kapur, non-executive chairman of the bank, was found in the hotel where he had been staying, informed a bank spokesperson.
Kapur was one of the promoters of the bank, along with his brother-in-law Rana Kapoor, who together held 34 per cent stake in the new generation private sector bank.
Let us see how stock market reacts on YES Bank stock with this happening.
Body of Kapur, non-executive chairman of the bank, was found in the hotel where he had been staying, informed a bank spokesperson.
Kapur was one of the promoters of the bank, along with his brother-in-law Rana Kapoor, who together held 34 per cent stake in the new generation private sector bank.
Let us see how stock market reacts on YES Bank stock with this happening.
Analyzing Stock Before Investing - Value Investing
As sentiments remained negative, investor interest in stock markets waned as indicated by low trading volumes. Investors were unwilling to invest in stocks as they believed the worst was yet to come. Analysts too seem to reinforce the view that the markets will drop even further in 2009.
With valuations of companies falling anywhere between 60-80 percent most companies listed on the NSE and BSE were available very cheap. The only happy investors seemed to be the long-term ones who can now pick and choose their favourite stocks at very low values.
Time to go long-term
Indeed it seems to be the right time for long-term investing. As the famous investors like Jim Rogers and Warren Buffet say, the markets are highly under-valued and are ripe for long-term investments. Many stocks are trading well below their intrinsic values. Smart investing, experts say, especially from an individual standpoint, is where you have the luxury of not having to participate in the market at all times. It also means choosing the most appropriate time to invest when the odds and probabilities of success are highly in your favour. From that perspective, there is no better time than today to invest in stocks as the odds of success are higher now.
So with some perseverance, a lot of research, and the ability to sift through a lot of information, you can find the right company to invest in that will yield supernormal returns over the long term.
One tool that can help in identifying the right company is an investment strategy called CANSLIM. Developed by William O'Neil, the acronym actually stands for a very successful investment strategy. This strategy has been proven and has yield good returns in the past.
So, what is this strategy all about?
CANSLIM consists of seven components. They are mainly quantitative parameters to be applied while selecting any company for investment. Each letter of the word CANSLIM denotes one parameter to be analysed in depth.
They are:
C – Current quarterly earnings per share
It is important to choose stocks that have grown on a quarterly basis. For example, a company's earnings per share (EPS) figures reported in this year's April-June quarter should have grown relative to the EPS figures for that same three-month period of the previous year.
The percentage of growth a company's EPS should grow by is subjective, but the CANSLIM system suggests around 18-20 percent. This suggests that basically all of the high performance stocks show an outstanding quarter-on-quarter growth.
A – Annual earnings per share
These figures should show meaningful growth over the past five years. CANSLIM stresses on the importance of annual earnings' growth. The system indicates that a company should have shown good annual growth (annual EPS) in each of the last five years.
N – New things
The third criterion for a good company is that it has recently undergone a change, which is often necessary for a company to become successful. It could be a new management team, a new product, a new market, or a new high in stock price.
S – Shares outstanding
This should be a small and reasonable number. CANSLIM investors are not looking for older companies with a large capitalisation.
L – Leaders
Buy market leaders and avoid laggards. In each industry, there are always those that lead, providing great gains to shareholders, and those that lag behind In CANSLIM analysis, distinguishing between market leaders and market laggards is of importance.
I – Institutional sponsorship
Buy stocks with at least a few institutional sponsors who have better-than-average recent performance records. Explore all the factors that should be considered when determining whether a company's institutional ownership is of high quality.
M – General market
The market will determine whether you win or lose. So learn how to discern the market's current direction, to interpret the indices (price and volume changes), and actions of the individual market leaders. The final CANSLIM criterion talks about market direction.
When picking stocks, it is important to recognise the type of market. The first two parts of the CANSLIM system are logical steps employing quantitative analysis by identifying a company that has demo strated strong earnings both quarterly and annually. By rigorously following them you have a good basis for a good stock selection.
With valuations of companies falling anywhere between 60-80 percent most companies listed on the NSE and BSE were available very cheap. The only happy investors seemed to be the long-term ones who can now pick and choose their favourite stocks at very low values.
Time to go long-term
Indeed it seems to be the right time for long-term investing. As the famous investors like Jim Rogers and Warren Buffet say, the markets are highly under-valued and are ripe for long-term investments. Many stocks are trading well below their intrinsic values. Smart investing, experts say, especially from an individual standpoint, is where you have the luxury of not having to participate in the market at all times. It also means choosing the most appropriate time to invest when the odds and probabilities of success are highly in your favour. From that perspective, there is no better time than today to invest in stocks as the odds of success are higher now.
So with some perseverance, a lot of research, and the ability to sift through a lot of information, you can find the right company to invest in that will yield supernormal returns over the long term.
One tool that can help in identifying the right company is an investment strategy called CANSLIM. Developed by William O'Neil, the acronym actually stands for a very successful investment strategy. This strategy has been proven and has yield good returns in the past.
So, what is this strategy all about?
CANSLIM consists of seven components. They are mainly quantitative parameters to be applied while selecting any company for investment. Each letter of the word CANSLIM denotes one parameter to be analysed in depth.
They are:
C – Current quarterly earnings per share
It is important to choose stocks that have grown on a quarterly basis. For example, a company's earnings per share (EPS) figures reported in this year's April-June quarter should have grown relative to the EPS figures for that same three-month period of the previous year.
The percentage of growth a company's EPS should grow by is subjective, but the CANSLIM system suggests around 18-20 percent. This suggests that basically all of the high performance stocks show an outstanding quarter-on-quarter growth.
A – Annual earnings per share
These figures should show meaningful growth over the past five years. CANSLIM stresses on the importance of annual earnings' growth. The system indicates that a company should have shown good annual growth (annual EPS) in each of the last five years.
N – New things
The third criterion for a good company is that it has recently undergone a change, which is often necessary for a company to become successful. It could be a new management team, a new product, a new market, or a new high in stock price.
S – Shares outstanding
This should be a small and reasonable number. CANSLIM investors are not looking for older companies with a large capitalisation.
L – Leaders
Buy market leaders and avoid laggards. In each industry, there are always those that lead, providing great gains to shareholders, and those that lag behind In CANSLIM analysis, distinguishing between market leaders and market laggards is of importance.
I – Institutional sponsorship
Buy stocks with at least a few institutional sponsors who have better-than-average recent performance records. Explore all the factors that should be considered when determining whether a company's institutional ownership is of high quality.
M – General market
The market will determine whether you win or lose. So learn how to discern the market's current direction, to interpret the indices (price and volume changes), and actions of the individual market leaders. The final CANSLIM criterion talks about market direction.
When picking stocks, it is important to recognise the type of market. The first two parts of the CANSLIM system are logical steps employing quantitative analysis by identifying a company that has demo strated strong earnings both quarterly and annually. By rigorously following them you have a good basis for a good stock selection.
Oil Cos Would Earn More Profits - HPCL, BPCL, IOCL could be beneficiary
OIL marketing companies will earn more profits, Rs 14.89/litre on petrol and Rs 3.03 per litre on diesel, since December 1 due to falling oil prices in international markets.
OIL marketing companies will earn more profits, Rs 14.89/litre on petrol and Rs 3.03 per litre on diesel, since December 1 due to falling oil prices in international markets. This is Rs 6.74 per litre more on diesel and Rs 2.38 per litre more on petrol than what they earned last month.
Cos will earn Rs 14.89/ litre on petrol, Rs 3.03/ litre on diesel from December 1
But there will be no immediate change in consumer prices of the two fuels. Had oil marketing companies passed on the benefit of the sharp fall in global oil prices to consumers, petrol would have cost them Rs 35.73 a litre, price last seen in June 2004. Similarly, diesel would have cost Rs 31.83 a litre, prevalent in February. But retail prices of controlled items such as petrol and diesel in Delhi are Rs 50.62 per litre and Rs 34.86 per litre respectively. Prices of four ‘sensitive’ petroleum products (petrol, diesel, kerosene sold at ration shops and cooking gas) are controlled by the government while prices of other petroleum products are market determined. “Profit margins on auto fuel sales has been positive for a month. But now margins have increased significantly. This calls for a roll back of petrol and diesel prices,” an official who didn’t wish to be identified said.
In June, when the average price of crude oil import touched $122/barrel, the government increased petrol prices by Rs 5 a litre, diesel by Rs 3 a litre and cooking gas by Rs 50 per cylinder. A petroleum ministry official said there was no final decision on the price revision as yet but cooking gas prices could be reduced only marginally as public sector oil companies are still losing Rs 143 on every cylinder.
The government is under pressure from the opposition parties to cut petrol and diesel prices but it is restrained by the election codes.
OUR VIEW - One may consider buying oil marketing companies shares since:
** It is clear that crude oil prices would remain range bound from $50 to $70 - $ 75 in world markets
** In the month of June 2008, when average crude oil import price touched $122 a barrel, the price of petrol & diesel were raised, if we compare this average price then (with crude at $ 143 per barrel), and present crude oil at below $50, oil companies would defenitely be making profits even if government decides to reduce fuel prices marginally.
** This would make positive impact on all oil marketing companies stocks making it look good for mid term investments.
Hospitality stocks slump - EIH, Indian Hotels worst hit - Aviation & Tourism suffers too
The hospitality sector was badly pounded Friday as Wednesday's attacks put an additional strain on nerves frayed by the global financial turmoil. Shares of Indian Hotels and EIH were under severe pressure after their main hotels -- Taj Mahal Hotel and Oberoi-Trident were hit by the attacks.
Creating a fear psychosis among visitors to the country, hoteliers are expecting large scale cancellation of bookings, especially from overseas visitors. According to reports, all the hotel association members are likely to meet the Tourism and Culture Minister Ambika Soni next week to draw a strategy to deal with the consequences of such incidents. This, being the the busiest season for tourists (October to March), this attack was unfortunate in the middle of the peak season.
At 10:30 am, EIH was down 5.65% at Rs 87.65, Indian Hotels slumped 10.84% at Rs 43.20 and Taj GVK Hotel lost 7.03% to Rs 41.65.
Aviation stocks also took a beating with airlines cancelling/rescheduling flights on account of the terror attacks. Kingfisher Airlines fell 6.32 per cent to Rs 27.40 and Jet Airways was down 4.28 per cent.
