India will monitor movements in its currency “for some time,” to assess whether and when it needs to take steps to curb swings, Finance Minister Pranab Mukherjee said.
“We will watch the situation for some time,” Mukherjee said in response to reporters’ questions today in Washington. “As and when intervention will be required, that will be considered at that stage.”
India’s rupee completed its worst week in 18 years as investors sold emerging-market assets in favor of the relative safety of the dollar amid concern the global economy is slowing. The currency lost 4.6 percent in the biggest weekly plunge since March 1993.
Mukherjee said that he had a discussion about the rupee with India’s central bank Governor Duvvuri Subbarao while both are in Washington to attend the annual meetings of the International Monetary Fund and World Bank this week. Still, “what I feel or what I value is not important” in the context of steps to be taken, Mukherjee said today.
Two days ago, Mukherjee told reporters in New York that the Reserve Bank of India is currently not intervening in the currency market to curb excessive swings in the rupee. The RBI will sell dollars to control movements in the exchange rate, though “right now there is no such situation,” Mukherjee had said Sept. 21.
The RBI may intervene if the rupee falls to levels seen during the financial crisis of 2008 and 2009, a finance ministry official said today in New Delhi, asking not to be identified because he’s not authorized to speak on the matter.
The Indian currency reached 49.43 per dollar at the 5 p.m. close in Mumbai.
To contact the reporters on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net Kartik Goyal in New Delhi at kgoyal@bloomberg.net
To contact the editors responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net Stephanie Phang at sphang@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Friday, September 23, 2011
Thursday, September 22, 2011
Reliance Said to Need Up to Four Years to Increase Output at Largest Field
By Rakteem Katakey - Sep 22, 2011
Billionaire Mukesh Ambani’s Reliance Industries Ltd. (RIL) and BP Plc (BP/) may need as long as four years to raise output from India’s biggest gas field because the reservoir is harder to tap than previously estimated, a person with direct knowledge of the matter said.
Reliance, which sold a 30 percent stake in the fields to BP, has sought permission from the Indian government to develop smaller areas to counter a drop from its main KG-D6 block off India’s east coast, the person said, asking not to be identified because the plan is private.
Profit at Reliance has missed analysts’ forecasts for six of the last seven quarters and its shares have slumped 26 percent this year as production of the clean-burning fuel falls. Tests showed increasing production may even be unviable at government controlled prices, the person said.
“The gas business is the most important for their growth and investors are hoping it’ll rise quickly,” said Walter Rossini, who overseas the equivalent of $269 million of Indian stocks, including Reliance, at Aletti Gestielle SGR SpA in Milan. “Without the growth in gas their shares will stagnate.”
Tushar Pania, a spokesman for Reliance, declined to comment on the gas production when reached on his mobile phone yesterday.
Shares of India’s biggest company by value fell 6.1 percent to 786.35 rupees yesterday, the biggest drop since July 6, 2009. BSE India Sensitive Index dropped 4 percent.
The cost of protecting Reliance’s debt using credit-default swaps has risen 126 basis points to 310 basis points, the most since since the quarter ended Dec. 31, 2008, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in privately negotiated markets.
‘Understand Options’
London-based BP, Europe’s second-biggest oil company, is studying data for the deepwater block in the Bay of Bengal after receiving the Indian government’s approval to buy the stake in 23 fields valued at $7.2 billion, according to an e-mail response from BP yesterday.
“We need to understand the options through joint evaluation of data before deciding the next course of action,” BP said in the e-mail. Reliance and BP are planning to develop discoveries known as the R-Series and other satellite fields in the KG-D6 block, according to BP.
Boosting output may take a couple of years, Sashi Mukundan, BP’s India chief said Sept. 6.
Gas output has dropped to 45 million cubic meters a day, a person with direct knowledge of the matter said Aug. 26. Production from the KG-D6 block averaged 48.6 million cubic meters a day in the three months ended June, R.P.N. Singh, junior oil minister, told parliament on Aug. 2.
Gas Price
Reliance sells gas to power plants and fertilizer units at $4.2 per million British thermal units, a price set by the government and scheduled for revision in April 2014.
The Indian government asked Reliance to drill 11 wells in the year ending March 31, S.K. Srivastava, director general at the country’s oil regulator, said May 2.
The decline in output may continue until work on the wells is completed and they are connected to the main pipeline system carrying the gas, according to a Aug. 25 statement from Calgary- based Niko Resources Ltd. (NKO), which has a 10 percent stake in the KG-D6 block.
The investment by BP will accelerate development and production from Reliance’s fields in India, Ambani said on Feb. 21 when the deal was announced. Reliance may get an additional $1.8 billion from London-based BP if the two companies discover more oil or gas in some of the blocks covered by the agreement.
To contact the reporter on this story: Rakteem Katakey in New Delhi at rkatakey@bloomberg.net
To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Billionaire Mukesh Ambani’s Reliance Industries Ltd. (RIL) and BP Plc (BP/) may need as long as four years to raise output from India’s biggest gas field because the reservoir is harder to tap than previously estimated, a person with direct knowledge of the matter said.
Reliance, which sold a 30 percent stake in the fields to BP, has sought permission from the Indian government to develop smaller areas to counter a drop from its main KG-D6 block off India’s east coast, the person said, asking not to be identified because the plan is private.
Profit at Reliance has missed analysts’ forecasts for six of the last seven quarters and its shares have slumped 26 percent this year as production of the clean-burning fuel falls. Tests showed increasing production may even be unviable at government controlled prices, the person said.
