By Siddharth Philip - May 27, 2011
Tata Motors Ltd. (TTMT), India’s biggest maker of trucks and buses, will open a Land Rover sport-utility vehicle assembly unit at its factory in the city of Pune today in a push to supply luxury vehicles to emerging economies.
“Our India assembly unit is the start of building our house in India,” Ralf Speth, head of Tata’s Jaguar Land Rover division, said at a press conference in Pune. “We believe we have huge potential to grow in India. It has a rapidly increasing middle class and the second-largest population in the world.”
The assembly line will allow Tata to hold back costs as India levies a 100 percent duty on imported cars while high-end competitors from abroad expand. In the last two months, Aston Martin Lagonda Ltd. and Fiat SpA (F)’s Ferrari and Maserati brands have set up dealerships in the world’s second-fastest growing major economy as rising wealth spurs demand for luxury vehicles.
Aston Martin said when it opened its first Indian dealership in April that it’s targeting about 25 percent of its sales to come from Asia and the Middle East in the next five years, compared with 10 percent to 12 percent now. Ferrari, Fiat’s most profitable unit, expects to sell as many as 100 vehicles in India by 2014, its Indian dealer said yesterday.
Profit Triples
The Land Rover brand will initially assemble Freelander models in India, Speth said at a separate press conference in Mumbai yesterday. He declined to comment on the line’s capacity.
Tata’s net income in the year through March 31 more than tripled to 92.7 billion rupees ($2.05 billion) from 25.7 billion rupees, as consolidated revenue jumped 33 percent, the company said yesterday. Jaguar Land Rover reported a 1.04 billion-pound ($1.7 billion) profit compared with a year-earlier loss of 14.2 million pounds.
Even so, Tata Motors fell as much as 6.9 percent to 1081.75 rupees in Mumbai trading today to a three-month low after margins fell and quarterly profit, excluding the Jaguar Land Rover operations, fell 4 percent to 5.73 billion rupees. The stock has declined 17 percent in 2011.
“While Tata Motors’ fourth-quarter consolidated profit was in line with estimates, margin pressures were clearly visible with both India and JLR reporting a quarter-on-quarter margin drop,” CLSA Ltd. said in a report dated yesterday.
The Indian company, whose Nano model is the world’s cheapest car, paid $2.4 billion in June 2008 to buy the Jaguar car and Land Rover SUV brands from Ford Motor Co. (F), and it combined them into a single division. Chief Financial Officer Chandrasekaran Ramakrishnan said yesterday that capital spending on the unit will amount to 1.5 billion pounds annually.
Chief Executive Officer Carl-Peter Forster, who said in May that investments in Jaguar Land Rover will total 5 billion pounds, said yesterday that Tata Motors is willing to consider setting up an Indian engine plant for the division. Ford currently supplies engines to the unit.
“With good growth volume, we will have to think about our future engine strategy,” Forster said at the press conference.
26% Delivery Growth
Jaguar Land Rover’s fiscal 2011 deliveries rose 26 percent to 243,621 cars and SUVs. Sales jumped 43 percent in China and Russia, with the Chinese market accounting for 29,600 vehicles, Nicola Rzeznik, a spokeswoman for the unit in Warwick, England, said in a May 25 e-mail.
“Tata Motors’ main focus is on their international business,” said Walter Rossini, who manages 250 million euros ($356 million) in an India equity fund at Aletti Gestielle SGR SpA in Milan. “They are doing very well, not just in traditional markets such as Europe and the U.S., but also in emerging markets like China.”
To contact the reporter on this story: Siddharth Philip in Mumbai at sphilip3@bloomberg.net
To contact the editor responsible for this story: Kae Inoue at kinoue@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Saturday, May 28, 2011
Friday, May 27, 2011
Sensex jumps 221 points on firming global cues
The Bombay Stock Exchange benchmark Sensex today advanced by 221 points as investors bought stocks at attractive low levels amid a firming global trend.
The Sensex, which had gained 197 points in the previous session, climbed by 221.46 points to 18,266.10, led by a rally in blue chips Reliance Industries and ICICI Bank.
The broad-based National Stock Exchange index Nifty also advanced by 63.75 points to 5,476.10.
RIL, the most valuable scrip on the 30-share gauge Sensex, rose 1.4 per cent to Rs 946.30 a share while ICICI Bank gained 4.23 per cent to Rs 1069 a share. IT bellwether Infosys, too, jumped by 0.31 per cent to Rs 2,787.95.
Brokers said the trading sentiment improved on a firm global trend after leaders of the G-8 grouping said the world economy was gaining strength. The MSCI Asia Pacific Index climbed 0.6 per cent, its biggest two-day rally since April 21.
The upswing since yesterday follows a period of market depression, led by stubbornly high inflation, rising crude prices and high interest rates. Sensex has lost 11 per cent in 2011 so far on concerns that higher borrowing costs would hurt corporate earnings.
The Reserve Bank of India on May 3 increased the key interest rates for the ninth time since March 2010 to curb the rising prices.
Brokers said investors were in a fresh mood on the first day of new settlement in the derivatives segment and picked up some of the blue chips at existing lower rates.
The Sensex, which had gained 197 points in the previous session, climbed by 221.46 points to 18,266.10, led by a rally in blue chips Reliance Industries and ICICI Bank.
The broad-based National Stock Exchange index Nifty also advanced by 63.75 points to 5,476.10.
RIL, the most valuable scrip on the 30-share gauge Sensex, rose 1.4 per cent to Rs 946.30 a share while ICICI Bank gained 4.23 per cent to Rs 1069 a share. IT bellwether Infosys, too, jumped by 0.31 per cent to Rs 2,787.95.
Brokers said the trading sentiment improved on a firm global trend after leaders of the G-8 grouping said the world economy was gaining strength. The MSCI Asia Pacific Index climbed 0.6 per cent, its biggest two-day rally since April 21.
The upswing since yesterday follows a period of market depression, led by stubbornly high inflation, rising crude prices and high interest rates. Sensex has lost 11 per cent in 2011 so far on concerns that higher borrowing costs would hurt corporate earnings.
The Reserve Bank of India on May 3 increased the key interest rates for the ninth time since March 2010 to curb the rising prices.
Brokers said investors were in a fresh mood on the first day of new settlement in the derivatives segment and picked up some of the blue chips at existing lower rates.
GoM recommends nod to Cairn deal
Cabinet panel to take the final view in two weeks
A group of ministers (GoM) has decided to recommend approval to the $9.8-billion Cairn-Vedanta deal to the Cabinet Committee on Economic Affairs (CCEA). A final call on whether the approval will be conditional will be taken by CCEA within two weeks.
After the GoM meeting, which lasted more than an hour, Petroleum Minister S Jaipal Reddy did not say whether it would be a conditional approval. “It (GoM) has taken a view on the matter ... It will be placed before CCEA in two weeks,” he said.
The deal was opposed by Oil and Natural Gas Corporation (ONGC), Cairn’s partner in its most prolific block in Barmer in Rajasthan. Under the original agreement, ONGC was to pay the entire royalty on production, though it was entitled to just 30 per cent revenue. After the deal was announced, ONGC said the royalty should be ‘cost-recoverable’. Making royalty cost-recoverable will pass on some burden on this account to Cairn India and the government.
Reddy reiterated support for ONGC’s claim. “My view was contained in the note put up to CCEA. I have always taken the view that ONGC’s claim that the royalty should be cost-recoverable is supported by us,” Reddy said, but clarified that he was not referring to the recommendation that might be made by the GoM. (Click here for table & graph)
Reddy said the GoM had “no authority to take a decision” but added it had taken a unanimous view.
Vedanta wants to buy a majority stake in Cairn India. Sesa Goa, its subsidiary, has already bought a 8.1 per cent share in an open offer. It has also bought a 10.4 per cent stake from Malaysia’s Petronas, raising its total holding to 18.5 per cent. On approval, Cairn Energy Plc will sell a 40 per cent stake in Cairn India to Vedanta. After this, Cairn will hold a 21.7 per cent stake in the company.