Tourism stocks Thomas Cook lost 4.44 per cent and Tourism Finance Corporation of India declined 2.7 per cent to Rs 14.40.
Creating a fear psychosis among visitors to the country, hoteliers are expecting large scale cancellation of bookings, especially from overseas visitors. According to reports, all the hotel association members are likely to meet the Tourism and Culture Minister Ambika Soni next week to draw a strategy to deal with the consequences of such incidents. This, being the the busiest season for tourists (October to March), this attack was unfortunate in the middle of the peak season.
At 10:30 am, EIH was down 5.65% at Rs 87.65, Indian Hotels slumped 10.84% at Rs 43.20 and Taj GVK Hotel lost 7.03% to Rs 41.65.
Aviation stocks also took a beating with airlines cancelling/rescheduling flights on account of the terror attacks. Kingfisher Airlines fell 6.32 per cent to Rs 27.40 and Jet Airways was down 4.28 per cent.
Tourism stocks Thomas Cook lost 4.44 per cent and Tourism Finance Corporation of India declined 2.7 per cent to Rs 14.40.
Going Short and Controversial - Be careful for Unitech
Going short on a stock in the current market is not looked upon as a risky proposition. There are, however, some who always attract eyeballs when they go short on a particular counter. A very interesting story. Read on...
The man in question is known to relish a bear market, although the counters in which he builds up short positions always end up in controversies, thereby fuelling theories of ‘more-than-what-meets-the-eyes’.
This person, who shares his first name with a heavyweight Maharashtra politician on the BCCI board, was said to have built up huge short positions in Core Projects & Technologies that more than halved in one single trading session on October 13.
The market was again abuzz with his name when ICICI Bank was being hammered from all sides. Now his name is being associated with Unitech that has been in the news for all the wrong reasons. Marketmen feel that he has significant short positions in case of Unitech that has been fighting against reports of one default after another. If market grapevine is to be believed, then he is in the know of trading calls of quite a few hedge funds that help him in building a position before the fund embarks on a selling spree.
The man in question is known to relish a bear market, although the counters in which he builds up short positions always end up in controversies, thereby fuelling theories of ‘more-than-what-meets-the-eyes’.
This person, who shares his first name with a heavyweight Maharashtra politician on the BCCI board, was said to have built up huge short positions in Core Projects & Technologies that more than halved in one single trading session on October 13.
The market was again abuzz with his name when ICICI Bank was being hammered from all sides. Now his name is being associated with Unitech that has been in the news for all the wrong reasons. Marketmen feel that he has significant short positions in case of Unitech that has been fighting against reports of one default after another. If market grapevine is to be believed, then he is in the know of trading calls of quite a few hedge funds that help him in building a position before the fund embarks on a selling spree.
Analysts Views & Recommendations
Analyst's views and recommendations for trading on IDEA CELLULAR, INDIABULLS REAL, VOLTAS, SPICEJET, ARIES AGRO.
IDEA CELLULAR
CMP: RS 44.15
TARGET PRICE: RS 56
Citigroup has maintained its ‘hold’ rating on Idea Cellular while cutting its price target to Rs 56 from Rs 70 in line with an earnings downgrade for financial years 2009 to 2011 by 1-3%. “Relatively weaker balance sheet compared to its larger peers reduces the funding flexibility in a tougher macro environment, thus constraining the valuation multiples,” the investment bank said in a report. “Estimated net debt of Rs 49 billion (or Rs 4,900 crore) as of end-FY09 (Rs 3,200 crore as of September, ‘08) is under control though net debt/EBITDA (earnings before interest taxation depreciation and amortisation) will be 2.3-2.4 times in FY10-11E. While this will moderate Idea’s bidding intensity, on the flip side, its balance sheet is most vulnerable to 3G bidding risk,” Citi added.
INDIABULLS REAL
CMP: RS 87.05
TARGET PRICE: RS 170 ICICI Securities has initiated coverage on Indiabulls Real Estate with a ‘buy’ rating, with a price target of Rs 170 on grounds the company is well capitalised to ride the current downturn in the realty sector. “IBREL has sold stake in its company and in properties to raise Rs 5,300 crore in the past two years. Its balance sheet is robust (debt Rs 2.5 billion, cash Rs 3,400 crore) to tied through the current downturn and capitalise on opportunities,” the broking company said in a recent report. “We estimate FY09E NAV (net asset value) to be Rs 8,800 crore, or Rs 341/share (target price Rs 170/share assuming 50% discount to NAV). Given the execution risks, we expect the stock to trade on its balance sheet strength (cash per share Rs 122, FY08 BV/share Rs 171) rather than the potential of the project pipeline,” it added.
VOLTAS
CMP: RS 52.45
TARGET PRICE: 57
Kotak Securities’ private client research has maintained its ‘accumulate’ rating on Voltas while trimming the price target to Rs 57 from Rs 70. “We are downgrading our earnings and target price for Voltas in view of deteriorating fundamentals in its major user industries,” the retail broking firm said, referring to slowdown in Dubai property market and declining investments of South India-based tex-tile makers. “Close to 81% of the order backlog of Rs 5,600 crore is from the Middle East (realty) market. Out of this, the order book from Dubai constituted just Rs 1.5 billion. Voltas indicated that they had anticipated a sharp slowdown in the Dubai market since a year earlier and had been consciously reducing exposure in the Dubai property market,” it said. The slackening of the consumer durables business, including water coolers window and split ACs, is also expected to weigh down Voltas’ revenue growth, Kotak said.
SPICEJET
CMP: RS 12.55
TARGET PRICE: RS 16
Karvy Stockbroking has maintained an ‘outperformer’ rating on SpiceJet, with a price target of Rs 16 in the wake of a fall in aviation fuel prices. “Lower ATF prices would lead to fall in airfares and that in turn would stimulate air travel. ATF prices are down by almost 40% from their peak in August 2008. ATF prices have come down to near October 2007 levels but the current airfares are still around 30% higher than airfares prevailing during October 2007,” the broking firm said in a report. “However, the general slowdown in the economy is expected to play its role and therefore, even though we expect the passenger traffic to improve, it would still be lower on YoY basis. On the other hand, we expect the average fares to remain higher by around 30% on YoY basis,” it added.
ARIES AGRO
CMP: RS 46.95
TARGET PRICE: RS 75
LKP Shares has recommended a ‘buy’ on Aries Agro, with a 12-month price target of Rs 75 on expectations that net profits would grow 65% and revenues would increase 42%, compounded over the next two years. The company posted a 23% drop in net profit in the first half of 2008-09, led by a 4% drop in operating profit margins to 20.5%, according to the broking firm. “Aries took a price increase during the end of the first quarter and another one during the second quarter, which we believe should enable the company to arrest the decline in margins during the second half of the current fiscal,” LKP said in a report. The outfit estimates Aries’ earnings per share for 2008-09 at Rs 9.24, as against Rs 8.79 in 2007-08. In 2009-10, its EPS is estimated at Rs 16.93.
IDEA CELLULAR
CMP: RS 44.15
TARGET PRICE: RS 56
Citigroup has maintained its ‘hold’ rating on Idea Cellular while cutting its price target to Rs 56 from Rs 70 in line with an earnings downgrade for financial years 2009 to 2011 by 1-3%. “Relatively weaker balance sheet compared to its larger peers reduces the funding flexibility in a tougher macro environment, thus constraining the valuation multiples,” the investment bank said in a report. “Estimated net debt of Rs 49 billion (or Rs 4,900 crore) as of end-FY09 (Rs 3,200 crore as of September, ‘08) is under control though net debt/EBITDA (earnings before interest taxation depreciation and amortisation) will be 2.3-2.4 times in FY10-11E. While this will moderate Idea’s bidding intensity, on the flip side, its balance sheet is most vulnerable to 3G bidding risk,” Citi added.
INDIABULLS REAL
CMP: RS 87.05
TARGET PRICE: RS 170 ICICI Securities has initiated coverage on Indiabulls Real Estate with a ‘buy’ rating, with a price target of Rs 170 on grounds the company is well capitalised to ride the current downturn in the realty sector. “IBREL has sold stake in its company and in properties to raise Rs 5,300 crore in the past two years. Its balance sheet is robust (debt Rs 2.5 billion, cash Rs 3,400 crore) to tied through the current downturn and capitalise on opportunities,” the broking company said in a recent report. “We estimate FY09E NAV (net asset value) to be Rs 8,800 crore, or Rs 341/share (target price Rs 170/share assuming 50% discount to NAV). Given the execution risks, we expect the stock to trade on its balance sheet strength (cash per share Rs 122, FY08 BV/share Rs 171) rather than the potential of the project pipeline,” it added.
VOLTAS
CMP: RS 52.45
TARGET PRICE: 57
Kotak Securities’ private client research has maintained its ‘accumulate’ rating on Voltas while trimming the price target to Rs 57 from Rs 70. “We are downgrading our earnings and target price for Voltas in view of deteriorating fundamentals in its major user industries,” the retail broking firm said, referring to slowdown in Dubai property market and declining investments of South India-based tex-tile makers. “Close to 81% of the order backlog of Rs 5,600 crore is from the Middle East (realty) market. Out of this, the order book from Dubai constituted just Rs 1.5 billion. Voltas indicated that they had anticipated a sharp slowdown in the Dubai market since a year earlier and had been consciously reducing exposure in the Dubai property market,” it said. The slackening of the consumer durables business, including water coolers window and split ACs, is also expected to weigh down Voltas’ revenue growth, Kotak said.
SPICEJET
CMP: RS 12.55
TARGET PRICE: RS 16
Karvy Stockbroking has maintained an ‘outperformer’ rating on SpiceJet, with a price target of Rs 16 in the wake of a fall in aviation fuel prices. “Lower ATF prices would lead to fall in airfares and that in turn would stimulate air travel. ATF prices are down by almost 40% from their peak in August 2008. ATF prices have come down to near October 2007 levels but the current airfares are still around 30% higher than airfares prevailing during October 2007,” the broking firm said in a report. “However, the general slowdown in the economy is expected to play its role and therefore, even though we expect the passenger traffic to improve, it would still be lower on YoY basis. On the other hand, we expect the average fares to remain higher by around 30% on YoY basis,” it added.
