India’s quest for natural resources to power its growing economy and compete with China has met the enemy: Its own red tape.
Thwarted by lengthy bureaucratic delays for approvals, Indian state companies have lost out on or walked away from at least seven purchases of overseas coal and mining assets in the last two years, data compiled by Bloomberg show. They have completed just a single overseas deal between them in that time.
In one would-be deal, International Coal Ventures Ltd., a venture of state-owned companies, had to run a gauntlet of seven ministries and a committee, called the Empowered Committee of Secretaries, to seek approval to buy a coal mine in Australia, two people with knowledge of the matter said. The company is still awaiting a sign-off after four months, as the overseeing committee hasn’t met for three months to discuss the $300 million deal. The delay has cost International Coal its status as exclusive bidder for the mine, owned by Aquila Resources Ltd., said one of the people.
“We have found ourselves struggling in the global arena,” said Sanjeev Krishna, an executive director at PricewaterhouseCoopers LLP in Mumbai who focuses on mergers and private equity. State-controlled companies “have suffered as a result of not having the independence to make these acquisitions.”
Trailing China
The balky approval process highlights the challenge facing Prime Minister Manmohan Singh as he jostles with China for resources needed to reduce India’s reliance on imported coal, copper and other raw materials. Chinese companies have completed $21 billion of overseas acquisitions of coal and mining assets in the past two years, more than four times the value of India’s deals, including private purchases, according to data compiled by Bloomberg.
India’s domestic coal production, which fires more than half of its power generation, is falling behind demand. In five years, the country will need 981 million metric tons annually compared with output of 715 million tons, the government estimates. Environmental restrictions and approval delays have stymied efforts to expand production.
To offset the gap this year, India may import more than 118 million tons of coal, a volume that would see it overtake China as the world’s biggest buyer, according to Daniel Hynes, a director of commodity research at Citigroup Inc. in Sydney.
Projects Delayed
The scarcity is hampering India’s ability to fuel power generation and steel-making capacity. Companies have already delayed a total of $36 billion of power-plant projects planned for the next five years, according to the Association of Power Producers. It blames a lack of coal from state-owned Coal India Ltd., which accounts for more than 80 percent of India’s output of the fuel, and higher prices of imported coal.
At risk is India’s economic growth, which already trails that of China. Singh wants to accelerate economic output, most recently at a three-year low of 6.9 percent, to an average 9 percent annually in the next five years. Meeting that target is unlikely, the Asian Development Bank said in an April report, citing in part “bottlenecks relating to fuel and power shortages.”
The shortages exist even though privately owned Indian companies, unencumbered by the need for state approvals, have been snapping up coal assets. In September, GVK Group, controlled by billionaire GV Krishna Reddy, agreed to pay $1.2 billion to acquire coal projects from Australia’s Hancock Prospecting Pty.
By contrast, four state-owned companies -- Coal India, NMDC Ltd. (COAL), National Aluminium Co. (NACL) and Steel Authority of India Ltd. (SAIL) - - can point to only one purchase among them: A $20 million deal by NMDC, India’s largest iron ore producer, in December to buy a 50 percent stake in Australia’s Legacy Iron Ore Ltd., according to data compiled by Bloomberg.
Late Approval
More typical is NMDC’s failure in 2011 to purchase a Siberian coal deposit from Russian billionaire Mikhail Prokhorov -- a deal that would have added 363 million metric tons of reserves. The company got beat out partly because government approval took a year, a person with knowledge of the matter said. Energy trader Gunvor Group Ltd., based in Cyprus, and Volga Resources of Luxembourg won the deal.
Coal India, 90 percent owned by the government, last year entered talks to buy a 30 percent stake in PT Golden Energy Mines from Indonesia’s Sinar Mas Group. The government gave approval for the deal in October -- two months after privately owned Indian rival GMR Energy Ltd. had agreed to buy the asset, said former Coal India Chairman Nirmal Chandra Jha, who retired in January.
$19 Billion Cash
Money isn’t the issue. The four state-owned companies hold a combined $19 billion of cash and equivalents. Instead, executives at state-owned companies are reluctant to push ahead with acquisitions abroad because they fear getting penalized by the government should deals go wrong, said Rana Som, who retired as chairman of NMDC (NMDC) in December, in an April 2 telephone interview from New Delhi.