“The gas business is the most important for their growth and investors are hoping it’ll rise quickly,” said Walter Rossini, who overseas the equivalent of $269 million of Indian stocks, including Reliance, at Aletti Gestielle SGR SpA in Milan. “Without the growth in gas their shares will stagnate.”
Tushar Pania, a spokesman for Reliance, declined to comment on the gas production when reached on his mobile phone yesterday.
Shares of India’s biggest company by value fell 6.1 percent to 786.35 rupees yesterday, the biggest drop since July 6, 2009. BSE India Sensitive Index dropped 4 percent.
The cost of protecting Reliance’s debt using credit-default swaps has risen 126 basis points to 310 basis points, the most since since the quarter ended Dec. 31, 2008, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in privately negotiated markets.
‘Understand Options’
London-based BP, Europe’s second-biggest oil company, is studying data for the deepwater block in the Bay of Bengal after receiving the Indian government’s approval to buy the stake in 23 fields valued at $7.2 billion, according to an e-mail response from BP yesterday.
“We need to understand the options through joint evaluation of data before deciding the next course of action,” BP said in the e-mail. Reliance and BP are planning to develop discoveries known as the R-Series and other satellite fields in the KG-D6 block, according to BP.
Boosting output may take a couple of years, Sashi Mukundan, BP’s India chief said Sept. 6.
Gas output has dropped to 45 million cubic meters a day, a person with direct knowledge of the matter said Aug. 26. Production from the KG-D6 block averaged 48.6 million cubic meters a day in the three months ended June, R.P.N. Singh, junior oil minister, told parliament on Aug. 2.
Gas Price
Reliance sells gas to power plants and fertilizer units at $4.2 per million British thermal units, a price set by the government and scheduled for revision in April 2014.
The Indian government asked Reliance to drill 11 wells in the year ending March 31, S.K. Srivastava, director general at the country’s oil regulator, said May 2.
The decline in output may continue until work on the wells is completed and they are connected to the main pipeline system carrying the gas, according to a Aug. 25 statement from Calgary- based Niko Resources Ltd. (NKO), which has a 10 percent stake in the KG-D6 block.
The investment by BP will accelerate development and production from Reliance’s fields in India, Ambani said on Feb. 21 when the deal was announced. Reliance may get an additional $1.8 billion from London-based BP if the two companies discover more oil or gas in some of the blocks covered by the agreement.
To contact the reporter on this story: Rakteem Katakey in New Delhi at rkatakey@bloomberg.net
To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Wednesday, September 21, 2011
Asian Stocks, Korean Won Decline on Fed, Bank Downgrades; Bond Risk Jumps By Shiyin Chen and Shani Raja - Sep 21, 2011
Asian stocks and currencies fell, bond risk jumped to a two-year high and copper sank for a fifth day as the Federal Reserve signaled “significant downside risks” in the U.S. economy and Moody’s Investors Service cut credit ratings on three banks.
The MSCI Asia Pacific Index dropped 2.8 percent as of 11:03 a.m. in Tokyo. Standard & Poor’s 500 Index futures climbed 0.2 percent after a three-day slump. Treasury 10-year yields fell to a record. The dollar rose 0.4 percent against the yen, helping an index of the U.S. currency to a seven-month high. South Korea’s won sank 2.3 percent and New Zealand’s dollar weakened 0.6 percent. Copper slumped 2.2 percent and oil lost 1.2 percent.
Financial shares were the biggest drag on the MSCI Asian index on concern the Fed’s plan to buy $400 billion of bonds with maturities of six to 30 years through June, replacing shorter dated debt, will curb profit margins for global banks. The plan, dubbed “Operation Twist” after a similar program in 1961, will probably fail to lower the 9.1 percent unemployment rate, according to 61 percent of economists surveyed by Bloomberg before the announcement.
“The version of Operation Twist the Fed announced was pretty much as expected, but having said there are now ‘significant downside risks’ to the U.S. economy, it isn’t enough,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which has almost $100 billion under management. “Investors have reacted by selling down shares, commodities and other growth assets.”
Stocks Slump
About 15 shares declined for every one that climbed on MSCI’s Asia Pacific Index, which was poised for its lowest close since July 7, 2010. Japan’s Nikkei 225 Stock Average slid 1.6 percent, South Korea’s Kospi Index decreased 2.6 percent and Hong Kong’s Hang Sent Index lost 3.4 percent.
Mitsubishi UFJ Financial Group Inc., Japan’s largest lender by market value, fell 2.1 percent as BNP Paribas said it was “negative” on the nation’s banks. HSBC Holdings Plc, Europe’s largest bank, dropped 2.9 percent.
“The market had priced in the Fed’s plan,” said Masahide Tanaka, a senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s third-largest bank by market value. “It won’t boost the economy much, while it may have a negative impact on earnings of financial institutions. Banks get short- term funding, use it in the long-term and take a profit.”
The S&P 500 slumped 2.9 percent yesterday after Moody’s cut its long-term credit ratings on Bank of America Corp. and Wells Fargo & Co., saying U.S. support has become less likely if lenders get into financial trouble. Citigroup Inc.’s short-term rating also was cut by Moody’s.
Yields Drop
Yields on 10-year Treasuries dropped as much as two basis points to an all-time low of 1.8345 percent today, after declining eight basis points yesterday. An index of U.S. leading indicators probably rose the least in August in four months, pointing to a slower recovery heading into next year, economists said before the data today. Japan’s benchmark 10-year yield slid 1.5 basis points to 0.97 after touching 0.965 percent, the lowest since Nov. 9.