In April, the cabinet, which was supposed to take a decision on the deal, referred the matter to the GoM. The petroleum ministry circulated a cabinet note that gave two options — either conditional clearance or absolute clearance while leaving legal recourse open to both Cairn India and ONGC.
There is also an issue of cess on production from the Barmer block that is under arbitration.
In August 2010, London Stock Exchange-listed Vedanta Resources had announced plan to buy up to 60 per cent stake in Cairn India for $9.6 billion. The deal however ran into hurdles with petroleum ministry insisting on written applications to clear the deal.
A group of ministers (GoM) has decided to recommend approval to the $9.8-billion Cairn-Vedanta deal to the Cabinet Committee on Economic Affairs (CCEA). A final call on whether the approval will be conditional will be taken by CCEA within two weeks.
After the GoM meeting, which lasted more than an hour, Petroleum Minister S Jaipal Reddy did not say whether it would be a conditional approval. “It (GoM) has taken a view on the matter ... It will be placed before CCEA in two weeks,” he said.
The deal was opposed by Oil and Natural Gas Corporation (ONGC), Cairn’s partner in its most prolific block in Barmer in Rajasthan. Under the original agreement, ONGC was to pay the entire royalty on production, though it was entitled to just 30 per cent revenue. After the deal was announced, ONGC said the royalty should be ‘cost-recoverable’. Making royalty cost-recoverable will pass on some burden on this account to Cairn India and the government.
Reddy reiterated support for ONGC’s claim. “My view was contained in the note put up to CCEA. I have always taken the view that ONGC’s claim that the royalty should be cost-recoverable is supported by us,” Reddy said, but clarified that he was not referring to the recommendation that might be made by the GoM. (Click here for table & graph)
Reddy said the GoM had “no authority to take a decision” but added it had taken a unanimous view.
Vedanta wants to buy a majority stake in Cairn India. Sesa Goa, its subsidiary, has already bought a 8.1 per cent share in an open offer. It has also bought a 10.4 per cent stake from Malaysia’s Petronas, raising its total holding to 18.5 per cent. On approval, Cairn Energy Plc will sell a 40 per cent stake in Cairn India to Vedanta. After this, Cairn will hold a 21.7 per cent stake in the company.
In April, the cabinet, which was supposed to take a decision on the deal, referred the matter to the GoM. The petroleum ministry circulated a cabinet note that gave two options — either conditional clearance or absolute clearance while leaving legal recourse open to both Cairn India and ONGC.
There is also an issue of cess on production from the Barmer block that is under arbitration.
In August 2010, London Stock Exchange-listed Vedanta Resources had announced plan to buy up to 60 per cent stake in Cairn India for $9.6 billion. The deal however ran into hurdles with petroleum ministry insisting on written applications to clear the deal.
Weak dollar, Greek debt propel gold to 3-week high
LONDON: Gold hit its highest in more than three weeks on Friday as worries about Greece's debt crisis triggered buying by investors looking for a safe place to park assets, while the softer dollar also helped underpin sentiment.
Spot gold hit $1,534.80 a troy ounce, its highest since May 4. It was bid at $1,527.90 an ounce at 1351 GMT from $1,518.10 late in New York on Thursday.
Gold's appeal has been boosted in recent weeks by worries about contagion from Greece to Ireland, Portugal and Spain.
The dollar fell to session lows against the euro after European Central Bank Governing Council member George Provopoulos said Greece can handle its debt if it sticks to its aid programme..
"The dollar is weaker, boosting commodities," said Peter Fertig, a consultant at Quantitative Commodity Research. "Also don't forget the situation in the euro zone, especially the latest comments from an EU official."
In the latest development on the Greek crisis, the head of euro zone finance ministers Jean-Claude Juncker said the International Monetary Fund could withhold the next slice of aid to Greece due next month.
"The chances of debt default by Greece are rising," a trader said, adding higher oil prices were also helping gold.
Gold is used by investors as a hedge against inflation, often triggered by rising oil prices.
SILVER HEDGING
Holdings of the largest silver-backed ETF, New York's iShares Silver Trust and the largest gold-backed exchange-traded-fund (ETF), New York's SPDR Gold Trust were unchanged on Thursday from Wednesday.
Overall though interest in gold ETFs remains unabated. However, that is not true of silver ETFs. Holdings have fallen by nearly nine million ounces this week, bringing year-to-date outflows to 42.79 million ounces or 8.4 percent.
Part of the reason behind silver's losses are producer hedging, an indication prices may be peaking.
Focus in the silver market was on Mexican miner Penoles, which earlier this week said it had hedged 13.4 million ounces of silver through 2013.
"This is not the first time that we're hearing of silver producer hedging this year," UBS said in a note.
Spot silver was bid at $38.04 an ounce from $37.24 late on Thursday, platinum at $1,785.49 from $1,764.85 and palladium at $755.72 from $751.45.
"We believe that the cash cost of the marginal producer is still the relevant benchmark to judge whether platinum and palladium provide value or not," Standard Bank said in a note.
"Therefore, the market could trade lower, fundamentally growing value in platinum and palladium on approach of $1,700 and $700 respectively."
Spot gold hit $1,534.80 a troy ounce, its highest since May 4. It was bid at $1,527.90 an ounce at 1351 GMT from $1,518.10 late in New York on Thursday.
Gold's appeal has been boosted in recent weeks by worries about contagion from Greece to Ireland, Portugal and Spain.
The dollar fell to session lows against the euro after European Central Bank Governing Council member George Provopoulos said Greece can handle its debt if it sticks to its aid programme..
"The dollar is weaker, boosting commodities," said Peter Fertig, a consultant at Quantitative Commodity Research. "Also don't forget the situation in the euro zone, especially the latest comments from an EU official."
In the latest development on the Greek crisis, the head of euro zone finance ministers Jean-Claude Juncker said the International Monetary Fund could withhold the next slice of aid to Greece due next month.
"The chances of debt default by Greece are rising," a trader said, adding higher oil prices were also helping gold.
Gold is used by investors as a hedge against inflation, often triggered by rising oil prices.
SILVER HEDGING
Holdings of the largest silver-backed ETF, New York's iShares Silver Trust and the largest gold-backed exchange-traded-fund (ETF), New York's SPDR Gold Trust were unchanged on Thursday from Wednesday.
Overall though interest in gold ETFs remains unabated. However, that is not true of silver ETFs. Holdings have fallen by nearly nine million ounces this week, bringing year-to-date outflows to 42.79 million ounces or 8.4 percent.
Part of the reason behind silver's losses are producer hedging, an indication prices may be peaking.
Focus in the silver market was on Mexican miner Penoles, which earlier this week said it had hedged 13.4 million ounces of silver through 2013.
"This is not the first time that we're hearing of silver producer hedging this year," UBS said in a note.
Spot silver was bid at $38.04 an ounce from $37.24 late on Thursday, platinum at $1,785.49 from $1,764.85 and palladium at $755.72 from $751.45.
"We believe that the cash cost of the marginal producer is still the relevant benchmark to judge whether platinum and palladium provide value or not," Standard Bank said in a note.
"Therefore, the market could trade lower, fundamentally growing value in platinum and palladium on approach of $1,700 and $700 respectively."
Lead Indicator Index dips to 104 points
The Edelweiss ET Now Lead Indicator Index for May has dipped considerably to 104 points, reflecting an underlying weakness in the economy.
According to Nischal Maheshwari, head of research, Edelweiss Securities , "What has specifically changed for the month is that cement dispatches have been particularly weak. In this case, it was nine months ago when cement dispatches were weak, so that's why the indicator has come down."
The weakness in the Lead Indicator Index is not being seen as a one-off situation. While the index has been strong for some months now, the weakness could continue for time to come.
"General conditions out there are becoming a bit weak and that is why the indicator is also giving in," says Mr Maheshwari. "I believe some amount of moderation is definitely on the cards because the IIP - one of the indicators we use - the CV cycle, the rising interest rate and sticky inflation will continue to put pressure on the indicator," he adds.
"We also have been tracking inflation very closely. We agree with the government's indication of peaking out, maybe around September or October," explains Mr Maheshwari.