“In my opinion, the problems in acquisitions of overseas assets are not external, but internal,” Som said. “There is a lack of courage and conviction on the part of decision makers to go ahead.”
Officials at Coal India, Steel Authority, NMDC and National Aluminum either declined to comment or didn’t respond to calls and e-mails. Requests for comment from India’s finance ministry went unanswered.
‘Policy Paralysis’
India has taken steps to speed up deals, prodded by the country’s industrialists, including Tata Group Chairman Ratan Tata, who met with Singh in January. State-run companies were granted greater powers to acquire coal, oil and other mineral assets without first consulting the government.
“Availability of raw material is a prerequisite not only for the growth of the manufacturing sector, but for the economy as a whole,” Information and Broadcasting Minister Ambika Soni said, citing a decision taken by the Cabinet of Ministers in October.
The easing was the latest twist in India’s official policy. In March 2010 the government said it was considering raising a sovereign wealth fund to help state companies compete for overseas energy assets. The fund has yet to be created. In December 2010, Coal Minister Sriprakash Jaiswal said buying coal mines was a “top priority,” later traveling to Europe to seek coal assets and mining technology. Then in September last year, Jaiswal changed course and said Coal India, the world’s largest producer of the commodity, should focus on boosting domestic production rather than on overseas purchases.
“There has been a policy paralysis in the government in the past six to eight months,” said Krishna of PwC. “It’s the heavy-footedness by the Indian government that caused some of these challenges.”
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Friday, May 4, 2012
Thursday, May 3, 2012
India’s Quest for Coal Stalls as Red Tape Kills Mining Takeovers By Editors: Larry Reibstein - May 3, 2012
India’s quest for natural resources to power its growing economy and compete with China has met the enemy: Its own red tape.
Thwarted by lengthy bureaucratic delays for approvals, Indian state companies have lost out on or walked away from at least seven purchases of overseas coal and mining assets in the last two years, data compiled by Bloomberg show. They have completed just a single overseas deal between them in that time.
In one would-be deal, International Coal Ventures Ltd., a venture of state-owned companies, had to run a gauntlet of seven ministries and a committee, called the Empowered Committee of Secretaries, to seek approval to buy a coal mine in Australia, two people with knowledge of the matter said. The company is still awaiting a sign-off after four months, as the overseeing committee hasn’t met for three months to discuss the $300 million deal. The delay has cost International Coal its status as exclusive bidder for the mine, owned by Aquila Resources Ltd., said one of the people.
“We have found ourselves struggling in the global arena,” said Sanjeev Krishna, an executive director at PricewaterhouseCoopers LLP in Mumbai who focuses on mergers and private equity. State-controlled companies “have suffered as a result of not having the independence to make these acquisitions.”
Trailing China
The balky approval process highlights the challenge facing Prime Minister Manmohan Singh as he jostles with China for resources needed to reduce India’s reliance on imported coal, copper and other raw materials. Chinese companies have completed $21 billion of overseas acquisitions of coal and mining assets in the past two years, more than four times the value of India’s deals, including private purchases, according to data compiled by Bloomberg.
India’s domestic coal production, which fires more than half of its power generation, is falling behind demand. In five years, the country will need 981 million metric tons annually compared with output of 715 million tons, the government estimates. Environmental restrictions and approval delays have stymied efforts to expand production.
To offset the gap this year, India may import more than 118 million tons of coal, a volume that would see it overtake China as the world’s biggest buyer, according to Daniel Hynes, a director of commodity research at Citigroup Inc. in Sydney.
Projects Delayed
The scarcity is hampering India’s ability to fuel power generation and steel-making capacity. Companies have already delayed a total of $36 billion of power-plant projects planned for the next five years, according to the Association of Power Producers. It blames a lack of coal from state-owned Coal India Ltd., which accounts for more than 80 percent of India’s output of the fuel, and higher prices of imported coal.
At risk is India’s economic growth, which already trails that of China. Singh wants to accelerate economic output, most recently at a three-year low of 6.9 percent, to an average 9 percent annually in the next five years. Meeting that target is unlikely, the Asian Development Bank said in an April report, citing in part “bottlenecks relating to fuel and power shortages.”