The cost of protecting Asia-Pacific corporate and sovereign bonds from default surged. The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan rose 17 basis points to 215 basis points, the highest since May 2009, according to Credit Agricole SA prices show and data from CMA. Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a government or company fail to adhere to its debt agreements.
Dollar, Euro
The dollar climbed to 76.77 yen from 76.46 yesterday in New York and traded at $1.3574 per euro. InterContinentalExchange Inc.’s Dollar Index, which tracks the U.S. currency against those of six trading partners, rose 0.2 percent, set for its highest close since Feb. 17.
The euro rallied 0.4 percent to 104.21 yen amid speculation Greece will accelerate budget cuts to keep emergency loans flowing after the government said yesterday it will target civil servants’ wages and pensioners. The policies were demanded by international lenders to ensure Greece meets the deficit- reduction targets that are a condition of its 110 billion-euro bailout package so it can receive a payment due next month.
The won dropped to 1,176.30 after reaching the lowest in more than a year. Overseas investors pulled $918 million from Korean stocks this month through yesterday. Taiwan’s dollar sank as much as 0.9 percent to NT$30.225 per dollar, an eight-month low. The island’s jobless rate likely rose to 4.4 percent in August from 4.37 percent in July, according to a Bloomberg survey of economists before data due today. The Indonesian rupiah slumped 1.6 percent to 9,225 per dollar.
Demand for Dollars
“It seems the Fed announcement is boosting demand for dollars instead of doing the opposite, after its comments on the economic downside risk,” said Lee Jin Ill, a Seoul-based senior currency dealer with Hana Bank. “The plan to buy long-term bonds was already expected and reflected in market prices.”
The so-called kiwi sank to 79.94 U.S. cents. New Zealand’s gross domestic product rose 0.1 percent in the three months through June from the previous quarter, less than all but one of 15 forecasts in a Bloomberg News survey.
Copper for three-month delivery dropped as much as 3.1 percent to $8,039.75 a metric ton before trading at $8,113 on the London Metal Exchange. A close at that level will bring losses from the Feb. 14 all-time high to 20 percent, a drop seen by some analysts as indicating a bear market.
Oil fell for a second day in New York as investors speculated that fuel demand will falter. Futures slipped as much as 2.1 percent before trading 1.3 percent lower at $84.78 a barrel on the New York Mercantile Exchange. Crude dropped 1.2 percent yesterday.
To contact the reporter on this story: Shiyin Chen in Singapore at schen37@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net
To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
The MSCI Asia Pacific Index dropped 2.8 percent as of 11:03 a.m. in Tokyo. Standard & Poor’s 500 Index futures climbed 0.2 percent after a three-day slump. Treasury 10-year yields fell to a record. The dollar rose 0.4 percent against the yen, helping an index of the U.S. currency to a seven-month high. South Korea’s won sank 2.3 percent and New Zealand’s dollar weakened 0.6 percent. Copper slumped 2.2 percent and oil lost 1.2 percent.
Financial shares were the biggest drag on the MSCI Asian index on concern the Fed’s plan to buy $400 billion of bonds with maturities of six to 30 years through June, replacing shorter dated debt, will curb profit margins for global banks. The plan, dubbed “Operation Twist” after a similar program in 1961, will probably fail to lower the 9.1 percent unemployment rate, according to 61 percent of economists surveyed by Bloomberg before the announcement.
“The version of Operation Twist the Fed announced was pretty much as expected, but having said there are now ‘significant downside risks’ to the U.S. economy, it isn’t enough,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which has almost $100 billion under management. “Investors have reacted by selling down shares, commodities and other growth assets.”
Stocks Slump
About 15 shares declined for every one that climbed on MSCI’s Asia Pacific Index, which was poised for its lowest close since July 7, 2010. Japan’s Nikkei 225 Stock Average slid 1.6 percent, South Korea’s Kospi Index decreased 2.6 percent and Hong Kong’s Hang Sent Index lost 3.4 percent.
Mitsubishi UFJ Financial Group Inc., Japan’s largest lender by market value, fell 2.1 percent as BNP Paribas said it was “negative” on the nation’s banks. HSBC Holdings Plc, Europe’s largest bank, dropped 2.9 percent.
“The market had priced in the Fed’s plan,” said Masahide Tanaka, a senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s third-largest bank by market value. “It won’t boost the economy much, while it may have a negative impact on earnings of financial institutions. Banks get short- term funding, use it in the long-term and take a profit.”
The S&P 500 slumped 2.9 percent yesterday after Moody’s cut its long-term credit ratings on Bank of America Corp. and Wells Fargo & Co., saying U.S. support has become less likely if lenders get into financial trouble. Citigroup Inc.’s short-term rating also was cut by Moody’s.
Yields Drop
Yields on 10-year Treasuries dropped as much as two basis points to an all-time low of 1.8345 percent today, after declining eight basis points yesterday. An index of U.S. leading indicators probably rose the least in August in four months, pointing to a slower recovery heading into next year, economists said before the data today. Japan’s benchmark 10-year yield slid 1.5 basis points to 0.97 after touching 0.965 percent, the lowest since Nov. 9.
The cost of protecting Asia-Pacific corporate and sovereign bonds from default surged. The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan rose 17 basis points to 215 basis points, the highest since May 2009, according to Credit Agricole SA prices show and data from CMA. Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a government or company fail to adhere to its debt agreements.