The index peaked in the second quarter of FY11 but moderated thereafter, capturing moderation in the non-agri GDP in the subsequent quarters.
According to Nischal Maheshwari, head of research, Edelweiss Securities , "What has specifically changed for the month is that cement dispatches have been particularly weak. In this case, it was nine months ago when cement dispatches were weak, so that's why the indicator has come down."
The weakness in the Lead Indicator Index is not being seen as a one-off situation. While the index has been strong for some months now, the weakness could continue for time to come.
"General conditions out there are becoming a bit weak and that is why the indicator is also giving in," says Mr Maheshwari. "I believe some amount of moderation is definitely on the cards because the IIP - one of the indicators we use - the CV cycle, the rising interest rate and sticky inflation will continue to put pressure on the indicator," he adds.
"We also have been tracking inflation very closely. We agree with the government's indication of peaking out, maybe around September or October," explains Mr Maheshwari.
The index peaked in the second quarter of FY11 but moderated thereafter, capturing moderation in the non-agri GDP in the subsequent quarters.
SpiceJet posts Rs 59 cr loss in Q4
NEW DELHI: Low-cost carrier SpiceJet on Friday posted a net loss of Rs 59 crore for the last quarter of 2010-11 fiscal due to high jet fuel prices.
The company had reported a net profit of Rs 27 crore during the corresponding period of 2009-10.
"One of the main reasons which affected our operations was fuel costs, which accounted for about 52 per cent of total costs during the quarter," SpiceJet CEO Neil Mills said.
Total revenues of the company, however, grew by 32.51% to Rs 758 crore during the quarter vis-a-vis Rs 572 crore reported during the corresponding quarter of FY10, he said.
For 2010-11 financial year, net profit jumped by 64.63% to Rs 101.15 crore compared to a net profit of Rs 61.44 crore in FY10. Total income rose by over 33% to Rs 2,934.38 crore in FY11 compared to Rs 2,202.40 crore of 2009-10. "We are pleased with our results. Despite higher fuel costs in the last quarter and irrational behaviour on pricing front by the competitors, we have managed to keep costs under control. We have, in fact, outperformed the industry during the year," Mills said.
The company had reported a net profit of Rs 27 crore during the corresponding period of 2009-10.
"One of the main reasons which affected our operations was fuel costs, which accounted for about 52 per cent of total costs during the quarter," SpiceJet CEO Neil Mills said.
Total revenues of the company, however, grew by 32.51% to Rs 758 crore during the quarter vis-a-vis Rs 572 crore reported during the corresponding quarter of FY10, he said.
For 2010-11 financial year, net profit jumped by 64.63% to Rs 101.15 crore compared to a net profit of Rs 61.44 crore in FY10. Total income rose by over 33% to Rs 2,934.38 crore in FY11 compared to Rs 2,202.40 crore of 2009-10. "We are pleased with our results. Despite higher fuel costs in the last quarter and irrational behaviour on pricing front by the competitors, we have managed to keep costs under control. We have, in fact, outperformed the industry during the year," Mills said.
Mumbai Indians winners on social media
MUMBAI: As the Indian Premier League ( IPL-4) draws to a close, Mukesh Ambani-owned Mumbai Indians (MI) have gathered the most amount of support across social media platforms followed by liquor baron Vijay Mallya's Royal Challengers Bangalore (RCB). According to a report by NM Incite, a Nielsen McKinsey company, among the players, Indian skipper MS Dhoni has emerged as the most discussed player on social media websites with the West Indian star Chris Gayle taking the second spot. Interestingly, Dhoni's Chennai Super Kings (CSK) beat Gayle's RCB in the playoffs to book a place in Sunday's final.
On the brand front, Samsung, Vodafone, Cadbury and Volkswagen top the list of brands which were the most talked about on blogs, discussion boards and online forums, said the report which was shared with TOI.
"In this edition of the IPL brands have created campaigns that are capable of engaging the digital consumer effectively. We find that this triggers positive buzz which can result in increased purchase intent," said Adrian Terron,VP, Nielsen.
Although, social networking websites like Facebook and Twitter have become part of every brand's marketing strategy, blogs and forums have also been used by brands increasingly, said the report. The report was generated by analyzing data collected by monitoring social media channels from the start of the tournament till May 13.
Samsung, which ran television campaigns during the IPL for its smartphone, Galaxy Tab, as well as its 3G phone, Hero, backed it up with increased online activity in this year's tournament. It also advertised during the live streaming of IPL matches. "Given the committed viewership that the IPL generates, we used the platform to launch five new campaigns so that we could generate the visibility as well as create awareness around these products online," said Ranjit Yadav, country head, Samsung Mobile & IT.
While CSK captain Dhoni was the most popular on international forums, the domestic blogs and boards had RCB's Gayle topping the charts. Indian and international players were a part of the list of players leading online discussions with Sachin Tendulkar and Sourav Ganguly featuring on it.
"When compared to the World Cup, brands haven't necessarily managed to draw similar linkages between themselves and the players that endorse them this time around," said Nielsen's Terron. Besides, the Mumbai and Bangalore teams, CSK and Shah Rukh Khan's Kolkata Knight Riders (KKR) were also able to create a sense of community online. Even the two new franchises, Kochi Tuskers and Pune Warriors, appear to have garnered a fifth of social media mentions, said the report.
On the brand front, Samsung, Vodafone, Cadbury and Volkswagen top the list of brands which were the most talked about on blogs, discussion boards and online forums, said the report which was shared with TOI.
"In this edition of the IPL brands have created campaigns that are capable of engaging the digital consumer effectively. We find that this triggers positive buzz which can result in increased purchase intent," said Adrian Terron,VP, Nielsen.
Although, social networking websites like Facebook and Twitter have become part of every brand's marketing strategy, blogs and forums have also been used by brands increasingly, said the report. The report was generated by analyzing data collected by monitoring social media channels from the start of the tournament till May 13.
Samsung, which ran television campaigns during the IPL for its smartphone, Galaxy Tab, as well as its 3G phone, Hero, backed it up with increased online activity in this year's tournament. It also advertised during the live streaming of IPL matches. "Given the committed viewership that the IPL generates, we used the platform to launch five new campaigns so that we could generate the visibility as well as create awareness around these products online," said Ranjit Yadav, country head, Samsung Mobile & IT.
While CSK captain Dhoni was the most popular on international forums, the domestic blogs and boards had RCB's Gayle topping the charts. Indian and international players were a part of the list of players leading online discussions with Sachin Tendulkar and Sourav Ganguly featuring on it.
"When compared to the World Cup, brands haven't necessarily managed to draw similar linkages between themselves and the players that endorse them this time around," said Nielsen's Terron. Besides, the Mumbai and Bangalore teams, CSK and Shah Rukh Khan's Kolkata Knight Riders (KKR) were also able to create a sense of community online. Even the two new franchises, Kochi Tuskers and Pune Warriors, appear to have garnered a fifth of social media mentions, said the report.
Taming price rise: Govt panel for FDI in multi-product retail
NEW DELHI: An inter-ministerial group (IMG) on inflation has recommended allowing foreign direct investment in multi-product retail as one of the two steps to tame rising prices and cut down the margin between farm gate and retail prices.
This is the first formal recommendation by a government panel to allow FDI in the tightly policed and sensitive retail sector.
"It is time for India to allow foreign direct investment in multi-product retail and the IMG recommends that the government considers this at the earliest. Reform in this sector can be an effective inflation busting measure," Basu told reporters. The proposals will be sent to Prime Minister Manmohan Singh and finance minister Pranab Mukherjee.
Basu said he was hopeful that the government will consider the proposal soon.
The move, which comes shortly after the end of key state elections, will now be discussed by the government and then sent to the cabinet for approval. But analysts say it is expected to face stiff opposition from political parties and traders.
The government allows 51% FDI in single brand retail and 100% in the wholesale cash-and-carry segment but has shied away from opening up the multi-product segment to foreign participation fearing opposition from small shop owners and political parties.
Stubbornly high inflation has forced the government to focus on revamping the supply chain particularly distribution of food grains, fruits and vegetables.
But the IMG cautioned that entry of FDI in this sector should be properly regulated and steps should be against these new corporations becoming monopolistic and charging high prices.