The shortages exist even though privately owned Indian companies, unencumbered by the need for state approvals, have been snapping up coal assets. In September, GVK Group, controlled by billionaire GV Krishna Reddy, agreed to pay $1.2 billion to acquire coal projects from Australia’s Hancock Prospecting Pty.
By contrast, four state-owned companies -- Coal India, NMDC Ltd. (COAL), National Aluminium Co. (NACL) and Steel Authority of India Ltd. (SAIL) - - can point to only one purchase among them: A $20 million deal by NMDC, India’s largest iron ore producer, in December to buy a 50 percent stake in Australia’s Legacy Iron Ore Ltd., according to data compiled by Bloomberg.
Late Approval
More typical is NMDC’s failure in 2011 to purchase a Siberian coal deposit from Russian billionaire Mikhail Prokhorov -- a deal that would have added 363 million metric tons of reserves. The company got beat out partly because government approval took a year, a person with knowledge of the matter said. Energy trader Gunvor Group Ltd., based in Cyprus, and Volga Resources of Luxembourg won the deal.
Coal India, 90 percent owned by the government, last year entered talks to buy a 30 percent stake in PT Golden Energy Mines from Indonesia’s Sinar Mas Group. The government gave approval for the deal in October -- two months after privately owned Indian rival GMR Energy Ltd. had agreed to buy the asset, said former Coal India Chairman Nirmal Chandra Jha, who retired in January.
$19 Billion Cash
Money isn’t the issue. The four state-owned companies hold a combined $19 billion of cash and equivalents. Instead, executives at state-owned companies are reluctant to push ahead with acquisitions abroad because they fear getting penalized by the government should deals go wrong, said Rana Som, who retired as chairman of NMDC (NMDC) in December, in an April 2 telephone interview from New Delhi.
“In my opinion, the problems in acquisitions of overseas assets are not external, but internal,” Som said. “There is a lack of courage and conviction on the part of decision makers to go ahead.”
Officials at Coal India, Steel Authority, NMDC and National Aluminum either declined to comment or didn’t respond to calls and e-mails. Requests for comment from India’s finance ministry went unanswered.
‘Policy Paralysis’
India has taken steps to speed up deals, prodded by the country’s industrialists, including Tata Group Chairman Ratan Tata, who met with Singh in January. State-run companies were granted greater powers to acquire coal, oil and other mineral assets without first consulting the government.
“Availability of raw material is a prerequisite not only for the growth of the manufacturing sector, but for the economy as a whole,” Information and Broadcasting Minister Ambika Soni said, citing a decision taken by the Cabinet of Ministers in October.
The easing was the latest twist in India’s official policy. In March 2010 the government said it was considering raising a sovereign wealth fund to help state companies compete for overseas energy assets. The fund has yet to be created. In December 2010, Coal Minister Sriprakash Jaiswal said buying coal mines was a “top priority,” later traveling to Europe to seek coal assets and mining technology. Then in September last year, Jaiswal changed course and said Coal India, the world’s largest producer of the commodity, should focus on boosting domestic production rather than on overseas purchases.
“There has been a policy paralysis in the government in the past six to eight months,” said Krishna of PwC. “It’s the heavy-footedness by the Indian government that caused some of these challenges.”
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Thwarted by lengthy bureaucratic delays for approvals, Indian state companies have lost out on or walked away from at least seven purchases of overseas coal and mining assets in the last two years, data compiled by Bloomberg show. They have completed just a single overseas deal between them in that time.
In one would-be deal, International Coal Ventures Ltd., a venture of state-owned companies, had to run a gauntlet of seven ministries and a committee, called the Empowered Committee of Secretaries, to seek approval to buy a coal mine in Australia, two people with knowledge of the matter said. The company is still awaiting a sign-off after four months, as the overseeing committee hasn’t met for three months to discuss the $300 million deal. The delay has cost International Coal its status as exclusive bidder for the mine, owned by Aquila Resources Ltd., said one of the people.