ARIES AGRO
CMP: RS 46.95
TARGET PRICE: RS 75
LKP Shares has recommended a ‘buy’ on Aries Agro, with a 12-month price target of Rs 75 on expectations that net profits would grow 65% and revenues would increase 42%, compounded over the next two years. The company posted a 23% drop in net profit in the first half of 2008-09, led by a 4% drop in operating profit margins to 20.5%, according to the broking firm. “Aries took a price increase during the end of the first quarter and another one during the second quarter, which we believe should enable the company to arrest the decline in margins during the second half of the current fiscal,” LKP said in a report. The outfit estimates Aries’ earnings per share for 2008-09 at Rs 9.24, as against Rs 8.79 in 2007-08. In 2009-10, its EPS is estimated at Rs 16.93.
New reports reveal battered US economy
WASHINGTON: The US government released a quartet of reports on Wednesday that paint a bleak picture of the nation's economy: Jobless claims remain at recessionary levels, Americans cut back on their spending by the largest amount since the 2001 terrorist attacks, orders to U.S. factories plummeted and homes sales fell to the lowest level in nearly 18 years.
The Labor Department reported that initial requests for unemployment benefits fell to a seasonally adjusted 529,000 from the previous week's upwardly revised figure of 543,000. But claims remain at recessionary levels. The four-week average, which smooths out fluctuations, rose to 518,000, its highest level since January 1983, when the economy was emerging from a steep recession.
One minor bright spot showed the number of people continuing to claim unemployment insurance dropped unexpectedly to 3.96 million, from the previous week's 4.02 million, which was the highest level in 25 years. The labor market has grown by about half since 1983.
Meanwhile, the Commerce Department reported that consumer spending plunged by 1 percent in October, even worse than the 0.9 percent decline that had been expected. Consumer spending accounts for two-thirds of total economic activity.
Orders to U.S. factories for big-ticket manufactured goods also plunged last month by the largest amount in two years. Orders for durable goods dropped by 6.2 percent, more than double the decline economists expected. The Commerce Department report showed widespread declines throughout manufacturing led by decreases in autos and airplanes.
The department also reported that new home sales decreased 5.3 percent last month to a seasonally adjusted annual sales pace of 433,000 homes, the lowest level since January 1991, another period when the country was undergoing a steep housing downturn.
The median price of a new home sold in October fell to $218,000, down 7 percent from a year ago, and the lowest since September 2004.
Wall Street appeared ready to give back some of its recent gains as investors reacted to the downbeat economic readings. The Dow Jones industrial average fell more than 60 points in early trading Wednesday. The stock market is coming off of three sessions of gains, so some giveback, especially with disappointing data, is to be expected.
With the economy showing further signs that it is headed into a steep swoon, the administration and the Federal Reserve rolled out two new programs Tuesday that would provide up to $800 billion in an effort to get more loans flowing in such critical areas as mortgage lending, credit cards, auto loans and small business loans.
Credit markets liked the new efforts, but private economists said the new moves were not likely to be the last changes in the government's vast rescue program, which has already undergone significant alterations since it was passed by Congress on Oct. 3.
Analysts believe more work will need to be done because of their expectations that the economy's vital signs will continue to worsen as the country slips into what many believe could be the worst recession since the early 1980s.
The unemployment rate has hit a 14-year high of 6.5 percent, putting pressure on personal incomes. The government reported Tuesday that the overall economy, as measured by the gross domestic product, shrank at an annual rate of 0.5 percent in the July-September quarter, reflecting the fact that consumer spending fell at the fastest pace in 28 years.
Nariman Behravesh, an economist at IHS Global Insight, said he was expecting GDP to shrink at a 4 percent rate in the current quarter, reflecting the battering consumers are taking from the worst financial crisis since the 1930s. He predicted that the economy would remain in recession through the first half of next year.
"We are in the early stages of one of the worst recessions in the postwar period, even factoring in a massive stimulus program," Behravesh.
Looking at these happenings in US and facts and numbers.....We believe this is not at all the right time to invest your hard earned money. Be prepared to face recessionary woes and keep your cash with you or invest in most safe investment tools like fixed deposits or Gold
The Labor Department reported that initial requests for unemployment benefits fell to a seasonally adjusted 529,000 from the previous week's upwardly revised figure of 543,000. But claims remain at recessionary levels. The four-week average, which smooths out fluctuations, rose to 518,000, its highest level since January 1983, when the economy was emerging from a steep recession.
One minor bright spot showed the number of people continuing to claim unemployment insurance dropped unexpectedly to 3.96 million, from the previous week's 4.02 million, which was the highest level in 25 years. The labor market has grown by about half since 1983.
Meanwhile, the Commerce Department reported that consumer spending plunged by 1 percent in October, even worse than the 0.9 percent decline that had been expected. Consumer spending accounts for two-thirds of total economic activity.
Orders to U.S. factories for big-ticket manufactured goods also plunged last month by the largest amount in two years. Orders for durable goods dropped by 6.2 percent, more than double the decline economists expected. The Commerce Department report showed widespread declines throughout manufacturing led by decreases in autos and airplanes.
The department also reported that new home sales decreased 5.3 percent last month to a seasonally adjusted annual sales pace of 433,000 homes, the lowest level since January 1991, another period when the country was undergoing a steep housing downturn.
The median price of a new home sold in October fell to $218,000, down 7 percent from a year ago, and the lowest since September 2004.
Wall Street appeared ready to give back some of its recent gains as investors reacted to the downbeat economic readings. The Dow Jones industrial average fell more than 60 points in early trading Wednesday. The stock market is coming off of three sessions of gains, so some giveback, especially with disappointing data, is to be expected.
With the economy showing further signs that it is headed into a steep swoon, the administration and the Federal Reserve rolled out two new programs Tuesday that would provide up to $800 billion in an effort to get more loans flowing in such critical areas as mortgage lending, credit cards, auto loans and small business loans.
Credit markets liked the new efforts, but private economists said the new moves were not likely to be the last changes in the government's vast rescue program, which has already undergone significant alterations since it was passed by Congress on Oct. 3.
Analysts believe more work will need to be done because of their expectations that the economy's vital signs will continue to worsen as the country slips into what many believe could be the worst recession since the early 1980s.
The unemployment rate has hit a 14-year high of 6.5 percent, putting pressure on personal incomes. The government reported Tuesday that the overall economy, as measured by the gross domestic product, shrank at an annual rate of 0.5 percent in the July-September quarter, reflecting the fact that consumer spending fell at the fastest pace in 28 years.
Nariman Behravesh, an economist at IHS Global Insight, said he was expecting GDP to shrink at a 4 percent rate in the current quarter, reflecting the battering consumers are taking from the worst financial crisis since the 1930s. He predicted that the economy would remain in recession through the first half of next year.
"We are in the early stages of one of the worst recessions in the postwar period, even factoring in a massive stimulus program," Behravesh.
Looking at these happenings in US and facts and numbers.....We believe this is not at all the right time to invest your hard earned money. Be prepared to face recessionary woes and keep your cash with you or invest in most safe investment tools like fixed deposits or Gold
Punj Lloyd - BUY Report
Anagram Research has recommended a buy rating on Punj Lloyd in its November 8, 2008 research report.
"The current consolidated order of over Rs 21700 crore is approximately 1.9x FY09 consolidated sales. Going forward, we expect PLL to gain a significant share of the ongoing industrial, Oil & gas and infrastructure capex from diversified geographical reach resulting in substantial topline growth and profitability. Going forward PLL’s foreying into defense will add fuel to the growth."
"We believe that the company reported robust Q2 FY09 numbers, which is better than our expectation, answering medium term concern on PLL’s earnings. Hence, we are keeping our estimates unchanged and are quite confident about its FY09E and FY10E earnings. At CMP PLL is trading 10.47x FY09E and 6.5X FY10 earnings with an EPS of Rs 19.1 and Rs 30.5 respectively. Considering the future growth potential of the company, we recommend a “BUY” rating on the Stock," says Anagram's research report.
"The current consolidated order of over Rs 21700 crore is approximately 1.9x FY09 consolidated sales. Going forward, we expect PLL to gain a significant share of the ongoing industrial, Oil & gas and infrastructure capex from diversified geographical reach resulting in substantial topline growth and profitability. Going forward PLL’s foreying into defense will add fuel to the growth."
"We believe that the company reported robust Q2 FY09 numbers, which is better than our expectation, answering medium term concern on PLL’s earnings. Hence, we are keeping our estimates unchanged and are quite confident about its FY09E and FY10E earnings. At CMP PLL is trading 10.47x FY09E and 6.5X FY10 earnings with an EPS of Rs 19.1 and Rs 30.5 respectively. Considering the future growth potential of the company, we recommend a “BUY” rating on the Stock," says Anagram's research report.
Titan Industries - Investment & Expansion Plans
Titan Industries has plans to open 300 retail stores for its 'Titan Eye' in the next three years across the country, a senior company official said today.
The company would add another 20 exclusive optical showrooms in the current fiscal, Titan Industries Integrated Retail Services Vice President V Govindaraj told reporters here after inaugurating the first 'Titan Eye' store in the city, the fifth in Tamil Nadu and 40th in India.
As the current Indian prescription eyewear market was "sizeable" with nearly 30 per cent of the population requiring vision correction, the company was eyeing a substantial market, with Rs 50 crore in 2009-10 and Rs 300 crore to Rs 500 crore in the third year, Govindaraj said.
Titan industries, a joint venture between Tata group and Tamil Nadu Industrial Development Corporation (TIDCO), has reported a turnover of Rs 3,041 crore for the year ended 2007-08, he said, adding that Titan Eye has recently entered into a technical pact with Sankara Nethralaya for training of retail and clinic staff.
The company was also running Titan Watches and Tanishq brand of jewellery, besides a precision engineering unit for supplying spares to aerospace and automobile industries, he said.
With a market size of Rs 1,500 crore to Rs 2,000 crore, the company expects to capture a substantial eyewear market share in the near future, Govindaraj said.
As per Sep 08 shareholding of the Titan Industries, Rakesh Jhunjhunwala is holding 2,581,062 shares of Titan Industries in the name of Jhunjhunwala Rakesh Radheshyam.