The government has taken a series of steps to ease the pain of high food prices while the Reserve Bank of India has raised interest rates nine times since March 2010 to calm inflation which currently stands at 8.66%, much above the comfort level of policymakers.
Several foreign retail giants such as Wal-Mart and Carrefour are present in the wholesale trading segment and other top retailers have been eyeing an entry into India's multi-product retail sector for the past several years. Some estimates say that the country's retail sector could be nearly $260 billion by 2020.
"Modern retail is capable of bringing down prices by as much as 20% on various products if the distribution system is revamped. What is needed at this point is a new supply chain system which will directly source from farmers and therefore help lower costs along with minimizing damages done to goods," said Kishore Biyani, promoter of the Future Group, which runs stores like Big Bazaar and Food Bazaar.
"Only new retail can meet the demand of the growing needs of the Indian consumer," he said.
The IMG also recommended revamping the Agricultural Produce Marketing Committee (APMC) Act to enable farmers to bring their products to retail outlets and also allow retailers to directly purchase from the farmers without facing blockade by incumbent traders. It said the APMC system has abetted monopolistic behaviour and reduced the choices available to small farmers.
Spiralling prices forced the government to set up the IMG in early February and the group was entrusted with the task of recommending policies to calm food inflation and demand management.
In India, the share of organized retail in the total retail trade is just over 4% compared with 66% in Japan, 20% in China and 55% in Malaysia. The IMG says China allowed FDI in multi-product retail since 2004 and the benefits have been palpable.
"One way of playing an enabling role is to allow FDI in multi-product retail. This is a way to get new technology to come into the country and expand organized retail. While this policy alone may not achieve all the results, it can be an important step in serving the interests of both consumers and farmers in the long run," the IMG said.
This is the first formal recommendation by a government panel to allow FDI in the tightly policed and sensitive retail sector.
"It is time for India to allow foreign direct investment in multi-product retail and the IMG recommends that the government considers this at the earliest. Reform in this sector can be an effective inflation busting measure," Basu told reporters. The proposals will be sent to Prime Minister Manmohan Singh and finance minister Pranab Mukherjee.
Basu said he was hopeful that the government will consider the proposal soon.
The move, which comes shortly after the end of key state elections, will now be discussed by the government and then sent to the cabinet for approval. But analysts say it is expected to face stiff opposition from political parties and traders.
The government allows 51% FDI in single brand retail and 100% in the wholesale cash-and-carry segment but has shied away from opening up the multi-product segment to foreign participation fearing opposition from small shop owners and political parties.
Stubbornly high inflation has forced the government to focus on revamping the supply chain particularly distribution of food grains, fruits and vegetables.
But the IMG cautioned that entry of FDI in this sector should be properly regulated and steps should be against these new corporations becoming monopolistic and charging high prices.
The government has taken a series of steps to ease the pain of high food prices while the Reserve Bank of India has raised interest rates nine times since March 2010 to calm inflation which currently stands at 8.66%, much above the comfort level of policymakers.
Several foreign retail giants such as Wal-Mart and Carrefour are present in the wholesale trading segment and other top retailers have been eyeing an entry into India's multi-product retail sector for the past several years. Some estimates say that the country's retail sector could be nearly $260 billion by 2020.
"Modern retail is capable of bringing down prices by as much as 20% on various products if the distribution system is revamped. What is needed at this point is a new supply chain system which will directly source from farmers and therefore help lower costs along with minimizing damages done to goods," said Kishore Biyani, promoter of the Future Group, which runs stores like Big Bazaar and Food Bazaar.
"Only new retail can meet the demand of the growing needs of the Indian consumer," he said.
The IMG also recommended revamping the Agricultural Produce Marketing Committee (APMC) Act to enable farmers to bring their products to retail outlets and also allow retailers to directly purchase from the farmers without facing blockade by incumbent traders. It said the APMC system has abetted monopolistic behaviour and reduced the choices available to small farmers.
Spiralling prices forced the government to set up the IMG in early February and the group was entrusted with the task of recommending policies to calm food inflation and demand management.
In India, the share of organized retail in the total retail trade is just over 4% compared with 66% in Japan, 20% in China and 55% in Malaysia. The IMG says China allowed FDI in multi-product retail since 2004 and the benefits have been palpable.
"One way of playing an enabling role is to allow FDI in multi-product retail. This is a way to get new technology to come into the country and expand organized retail. While this policy alone may not achieve all the results, it can be an important step in serving the interests of both consumers and farmers in the long run," the IMG said.
Thursday, May 26, 2011
Rising greenback could make you see red
Returns from the Indian market to weaken as the dollar gets stronger against major currencies.
For investors in the Indian stock market, the rising dollar is a cause of worry. With growth concerns across the world, foreign institutional investors are moving their money to safe havens. And in most cases, the safe haven happens to be the dollar.
The US Federal Reserve launched the QE2, its $600-billion bond buying programme, in November 2010 to prop up the ailing economy. With the programme expected to end in June, the liquidity conditions will become tighter. Fund managers, as a result, are already busy pruning their risky assets, including investments in Indian and other emerging market equities.
“Around 40 per cent of the money that enters India is hedge fund or hot money, which is interest rate and exchange rate-sensitive. There has been some flight of capital in anticipation of the QE2 ending,” said Saurabh Mukherjea, head of equities at Ambit Capital.
Besides the QE2 ending, sovereign debt woes emanating from Greece have also supported the dollar’s up move. Citigroup’s Hong Kong-based analyst Kelly Kwok said the dollar strengthened because whenever investors are risk averse, they sell other assets and buy the dollar.
As a result of these events, emerging market equities posted their first weekly loss last week (ended May 18) after seven consecutive weeks of inflows. According to an equity strategy report by Citi, emerging markets saw outflows of $1.6 billion for the week ended May 18, as investors sought to avoid risk.
No wonder then that the dollar and the Sensex’s inverse relationship has become very stark in the past three weeks. The Dollar Index, which measures the performance of the US dollar against the basket of six major currencies, has bounced from a recent low of 72.93 (April 29) to 75.62.
During the same period, the Indian benchmark Sensex has fallen 6 per cent. Foreign institutional investors (FIIs) have sold equities worth $1.74 billion (Rs 7,791 crore) in the Indian markets in May, according to data from the Securities & Exchange Board of India.
However, experts believe there are no reasons for long-term investors to panic. While the Indian markets have been weak because of the underlying fundamental reasons of high inflation and monetary tightening, which may dent the country’s growth prospects, Mukherjea said, “the price movements in the market in the last four-five months have not been so significant for patient long-term money to either consider a major exit or entry. The four-five per cent market movement that we have seen is of interest to hedge funds that are interested in short-term flip trades.”
The good news for investors is that a strong dollar is likely to be a temporary phase. Traders are shunning riskier assets like equities and are putting money in the greenback because of the Greek debt restructuring woes, concerns over global growth and weakness in commodities, according to Moses Harding, Head – Global Markets Group, IndusInd Bank.
The euro, which has the highest weight in the dollar index, has slipped 5 per cent against the greenback in the past month on worries the euro zone may not be able to raise interest rates ahead of the US, said Harding.
N Subramaniam, forex consultant at Pinnacle Forex, said, “At near zero interest rates, nobody wanted the dollar, but if Ben Bernanke ends the stimulus package and raises interest rates, it will strengthen. The short on the dollar and long on equities and commodities trade, which has been very prominent for the last two years, is unwinding.”
Once the QE2 ends, the cheap money flowing across different asset classes will dry up. Analysts say long-term funds have not been coming into India for the past few months, which may be the case in the near future unless fundamental factors improve.
But, how far will the dollar rise? Kwok says the dollar’s strength is only temporary because fundamentally the US economy continues to remain weak against the emerging economies. Harding expects the Dollar Index to surge to the 79 levels in the near term before cooling off.
For investors in the Indian stock market, the rising dollar is a cause of worry. With growth concerns across the world, foreign institutional investors are moving their money to safe havens. And in most cases, the safe haven happens to be the dollar.