Dollar, Euro
The dollar climbed to 76.77 yen from 76.46 yesterday in New York and traded at $1.3574 per euro. InterContinentalExchange Inc.’s Dollar Index, which tracks the U.S. currency against those of six trading partners, rose 0.2 percent, set for its highest close since Feb. 17.
The euro rallied 0.4 percent to 104.21 yen amid speculation Greece will accelerate budget cuts to keep emergency loans flowing after the government said yesterday it will target civil servants’ wages and pensioners. The policies were demanded by international lenders to ensure Greece meets the deficit- reduction targets that are a condition of its 110 billion-euro bailout package so it can receive a payment due next month.
The won dropped to 1,176.30 after reaching the lowest in more than a year. Overseas investors pulled $918 million from Korean stocks this month through yesterday. Taiwan’s dollar sank as much as 0.9 percent to NT$30.225 per dollar, an eight-month low. The island’s jobless rate likely rose to 4.4 percent in August from 4.37 percent in July, according to a Bloomberg survey of economists before data due today. The Indonesian rupiah slumped 1.6 percent to 9,225 per dollar.
Demand for Dollars
“It seems the Fed announcement is boosting demand for dollars instead of doing the opposite, after its comments on the economic downside risk,” said Lee Jin Ill, a Seoul-based senior currency dealer with Hana Bank. “The plan to buy long-term bonds was already expected and reflected in market prices.”
The so-called kiwi sank to 79.94 U.S. cents. New Zealand’s gross domestic product rose 0.1 percent in the three months through June from the previous quarter, less than all but one of 15 forecasts in a Bloomberg News survey.
Copper for three-month delivery dropped as much as 3.1 percent to $8,039.75 a metric ton before trading at $8,113 on the London Metal Exchange. A close at that level will bring losses from the Feb. 14 all-time high to 20 percent, a drop seen by some analysts as indicating a bear market.
Oil fell for a second day in New York as investors speculated that fuel demand will falter. Futures slipped as much as 2.1 percent before trading 1.3 percent lower at $84.78 a barrel on the New York Mercantile Exchange. Crude dropped 1.2 percent yesterday.
To contact the reporter on this story: Shiyin Chen in Singapore at schen37@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net
To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Tuesday, September 20, 2011
Mumbai Road Builders Ready First Dim Sum Bonds to Cut Costs: India Credit By Bloomberg News - Sep 20, 2011
Indian companies may turn to Hong Kong’s yuan bond market to raise funds at 40 percent the cost of top-rated companies at home after the South Asian nation eased borrowing rules.
The government agreed for the first time last week to allow Indian companies raise as much as $1 billion of debt in the Chinese currency, bolstering the yuan’s challenge to the dollar as a funding currency. Mumbai-based Infrastructure Leasing & Financial Services Ltd., an Indian lender to road projects, plans to raise $100 million in yuan bonds and developer Unity Infraprojects Ltd. (UIP) said it may consider a sale.
Yields on so-called dim sum bonds fell 3 basis points in September to 2.8 percent, while three-year AAA-rated corporate notes in India climbed 4 basis points this month to an average yield of 9.43 percent, after the Reserve Bank of India raised interest rates 12 times since March 2010 to slow inflation. U.S. dollar bonds from India pay an average 6.2 percent, HSBC Holdings Plc and JPMorgan Chase & Co. indexes show.
“Most of the India issuers, including the banks, are high yield, but they still can save some money in the yuan market,” Steve Wang, the head of fixed-income research in Hong Kong at BOCI Securities, a unit of Bank of China Ltd., said in a telephone interview on Sept. 16. Top-rated Indian companies would be able to sell yuan debt for around 3 to 4 percent, he said.
Dim Sum Bonds
International bond sales by Indian companies stalled this month, while sales in rupees dropped 87 percent to 33 billion rupees ($687 million), according to data compiled by Bloomberg. In Hong Kong, companies have raised 8.8 billion yuan ($1.4 billion) in the dim sum bond market this month, with sales tripling this year to a record 118.8 billion yuan.
China, which was the biggest contributor to world growth last year, according to the International Monetary Fund, is promoting the yuan’s use in global trade and finance.
Yuan deposits in Hong Kong probably totaled a record 572.2 billion yuan at the end of July, almost double the level at the end of 2010, according to Hong Kong Monetary Authority data.
“The IL&FS group is to raise an equivalent of $100 million in yuan-denominated bonds,” Milind Patel, the Mumbai-based deputy managing director of IL&FS Financial Services Ltd., a unit of lender Infrastructure Leasing & Financial Services, said in a telephone interview yesterday.
The company retained Deutsche Bank AG, Royal Bank of Scotland Group Plc and UBS AG to manage the issue.
‘Attractive Proposition’
Rural Electrification Corp., India’s state-controlled lender to power projects, has applied to China Export and Credit Insurance Corp., the state-owned export credit agency known as Sinosure, for a guarantee on a $350 million loan, Chairman Hari Das Khunteta said in an interview on Sept. 16.
“Borrowing in yuan-denominated debt is an attractive proposition and we will consider it soon to offset rising interest costs in India,” Madhav Nadkarni, chief financial officer at Mumbai-based Unity Infraprojects, said in a telephone interview on Sept. 19 in Mumbai. “Allowing issuance of debt denominated in many currencies is becoming a necessity and not an option.”
Power companies such as Lanco Infratech Ltd. (LANCI) and Adani Power Ltd. have also said they’re talking to Chinese banks for loans after Reliance Power Ltd. (RPWR) borrowed $1.1 billion from China Development Bank Corp. in December.