The company would add another 20 exclusive optical showrooms in the current fiscal, Titan Industries Integrated Retail Services Vice President V Govindaraj told reporters here after inaugurating the first 'Titan Eye' store in the city, the fifth in Tamil Nadu and 40th in India.
As the current Indian prescription eyewear market was "sizeable" with nearly 30 per cent of the population requiring vision correction, the company was eyeing a substantial market, with Rs 50 crore in 2009-10 and Rs 300 crore to Rs 500 crore in the third year, Govindaraj said.
Titan industries, a joint venture between Tata group and Tamil Nadu Industrial Development Corporation (TIDCO), has reported a turnover of Rs 3,041 crore for the year ended 2007-08, he said, adding that Titan Eye has recently entered into a technical pact with Sankara Nethralaya for training of retail and clinic staff.
The company was also running Titan Watches and Tanishq brand of jewellery, besides a precision engineering unit for supplying spares to aerospace and automobile industries, he said.
With a market size of Rs 1,500 crore to Rs 2,000 crore, the company expects to capture a substantial eyewear market share in the near future, Govindaraj said.
As per Sep 08 shareholding of the Titan Industries, Rakesh Jhunjhunwala is holding 2,581,062 shares of Titan Industries in the name of Jhunjhunwala Rakesh Radheshyam.
Motilal Oswal Securities - BUY Godrej Consumer Products
Motilal Oswal Securities has maintained a ‘buy’ rating on Godrej Consumer Products as it feels that margins in the FMCG sector would rise significantly and the overall volumes would also improve.
Godrej Consumer
CMP: Rs 115
TARGET PRICE: NA
Motilal Oswal Securities has maintained a ‘buy’ rating on Godrej Consumer Products as it feels that margins in the FMCG sector would rise significantly and the overall volumes would also improve. “The FMCG sector witnessed strong sales growth in the past 18 months largely on the back of 10-12% price increase adopted by FMCG companies across categories,” says the report.
However, it adds that this increase has not had any impact on volume pick-up, nor has it resulted in significant downtrading by consumers. According to the broking firm, the company “is hopeful of a revival in volume growth as inflationary pressures are receding.” Motilal Oswal Securities is of the view that improved margins would result in PAT growth accelerating to 31% in FY10 versus just 2% in FY09.
Godrej Consumer
CMP: Rs 115
TARGET PRICE: NA
Motilal Oswal Securities has maintained a ‘buy’ rating on Godrej Consumer Products as it feels that margins in the FMCG sector would rise significantly and the overall volumes would also improve. “The FMCG sector witnessed strong sales growth in the past 18 months largely on the back of 10-12% price increase adopted by FMCG companies across categories,” says the report.
However, it adds that this increase has not had any impact on volume pick-up, nor has it resulted in significant downtrading by consumers. According to the broking firm, the company “is hopeful of a revival in volume growth as inflationary pressures are receding.” Motilal Oswal Securities is of the view that improved margins would result in PAT growth accelerating to 31% in FY10 versus just 2% in FY09.
Reliance Industries (RIL) - BUY Rating Report from Merrill Lynch
MERRILL Lynch retains ‘buy’ rating on Reliance Industries.
Reliance Industries
RESEARCH: MERRILL LYNCH
RATING: BUY
CMP: Rs 1,127
MERRILL Lynch has retained it ‘buy’ rating on Reliance Industries (RIL). Its refining margin has consistently been higher than the benchmark Singapore complex refining margin. Analyses suggests RIL’s superior refining margin is due to its ability to refine heavier crude than Dubai. Compared to the last refining downturn, RIL is set to benefit more in FY10-FY 11E from its ability to refine heavier crude. Reliance Petroleum’s (RPL) refinery, which is expected to start operations soon, can process even heavier crude than RIL and has a superior product slate.
The average discount of Arab heavy to Dubai since FY01 is $2.4/bbl. The discount has sustained at over $5/bbl even in the past six weeks, despite the slump in oil prices. Merrill Lynch estimates RPL’s refining margin at $12.9/bbl if it were to operate in Q3 FY09, vis-Ã -vis Singapore margin of $7.3/bbl. It will produce more gasoline than RIL. Gasoline cracks have always been at a premium to naphtha and LPG cracks. Merrill Lynch feels that a weakening in diesel and gasoline cracks is the main risk to RPL attaining such high margins when it begins operations.
Reliance Industries
RESEARCH: MERRILL LYNCH
RATING: BUY
CMP: Rs 1,127
MERRILL Lynch has retained it ‘buy’ rating on Reliance Industries (RIL). Its refining margin has consistently been higher than the benchmark Singapore complex refining margin. Analyses suggests RIL’s superior refining margin is due to its ability to refine heavier crude than Dubai. Compared to the last refining downturn, RIL is set to benefit more in FY10-FY 11E from its ability to refine heavier crude. Reliance Petroleum’s (RPL) refinery, which is expected to start operations soon, can process even heavier crude than RIL and has a superior product slate.
The average discount of Arab heavy to Dubai since FY01 is $2.4/bbl. The discount has sustained at over $5/bbl even in the past six weeks, despite the slump in oil prices. Merrill Lynch estimates RPL’s refining margin at $12.9/bbl if it were to operate in Q3 FY09, vis-Ã -vis Singapore margin of $7.3/bbl. It will produce more gasoline than RIL. Gasoline cracks have always been at a premium to naphtha and LPG cracks. Merrill Lynch feels that a weakening in diesel and gasoline cracks is the main risk to RPL attaining such high margins when it begins operations.
Financial Crisis - Fed rolls second stimulus of over $800 bn
WASHINGTON: The Federal Reserve said Tuesday it will buy up to $600 billion in mortgage-backed assets in another attempt to deal with the financial crisis.
The Fed said it will purchase up to $100 billion in direct obligations from mortgage giants Fannie Mae and Freddie Mac as well as the Federal Home Loan Banks. It also will purchase another $500 billion in mortgage-backed securities, pools of mortgages that are bundled together and sold to investors.
The $600 billion effort on mortgages came as the Fed also unveiled a new program to help unfreeze the market that backs consumer debt such as credit cards, auto loans and student loans.
The program on consumer debt will lend up to $200 billion to the holders of securities backed by various types of consumer loans. Treasury Secretary Henry Paulson had said recently that the government was working on the new program, which will be supported by $20 billion of credit protection provided by the $700 billion bailout fund.
The Fed said that the $600 billion effort to support the mortgage market was being taken to reduce the cost of home mortgages and increase their availability. It said the purchases of the mortgages and mortgage-backed securities would take place over a number of months.
The severe financial crisis that is rocking global markets at the moment began more than a year ago with rising defaults on subprime mortgages, loans provided to borrowers with weak credit histories.
The billions of dollars of losses financial institutions have suffered on their mortgage loans have caused banks to stop making new loans of various types, which almost certainly has helped push the country into a deep recession.
Verdict: This new round of bailout package might help saving financial institutes making them strong and so the overall financial system. Strong financial system could trigger new growth trajectories.
The Fed said it will purchase up to $100 billion in direct obligations from mortgage giants Fannie Mae and Freddie Mac as well as the Federal Home Loan Banks. It also will purchase another $500 billion in mortgage-backed securities, pools of mortgages that are bundled together and sold to investors.
The $600 billion effort on mortgages came as the Fed also unveiled a new program to help unfreeze the market that backs consumer debt such as credit cards, auto loans and student loans.
The program on consumer debt will lend up to $200 billion to the holders of securities backed by various types of consumer loans. Treasury Secretary Henry Paulson had said recently that the government was working on the new program, which will be supported by $20 billion of credit protection provided by the $700 billion bailout fund.
The Fed said that the $600 billion effort to support the mortgage market was being taken to reduce the cost of home mortgages and increase their availability. It said the purchases of the mortgages and mortgage-backed securities would take place over a number of months.
The severe financial crisis that is rocking global markets at the moment began more than a year ago with rising defaults on subprime mortgages, loans provided to borrowers with weak credit histories.
The billions of dollars of losses financial institutions have suffered on their mortgage loans have caused banks to stop making new loans of various types, which almost certainly has helped push the country into a deep recession.
Verdict: This new round of bailout package might help saving financial institutes making them strong and so the overall financial system. Strong financial system could trigger new growth trajectories.
Large Cap-Mid Cap-Small Cap Value Stock Picks
Posted:
Emkay's picks in small cap segment HEG CMP: Rs 124 HEG will become number one manufacturer of graphite electrodes in
Click Link To Read Article >>
Posted:
Geojit's picks in mid cap segment.... JSW Steel CMP: Rs 204 The company is among the largest Indian steel companies. It has now tied up with
Click Link To Read Article >>
Value picks in large cap segment for investment
Posted:
Investment and broking firm KR Choksey's picks in large cap segment for investment. Both the stocks are fundamentally strong and are available atttractive valuations. Strictly for long term...
Click Link To Read Article >>
Posted:
§ IKF Technologies - Plans of investments in Bio Diesel
IKF Green Fuels Ltd formed as a subsidiary of IKF Technologies in 2005-06 started working in 2006 and has begun field operations in the current cropping season in 16 states in
§ Go Green With Biofuels - An opportunity for Investors | Indi
With the government having proposed 20 percent blending of biofuels by 2017, the countdown to
§ A Definitive Multi Bagger in 2012 - 2015 - Only For Patient
A group of individuals bought a listed company in 2004 and turned it around. The software company they bought, has now expanded into telecom and even into the emerging bio-fuels business.
Picks in small cap segment
Emkay's picks in small cap segment
HEG
CMP: Rs 124
HEG will become number one manufacturer of graphite electrodes in India after its expansion from 60000 tpa to 80000 tpa by Q4FY09. We expect topline and PAT to have CAGR of 37% and 25% respectively for next two years. It is trading at 5.9x FY09E FDEPS of Rs21.2 and at 2.6x FY10E FDEPS of Rs48.8.
Godawari Power and Ispat
CMP: Rs 65
Godawari Power’s iron ore pelletisation will commence in 2HFY10 while the iron ore mining will start from Q4FY09 which will translate into tremendous savings. PAT is expected to grow at CAGR of 47% GPIL trading at 1.6x FY09E FDEPS of Rs40.2 and at 0.8x FY10E FDEPS of Rs76.6, while on EV/EBITDA basis it is trading at 2.4x FY09E EV/EBITDA and at 1.2x FY10E EV/EBITDA.