The US Federal Reserve launched the QE2, its $600-billion bond buying programme, in November 2010 to prop up the ailing economy. With the programme expected to end in June, the liquidity conditions will become tighter. Fund managers, as a result, are already busy pruning their risky assets, including investments in Indian and other emerging market equities.
“Around 40 per cent of the money that enters India is hedge fund or hot money, which is interest rate and exchange rate-sensitive. There has been some flight of capital in anticipation of the QE2 ending,” said Saurabh Mukherjea, head of equities at Ambit Capital.
Besides the QE2 ending, sovereign debt woes emanating from Greece have also supported the dollar’s up move. Citigroup’s Hong Kong-based analyst Kelly Kwok said the dollar strengthened because whenever investors are risk averse, they sell other assets and buy the dollar.
As a result of these events, emerging market equities posted their first weekly loss last week (ended May 18) after seven consecutive weeks of inflows. According to an equity strategy report by Citi, emerging markets saw outflows of $1.6 billion for the week ended May 18, as investors sought to avoid risk.
No wonder then that the dollar and the Sensex’s inverse relationship has become very stark in the past three weeks. The Dollar Index, which measures the performance of the US dollar against the basket of six major currencies, has bounced from a recent low of 72.93 (April 29) to 75.62.
During the same period, the Indian benchmark Sensex has fallen 6 per cent. Foreign institutional investors (FIIs) have sold equities worth $1.74 billion (Rs 7,791 crore) in the Indian markets in May, according to data from the Securities & Exchange Board of India.
However, experts believe there are no reasons for long-term investors to panic. While the Indian markets have been weak because of the underlying fundamental reasons of high inflation and monetary tightening, which may dent the country’s growth prospects, Mukherjea said, “the price movements in the market in the last four-five months have not been so significant for patient long-term money to either consider a major exit or entry. The four-five per cent market movement that we have seen is of interest to hedge funds that are interested in short-term flip trades.”
The good news for investors is that a strong dollar is likely to be a temporary phase. Traders are shunning riskier assets like equities and are putting money in the greenback because of the Greek debt restructuring woes, concerns over global growth and weakness in commodities, according to Moses Harding, Head – Global Markets Group, IndusInd Bank.
The euro, which has the highest weight in the dollar index, has slipped 5 per cent against the greenback in the past month on worries the euro zone may not be able to raise interest rates ahead of the US, said Harding.
N Subramaniam, forex consultant at Pinnacle Forex, said, “At near zero interest rates, nobody wanted the dollar, but if Ben Bernanke ends the stimulus package and raises interest rates, it will strengthen. The short on the dollar and long on equities and commodities trade, which has been very prominent for the last two years, is unwinding.”
Once the QE2 ends, the cheap money flowing across different asset classes will dry up. Analysts say long-term funds have not been coming into India for the past few months, which may be the case in the near future unless fundamental factors improve.
But, how far will the dollar rise? Kwok says the dollar’s strength is only temporary because fundamentally the US economy continues to remain weak against the emerging economies. Harding expects the Dollar Index to surge to the 79 levels in the near term before cooling off.
Markets open strong, realty leads
Taking cues from the firm Asian markets the Indian markets opened strong with the BSE benchmark index, Sensex up 132 points at 18,177 and the Nifty started off the day above the 5,400 level, gaining 32 points at 5,445.In the broader markets, the midcap and the smallcap indices added 0.4% each, underperforming the Sensex which added 0.6%.
Among the sectoral indices, there was renewed buying interest seen in the beaten down spaces like Realty and Bankex which gained 1% ecah in the opening trades. However, rate sensitive, Auto space started the day in the negative, giving off nearly 1%. Capital Goods and FMCG indices were also quiet with a gain of 0.4%. Tata Motors and Hero Honda shedding 3% and 1% respectively are weighing on the auto space.
Among the Sensex gainers in the opening trades are realty major DLF up nearly 2% followed by ICICI Bank, ONGC, Reliance Infrastructure, HDFC, Jaiprakash Associates and Bharti Airtel adding 1% each.
Apart from the auto scrips, Hindustan Unilever down 0.7% was the onlt loser among the Sensex scrips.
The market breadth was positive. Of the total 1326 scrips traded on the BSE, 901 scrips advanced while 365 declined.
Among the sectoral indices, there was renewed buying interest seen in the beaten down spaces like Realty and Bankex which gained 1% ecah in the opening trades. However, rate sensitive, Auto space started the day in the negative, giving off nearly 1%. Capital Goods and FMCG indices were also quiet with a gain of 0.4%. Tata Motors and Hero Honda shedding 3% and 1% respectively are weighing on the auto space.
Among the Sensex gainers in the opening trades are realty major DLF up nearly 2% followed by ICICI Bank, ONGC, Reliance Infrastructure, HDFC, Jaiprakash Associates and Bharti Airtel adding 1% each.
Apart from the auto scrips, Hindustan Unilever down 0.7% was the onlt loser among the Sensex scrips.
The market breadth was positive. Of the total 1326 scrips traded on the BSE, 901 scrips advanced while 365 declined.
Indian exchanges given SME platform go-ahead
The Bombay Stock Exchange and National Stock Exchange of India have both secured provisional approval from India’s markets regulator to establish separate platforms for small and medium sized companies as the two go head-to-head for market share.
The new SME platforms will allow Indian companies to list at a lower cost and raise a smaller amount of money than on the main boards. The new platforms aim to increase visibility among investors and venture capitalists as well as providing liquidity for shareholders and encouraging entrepreneurship in India.
Madhu Kannan, chief executive of the BSE, said the SME platform would tie in well with the government’s agenda of opening up India’s markets to more of the population. He said it would also provide “promising enterprises of the future to access retail capital”.
Mr Kannan, a former banker who has worked for the New York Stock Exchange and Merrill Lynch, was appointed as head of the BSE two years ago with an agenda to drive through reforms at the 136-year old exchange, which had been steadily losing market share to its younger rival, the NSE.
Ravi Narain, chief executive of the NSE, said SMEs played a critical role in the Indian economy: “We are committed to providing a world class platform to deserving SMEs to give them the opportunity to list. This will give them access to the capital markets in an efficient manner and help them to raise capital to meet their growth opportunities.”
The Securities and Exchange Board of India, the market regulator, set out guidelines for an SME exchange last year, relaxing rules in an effort to make it easier for SMEs to list. Companies listing on the new trading platforms, for example, would only have to report half-yearly and not quarterly.
The BSE said it expected to secure final approval from Sebi in the next few months after it had addressed a number of technical, regulatory and arbitration issues. The NSE said it was making good progress to “operationalise” the platform.
The new trading platform will follow a hybrid model that copies elements from other exchanges such as London’s junior Aim market or Nasdaq OMX.
The Multi Commodity Exchange of India, controlled by Indian markets entrepreneur Jignesh Shah’s Financial Technologies, has also signalled interest in launching its own SME platform.
With only 2 per cent of India’s 1.2bn population involved in market trading, commentators point to the huge growth potential in India.
Research by the International Monetary Fund and Standard Chartered suggests that India could move from being the world’s tenth largest economy, with a GDP of $1,700bn, to the world’s third largest economy by 2030.
The Organisation for Economic Co-operation and Development said on Wednesday that it expected India’s economy to grow about 8.5 per cent this year.
The new SME platforms will allow Indian companies to list at a lower cost and raise a smaller amount of money than on the main boards. The new platforms aim to increase visibility among investors and venture capitalists as well as providing liquidity for shareholders and encouraging entrepreneurship in India.
Madhu Kannan, chief executive of the BSE, said the SME platform would tie in well with the government’s agenda of opening up India’s markets to more of the population. He said it would also provide “promising enterprises of the future to access retail capital”.
Mr Kannan, a former banker who has worked for the New York Stock Exchange and Merrill Lynch, was appointed as head of the BSE two years ago with an agenda to drive through reforms at the 136-year old exchange, which had been steadily losing market share to its younger rival, the NSE.
Ravi Narain, chief executive of the NSE, said SMEs played a critical role in the Indian economy: “We are committed to providing a world class platform to deserving SMEs to give them the opportunity to list. This will give them access to the capital markets in an efficient manner and help them to raise capital to meet their growth opportunities.”