Growth, Inflation
“Yuan is a strong currency and China has reserves of more than $3 trillion,” Khunteta said. Rural Electrification will borrow in yuan “if the terms are good and taking into account interest rates,” Khunteta said.
Annual trade between the world’s most populous countries will touch $60 billion in 2011, the Federation of Indian Export Organisations, a government-affiliated trade group, said in a statement on April 15.
The Asian Development Bank cut its forecast for India’s economic expansion in the year ending March 31 to 7.9 percent last week from 8.2 percent estimated in April. Gross domestic product gained 7.7 percent last quarter from a year earlier, the smallest gain since 2009, a government report showed on Aug. 30.
Benchmark inflation in India is the highest among the so- called BRIC nations, increasing to a 13-month high of 9.78 percent in August, according to government data.
Consumer prices rose 7.2 percent in Brazil, 8.2 percent in Russia and 6.2 percent in China last month from a year earlier. In South Africa, they climbed 5.3 percent in July.
Credit-Default Swaps
The cost of insuring against default the debt of government-owned State Bank of India, seen as a proxy for the nation, climbed 43 basis points this month to 318 yesterday, according to data provider CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in privately negotiated markets. The swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a government or company fail to adhere to its debt agreements.
Yields on India’s benchmark 10-year bonds rose one basis point to 8.34 percent yesterday, according to the central bank’s trading system. The extra yield investors demand to hold five- year company debt rather than similar-maturity government securities has risen 4 basis points this month to 93, according to data compiled by Bloomberg.
Industrial & Commercial Bank of China Ltd., the world’s largest bank by market value, may provide dim sum bond services to Indian companies, Yang Kaisheng, president of the Beijing based bank, said in Mumbai on Sept. 15.
Yuan Appreciation
Indian companies can now see how the yuan is appreciating and might want to hold some renminbi funds, Yang said. The yuan is the only currency among the biggest emerging nations to strengthen against the dollar this quarter, and yuan-denominated notes in Hong Kong are the only domestic bonds among the so- called BRICs to provide positive returns, according to indexes compiled by HSBC and JPMorgan.
“The moment China delinks the renminbi, the currency will appreciate,” Prabal Banerji, chief financial officer at Adani Power Ltd. (ADANI) in the western Indian city of Ahmedabad, said in an interview on Sept. 13. “It will be inadvisable and not appropriate for Indian corporates to borrow renminbi at this point of time. A rising yuan means all borrowers will be out of money.”
The rupee declined 7 percent this quarter, the worst performer of the 10 Asian currencies tracked by Bloomberg. India’s currency weakened 0.5 percent to 48.06 per dollar yesterday, according to Bloomberg data. The yuan appreciated 1.3 percent this quarter to 6.3840 per dollar in Shanghai, according to the China Foreign Exchange Trade System.
‘New Animal’
Investors will be interested in Indian dim sum bonds to tap potential for growth in the South Asian nation without taking a currency risk, said Dariusz Kowalczyk, a senior strategist at Credit Agricole CIB in Hong Kong. “Indian yields may be more attractive,” he said.
Dim sum bonds returned 0.6 percent this quarter, compared with losses of 11.1 percent for local-currency bonds in Brazil, 10.1 percent for Russia and 5.9 percent for India, according to indexes compiled by HSBC and JPMorgan.
“Yuan debt from India is a new animal,” said Hong Kong- based Atul Gharde, a credit analyst at SJS Markets Ltd. “This is more of a diversification strategy for Indian dim sum issuers and a new market opening up for Chinese investors.”
To contact the Bloomberg News staff for this story: Anurag Joshi in Mumbai at ajoshi53@bloomberg.net Henry Sanderson in Beijing at hsanderson@bloomberg.net
To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
The government agreed for the first time last week to allow Indian companies raise as much as $1 billion of debt in the Chinese currency, bolstering the yuan’s challenge to the dollar as a funding currency. Mumbai-based Infrastructure Leasing & Financial Services Ltd., an Indian lender to road projects, plans to raise $100 million in yuan bonds and developer Unity Infraprojects Ltd. (UIP) said it may consider a sale.
Yields on so-called dim sum bonds fell 3 basis points in September to 2.8 percent, while three-year AAA-rated corporate notes in India climbed 4 basis points this month to an average yield of 9.43 percent, after the Reserve Bank of India raised interest rates 12 times since March 2010 to slow inflation. U.S. dollar bonds from India pay an average 6.2 percent, HSBC Holdings Plc and JPMorgan Chase & Co. indexes show.
“Most of the India issuers, including the banks, are high yield, but they still can save some money in the yuan market,” Steve Wang, the head of fixed-income research in Hong Kong at BOCI Securities, a unit of Bank of China Ltd., said in a telephone interview on Sept. 16. Top-rated Indian companies would be able to sell yuan debt for around 3 to 4 percent, he said.
Dim Sum Bonds
International bond sales by Indian companies stalled this month, while sales in rupees dropped 87 percent to 33 billion rupees ($687 million), according to data compiled by Bloomberg. In Hong Kong, companies have raised 8.8 billion yuan ($1.4 billion) in the dim sum bond market this month, with sales tripling this year to a record 118.8 billion yuan.
China, which was the biggest contributor to world growth last year, according to the International Monetary Fund, is promoting the yuan’s use in global trade and finance.
Yuan deposits in Hong Kong probably totaled a record 572.2 billion yuan at the end of July, almost double the level at the end of 2010, according to Hong Kong Monetary Authority data.