“We have found ourselves struggling in the global arena,” said Sanjeev Krishna, an executive director at PricewaterhouseCoopers LLP in Mumbai who focuses on mergers and private equity. State-controlled companies “have suffered as a result of not having the independence to make these acquisitions.”
Trailing China
The balky approval process highlights the challenge facing Prime Minister Manmohan Singh as he jostles with China for resources needed to reduce India’s reliance on imported coal, copper and other raw materials. Chinese companies have completed $21 billion of overseas acquisitions of coal and mining assets in the past two years, more than four times the value of India’s deals, including private purchases, according to data compiled by Bloomberg.
India’s domestic coal production, which fires more than half of its power generation, is falling behind demand. In five years, the country will need 981 million metric tons annually compared with output of 715 million tons, the government estimates. Environmental restrictions and approval delays have stymied efforts to expand production.
To offset the gap this year, India may import more than 118 million tons of coal, a volume that would see it overtake China as the world’s biggest buyer, according to Daniel Hynes, a director of commodity research at Citigroup Inc. in Sydney.
Projects Delayed
The scarcity is hampering India’s ability to fuel power generation and steel-making capacity. Companies have already delayed a total of $36 billion of power-plant projects planned for the next five years, according to the Association of Power Producers. It blames a lack of coal from state-owned Coal India Ltd., which accounts for more than 80 percent of India’s output of the fuel, and higher prices of imported coal.
At risk is India’s economic growth, which already trails that of China. Singh wants to accelerate economic output, most recently at a three-year low of 6.9 percent, to an average 9 percent annually in the next five years. Meeting that target is unlikely, the Asian Development Bank said in an April report, citing in part “bottlenecks relating to fuel and power shortages.”
The shortages exist even though privately owned Indian companies, unencumbered by the need for state approvals, have been snapping up coal assets. In September, GVK Group, controlled by billionaire GV Krishna Reddy, agreed to pay $1.2 billion to acquire coal projects from Australia’s Hancock Prospecting Pty.
By contrast, four state-owned companies -- Coal India, NMDC Ltd. (COAL), National Aluminium Co. (NACL) and Steel Authority of India Ltd. (SAIL) - - can point to only one purchase among them: A $20 million deal by NMDC, India’s largest iron ore producer, in December to buy a 50 percent stake in Australia’s Legacy Iron Ore Ltd., according to data compiled by Bloomberg.
Late Approval
More typical is NMDC’s failure in 2011 to purchase a Siberian coal deposit from Russian billionaire Mikhail Prokhorov -- a deal that would have added 363 million metric tons of reserves. The company got beat out partly because government approval took a year, a person with knowledge of the matter said. Energy trader Gunvor Group Ltd., based in Cyprus, and Volga Resources of Luxembourg won the deal.
Coal India, 90 percent owned by the government, last year entered talks to buy a 30 percent stake in PT Golden Energy Mines from Indonesia’s Sinar Mas Group. The government gave approval for the deal in October -- two months after privately owned Indian rival GMR Energy Ltd. had agreed to buy the asset, said former Coal India Chairman Nirmal Chandra Jha, who retired in January.
$19 Billion Cash
Money isn’t the issue. The four state-owned companies hold a combined $19 billion of cash and equivalents. Instead, executives at state-owned companies are reluctant to push ahead with acquisitions abroad because they fear getting penalized by the government should deals go wrong, said Rana Som, who retired as chairman of NMDC (NMDC) in December, in an April 2 telephone interview from New Delhi.
“In my opinion, the problems in acquisitions of overseas assets are not external, but internal,” Som said. “There is a lack of courage and conviction on the part of decision makers to go ahead.”
Officials at Coal India, Steel Authority, NMDC and National Aluminum either declined to comment or didn’t respond to calls and e-mails. Requests for comment from India’s finance ministry went unanswered.
‘Policy Paralysis’
India has taken steps to speed up deals, prodded by the country’s industrialists, including Tata Group Chairman Ratan Tata, who met with Singh in January. State-run companies were granted greater powers to acquire coal, oil and other mineral assets without first consulting the government.
“Availability of raw material is a prerequisite not only for the growth of the manufacturing sector, but for the economy as a whole,” Information and Broadcasting Minister Ambika Soni said, citing a decision taken by the Cabinet of Ministers in October.