HEG
CMP: Rs 124
HEG will become number one manufacturer of graphite electrodes in India after its expansion from 60000 tpa to 80000 tpa by Q4FY09. We expect topline and PAT to have CAGR of 37% and 25% respectively for next two years. It is trading at 5.9x FY09E FDEPS of Rs21.2 and at 2.6x FY10E FDEPS of Rs48.8.
Godawari Power and Ispat
CMP: Rs 65
Godawari Power’s iron ore pelletisation will commence in 2HFY10 while the iron ore mining will start from Q4FY09 which will translate into tremendous savings. PAT is expected to grow at CAGR of 47% GPIL trading at 1.6x FY09E FDEPS of Rs40.2 and at 0.8x FY10E FDEPS of Rs76.6, while on EV/EBITDA basis it is trading at 2.4x FY09E EV/EBITDA and at 1.2x FY10E EV/EBITDA.
Picks in Mid cap segment
Geojit's picks in mid cap segment....
JSW Steel
CMP: Rs 204
The company is among the largest Indian steel companies. It has now tied up with UK based Severfield Rowen to float an equal stake joint venture company for manufacturing construction steel. The net profit of the company has grown 44.72% from the June quarter to this September quarter. The P/E of the stock is 3.43 and the EPS (TTM) is at 70.89.
WELSPUN GUJARAT STAHL
CMP: Rs 91
Welspun Gujarat Stahl Rohren is the flagship company of Welspun Group. It is all set to be positioned as the world’s largest pipe company with an increase in capacity from 1 million ton pa to 1.75 million ton by March 2009. The debt-equity ratio at 1.21 shows that most of the assets are financed and it must set aside more money to pay the cost of borrowed money.
JSW Steel
CMP: Rs 204
The company is among the largest Indian steel companies. It has now tied up with UK based Severfield Rowen to float an equal stake joint venture company for manufacturing construction steel. The net profit of the company has grown 44.72% from the June quarter to this September quarter. The P/E of the stock is 3.43 and the EPS (TTM) is at 70.89.
WELSPUN GUJARAT STAHL
CMP: Rs 91
Welspun Gujarat Stahl Rohren is the flagship company of Welspun Group. It is all set to be positioned as the world’s largest pipe company with an increase in capacity from 1 million ton pa to 1.75 million ton by March 2009. The debt-equity ratio at 1.21 shows that most of the assets are financed and it must set aside more money to pay the cost of borrowed money.
Value picks in large cap segment for investment
Investment and broking firm KR Choksey's picks in large cap segment for investment. Both the stocks are fundamentally strong and are available atttractive valuations. Strictly for long term investment. No trading and short term investment please.
TATA STEEL
CMP: Rs 160
The company’s EBITDA has increased by 43.68% Y-o-Y from Rs 2,733.4 cr to Rs 3,075.9 cr. While PAT has increased to 50.13% from Rs 1,488.4 cr to Rs 1787.8 cr. Other income has also increased by 152.72% which has led to increase in the profit margins. We recommend a buy on the stock despite the growth concerns purely on the basis of attractive valuations.
SAIL
CMP: Rs 63
SAIL’s net sales increased 34% Y-o-Y to Rs 12,238.59 crore in Q2FY09 as against Rs 916 3.49 crore during Q2Y08. EBITDAof the company registered a growth of 17% Y-o-Y to Rs 3,433.92 crore & PAT rose by 18% Y-o-Y to Rs 2,009.6 crore. The second half of FY09 is expected to present significant challenges in the metals sector, though the long term fundamentals of the company remains strong.
TATA STEEL
CMP: Rs 160
The company’s EBITDA has increased by 43.68% Y-o-Y from Rs 2,733.4 cr to Rs 3,075.9 cr. While PAT has increased to 50.13% from Rs 1,488.4 cr to Rs 1787.8 cr. Other income has also increased by 152.72% which has led to increase in the profit margins. We recommend a buy on the stock despite the growth concerns purely on the basis of attractive valuations.
SAIL
CMP: Rs 63
SAIL’s net sales increased 34% Y-o-Y to Rs 12,238.59 crore in Q2FY09 as against Rs 916 3.49 crore during Q2Y08. EBITDAof the company registered a growth of 17% Y-o-Y to Rs 3,433.92 crore & PAT rose by 18% Y-o-Y to Rs 2,009.6 crore. The second half of FY09 is expected to present significant challenges in the metals sector, though the long term fundamentals of the company remains strong.
IKF Technologies - Bio Diesel Story - Buy Stocks To Gain Or Loose..
IKF Green Fuels Ltd formed as a subsidiary of IKF Technologies in 2005-06 started working in 2006 and has begun field operations in the current cropping season in 16 states in India.
IKF Green Fuels Ltd formed as a subsidiary of IKF Technologies in 2005-06 started working in 2006 and has begun field operations in the current cropping season in 16 states in India including Chattisgarh, West Bengal, Jharkhand, Orissa, Rajasthan, Karnataka, Madhya Pradesh, Tamil Nadu, Andhra Pradesh, Maharashtra, Gujarat, Manipur, Arunachal Pradesh, Assam, Meghalaya and Nagaland.
The parent company IKF Technologies has committed an investment of Rs 200 crore into IKF Green Fuels Ltd. Currently the company has 50,000 hectares of land under cultivation and has recently signed an MoU with the government of Madhya Pradesh where it would be investing Rs 30 crore in setting up a refinery. It is also seeking 2,000 hectares of wasteland for the cultivation of Jatropha in the state. The company has also signed an agreement with Indian Oil Corporation Ltd, R&D center, Faridabad for transferring of technology and providing technical assistance for conversion of Jatropha into biofuel.
Exerpts of interview with Vishal Rawat printed in BioSpectrum magazine.
How many refineries do you have? Any plans for expansion?
The company has a refinery at Udaipur with a capacity to process 3,000 liters of biodiesel per day for trial and demonstration purposes. We are looking at the expansion of that refinery as well as setting up of more refineries in Vidharbha, Gujarat and Meghalaya. The capacity would be dependent on the captive area.
When do you expect to start commercial production?
We expect to start it by 2011. We expect full-fledged commercial production to start by 2015-16 since by then we would have a fully-developed refining capacity and plantations. We expect the size of the industry to be close to Rs 80,000-l00,000 crore by 2017.
How are you funding the plantations?
We have an agreement with HDFC bank for a credit line of Rs 20 crore on an all India basis for the farmers to undertake contract farming for IKF Green Fuels Ltd. We also have got a preliminary approval from Buldhana Urban Cooperative Credit Society (Maharashtra) for extending a credit line of Rs 50 crore for Jatropha cultivation. We are targeting 10,000 hectares in Maharashtra by the end of this year. We are also in advanced stages of talks with the Punjab National Bank and Cooperation Bank for a similar arrangement.
Are you looking at any acquisitions?
We are looking at acquiring a proprietorship concern in Rajasthan. It has around 10,000 hectares of existing plantation and an assured credit line of Rs 10 crore. The deal is almost finalized. We have also put up a proposal to Rajasthan fuel development authority for allotting 10,000 hectares which will take some time.
What is the progress made on R&D?
We already have 26 different varieties of Jatropha and we have collected the planting material from different sources. We are setting up a 200 hectares research farm in Ahamgaon in Maharashtra and looking at tie-ups with agricultural universities as well.
More on IKF Technologies:
IKF Technologies - For Patient Investors...
IKF Green Fuels Ltd formed as a subsidiary of IKF Technologies in 2005-06 started working in 2006 and has begun field operations in the current cropping season in 16 states in India including Chattisgarh, West Bengal, Jharkhand, Orissa, Rajasthan, Karnataka, Madhya Pradesh, Tamil Nadu, Andhra Pradesh, Maharashtra, Gujarat, Manipur, Arunachal Pradesh, Assam, Meghalaya and Nagaland.
The parent company IKF Technologies has committed an investment of Rs 200 crore into IKF Green Fuels Ltd. Currently the company has 50,000 hectares of land under cultivation and has recently signed an MoU with the government of Madhya Pradesh where it would be investing Rs 30 crore in setting up a refinery. It is also seeking 2,000 hectares of wasteland for the cultivation of Jatropha in the state. The company has also signed an agreement with Indian Oil Corporation Ltd, R&D center, Faridabad for transferring of technology and providing technical assistance for conversion of Jatropha into biofuel.
Go Green With Biofuels - An opportunity for Investors
According to Vishal Rawat, President, IKF Green Fuels, "The company plans to invest Rs 2,200 crore by 2015 in both plantations and refineries to become a market leader in the field and is eyeing 15-20 percent of the market share of biodiesel by then." The company has joint ventures for Jatropha cultivation in several states. In Andhra Pradesh, it has tied up with Sigma Biofuels Hyderabad and SRECKO Indhan Ltd while in Gujarat it has a JV with Avani Vermi Compost and Biofuel, Ahmedabad.
Bio Diesel Sector - Future Prospects
"We aim to have 15-20 percent share of the biodiesel market by 2015,"
-Vishal Rawat, President, IKF Green Fuels
Exerpts of interview with Vishal Rawat printed in BioSpectrum magazine.
How many refineries do you have? Any plans for expansion?
The company has a refinery at Udaipur with a capacity to process 3,000 liters of biodiesel per day for trial and demonstration purposes. We are looking at the expansion of that refinery as well as setting up of more refineries in Vidharbha, Gujarat and Meghalaya. The capacity would be dependent on the captive area.
When do you expect to start commercial production?
We expect to start it by 2011. We expect full-fledged commercial production to start by 2015-16 since by then we would have a fully-developed refining capacity and plantations. We expect the size of the industry to be close to Rs 80,000-l00,000 crore by 2017.
How are you funding the plantations?
We have an agreement with HDFC bank for a credit line of Rs 20 crore on an all India basis for the farmers to undertake contract farming for IKF Green Fuels Ltd. We also have got a preliminary approval from Buldhana Urban Cooperative Credit Society (Maharashtra) for extending a credit line of Rs 50 crore for Jatropha cultivation. We are targeting 10,000 hectares in Maharashtra by the end of this year. We are also in advanced stages of talks with the Punjab National Bank and Cooperation Bank for a similar arrangement.