The Securities and Exchange Board of India, the market regulator, set out guidelines for an SME exchange last year, relaxing rules in an effort to make it easier for SMEs to list. Companies listing on the new trading platforms, for example, would only have to report half-yearly and not quarterly.
The BSE said it expected to secure final approval from Sebi in the next few months after it had addressed a number of technical, regulatory and arbitration issues. The NSE said it was making good progress to “operationalise” the platform.
The new trading platform will follow a hybrid model that copies elements from other exchanges such as London’s junior Aim market or Nasdaq OMX.
The Multi Commodity Exchange of India, controlled by Indian markets entrepreneur Jignesh Shah’s Financial Technologies, has also signalled interest in launching its own SME platform.
With only 2 per cent of India’s 1.2bn population involved in market trading, commentators point to the huge growth potential in India.
Research by the International Monetary Fund and Standard Chartered suggests that India could move from being the world’s tenth largest economy, with a GDP of $1,700bn, to the world’s third largest economy by 2030.
The Organisation for Economic Co-operation and Development said on Wednesday that it expected India’s economy to grow about 8.5 per cent this year.
Tech Mahindra: Recovery in telecom spending bodes well; stock up
The country's fifth-largest software exporter Tech Mahindra, continued its earlier subdued performance even during the March 2011 quarter.
While the company managed a marginal revenue growth during the quarter, compared with earlier quarters, the growth in bottomline remained more or less flat.
At 9:42 am, shares of Tech Mahindra were trading 0.21 per cent up at Rs 660 on the Bombay Stock Exchange . It hit a low of Rs 587.15 nad a high of Rs 664.30 in trade so far.
The company's growth has remained restricted over the past few quarters due to turbulence in the global telecom sector, which contributes a major chunk of the company's overall business.
Also, the performance of the company's largest customer - British Telecom , which contributes over 40% to the overall business, has remained unstable in the past.
Facing these challenges, the slight increase in discretionary spends globally comes as a positive for the company. While demand from the the US and Europe continue to remain slow, emerging markets have shown healthy signs of demand revival.
To address the new technology initiatives such as cloud computing, Tech Mahindra has expanded its service offerings beyond applications to include infrastructure management, BPO, security, VAS & network services.
During the quarter, the company posted a 4.2% revenue growth atRs1,262 crore, against the previous quarter, driven largely by a 2.5% volume growth. On the operational front, increased selling, general and administrative expenses relative to net sales resulted in a more or less flat operating profit margin at 20.4%.
Wage hikes and pricing pressures in the coming quarters are likely to act as a headwind squeezing margins further. The company's bottomline also showed a flattish trend at Rs208 crore, on a sequential basis.
During the March 2011 quarter, the company's BT driven revenue stood at £70 million, which is expected to remain stagnant. However, non-BT revenues grew at 9% sequentially, showing signs of revival.
The company has witnessed an improved traction in its Africa business, where it is serving 2,000 clients across 7 countries. The Vodafone projects in Australia and Qatar, signed in the March quarter, bode well for the company. Tech Mahindra has witnessed increased demand from the emerging markets. This is evident from a significant employee addition of 4,125 during the quarter.
The stock is currently trading at 11.6 times its earnings for FY11. A strong traction is expected from emerging markets for the company in the coming quarters.
Also, the recovery in telecom spending and synergies from an ultimate merger with subsidiary Mahindra Satyam are positive signs for the company going ahead.
While the company managed a marginal revenue growth during the quarter, compared with earlier quarters, the growth in bottomline remained more or less flat.
At 9:42 am, shares of Tech Mahindra were trading 0.21 per cent up at Rs 660 on the Bombay Stock Exchange . It hit a low of Rs 587.15 nad a high of Rs 664.30 in trade so far.
The company's growth has remained restricted over the past few quarters due to turbulence in the global telecom sector, which contributes a major chunk of the company's overall business.
Also, the performance of the company's largest customer - British Telecom , which contributes over 40% to the overall business, has remained unstable in the past.
Facing these challenges, the slight increase in discretionary spends globally comes as a positive for the company. While demand from the the US and Europe continue to remain slow, emerging markets have shown healthy signs of demand revival.
To address the new technology initiatives such as cloud computing, Tech Mahindra has expanded its service offerings beyond applications to include infrastructure management, BPO, security, VAS & network services.
During the quarter, the company posted a 4.2% revenue growth atRs1,262 crore, against the previous quarter, driven largely by a 2.5% volume growth. On the operational front, increased selling, general and administrative expenses relative to net sales resulted in a more or less flat operating profit margin at 20.4%.
Wage hikes and pricing pressures in the coming quarters are likely to act as a headwind squeezing margins further. The company's bottomline also showed a flattish trend at Rs208 crore, on a sequential basis.
During the March 2011 quarter, the company's BT driven revenue stood at £70 million, which is expected to remain stagnant. However, non-BT revenues grew at 9% sequentially, showing signs of revival.
The company has witnessed an improved traction in its Africa business, where it is serving 2,000 clients across 7 countries. The Vodafone projects in Australia and Qatar, signed in the March quarter, bode well for the company. Tech Mahindra has witnessed increased demand from the emerging markets. This is evident from a significant employee addition of 4,125 during the quarter.
The stock is currently trading at 11.6 times its earnings for FY11. A strong traction is expected from emerging markets for the company in the coming quarters.
Also, the recovery in telecom spending and synergies from an ultimate merger with subsidiary Mahindra Satyam are positive signs for the company going ahead.
Tata Motors: Volume growth may be tough; stock slumps
Tata Motors posted its highest-ever quarterly consolidated profits for the March 2011 quarter in line with the Street's expectations. However, the signs of a slowdown have become visible with pressure on margin. On the other hand, the company has a significantly better balance sheet compared with a year ago, making it ready to face headwinds.
At 9:35 am, shares of Tata Motors were trading down 5.19 per cent atyRs 1101 on the Bombay Stock Exchange . It hit a low of Rs 1099.10 and a high of Rs 1185 in trade so far.
The company's operating profit margins for the March '11 quarter at 12.8% were the lowest in the four quarters of FY11 and the 27% growth in operating profit to Rs4,545.9 crore was the slowest during any quarter of the year. The year-on-year growth in net profit was a paltry 18% for the quarter. However, it was due to inflated profits of the year-ago period, following a sale of investments.
The company ended FY11 with a significantly strengthened balance sheet thanks to the 3.6 times jump in annual profits and also the capital infusion. The company issued Rs3,350 crore through qualified institutional placement in October 2010 and FCCB conversions added another 2.36 crore equity shares between November and March 2011. This has brought down the promoter group's shareholding from 37% a year ago to 34.83% by end-March '11.
As a result, the debt burden came down 6.6% through FY11 to Rs32,791 crore. This was 1.7 times its consolidated equity, against 4.3 a year ago. However, considering the Rs9,900-crore debt portfolio of its auto-finance subsidiary and its cash balance of Rs10,948 crore, net debt-toequity stands at 0.69.
For the full year, the company achieved a 33% revenue growth to Rs1,23,133 crore thanks mainly to the strong volume growth - 23% up in domestic and 70% jump in exports - while the price hikes remained just around 5% in both commercial as well as passenger car segments. A substantial jump in operating margins, reduction in interest cost and a benign increase in depreciation and tax expenses helped it clock a fantastic 261% jump in net profit to Rs9,274 crore.
The company faces many challenges going ahead. The macro-economic factors such as high inflation, rising interest rates and slower industrial growth have the potential to adversely impact demand for automobiles, while cost concerns continue with high commodity prices.
The company will focus mainly on export growth in both commercial as well as passenger vehicle segments and continue expanding and improving its product portfolio. It appears difficult for the company to maintain its volume growth, but reduction in interest and other costs could see it improve profits in the coming quarters.
At 9:35 am, shares of Tata Motors were trading down 5.19 per cent atyRs 1101 on the Bombay Stock Exchange . It hit a low of Rs 1099.10 and a high of Rs 1185 in trade so far.