“The IL&FS group is to raise an equivalent of $100 million in yuan-denominated bonds,” Milind Patel, the Mumbai-based deputy managing director of IL&FS Financial Services Ltd., a unit of lender Infrastructure Leasing & Financial Services, said in a telephone interview yesterday.
The company retained Deutsche Bank AG, Royal Bank of Scotland Group Plc and UBS AG to manage the issue.
‘Attractive Proposition’
Rural Electrification Corp., India’s state-controlled lender to power projects, has applied to China Export and Credit Insurance Corp., the state-owned export credit agency known as Sinosure, for a guarantee on a $350 million loan, Chairman Hari Das Khunteta said in an interview on Sept. 16.
“Borrowing in yuan-denominated debt is an attractive proposition and we will consider it soon to offset rising interest costs in India,” Madhav Nadkarni, chief financial officer at Mumbai-based Unity Infraprojects, said in a telephone interview on Sept. 19 in Mumbai. “Allowing issuance of debt denominated in many currencies is becoming a necessity and not an option.”
Power companies such as Lanco Infratech Ltd. (LANCI) and Adani Power Ltd. have also said they’re talking to Chinese banks for loans after Reliance Power Ltd. (RPWR) borrowed $1.1 billion from China Development Bank Corp. in December.
Growth, Inflation
“Yuan is a strong currency and China has reserves of more than $3 trillion,” Khunteta said. Rural Electrification will borrow in yuan “if the terms are good and taking into account interest rates,” Khunteta said.
Annual trade between the world’s most populous countries will touch $60 billion in 2011, the Federation of Indian Export Organisations, a government-affiliated trade group, said in a statement on April 15.
The Asian Development Bank cut its forecast for India’s economic expansion in the year ending March 31 to 7.9 percent last week from 8.2 percent estimated in April. Gross domestic product gained 7.7 percent last quarter from a year earlier, the smallest gain since 2009, a government report showed on Aug. 30.
Benchmark inflation in India is the highest among the so- called BRIC nations, increasing to a 13-month high of 9.78 percent in August, according to government data.
Consumer prices rose 7.2 percent in Brazil, 8.2 percent in Russia and 6.2 percent in China last month from a year earlier. In South Africa, they climbed 5.3 percent in July.
Credit-Default Swaps
The cost of insuring against default the debt of government-owned State Bank of India, seen as a proxy for the nation, climbed 43 basis points this month to 318 yesterday, according to data provider CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in privately negotiated markets. The swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a government or company fail to adhere to its debt agreements.
Yields on India’s benchmark 10-year bonds rose one basis point to 8.34 percent yesterday, according to the central bank’s trading system. The extra yield investors demand to hold five- year company debt rather than similar-maturity government securities has risen 4 basis points this month to 93, according to data compiled by Bloomberg.
Industrial & Commercial Bank of China Ltd., the world’s largest bank by market value, may provide dim sum bond services to Indian companies, Yang Kaisheng, president of the Beijing based bank, said in Mumbai on Sept. 15.
Yuan Appreciation
Indian companies can now see how the yuan is appreciating and might want to hold some renminbi funds, Yang said. The yuan is the only currency among the biggest emerging nations to strengthen against the dollar this quarter, and yuan-denominated notes in Hong Kong are the only domestic bonds among the so- called BRICs to provide positive returns, according to indexes compiled by HSBC and JPMorgan.
“The moment China delinks the renminbi, the currency will appreciate,” Prabal Banerji, chief financial officer at Adani Power Ltd. (ADANI) in the western Indian city of Ahmedabad, said in an interview on Sept. 13. “It will be inadvisable and not appropriate for Indian corporates to borrow renminbi at this point of time. A rising yuan means all borrowers will be out of money.”
The rupee declined 7 percent this quarter, the worst performer of the 10 Asian currencies tracked by Bloomberg. India’s currency weakened 0.5 percent to 48.06 per dollar yesterday, according to Bloomberg data. The yuan appreciated 1.3 percent this quarter to 6.3840 per dollar in Shanghai, according to the China Foreign Exchange Trade System.
‘New Animal’
Investors will be interested in Indian dim sum bonds to tap potential for growth in the South Asian nation without taking a currency risk, said Dariusz Kowalczyk, a senior strategist at Credit Agricole CIB in Hong Kong. “Indian yields may be more attractive,” he said.
Dim sum bonds returned 0.6 percent this quarter, compared with losses of 11.1 percent for local-currency bonds in Brazil, 10.1 percent for Russia and 5.9 percent for India, according to indexes compiled by HSBC and JPMorgan.
“Yuan debt from India is a new animal,” said Hong Kong- based Atul Gharde, a credit analyst at SJS Markets Ltd. “This is more of a diversification strategy for Indian dim sum issuers and a new market opening up for Chinese investors.”
To contact the Bloomberg News staff for this story: Anurag Joshi in Mumbai at ajoshi53@bloomberg.net Henry Sanderson in Beijing at hsanderson@bloomberg.net
To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Monday, September 19, 2011
India Government Said to Consider Almost Doubling ONGC’s Fuel Subsidy Bill By Rakteem Katakey and Anto Antony - Sep 19, 2011
India’s government is considering almost doubling Oil & Natural Gas Corp.’s share of fuel subsidy to cut expenditure and reduce the fiscal deficit, two people with direct knowledge of the matter said.
The country’s biggest energy explorer may pay about 470 billion rupees ($9.8 billion) as the government-mandated subsidy in this financial year, one of the people said, asking not to be identified because the details are private. The New Delhi-based company paid 248.9 billion rupees as subsidy in the year ended March 31, according to a May 30 stock exchange filing.