The easing was the latest twist in India’s official policy. In March 2010 the government said it was considering raising a sovereign wealth fund to help state companies compete for overseas energy assets. The fund has yet to be created. In December 2010, Coal Minister Sriprakash Jaiswal said buying coal mines was a “top priority,” later traveling to Europe to seek coal assets and mining technology. Then in September last year, Jaiswal changed course and said Coal India, the world’s largest producer of the commodity, should focus on boosting domestic production rather than on overseas purchases.
“There has been a policy paralysis in the government in the past six to eight months,” said Krishna of PwC. “It’s the heavy-footedness by the Indian government that caused some of these challenges.”
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Wednesday, May 2, 2012
Foreigners Sell Indian Equities in April as Tax Concerns Weigh By Shikhar Balwani - May 2, 2012
Foreign funds turned net sellers of Indian stocks in April, the first month of withdrawals in 2012, deterred by proposed changes in tax rules in the fourth-largest equity market in Asia outside Japan.
Offshore investors sold a net $102.6 million of local equities last month, data compiled by the market regulator yesterday showed. Funds, who were net buyers in each of the previous three months, have invested a net $8.76 billion into Indian shares this year.
“Long-term investors into India aren’t increasing their exposure as the horizon isn’t clear,” A.S. Thiyaga Rajan, a senior managing director at Aquarius Investment Advisors Pte. in Singapore, which has been investing in India since 1995 and has about $400 million in Indian assets, wrote in an e-mail. “First, there is uncertainty on tax. Second is the continuing depreciation of the rupee given weak economic fundamentals.”
Finance Minister Pranab Mukherjee proposed in March to introduce the General Anti-Avoidance Rule, or GAAR, to curb evasion of taxes by companies through misuse of tax treaties with other countries. Foreign funds are concerned the new rule may apply to their holdings of domestic shares, prompting U.S. trade and lobby groups to raise the matter in an April 17 letter to U.S. Treasury Secretary Timothy F. Geithner, who discussed the plans last month with Mukherjee.
India’s $1.2 trillion market is influenced by flows from overseas. The BSE India Sensitive Index (SENSEX) was the best performer among the world’s top 10 markets in 2010 when the nation took in a record $29.4 billion. The gauge sank 52 percent in 2008, its biggest annual slump, when withdrawals reached an all-time high. Flows into Indian equities this year are the highest in Asia outside of Japan after South Korea, which received a net $9.54 billion, data compiled by Bloomberg show.
‘Needs to be Competitive’
“India, with its current-account deficit, needs to be competitive when attracting global capital,” Adrian Mowat, the chief Asia and emerging-market strategist at JPMorgan Chase & Co., who has been investing in India since 1993, said by e-mail. “The country is unique in charging capital-gains tax to foreign institutional investors.”
India’s $1.7 trillion economy slowed for four consecutive quarters through December. Gross domestic product probably grew 6.9 percent in the year ended March, the least in three years, according to government estimates. The slowdown has sapped tax revenue even as subsidies spur spending, leaving India with the widest budget gap among the so-called BRIC group of biggest emerging markets that also includes Brazil, Russia and China.
‘Level-Playing Field’
The rupee weakened to a four-month low of 52.955 per dollar yesterday. The current-account deficit was $19.6 billion in the three months through December, the worst quarterly performance on record. Mukherjee in his budget speech on March 16 estimated the fiscal deficit at 5.9 percent of GDP in the year ended March 31 and sought to reduce the gap to 5.1 percent this financial year by raising taxes and proposing to cap a subsidy program.
“GAAR would help government revenues, but would do more harm in the medium term,” Adrian Lim, a Singapore-based senior investment manager at Aberdeen Asset Management Plc, said in an interview with Bloomberg UTV on April 30. “Foreign investors want a predictable, level-playing field.”
The proposed changes to tax rules, which will be discussed by lawmakers in the current parliamentary session, followed a ruling in January by India’s Supreme Court that Vodafone Group Plc (VOD) doesn’t have to pay $2.2 billion in tax on its purchase, conducted offshore, of the Indian business of Hutchison Whampoa Ltd. in 2007.