The company's operating profit margins for the March '11 quarter at 12.8% were the lowest in the four quarters of FY11 and the 27% growth in operating profit to Rs4,545.9 crore was the slowest during any quarter of the year. The year-on-year growth in net profit was a paltry 18% for the quarter. However, it was due to inflated profits of the year-ago period, following a sale of investments.
The company ended FY11 with a significantly strengthened balance sheet thanks to the 3.6 times jump in annual profits and also the capital infusion. The company issued Rs3,350 crore through qualified institutional placement in October 2010 and FCCB conversions added another 2.36 crore equity shares between November and March 2011. This has brought down the promoter group's shareholding from 37% a year ago to 34.83% by end-March '11.
As a result, the debt burden came down 6.6% through FY11 to Rs32,791 crore. This was 1.7 times its consolidated equity, against 4.3 a year ago. However, considering the Rs9,900-crore debt portfolio of its auto-finance subsidiary and its cash balance of Rs10,948 crore, net debt-toequity stands at 0.69.
For the full year, the company achieved a 33% revenue growth to Rs1,23,133 crore thanks mainly to the strong volume growth - 23% up in domestic and 70% jump in exports - while the price hikes remained just around 5% in both commercial as well as passenger car segments. A substantial jump in operating margins, reduction in interest cost and a benign increase in depreciation and tax expenses helped it clock a fantastic 261% jump in net profit to Rs9,274 crore.
The company faces many challenges going ahead. The macro-economic factors such as high inflation, rising interest rates and slower industrial growth have the potential to adversely impact demand for automobiles, while cost concerns continue with high commodity prices.
The company will focus mainly on export growth in both commercial as well as passenger vehicle segments and continue expanding and improving its product portfolio. It appears difficult for the company to maintain its volume growth, but reduction in interest and other costs could see it improve profits in the coming quarters.
Global hospitality majors check into Bangalore
BANGALORE: With the city emerging as a hub for international business travel, global hospitality brands are checking into Bangalore rather rapidly. Starwood Hotels and Resorts opened Sheraton Hotel at Brigade Gateway in Malleswaram last week. Switzerland-based Movenpick Hotels & Resorts is opening its first 5-star property in the country in Bangalore on June 1.
Many more are in line, and over the next two years, the city will witness an addition of 2,500 rooms across categories (3-star budget to 5-star luxury). Bangalore currently has about 5,550 rooms in these categories.
Several of the new launches will be in the five-star deluxe category. Prestige Estates Projects has partnered with JW Marriott to build a 300-room luxury resort hotel —Prestige Golfshire — on Nandi Hills Road. Shangri-La on Palace Road and Ritz Carlton on Residency Road are expected to be ready within the next two years.
"A fair amount of supply has come into Bangalore which has allowed for some rate rationalization. However,there are many micro markets in Bangalore that continue to do well," said Manav Thadani, chairman of hospitality consultancy firm HVS.
Micro markets of Whitefield, Electronics City and Outer Ring Road are seeing new supplies with many IT/ITeS companies expanding on the periphery. MDB Zephyr, part of New Delhi-based MBD Group, is setting up a 200-room luxury hotel in Whitefield. Hospitality brand Alila is doing a 120-room luxury hotel in Whitefield.
Business travellers account for 80% of the demand for rooms in Bangalore. The meetings and conferences segment and the leisure segment account for 5% and 3% , according to real estate consultancy Cushman & Wakefield. "A large chunk of business is driven by corporates. Except for Aero India, there aren't big events coming to Bangalore," said Akshay Kulkarni, executive director for hospitality services South Asia, in Cushman & Wakefield. The average room rate peaked at Rs 8,500 in 2007 as per Cushman & Wakefield hospitality report 2010 . It dropped to Rs 6,600 in 2009, and has since hardened by 10-15% because of rising demand.
The incremental room supply will result in softening of room rates in the short to medium term. "Occupancy rates in Bangalore are improving with average rates more or less flat compared to last year. With the new supply, the growth in business will be absorbed leaving occupancy and average daily rates flat," said Chris Moloney, COO, South West Asia, Intercontinental Hotels Group (IHG), which will soon launch Holiday Inn Hotels and Resorts in Bangalore.
Dilip Puri, MD-India, Starwood Asia Pacific Hotels & Resorts, said the luxury room rates have corrected after the steep rise in 2007. "The average room rate for luxury hotels shot up to $400 some three years back. The recession brought about a reality check. Rentals are exactly where they should be today. Anything between $200-$250 per room night are realistic."
Many more are in line, and over the next two years, the city will witness an addition of 2,500 rooms across categories (3-star budget to 5-star luxury). Bangalore currently has about 5,550 rooms in these categories.
Several of the new launches will be in the five-star deluxe category. Prestige Estates Projects has partnered with JW Marriott to build a 300-room luxury resort hotel —Prestige Golfshire — on Nandi Hills Road. Shangri-La on Palace Road and Ritz Carlton on Residency Road are expected to be ready within the next two years.
"A fair amount of supply has come into Bangalore which has allowed for some rate rationalization. However,there are many micro markets in Bangalore that continue to do well," said Manav Thadani, chairman of hospitality consultancy firm HVS.
Micro markets of Whitefield, Electronics City and Outer Ring Road are seeing new supplies with many IT/ITeS companies expanding on the periphery. MDB Zephyr, part of New Delhi-based MBD Group, is setting up a 200-room luxury hotel in Whitefield. Hospitality brand Alila is doing a 120-room luxury hotel in Whitefield.
Business travellers account for 80% of the demand for rooms in Bangalore. The meetings and conferences segment and the leisure segment account for 5% and 3% , according to real estate consultancy Cushman & Wakefield. "A large chunk of business is driven by corporates. Except for Aero India, there aren't big events coming to Bangalore," said Akshay Kulkarni, executive director for hospitality services South Asia, in Cushman & Wakefield. The average room rate peaked at Rs 8,500 in 2007 as per Cushman & Wakefield hospitality report 2010 . It dropped to Rs 6,600 in 2009, and has since hardened by 10-15% because of rising demand.
The incremental room supply will result in softening of room rates in the short to medium term. "Occupancy rates in Bangalore are improving with average rates more or less flat compared to last year. With the new supply, the growth in business will be absorbed leaving occupancy and average daily rates flat," said Chris Moloney, COO, South West Asia, Intercontinental Hotels Group (IHG), which will soon launch Holiday Inn Hotels and Resorts in Bangalore.
Dilip Puri, MD-India, Starwood Asia Pacific Hotels & Resorts, said the luxury room rates have corrected after the steep rise in 2007. "The average room rate for luxury hotels shot up to $400 some three years back. The recession brought about a reality check. Rentals are exactly where they should be today. Anything between $200-$250 per room night are realistic."
Diesel, LPG prices may be hiked on June 9
NEW DELHI: The ministerial panel on fuels under FM Pranab Mukherjee is expected to raise diesel and cooking gas prices on June 9. Diesel price is likely to be increased by Rs 2-3 a litre and cooking gas by about Rs 35 per cylinder. The increase in price of diesel, which is the main transportation fuel, is expected to push up cost of essential items, all goods that move on trucks as well as bus and taxi fares.
A revision in diesel and cooking gas prices was in the offing since petrol price was jacked up on May 15 by Rs 5 a litre, the steepest-ever increase. The ministerial panel was expected to meet on May 11, the day after the last phase of polling was to get over in Bengal. But the government pushed the pause button in view of a see-saw in global crude prices after Osama bin-Laden's killing.
The fluctuation in crude price in the intervening period has brought down the loss on a litre of diesel from a high of Rs 19 or so, when the price of Indian crude mix averaged nearly $121 a barrel before Osama was killed. Diesel and cooking gas prices were last revised in June 2010. The present pump price of diesel corresponds to around $70 a barrel of crude mix bought by the state-run refiners. That mix is ruling at $118 now. As a result, oil marketers are currently losing Rs 16.49 on every litre of diesel and Rs 329 on each cooking gas refill.