ONGC supplies crude at a discount to state-owned refiners to partly compensate them for selling diesel, kerosene and cooking gas below cost and its share of subsidy rises when the cost of oil climbs. Asia’s second-fastest growing major economy needs to narrow its budget deficit to help curb inflationary pressures, according to the central bank.
“An already ad-hoc subsidy-sharing mechanism is becoming more random and we don’t know what to expect from the government,” said Deepak Darisi, a Mumbai-based analyst with LKP Shares & Securities Ltd., who has a “buy” rating on the stock. “If the government finalizes this, the stock would fall way below current levels.”
The government last week deferred selling a 5 percent stake in ONGC, valued at about $2.4 billion, to raise money to build schools, hospitals and roads. No reason was given for delaying the offer, which was scheduled to start today.
ONGC declined 1.9 percent to 269.45 rupees in Mumbai yesterday. The stock has dropped 16 percent this year, compared with an 18 percent fall in the benchmark Sensitive Index.
Tax Cut
The selling price for ONGC’s crude produced in India may fall to about $42 a barrel if the subsidy bill rises to 470 billion rupees, one of the people said. The subsidy burden is based on current crude oil prices and currency rates, the people said.
Finance Ministry spokesman D.S. Malik declined to comment on the subsidy. ONGC hasn’t received information from the government on subsidy payments and cannot comment, the company said in an e-mail.
Prime Minister Manmohan Singh’s government raised prices of diesel, kerosene and cooking gas and cut taxes on fuels on June 25 to reduce the subsidy burden as crude oil costs rose. The price increase is estimated to have narrowed the loss of revenue for state refiners to about 1.2 trillion rupees for the year from 1.71 trillion rupees, according to a June 24 oil ministry statement.
The government may consider the 490 billion rupee loss of revenue from the tax cut as subsidy, one of the people said.
Indian Oil Corp., the country’s biggest refiner, raised gasoline prices Sept. 16 as losses from selling fuels below cost increased after the rupee declined to a two-year low against the dollar.
To contact the reporters on this story: Rakteem Katakey in New Delhi at rkatakey@bloomberg.net; Anto Antony in New Delhi at aantony1@bloomberg.net
To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
The country’s biggest energy explorer may pay about 470 billion rupees ($9.8 billion) as the government-mandated subsidy in this financial year, one of the people said, asking not to be identified because the details are private. The New Delhi-based company paid 248.9 billion rupees as subsidy in the year ended March 31, according to a May 30 stock exchange filing.
ONGC supplies crude at a discount to state-owned refiners to partly compensate them for selling diesel, kerosene and cooking gas below cost and its share of subsidy rises when the cost of oil climbs. Asia’s second-fastest growing major economy needs to narrow its budget deficit to help curb inflationary pressures, according to the central bank.
“An already ad-hoc subsidy-sharing mechanism is becoming more random and we don’t know what to expect from the government,” said Deepak Darisi, a Mumbai-based analyst with LKP Shares & Securities Ltd., who has a “buy” rating on the stock. “If the government finalizes this, the stock would fall way below current levels.”
The government last week deferred selling a 5 percent stake in ONGC, valued at about $2.4 billion, to raise money to build schools, hospitals and roads. No reason was given for delaying the offer, which was scheduled to start today.
ONGC declined 1.9 percent to 269.45 rupees in Mumbai yesterday. The stock has dropped 16 percent this year, compared with an 18 percent fall in the benchmark Sensitive Index.
Tax Cut
The selling price for ONGC’s crude produced in India may fall to about $42 a barrel if the subsidy bill rises to 470 billion rupees, one of the people said. The subsidy burden is based on current crude oil prices and currency rates, the people said.
Finance Ministry spokesman D.S. Malik declined to comment on the subsidy. ONGC hasn’t received information from the government on subsidy payments and cannot comment, the company said in an e-mail.
Prime Minister Manmohan Singh’s government raised prices of diesel, kerosene and cooking gas and cut taxes on fuels on June 25 to reduce the subsidy burden as crude oil costs rose. The price increase is estimated to have narrowed the loss of revenue for state refiners to about 1.2 trillion rupees for the year from 1.71 trillion rupees, according to a June 24 oil ministry statement.
The government may consider the 490 billion rupee loss of revenue from the tax cut as subsidy, one of the people said.
Indian Oil Corp., the country’s biggest refiner, raised gasoline prices Sept. 16 as losses from selling fuels below cost increased after the rupee declined to a two-year low against the dollar.
To contact the reporters on this story: Rakteem Katakey in New Delhi at rkatakey@bloomberg.net; Anto Antony in New Delhi at aantony1@bloomberg.net
To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Sunday, September 18, 2011
Billionaire Reddy to Sell $1 Billion Stake in Unit to Buy Rinehart’s Mines By Rajesh Kumar Singh and Sharang Limaye - Sep 18, 2011
GVK Group, controlled by Indian billionaire GV Krishna Reddy, plans to raise $1 billion selling a stake in its energy unit to help fund the acquisition of coal assets from a company owned by Australia’s richest woman.
The group that runs airports and builds power plants and highways, plans to sell the stake in GVK Coal Developers (Singapore) Pte. in three to six months, said GV Sanjay Reddy, vice chairman of GVK Power & Infrastructure Ltd. (GVKP), the group’s publicly traded unit. GVK agreed to pay $1.26 billion to buy a 79 percent stake in Gina Rinehart’s Hancock Prospecting Pty. coal assets, according to a statement e-mailed on Sept. 16.