Vodafone, the biggest cell-phone company, has threatened to pursue international arbitration should India proceed with the plans. The operator’s Dutch unit served a notice of dispute to the government on April 17, invoking an investment treaty between India and the Netherlands.
Participatory Notes
The proposed tax provisions won’t apply to holders of participatory notes, or derivatives held overseas, Mukherjee said in March. Investments through the notes were 15 percent of 11.07 trillion rupees that foreigners had in stocks, bonds and derivatives at the end of March, data from the regulator show.
Participatory notes allow foreigners not registered in the country to invest in the stock market.
Macquarie’s Asia hedge fund has exited its short positions in Indian single-stock futures in response to the proposed tax rules, Reuters reported on April 23, citing a letter to clients from Nick Bird, the fund’s portfolio manager. The fund could become liable for tax on unrealized gains after April 1, while open positions in single-stock futures might also be liable, Bird told clients, according to the report.
‘Earnings Magnet’
The Sensex has risen 12 percent this year as foreign funds bought local stocks on optimism the central bank would reduce interest rates after record increases in funding costs eroded corporate profits. Earnings for four, or 33 percent, of the 12 Sensex companies that have posted results for the three months ended March 31, have missed analysts’ estimates. In comparison, 47 percent of the 30 Sensex companies lagged behind forecasts in the December quarter.
“Earnings seem to have bottomed and should recover from here on and that will be the magnet that will bring back flows irrespective of how the tax issue evolves,” Arjuna Mahendran, the Singapore-based head of Asia investment strategy at HSBC Private Bank, told Bloomberg UTV yesterday. “India offers global investors superior rates of growth. I can’t see large institutional investors, including us, departing because of this,” he said, referring to the proposed changes in tax rules.
The Bank of New York Mellon Corp. index of Indian American depositary receipts slipped 1.1 percent to 1,010.63 by 2:11 p.m. in New York, poised for the biggest one-day drop since April 23.
To contact the reporters on this story: Shikhar Balwani in Mumbai at sbalwani@bloomberg.net
To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Offshore investors sold a net $102.6 million of local equities last month, data compiled by the market regulator yesterday showed. Funds, who were net buyers in each of the previous three months, have invested a net $8.76 billion into Indian shares this year.
“Long-term investors into India aren’t increasing their exposure as the horizon isn’t clear,” A.S. Thiyaga Rajan, a senior managing director at Aquarius Investment Advisors Pte. in Singapore, which has been investing in India since 1995 and has about $400 million in Indian assets, wrote in an e-mail. “First, there is uncertainty on tax. Second is the continuing depreciation of the rupee given weak economic fundamentals.”
Finance Minister Pranab Mukherjee proposed in March to introduce the General Anti-Avoidance Rule, or GAAR, to curb evasion of taxes by companies through misuse of tax treaties with other countries. Foreign funds are concerned the new rule may apply to their holdings of domestic shares, prompting U.S. trade and lobby groups to raise the matter in an April 17 letter to U.S. Treasury Secretary Timothy F. Geithner, who discussed the plans last month with Mukherjee.
India’s $1.2 trillion market is influenced by flows from overseas. The BSE India Sensitive Index (SENSEX) was the best performer among the world’s top 10 markets in 2010 when the nation took in a record $29.4 billion. The gauge sank 52 percent in 2008, its biggest annual slump, when withdrawals reached an all-time high. Flows into Indian equities this year are the highest in Asia outside of Japan after South Korea, which received a net $9.54 billion, data compiled by Bloomberg show.
‘Needs to be Competitive’
“India, with its current-account deficit, needs to be competitive when attracting global capital,” Adrian Mowat, the chief Asia and emerging-market strategist at JPMorgan Chase & Co., who has been investing in India since 1993, said by e-mail. “The country is unique in charging capital-gains tax to foreign institutional investors.”
India’s $1.7 trillion economy slowed for four consecutive quarters through December. Gross domestic product probably grew 6.9 percent in the year ended March, the least in three years, according to government estimates. The slowdown has sapped tax revenue even as subsidies spur spending, leaving India with the widest budget gap among the so-called BRIC group of biggest emerging markets that also includes Brazil, Russia and China.