The oil ministry will also push for an increase in the price of kerosene, politically the holy cow of fuels. The companies are losing almost Rs 30 a litre on the poor man's fuel, nearly 40% of which flows into the black market. The panel is unlikely to tinker with fuel taxes for fear of upsetting the government's calculations. Top finance ministry officials have, over the week, categorically ruled on reducing taxes to pare increase in fuel prices.
A revision in diesel and cooking gas prices was in the offing since petrol price was jacked up on May 15 by Rs 5 a litre, the steepest-ever increase. The ministerial panel was expected to meet on May 11, the day after the last phase of polling was to get over in Bengal. But the government pushed the pause button in view of a see-saw in global crude prices after Osama bin-Laden's killing.
The fluctuation in crude price in the intervening period has brought down the loss on a litre of diesel from a high of Rs 19 or so, when the price of Indian crude mix averaged nearly $121 a barrel before Osama was killed. Diesel and cooking gas prices were last revised in June 2010. The present pump price of diesel corresponds to around $70 a barrel of crude mix bought by the state-run refiners. That mix is ruling at $118 now. As a result, oil marketers are currently losing Rs 16.49 on every litre of diesel and Rs 329 on each cooking gas refill.
The oil ministry will also push for an increase in the price of kerosene, politically the holy cow of fuels. The companies are losing almost Rs 30 a litre on the poor man's fuel, nearly 40% of which flows into the black market. The panel is unlikely to tinker with fuel taxes for fear of upsetting the government's calculations. Top finance ministry officials have, over the week, categorically ruled on reducing taxes to pare increase in fuel prices.
Sunday, May 22, 2011
Reliance Fuel Exports From India Rise 25% on Gasoline, Jet-Fuel Shipments
By Pratish Narayanan - May 22, 2011
Fuel exports by Reliance Industries Ltd. (RIL), India’s largest publicly traded company, climbed 25 percent in the first half of May from a month earlier as it shipped more gasoline to the U.S. and demand for jet fuel grew.
The Mumbai-based company, which operates the world’s largest refining complex, sold at least 1 million metric tons of fuel products overseas from its Jamnagar facility from 800,000 tons in the first 15 days of April, according to ship-tracking data compiled by Bloomberg and vessel fixtures from Clarkson Research Services Ltd.
Reliance, controlled by billionaire Mukesh Ambani, is aiming to increase exports while state-owned rivals such as Indian Oil Corp. and Bharat Petroleum Corp. sell more fuel domestically at government-capped prices. Demand for gasoline in the U.S., the world’s biggest economy, peaks during the summer driving season, which lasts from the Memorial Day weekend in late May to the Labor Day holiday in early September.
Manoj Warrier, a spokesman for Reliance in Mumbai, didn’t respond to an e-mail seeking comment. All figures from Clarkson are for single-voyage bookings and exclude long-term charters. Shipbrokers aren’t obliged to report charters so the scope of data capture can vary from month to month.
Gasoline Shipments
Reliance exported at least 555,000 tons of gasoline from Jamnagar in western India during the first half of this month, according to transmissions captured by AISLive on Bloomberg and data from Clarkson Research, a unit of the world’s biggest shipbroker.
At least 41 percent of the month’s gasoline shipments went to the U.S., while other destinations included Europe, Africa and Singapore. Gasoline consumption rises when Americans take to the roads for summer vacations. Consumption tends to peak after Independence Day on July 4.
The Qi Lin Zuo was hired by New York-based Hess Corp. to transport 65,000 tons of gasoline to the U.S. from the port of Sikka near Jamnagar, the Clarkson data show. The vessel sailed from near Sikka in early May and was last tracked in the Mediterranean Sea headed to New York, according to ship transmissions captured by Bloomberg.
Reliance’s shipments of jet fuel jumped 120 percent to at least 125,000 tons in the first 15 days of this month, the data show. Jet-fuel stockpiles fell to the lowest in more than two years in Europe’s Amsterdam-Rotterdam-Antwerp oil-trading hub before the start of the peak summer travel season, according to PJK International BV.
Supplies of the aviation fuel in independent storage declined 37,000 tons, or 7 percent, to 491,000 tons, in the week to May 19, the Oosterhout, Netherlands-based researcher said. That’s the lowest since Oct. 16, 2008.
New Century
The New Century sailed from near Sikka this month, carrying 65,000 tons of jet fuel to Europe, the data show. The vessel was last tracked near the Suez Canal headed to Le Havre in France, according to ship transmissions captured by Bloomberg.
Reliance’s gasoil, or diesel, shipments were little changed at 160,000 tons during the period. Most of the diesel cargoes went to Africa, the data show. The company also shipped at least 130,000 tons of naphtha to Japan, up from 35,000 tons.
Reliance runs two refineries in the western Indian state of Gujarat, which are capable of processing heavier grades of crude. They have a combined processing capacity of 1.24 million barrels a day, and account for about 1.6 percent of global refining capacity, according to the company’s website.
To contact the reporter on this story: Pratish Narayanan in Mumbai at pnarayanan9@bloomberg.net
To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Fuel exports by Reliance Industries Ltd. (RIL), India’s largest publicly traded company, climbed 25 percent in the first half of May from a month earlier as it shipped more gasoline to the U.S. and demand for jet fuel grew.
The Mumbai-based company, which operates the world’s largest refining complex, sold at least 1 million metric tons of fuel products overseas from its Jamnagar facility from 800,000 tons in the first 15 days of April, according to ship-tracking data compiled by Bloomberg and vessel fixtures from Clarkson Research Services Ltd.
Reliance, controlled by billionaire Mukesh Ambani, is aiming to increase exports while state-owned rivals such as Indian Oil Corp. and Bharat Petroleum Corp. sell more fuel domestically at government-capped prices. Demand for gasoline in the U.S., the world’s biggest economy, peaks during the summer driving season, which lasts from the Memorial Day weekend in late May to the Labor Day holiday in early September.
Manoj Warrier, a spokesman for Reliance in Mumbai, didn’t respond to an e-mail seeking comment. All figures from Clarkson are for single-voyage bookings and exclude long-term charters. Shipbrokers aren’t obliged to report charters so the scope of data capture can vary from month to month.
Gasoline Shipments
Reliance exported at least 555,000 tons of gasoline from Jamnagar in western India during the first half of this month, according to transmissions captured by AISLive on Bloomberg and data from Clarkson Research, a unit of the world’s biggest shipbroker.
At least 41 percent of the month’s gasoline shipments went to the U.S., while other destinations included Europe, Africa and Singapore. Gasoline consumption rises when Americans take to the roads for summer vacations. Consumption tends to peak after Independence Day on July 4.
The Qi Lin Zuo was hired by New York-based Hess Corp. to transport 65,000 tons of gasoline to the U.S. from the port of Sikka near Jamnagar, the Clarkson data show. The vessel sailed from near Sikka in early May and was last tracked in the Mediterranean Sea headed to New York, according to ship transmissions captured by Bloomberg.
Reliance’s shipments of jet fuel jumped 120 percent to at least 125,000 tons in the first 15 days of this month, the data show. Jet-fuel stockpiles fell to the lowest in more than two years in Europe’s Amsterdam-Rotterdam-Antwerp oil-trading hub before the start of the peak summer travel season, according to PJK International BV.
Supplies of the aviation fuel in independent storage declined 37,000 tons, or 7 percent, to 491,000 tons, in the week to May 19, the Oosterhout, Netherlands-based researcher said. That’s the lowest since Oct. 16, 2008.
New Century
The New Century sailed from near Sikka this month, carrying 65,000 tons of jet fuel to Europe, the data show. The vessel was last tracked near the Suez Canal headed to Le Havre in France, according to ship transmissions captured by Bloomberg.
Reliance’s gasoil, or diesel, shipments were little changed at 160,000 tons during the period. Most of the diesel cargoes went to Africa, the data show. The company also shipped at least 130,000 tons of naphtha to Japan, up from 35,000 tons.
Reliance runs two refineries in the western Indian state of Gujarat, which are capable of processing heavier grades of crude. They have a combined processing capacity of 1.24 million barrels a day, and account for about 1.6 percent of global refining capacity, according to the company’s website.
To contact the reporter on this story: Pratish Narayanan in Mumbai at pnarayanan9@bloomberg.net
To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
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