Are you looking at any acquisitions?
We are looking at acquiring a proprietorship concern in Rajasthan. It has around 10,000 hectares of existing plantation and an assured credit line of Rs 10 crore. The deal is almost finalized. We have also put up a proposal to Rajasthan fuel development authority for allotting 10,000 hectares which will take some time.
What is the progress made on R&D?
We already have 26 different varieties of Jatropha and we have collected the planting material from different sources. We are setting up a 200 hectares research farm in Ahamgaon in Maharashtra and looking at tie-ups with agricultural universities as well.
More on IKF Technologies:
IKF Technologies - For Patient Investors...
Go Green With Biofuels - An opportunity for Investors
With the government having proposed 20 percent blending of biofuels by 2017, the countdown to India on way to its target to becoming self-sufficient in its energy needs has begun. Development of the biofuels industry is thus more than just the means to the end.
I came across this article about bio fuels in BioSpectrum magazine. Bio fuels are being considered as next generation technology fules to make India helping in being self suffiecient for it's fuel needs. Two major Bio fuels; bio diesel and Ethanol, are two veriants of hybro carbons are being condidered to lead this way. These fuel can make India self sufficient and open up new opportunity for investors toi create wealth. Posting this article to provide investors a thought in this direction.
Article: Go Green
India started a Biofuel mission in 2003. And five years later, the government has announced a Biofuel Policy in September 2008. The policy is rightly timed with global biofuels production standing at 16 billion gallons as compared to 4.8 billion gallons in 2000. With biofuels forming less than 1 percent of the existing global fossil fuel usage, the opportunities are limitless. And India is all set to tap into the biofuels pie. Biofuels are increasingly being adopted by key industry players in response to climate change proposals and the demands of environmentally aware consumers. The growing global interest in biofuels can be gauged by the whirlwind of activity currently underway. The US Department of Energy (DOE) is set to invest more than $5.7 billion in six advanced biofuels projects at US universities to support R&D for cost-effective, environmentally friendly biomass convesiontechnologies for turning non-food feedstocks into advanced biofuels. In India too a lot of companies have plunged into action in this area--Reliance Industries, Tata Chemicals, ONGC, BPCL, HPCL, Godrej Agrovet, and Emami group are a few to name. The state governments are also not far behind. Leading by example is the state of Chattisgarh, where the Chief Minister's car itself has been running on biodiesel since 2005. HPCL has ambitious plans to undertake a "Seed to wheel" project of producing and marketing biodiesel in the state with the signing of an MoU with the state government to undertake Jatropha plantation on 15,000 hectares of land. The Hague, Netherlands-based Royal Dutch Shell, one of the world's largest distributors of first-generation biofuels, is rumored to be in the process of tapping the Indian market and even DuPont has set up a Bioenergy center in Hyderabad.
According to a report by Frost & Sullivan titled Strategic Analysis of the Indian Biofuels Industry, the Indian market is an emerging one and has a long way to go before it catches up with global competitors. A strong economy, rising incomes, and a vibrant market have given a huge boost to the transport sector, which is the fastest growing energy-consuming sector in India. These trends have made a case for biofuels in India, strengthened by the huge dependence on oil imports which comprise nearly 80 percent of our current requirements.
Biofuels thus will be critical in reducing dependence on fossil fuels, achieving greater energy security, and reducing noxious emissions. India has identified Jatropha curcas as its biodiesel bearing plant to be grown on the country's wastelands. It is to be noted that India has nearly 60 million hectares of wasteland and hence it presents a huge opportunity with several states in India including Andhra Pradesh, Chattisgarh, Tamil Nadu, Uttaranchal, Rajasthan, Madhya Pradesh, Orissa and Maharashtra witnessing frenetic activity in Jatropha plantation to help the country achieve its target of energy independence by 2012.
I came across this article about bio fuels in BioSpectrum magazine. Bio fuels are being considered as next generation technology fules to make India helping in being self suffiecient for it's fuel needs. Two major Bio fuels; bio diesel and Ethanol, are two veriants of hybro carbons are being condidered to lead this way. These fuel can make India self sufficient and open up new opportunity for investors toi create wealth. Posting this article to provide investors a thought in this direction.
Article: Go Green
India started a Biofuel mission in 2003. And five years later, the government has announced a Biofuel Policy in September 2008. The policy is rightly timed with global biofuels production standing at 16 billion gallons as compared to 4.8 billion gallons in 2000. With biofuels forming less than 1 percent of the existing global fossil fuel usage, the opportunities are limitless. And India is all set to tap into the biofuels pie. Biofuels are increasingly being adopted by key industry players in response to climate change proposals and the demands of environmentally aware consumers. The growing global interest in biofuels can be gauged by the whirlwind of activity currently underway. The US Department of Energy (DOE) is set to invest more than $5.7 billion in six advanced biofuels projects at US universities to support R&D for cost-effective, environmentally friendly biomass convesiontechnologies for turning non-food feedstocks into advanced biofuels. In India too a lot of companies have plunged into action in this area--Reliance Industries, Tata Chemicals, ONGC, BPCL, HPCL, Godrej Agrovet, and Emami group are a few to name. The state governments are also not far behind. Leading by example is the state of Chattisgarh, where the Chief Minister's car itself has been running on biodiesel since 2005. HPCL has ambitious plans to undertake a "Seed to wheel" project of producing and marketing biodiesel in the state with the signing of an MoU with the state government to undertake Jatropha plantation on 15,000 hectares of land. The Hague, Netherlands-based Royal Dutch Shell, one of the world's largest distributors of first-generation biofuels, is rumored to be in the process of tapping the Indian market and even DuPont has set up a Bioenergy center in Hyderabad.
According to a report by Frost & Sullivan titled Strategic Analysis of the Indian Biofuels Industry, the Indian market is an emerging one and has a long way to go before it catches up with global competitors. A strong economy, rising incomes, and a vibrant market have given a huge boost to the transport sector, which is the fastest growing energy-consuming sector in India. These trends have made a case for biofuels in India, strengthened by the huge dependence on oil imports which comprise nearly 80 percent of our current requirements.
Biofuels thus will be critical in reducing dependence on fossil fuels, achieving greater energy security, and reducing noxious emissions. India has identified Jatropha curcas as its biodiesel bearing plant to be grown on the country's wastelands. It is to be noted that India has nearly 60 million hectares of wasteland and hence it presents a huge opportunity with several states in India including Andhra Pradesh, Chattisgarh, Tamil Nadu, Uttaranchal, Rajasthan, Madhya Pradesh, Orissa and Maharashtra witnessing frenetic activity in Jatropha plantation to help the country achieve its target of energy independence by 2012.
Bio Diesel Sector - Future Prospects
Movers and shakers
IKF Green Fuels Ltd formed as a subsidiary of IKF Technologies in 2005-06 started working in 2006 and has begun field operations in the current cropping season in 16 states in India including Chattisgarh, West Bengal, Jharkhand, Orissa, Rajasthan, Karnataka, Madhya Pradesh, Tamil Nadu, Andhra Pradesh, Maharashtra, Gujarat, Manipur, Arunachal Pradesh, Assam, Meghalaya and Nagaland. The parent company IKF Technologies has committed an investment of Rs 200 crore into IKF Green Fuels Ltd. Currently the company has 50,000 hectares of land under cultivation and has recently signed an MoU with the government of Madhya Pradesh where it would be investing Rs 30 crore in setting up a refinery. It is also seeking 2,000 hectares of wasteland for the cultivation of Jatropha in the state. The company has also signed an agreement with Indian Oil Corporation Ltd, R&D center, Faridabad for transferring of technology and providing technical assistance for conversion of Jatropha into biofuel. According to Vishal Rawat, President, IKF Green Fuels, "The company plans to invest Rs 2,200 crore by 2015 in both plantations and refineries to become a market leader in the field and is eyeing 15-20 percent of the market share of biodiesel by then." The company has joint ventures for Jatropha cultivation in several states. In Andhra Pradesh, it has tied up with Sigma Biofuels Hyderabad and SRECKO Indhan Ltd while in Gujarat it has a JV with Avani Vermi Compost and Biofuel, Ahmedabad.
A Definitive Multi Bagger in 2012 - 2015 - Only For Patient Investors
Companies are also importing palm oil from countries such as Indonesia and Malaysia, only to switch to feedstock based biodiesel, given the fact that it takes 3-4 years for the crop to give substantial yields. Naturol BioEnergy, an integrated Oleo Chemical Complex near Kakinada port in South India has a capacity to manufacture 100,000 tons per annum of biodiesel. The company started commercial production with palm oil as feedstock in April 2008 (the first lot of 9,188 tons was shipped in June 2008 and the second lot is expected to be shipped shortly). It has an advanced plant technology partnership with De Smet Ballestra Group (Belgium) and a multi-feed stock plant with ability to use nearly 20 percent cheaper fatty acids vis-Ã -vis standard norm of 5 percent (nearly $650 compared to $1050 for palm oil) which it plans to increase it to nearly 40 percent levels through process enhancements. The company has capabilities to convert crude glycerin into pharmaceutical grade adding approximately $100 per ton of biodiesel to the revenues.
Praj Industries- Giant in making - Bio-Diesel segment
Bhaskar Chalsani, Managing Director, Naturol stated, "Our future strategy would be to de-risk the business model through process enhancements and backward and forward integration resulting in expansion of current unit economics from nearly $155 per ton of biodiesel to $450 per ton of biodiesel." We expected to record a turnover of Rs 790 crore with EBIDTA margins around 32 percent in FY2012, he shared. "We are exploring possible partnerships with oil majors, oil distributors and plantation firms in India and Africa for energy crops. We have mandated fund raising to an investment bank to help us raise about $150 million in next 12 months from Private Equity (PE) funds for scaling as well investments in plantations for energy crops," Chalsani shared.