‘Level-Playing Field’
The rupee weakened to a four-month low of 52.955 per dollar yesterday. The current-account deficit was $19.6 billion in the three months through December, the worst quarterly performance on record. Mukherjee in his budget speech on March 16 estimated the fiscal deficit at 5.9 percent of GDP in the year ended March 31 and sought to reduce the gap to 5.1 percent this financial year by raising taxes and proposing to cap a subsidy program.
“GAAR would help government revenues, but would do more harm in the medium term,” Adrian Lim, a Singapore-based senior investment manager at Aberdeen Asset Management Plc, said in an interview with Bloomberg UTV on April 30. “Foreign investors want a predictable, level-playing field.”
The proposed changes to tax rules, which will be discussed by lawmakers in the current parliamentary session, followed a ruling in January by India’s Supreme Court that Vodafone Group Plc (VOD) doesn’t have to pay $2.2 billion in tax on its purchase, conducted offshore, of the Indian business of Hutchison Whampoa Ltd. in 2007.
Vodafone, the biggest cell-phone company, has threatened to pursue international arbitration should India proceed with the plans. The operator’s Dutch unit served a notice of dispute to the government on April 17, invoking an investment treaty between India and the Netherlands.
Participatory Notes
The proposed tax provisions won’t apply to holders of participatory notes, or derivatives held overseas, Mukherjee said in March. Investments through the notes were 15 percent of 11.07 trillion rupees that foreigners had in stocks, bonds and derivatives at the end of March, data from the regulator show.
Participatory notes allow foreigners not registered in the country to invest in the stock market.
Macquarie’s Asia hedge fund has exited its short positions in Indian single-stock futures in response to the proposed tax rules, Reuters reported on April 23, citing a letter to clients from Nick Bird, the fund’s portfolio manager. The fund could become liable for tax on unrealized gains after April 1, while open positions in single-stock futures might also be liable, Bird told clients, according to the report.
‘Earnings Magnet’
The Sensex has risen 12 percent this year as foreign funds bought local stocks on optimism the central bank would reduce interest rates after record increases in funding costs eroded corporate profits. Earnings for four, or 33 percent, of the 12 Sensex companies that have posted results for the three months ended March 31, have missed analysts’ estimates. In comparison, 47 percent of the 30 Sensex companies lagged behind forecasts in the December quarter.
“Earnings seem to have bottomed and should recover from here on and that will be the magnet that will bring back flows irrespective of how the tax issue evolves,” Arjuna Mahendran, the Singapore-based head of Asia investment strategy at HSBC Private Bank, told Bloomberg UTV yesterday. “India offers global investors superior rates of growth. I can’t see large institutional investors, including us, departing because of this,” he said, referring to the proposed changes in tax rules.
The Bank of New York Mellon Corp. index of Indian American depositary receipts slipped 1.1 percent to 1,010.63 by 2:11 p.m. in New York, poised for the biggest one-day drop since April 23.
To contact the reporters on this story: Shikhar Balwani in Mumbai at sbalwani@bloomberg.net
To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Tuesday, May 1, 2012
Hindustan Unilever Net Beats Estimates on Soaps, Shampoos By Malavika Sharma - May 1, 2012
Hindustan Unilever Ltd. (HUVR), the Indian unit of the world’s second-largest consumer goods company, reported profit rose 21 percent and exceeded analysts’ estimates on higher sales of soaps and personal-care products.
Net income rose to 6.87 billion rupees ($130.3 million) in the quarter ended March 31, from 5.69 billion rupees a year earlier, the Mumbai-based maker of Sunsilk shampoo and Knorr soups said in a statement yesterday. That beat the 6.44 billion- rupee median of 30 analysts’ estimates compiled by Bloomberg.
The introduction of high-end products and higher sales of laundry detergents boosted revenue by 16 percent to 56.6 billion rupees. The company wants to boost sales of products such as fabric conditioner and face wash, Chief Executive Officer Nitin Paranjpe said in an interview in February.
“Personal products continue to do well, largely driven by volume growth,” said Sameer Narang, an analyst at HDFC Securities Ltd. “In the soaps and detergent business also they have been able to get some volume traction.”