Utilities in Asia’s second-fastest growing major economy are seeking fuel in Australia and Indonesia to overcome a local shortfall as they build power plants. The GVK Group may spend a total of $2.1 billion, including development costs, for the purchase, Chief Financial Officer Isaac George said. The company will borrow $1 billion, he said.
“This deal will help us secure fuel for our thermal power projects,” George said in a telephone interview on Sept. 17. “We are also planning to enter the business of commodity trading of coal.”
GVK Coal is buying the 79 percent stake in the Alpha and Alpha West projects, all of the Kevin’s Corner project as well as the rail and port projects connecting the coal deposits to Abbot Point in Australia’s Queensland state. Privately held Hancock Prospecting is chaired by Rinehart, the first woman to top Forbes Asia’s list of Australia’s richest people.
Project Funding
GVK agreed to pay $500 million once the transaction is completed, followed by $200 million one year from the deal closing. It will pay an additional $560 million after the financial closure of the project, expected to be in 2012. Funding for the acquisition is “tied up with banks,” GVK said in the statement, without disclosing names of the lenders.
Hyderabad-based GVK will keep GVK Power & Infrastructure, which had 52.5 billion rupees ($1.1 billion) of long-term debt at the end of March 31, or almost double the company’s market value, out of the fund-raising process, Reddy said in a separate interview on Sept. 17.
GVK Power & Infrastructure has dropped 58 percent this year after reports of the purchase began in January. The shares were unchanged at 17 rupees on Sept. 16. GVK Power & Infrastructure will own 10 percent of GVK Coal with an option to raise the stake to 49 percent, according to the statement.
GVK Power & Infrastructure will invite Rinehart on its board as a director, according to the statement.
Full Output
At full output, the projects may produce 84 million metric tons of coal annually, GVK said in the Sept. 16 statement. Production is scheduled to start in 2014 at a rate of 30 million tons of power station coal a year, the company said. Development of the first phase of output is estimated to cost $10 billion, it said.
“We have a feeling that the project development cost can be significantly brought down to $7 billion,” Reddy said. “This can happen through cost optimization and outsourcing a range of activities such as coal washing and laying rail tracks.”
Ernst & Young LLP was the sole financial adviser to GVK, according to the statement. The transaction is expected to close in two weeks, the statement said.
To contact the reporters on this story: Rajesh Kumar Singh in New Delhi at rsingh133@bloomberg.net; Sharang Limaye in Hyderabad at slimaye@bloomberg.net
To contact the editor responsible for this story: Paul Tighe at ptighe@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
The group that runs airports and builds power plants and highways, plans to sell the stake in GVK Coal Developers (Singapore) Pte. in three to six months, said GV Sanjay Reddy, vice chairman of GVK Power & Infrastructure Ltd. (GVKP), the group’s publicly traded unit. GVK agreed to pay $1.26 billion to buy a 79 percent stake in Gina Rinehart’s Hancock Prospecting Pty. coal assets, according to a statement e-mailed on Sept. 16.
Utilities in Asia’s second-fastest growing major economy are seeking fuel in Australia and Indonesia to overcome a local shortfall as they build power plants. The GVK Group may spend a total of $2.1 billion, including development costs, for the purchase, Chief Financial Officer Isaac George said. The company will borrow $1 billion, he said.
“This deal will help us secure fuel for our thermal power projects,” George said in a telephone interview on Sept. 17. “We are also planning to enter the business of commodity trading of coal.”
GVK Coal is buying the 79 percent stake in the Alpha and Alpha West projects, all of the Kevin’s Corner project as well as the rail and port projects connecting the coal deposits to Abbot Point in Australia’s Queensland state. Privately held Hancock Prospecting is chaired by Rinehart, the first woman to top Forbes Asia’s list of Australia’s richest people.
Project Funding
GVK agreed to pay $500 million once the transaction is completed, followed by $200 million one year from the deal closing. It will pay an additional $560 million after the financial closure of the project, expected to be in 2012. Funding for the acquisition is “tied up with banks,” GVK said in the statement, without disclosing names of the lenders.
Hyderabad-based GVK will keep GVK Power & Infrastructure, which had 52.5 billion rupees ($1.1 billion) of long-term debt at the end of March 31, or almost double the company’s market value, out of the fund-raising process, Reddy said in a separate interview on Sept. 17.
GVK Power & Infrastructure has dropped 58 percent this year after reports of the purchase began in January. The shares were unchanged at 17 rupees on Sept. 16. GVK Power & Infrastructure will own 10 percent of GVK Coal with an option to raise the stake to 49 percent, according to the statement.
GVK Power & Infrastructure will invite Rinehart on its board as a director, according to the statement.
Full Output
At full output, the projects may produce 84 million metric tons of coal annually, GVK said in the Sept. 16 statement. Production is scheduled to start in 2014 at a rate of 30 million tons of power station coal a year, the company said. Development of the first phase of output is estimated to cost $10 billion, it said.
“We have a feeling that the project development cost can be significantly brought down to $7 billion,” Reddy said. “This can happen through cost optimization and outsourcing a range of activities such as coal washing and laying rail tracks.”
Ernst & Young LLP was the sole financial adviser to GVK, according to the statement. The transaction is expected to close in two weeks, the statement said.
To contact the reporters on this story: Rajesh Kumar Singh in New Delhi at rsingh133@bloomberg.net; Sharang Limaye in Hyderabad at slimaye@bloomberg.net
To contact the editor responsible for this story: Paul Tighe at ptighe@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
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