Hyderabad-based Nandan Biomatrix Ltd (NBL), which was set up in 1999, is an integrated natural solutions provider offering a wide array of services to include medicinal plant cultivation and processing, bulk extracts, nutraceuticals, Jatropha plantations, and production of biodiesel. NBL is strong with IPRs in the fields of nutraceuticals and biofuels and has applied for patents for improved hybrids of Jatropha. The company has a research target of producing Jatropha hybrids capable of yielding 5 million metric ton of oil per hectare per annum. It has identified catchment areas in India, Bangladesh, Myanmar, Malaysia, Indonesia, the Philippines, Thailand, Australia and a few of the countries from Africa and South America, wherein large scale plantation of Jatropha is being undertaken. The company has a state-of-the-art research center and resource center spread out over thousand acres of area to do extensive research and come out with hybrids which are high yielding and have high oil content and has close to 40 scientists working towards achieving its R&D roadmap which the company has laid for itself for the next 10 years.
UK-based D1 Oils Plc and British Petroleum Ltd entered into a 50:50 joint venture in October 2007 to make more sustainable biodiesel feedstock available commercially through the planting and cultivation of Jatropha curcas globally and aim to invest $160 million globally over the next five years. The partnership aims to combine D1 Oils' unique experience in the plant science and commercial planting of Jatropha for the production of biodiesel with BP's commercial strength, fuels technology expertise and access to major international fuel markets. Today the company has its presence in 14 countries and focuses on Jatropha cultivation in South East Asia, Africa, and India. It plans to plant some 1 million hectares by 2011, with an estimated 300,000 hectares per year thereafter.
Its Indian subsidiary, Gurgaon-based D1BPfuelcrops India Pvt Ltd has two joint ventures-one with Williamson Magor (for the seven North-Eastern states and certain states in the East), a leading tea producer and another with Mohan Breweries in the South. In Chattisgarh, UP, Rajasthan and MP, the company is present on its own. The company currently has 150,000 hectares of plantations in India till date in Chattisgarh, UP, Rajasthan, MP, Tamil Nadu and Jharkhand and is having trial runs in Andhra Pradesh and Orissa. It expects to commence the production from 2009 for some plantations (given the fact that the crop starts yielding from third year onwards) and is expecting to have an area of 300,000 hectares in next two years with a target of 220,000 hectares by 2009 said Samiran Das, CEO of D1BPfuel crops India. Elaborating on the business model of the company, he said, "In India the objective of the company is to steer clear of the food fuel debate (hence Jatropha) and focus on wastelands instead. The company will get into contract farming and not buy or lease land. We want to work with the community-the farmers, the government and the panchayats. We want to ensure a revenue flow for the owner of the land (farmer) who is not able to grow anything on the land and thus promote rural empowerment and sustainable development. We offer the farmer technical expertise to grow the crop and buyback the crop from the farmer." The company is now in the process of getting into the next stage which is manufacturing and hence is looking at producing substantial amount of crude oil which it says would depend upon the produce. "We are planning to set up refineries in the next step of setting up the supply chain. We have planned to set up the first two expelling units in the North-East in 2009 after doing our supply chain analysis," added Das. The size of the plant may vary depending on the yield ranging from Rs 30-50 crore to Rs 150 crore, he added.
Southern Online Biotechnologies Ltd (SBT) ventured into the biofuels business in 2005 and has established its biodiesel unit at Samsthan Narayanpur Village & Mandal, Nalgonda District in Andhra Pradesh with 40,000 liters per day capacity with an investment of Rs 25.72 crore. It commenced the sale of biodiesel from July 2007 and has been supplying to various well reputed customers like IDEA Cellular, L&T, Airtel, Kirloskar Oil Engines, Toyota Kirloskar and Giatech. The company received an order from Andhra Pradesh Road Transport Corporation (APSRTC) for the supply of 300,000 liters of biodiesel per month to its 12 depots in Hyderabad and Secunderabad to use in their buses of 23 depots out of the 252 depots. SBL is expecting orders for other depots of APSRTC and RDSO (Division of Indian Railways). The Indian Railways RDSO, Lucknow, has already started purchasing the biodiesel from the company. Indian Railways has also called for tenders to procure 1.40 lakh liters per day for which the company has received the offer for 400 kl per month biodiesel supply for SCR depots. SBT plans to upgrade the current biodiesel unit from 12,500 TPY (tons per year) to 25000 TPY, over a period of three years. It is in the process of setting up a unit of 250 tons per day capacity at Vizag as domestic/EOU/SEZ to have presence in the global market also. The project cost of the proposed biodiesel plant is Rs 90 crore.
Royal Energy Ltd incorporated in July 2003 headquartered in Mumbai is a renewable energy company of the RK Agarwal Group. The company has one of the largest ethanol plants in India today, having a capacity of 150 KL per day. The company is now embarking on a biodiesel project that will involve setting up of a multi-feedstock based plant of 300 TPD each, in Maharashtra. On full commissioning the total production capacity of the company would be about 0.7 MTPA of biodiesel, equivalent to about 1.7 percent of the current diesel market size in India. According to Syed Saheeruddin, Manager-International Business, Royal Energy Ltd, "The company is yet to start Jatropha cultivation. About 5,000 acres of land has been allotted against 12,500 acres in Dhar district, MP, and 500 acres in Patan district of Gujarat as a prototype for Jatropha cultivation. Plantation will be started in November 2008 after acquiring the allotted land. We plan to make investments of Rs 800 crore for Jatropha cultivation."
Several industrial groups have also diversified into the biofuels sector looking at the potential that it represents. Emami Group has begun operations at its palm biodiesel plant in Haldia. Initially, Emami Group plans to produce 300 tons of biodiesel a day and 1,000 tons of palm oil a day. Later in the year, soya and rice brain oil will also be added as feedstocks. The 40-acre plant in West Bengal was set with an investment of Rs 150 crore for creating a production capacity of 100,000 tons of biodiesel a year. For feeding the biodiesel plant with adequate supply of feedstock, the company is looking at entering into Jatropha cultivation over an area of 100,000 acres in West Bengal, Orissa and Andhra Pradesh later this year. Reliance Industries has also ventured into biofuels with Reliance Biofuels Private Ltd, a 100 percent subsidiary of Reliance Life Sciences. The company is working with villagers in 14 districts across five States, which include Khammam and Nizamabad in AP; Nanded, Parbhani and Hingoli in Maharashtra; Bilaspur and Bastar in Chattisgarh; Junagarh and Vyara in Gujarat and Dewas, Shajapur, Chhindwara, Seoni and Mandla in Madhya Pradesh testing intercropping of Jatropha and pongamia (non-edible fuel crops) along with a diverse set of food crops including corn, mango, medicinal plants and vegetables in its research and development farms.
Biofuels: An opportunity for Investors
It's not just IT that's on Bill Gates mind these days. Cascades Investments LLC, Bill Gates' personal investment vehicle, is backing Sapphire Energy, a start up working towards a commercial-scale facility to produce oil from algae. Well known investor, Vinod Khosla is one of the leading proponents of biofuels and has backed Brazilian Renewable Energy Company (Brenco) and also made investments in Segetis, founded by former Soviet scientists Sergey and Olga Selifonova, to develop renewable chemical products. Khosla is also a minor stakeholder in Pune based Praj Industries that is a biofuel technology provider and equipment maker. The sector is surely rewarding for an investor, said Rajeev Mantri, executive director, Navam Capital, a Kolkata-based private investment firm focused on early stage investments in emerging technologies, "For an investor, the opportunity lies in the size of the market. Think of all the thousands and thousands of liters of liquid fuel consumed by cars, planes, commercial vehicles and industrial equipment. If you can capture even a small portion of that market, it's a potentially huge killing. The payoff justifies the pursuit."
However in India most of the biofuels projects are funded through bank financing. "Initially there was not enough support on microfinancing our project to farmers, but gradually seeing our commitment and dedication, some financial institutions became positive. All nationalized banks are now financing Jatropha based projects. For the first time we got a national insurance company (United India Assurance) to insure Jatropha crops," added Dr Alok Adholeya, Director, Biotechnology and management of Bioresources, TERI. YES bank extended a term loan facility to Nandan Biomatrix Ltd (NBL) and farmers associated with NBL for cultivation and other agricultural expenses according to Ajay Desai, Senior Vice President & Head Agri, Rural and Social Banking (ARSB), YES Bank. However given the fact the biofuels sector is still at a nascent stage, India is yet to see venture capital flow. Rajeev Mantri said, "Building projects through bank financing is not a viable or sustainable approach since the projects are too risky for banks to finance, especially in the current scenario of high interest rates. Moreover, it takes a lot more than just money to get a new technology to market. What we need is venture capital and private equity money flowing into the sector, like it has in the US, for it to really develop into a viable industry."
Next generation technology
While feedstock (Jatropha, pongamia for biodiesel and corn and sugarcane for ethanol) based biofuels comprise the first generation biofuels, second generation biofuels refer to cellulosic ethanol, algal biodiesel, biohydrogen etc. that are more sustainable. They are arousing considerable interest in the US and EU owing to growing sustainability concerns and market demands for improved process efficiencies and greater feedstock production yields. As leading venture capitalist and biofuels proponent Vinod Khosla addresses the Algae Biomass Summit in Seattle next month. In India research is still underway. Only recently, Hyderabad based the International Crops Research Institute for the Semi-Arid Tropics (ICRISAT) received a funding of $1.5 million for a three-year biofuels research-for-development project from The International Fund for Agricultural Development (IFAD) of the United Nations. The project will facilitate farmers and entrepreneurs to utilize sweet sorghum stalks and cassava roots in producing ethanol, and seeds of Jatropha in producing biodiesel. The Inter-Center project, involving ICRISAT, International Center for Tropical Agriculture and some national bodies, is aimed at popularizing the cultivation of sweet sorghum in the Philippines, China, Mali and India.