Revenue from selling soaps and detergents rose 29 percent to 28.3 billion rupees in the fourth quarter. Sales of personal- care products gained 17 percent to 17.1 billion rupees.
Volumes, Prices
Higher sales of shampoos such as Sunsilk and skin products such as Ponds boosted the personal-care products’ business, Chief Financial Officer Sridhar Ramamurthy said on a call with reporters. Higher volumes and price increases drove up soaps and detergents revenue, he said.
“They’re trying to premiumize their product portfolio,” said Shivani Mehra, an analyst with Techno Shares & Stocks Ltd. “The premiumization would lead to growth, with different product launches.”
Parent Unilever on April 26 reported first-quarter revenue growth that beat estimates and outstripped competitors Danone (BN) and Nestle SA (NESN), led by Dove skincare and Tresemme hair products. Underlying sales, which exclude acquisitions, disposals and currency fluctuations, grew 8.4 percent from a year earlier.
Hindustan Unilever’s shares were unchanged at 417.60 rupees at the close of trading in Mumbai on April 30. Markets were closed yesterday for a public holiday. The company’s shares have gained 2.5 percent this year.
To contact the reporter on this story: Malavika Sharma in New Delhi at msharma52@bloomberg.net
To contact the editor responsible for this story: Stephanie Wong at swong139@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Sunday, April 29, 2012
Billionaire Mittal Says ‘Not Giving Up’ on Indian Economy By Rakteem Katakey and Anto Antony - Apr 29, 2012
Billionaire Lakshmi N. Mittal, who chose India for his first investment in crude oil processing, said the nation’s economy will continue to expand, unaffected by slowing reforms and delays in government’s decision-making.
“The India story is not over,” Mittal, chairman of the world’s biggest steelmaker ArcelorMittal, said in New Delhi yesterday. “Whatever may happen in terms of policies and paralysis, the country will continue to grow.”
Mittal, with a net worth of $18.7 billion, said India is on his “priority list” as a rising middle-class population will spur demand while it may take at least five years for Europe to recover from its debt crisis. His optimism on Asia’s third- biggest economy contrasts with Standard & Poor’s, which cut the nation’s sovereign credit outlook last week, citing slowing investments and growth.
“I am not giving up,” Mittal said. “There has been some slowdown. But you can’t ignore India.”
Economy of the world’s second-most populous country expanded 6.1 percent in the three months ended Dec. 31, the slowest pace in almost three years, as costlier credit hurt consumer spending and dented investments. India’s central bank cut interest rates on April 17 for the first time since 2009 to help bolster growth.
Prime Minister Manmohan Singh’s administration is facing one of the most challenging periods since taking office in 2004. Rifts in the ruling coalition have hampered efforts to push through various legislation, including a move to allow overseas retailers like Wal-Mart Stores Inc. (WMT)
$20 Billion
Mittal’s energy unit opened a $4 billion refinery in the Northern Punjab state in a venture with India’s Hindustan Petroleum Corp. (HPCL) on April 28. ArcelorMittal has $20 billion of planned projects in the states of Odisha and Jharkhand.
Mittal Energy also has a venture with India’s Oil & Natural Gas Corp., which has offshore oil exploration blocks in Nigeria, according to ONGC’s overseas unit. In the Punjab refinery, run by HPCL-Mittal Energy Ltd., the partners own 49 percent each.
ArcelorMittal (MT) plans to invest in expanding its existing mining operations and some steel projects in Canada, Liberia and Brazil, Mittal said. Allocation of mining rights in India has to become more transparent, he said. The company has waited for more than six years because of delays in securing approvals and land for its Indian steel projects.
Steel consumption in China will increase by 4 percent this year, Mittal said. Demand will rise as much as 8 percent in the U.S. while that in Europe may slow, he said.
The European Union “continues to be slow and it’ll probably be 2016-17 for it to emerge at the pre-crisis levels of 2008,” he said.
To contact the reporters on this story: Rakteem Katakey in New Delhi at rkatakey@bloomberg.net; Anto Antony in Mumbai at aantony1@bloomberg.net
To contact the editor responsible for this story: Paul Tighe at ptighe@bloomberg.net
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