According to Suprotim Ganguly, Deputy Director, Biofuels and Energy efficiency, CII, "Conventional technologies have capacity as well as productivity limitations, so we need to build our muscle on the technological front. The productivity of algae is higher than the normal conventional feedstocks and has lesser dependency on politically debated resources like water and land. The technological initiatives by R&D institutes need to be brought under a single umbrella to spearhead the development of such second generation biofuels." CII has put forward a Nine-point recommendation to Sharad Pawar and Vilas Rao Muttemwar in June this year advocating setting up of a second generation biofuels fund to support all such research. It has also suggested setting up of four regional bioenergy centers to fund need based research. "If India is not prepared for second generation technology, we stand to lose," he added. Research is also being done on cellulosic ethanol, informed Dr RP Singh, senior scientist with CSIR. "Under one of the NMITLI projects sugarcane bagasse has been successfully fractionated using Steam Explosion Process into cellulose, hemicellulose, and lignin in highly pure form which are then converted to simple sugars and then to ethanol . These three can also be recovered from other cellulose-rich feedstock like wheat straw and jute sticks, which are abundantly available in India since this process is generic in nature. NMITLI has established a pilot-scale facility which is operational. The ultimate long-term objective is to substitute petroleum products as a base for many industrial goods with renewable biomass. The project is being carried out through a network of research institution in the public domain and CSIR is in the process of expanding the project further," he said.
Work is also being done at improving the quality of current feedstocks such as Jatropha and looking at alternate feedstocks. "At TERI we are also working on packaging the technology, plant varieties, doing genetic modification, conventional breeding so that we soon have more varieties which give us higher yield, high oil content, tolerant to salinity so that the future is insured in terms of a better crop. So in the first generation, we are looking for the next generation feedstock. As far as second generation technologies are concerned, India has a great deal to do," said Dr Alok Adholeya, Director, Biotechnology and management of Bioresources, TERI.
National Biofuels Policy: Challenges and expectations
On September 11, 2008 Union Minister of Agriculture, Food & Public Distribution, Sharad Pawar announced the long awaited Biofuel policy. He stated that the policy prepared by the Ministry of New and Renewable Energy (MNES) was approved by the Union Cabinet in its meeting. A proposal on "National Policy on Biofuels and its Implementation" was prepared after wide scale consultations and inter-Ministerial deliberations. The draft Policy was considered by a Group of Ministers (GoM) under the Chairmanship of Union Agriculture Minister Sharad Pawar and after considering the suggestions of Planning Commission and other Members, the Group of Ministers recommended the National Biofuel Policy to the Cabinet. An empowered National Biofuel Coordination Committee, headed by the Prime Minister of India and a Biofuel Steering Committee headed by Cabinet Secretary has been set up.
Most of the companies are toeing the line when it comes to planting Jatropha on wastelands. Samiran Das, CEO, D1BPfuelcrops India Pvt Ltd, said, "We are not encroaching on food security by targeting wastelands for Jatropha production and are also involving the rural poor into the growth story by empowering them to grow biofuel crops. Even if we are able to grow Jatropha on 10 million hectares of land, we shall be able to blend 5-10 percent of biodiesel and reduce imports." Agrees Dr Alok Adholeya, Director, Biotechnology and Bioresources management, TERI "We need to engage our wastelands and achieve rural employment without encroaching on food security. We need to look at additional areas of cultivation and improve production." The Biofuel policy aims at scrapping taxes and duties on biodiesel and declared goods status being conferred on biodiesel and this is good news according to CS Jadhav, Director, Marketing, Nandan Biomatrix, "Declared goods status would mean that biodiesel would attract a uniform central sales tax or VAT rate rather than varied sales tax rates prevalent in states This new bio fuel policy tries to solve lot of the issues faced by the bio fuel industry especially with regard to the blending mandate for various oil marketing companies and the uniformity of taxes."
However, the challenges too have their share. Many see the target to achieving a 20 percent blend of biodiesel by the year 2017 as too ambitious. "At this rate the requirement of biodiesel in 2017 would be 16.72 MT and the area required under various biodiesel plantation would be around 35 million acres (Assuming yield of 1.6 tons per acre and oil recovery as 30 %). To bring in 35 million acres under bio fuel plantations, lot of effort is required from various Government Departments, financial institutions and private entrepreneurs. Research has to be done to increase the productivity of bio fuel crops per hectare of land, says C S Jadhav, Director, Marketing, Nandan Biomatrix.
According to Vishal Rawat, President, IKF Green fuels Ltd," We already have our capabilities developed as far as bioethanol is concerned, but not in biodiesel. The decision to bring biofuels under declared goods is welcome but the policy has to be clear on contract farming as well." Pricing is another issue. Oil companies have declared their own biodiesel Purchase Policy. These companies offer a price of Rs 26.50 per liter of biodiesel, which is not going well with manufacturers alike.
According to Dr Alok Adholeya, "There has to be a workable purchase policy that takes into account the feedstock growers. The buy back price of Rs 26.50 is practically not right. There has to be a commitment from the government to purchase biodiesel on a price that will be on a parity basis. A higher price might affect food production where biofuel crops might compete with food crops." Subsidies are another concern. "We are waiting for the support price for Jatropha and the feedstock. The plantation of Jatropha is a long-term investment and production starts only after the third year of the crop and hence there should be provisions of soft loans to farmers and incentives to companies to set up refineries," echoed Vishal Rawat. "If a wasteland is being engaged for cultivation, subsidies should be provided on the resources end to encourage private players," added Dr Adholeya. He also feels that lack of blending regulations and an ambiguous export policy are some of the grey areas that need to be looked into to create transparency. However CS Jadhav is quite positive about the future. "India has major projects and within the next 5-10 years renewable sector would be the biggest industry in India and in the world and will be more organized and structured. After the success of information technology and biotechnology, energy would be the next big industry."
Tips for home loan borrowers
The recent hike in the cash reserve ratio (CRR) and repo rate announced by the Reserve Bank of India (RBI) has prompted banks to review their lending rates. Banks (private as well as PSU banks) have increased lending rates across the board for all loans as their input costs have gone up. Existing borrowers in all consumer loan segments, including home loans, have to pay an additional Rs 20 to Rs 30 per lakh per month in their equated monthly installment (EMI) payments.The higher interest rate affects the home loan borrowers more than any other consumer loan borrowers because the principal amount is high and repayment tenure is longer in home loans. Home loan EMIs account for a large portion of a borrower's income that is paid out to clear the debt. Currently, home loan interest rates are quoting above 10 per cent per annum, which used to be around seven per cent a couple of years ago.
The macroeconomic situation in the country is not very encouraging at the moment. Inflation is ruling at around the 12 per cent level which is much higher than the RBI and government's mandated level of five per cent per annum.
The RBI has increased the interest rate to control the rising inflation. Analysts believe that if this era of higher inflation/interest rates continues for a long time, it will have a negative impact on the economy's growth rate. Here are some significant factors that influence the movement of interest rates.
Inflation
Borrowers can expect some softening in the interest rates if some of them are moderated in the short to medium term:This is one of the prime factors that influences the monetary policy of the RBI and forced it to hike interest rates. Currently, inflation is ruling at around 12 per cent per annum. The main factors that are driving high inflation in the country are sharp rise in prices of basic commodities like cement, steel, food items etc coupled with a hike in petroleum products (petrol, diesel and cooking gas).
These higher prices can be attributed partially to certain global factors and part of it can be attributed to issues in the local markets like speculation etc. The Government and RBI are taking measures to moderate the price hike through the monetary policy as well as government policies.
The liquidity in the system is another parameter which influences the interest rates. Liquidity influences the cost of acquisition of funds for banks. If the liquidity is low, cost of raising the funds will increase, and hence they will need to raise the interest rates on their lending. There are many factors that influence liquidity in the system.
For example, fund inflows from foreign investors and a cut in the cash reserve ratio increase the liquidity in the system and vice versa. Currently, many foreign investors are taking out their funds from the domestic markets due to issues in their local markets as well as growth concerns in emerging markets.
Rates expected to drop
Existing home loan borrowers need not panic at the high interest rate scenario ruling today. Experts believe that the rates are near their peaks and expect them to moderate in the near to medium terms. Most of the banks offer various options for the existing borrowers such as extending the tenure of the loans (rather than increasing EMI) or prepayment of a part of the loan in order to keep the EMI outgo constant.
New borrowers should be a little cautious and evaluate their financial positions before opting between the fixed and floating interest rate options. They can also evaluate combo/structured products like part fixed and part floating interest rates, and step-up EMIs which are low in the initial stages but increase in later years. Borrowers should also weigh the options of making a part prepayment or switching to fixed/ floating interest rates.
Also Read
Tips For People Availing Home Loans
How to select a Home Loan?
Home loans - Should you prepay or stay with higher EMI...
CREDIT cards are a like nagging wives
Buried under debt? Credit counsellors can find you...
Promoters Buying stocks - Bio diesel future
| Bio Diesel Sector - Future Prospects Posted: 20 Nov 2008 09:23 AM PST The importance of Bio-fuel (bio-diesel & ethanol) is increasing rapidly with growing anxiety over crude oil supply and fast climatic changes. Bio-diesel is an environment friendly fuel prepared from... Click Link To Read Article >>       |
| Promoters buying their own stocks Posted: 20 Nov 2008 08:42 AM PST The slump in valuations on Indian bourses has come as a blessing in disguise for many promoters, particularly those who don't own controlling stakes in their companies. Checkout which promoters have... Click Link To Read Article >>    |
| XL Telecom & Energy - Multibagger Stock Posted: 20 Nov 2008 06:16 AM PST This company has transformed itself from a low margin Telecom company by diversifying substantially into the high margin business of Solar Photo Voltaic Modules (SPV). Buy XL Telecom & Energy at... Click Link To Read Article >>    |
| Praj Industries- Giant in making - Bio-Diesel segment Posted: 20 Nov 2008 05:09 AM PST Praj Industries is the world's single largest supplier of molasses based distillery technology, plant and equipment.Praj Industries has been one of the fancied stock in the recent rally not only... Click Link To Read Article >>    |
| A Definitive Multi Bagger in 2012 - 2015 - Only For Patient Investors Posted: 20 Nov 2008 09:42 AM PST A group of individuals bought a listed company in 2004 and turned it around. The software company they bought, has now expanded into telecom and even into the emerging bio-fuels business. IKF... Click Link To Read Article >>    |
| Solar power - Huge Market Opportunities Posted: 20 Nov 2008 07:25 AM PST Globally, energy is fast emerging as a critical issue, especially as existing power generation options have limitations in terms of growth potential and long-term sustenance. solar power is fast... Click Link To Read Article >>    |
Subscribe to:
Posts (Atom)