India’s JSW Steel Agrees to Absorb Ispat Unit

By Abhishek Shanker - Sep 1, 2012

JSW Steel Ltd. (JSTL), India’s third- largest steelmaker, will absorb its JSW Ispat Ltd. unit, almost two years after agreeing to buy a majority stake in the company to boost earnings through tax benefits.
Investors will get one JSW Steel share for every 72 shares of JSW Ispat that they own, according to an e-mailed statement from JSW Steel. The transaction “will help in realization of integration benefits of the two companies,” Sajjan Jindal, chairman and managing director of JSW Steel said.
JSW Steel’s founders will own 35.12 percent of the merged company, according to the statement. JFE Holdings Inc. (5411) of Japan, which owns a 15 percent stake in JSW Steel, will own 14.92 percent of the combined entity.
JSW held about 47 percent of Ispat (JSWI) before today’s announcement. The Mumbai-based company paid 21.6 billion rupees ($389 million) excluding debt for Ispat Industries Ltd. in December 2010. Renamed JSW Ispat, the steelmaker which owns a 3.2 million metric ton factory in the western state of Maharashtra, refinanced its debt in August last year, lowering its interest cost.
“A potential merger of JSW Ispat and JSW Steel would lead to a spike in net debt and deterioration of leverage ratios of JSW Steel,” Bijal Shah and Jaykumar Doshi, analysts at India Infoline Ltd. (IIFL) in Mumbai, said in a report on Aug. 30. “Carried- forward tax losses of JSW Ispat would reduce tax expense and boost earnings. The impact of tax benefit would far outweigh the 100 percent consolidation of Ispat’s losses.”
The net debt of the combined entity will jump 40 percent to 232 billion rupees, according to the analysts. JSW Ispat has carried forward tax losses of about 75 billion rupees, equivalent to a tax shield of approximately 25 billion rupees, which JSW Steel may use to cut its tax expenses, they said in the report.
JSW Steel fell 0.2 percent to 693.7 rupees in Mumbai yesterday, while the shares of JSW Ispat remained unchanged at 9.55 rupees. The Bombay Stock Exchange’s benchmark Sensitive Index dropped 0.6 percent yesterday.
To contact the reporter on this story: Abhishek Shanker in Mumbai at ashanker1@bloomberg.net
To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

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India Growth Beats Estimates After Rate Cut to Aid Spending

By Unni Krishnan and Kartik Goyal - Aug 31, 2012

India’s economy grew more than estimated last quarter after the central bank cut interest rates to support spending at home as Europe’s debt crisis crimped export growth. Bonds fell and the rupee pared losses.

Gross domestic product rose 5.5 percent in the three months through June from a year earlier, faster than the three-year low of 5.3 percent in the previous quarter, data from the Central Statistical Office in New Delhi showed today. The median of 39 estimates in a Bloomberg News survey was for a 5.2 percent gain.

“Despite slightly higher growth, the underlying momentum remains weak,” said Sonal Varma, an economist at Nomura Holdings Inc. in Mumbai. “India needs a faster expansion to cut poverty and accelerate development, but its economic performance is likely to remain below potential.”

Prime Minister Manmohan Singh faces pressure to rejuvenate a development agenda hampered by graft allegations and political gridlock, as inflation near 7 percent limits the central bank’s room to lower rates further to revive investment. India and BRIC peers China, Russia and Brazil are relying on domestic demand as Europe’s woes dim the outlook for overseas sales.

Inflation has been fanned by food costs and a 17 percent drop in the rupee against the dollar in the past year that made imports such as oil costlier. A below-average monsoon threatens to exacerbate price increases and weigh on growth by crimping farm output.

Rupee, Stocks

The yield on the 8.15 percent bond due June 2022 rose to 8.23 percent as of 3:19 p.m. in Mumbai from 8.19 percent yesterday. The rupee little changed at 55.655 per dollar, after sliding as much as 0.3 percent earlier. The BSE India Sensitive Index fell 0.8 percent.

GDP rose 3.9 percent last quarter from a year earlier, the slowest pace since 2009, based on an alternative estimate using expenditures on goods and services, according to calculations by Bloomberg.

India’s wholesale-price index rose 6.87 percent last month from a year earlier, the fastest inflation in the BRIC group even as the pace eased to a 32-month low. India also faces record borrowing needs to plug the widest BRIC budget deficit and a trade shortfall that has pressured the rupee.

The nation is “somewhat of an outlier in the world” as inflation remains above a comfort level of about 5 percent even as GDP growth moderates, according to Reserve Bank of India Governor Duvvuri Subbarao. He left borrowing costs unchanged at 8 percent in July for a second meeting, after a 0.5 percentage point cut on April 17.

Faster Development

Brazil lowered its lending rate for the ninth straight meeting this week to a record low 7.5 percent. The nation’s GDP growth probably slowed to 0.7 percent in the second quarter from a year earlier, the weakest pace since 2009, according to the median estimate in a Bloomberg News survey before a report today.

India’s central bank predicts a 6.5 percent GDP climb in the 12 months that began April 1, matching last year’s pace, which was a nine-year low following a moderation in investment.

“Today’s growth rate was driven by the construction sector and other services,” said Suvodeep Rakshit, an economist at Kotak Securities Ltd. in Mumbai. “But the weak growth story still continues. The Reserve Bank of India’s priority remains inflation, so the onus is on the government to accelerate reforms.”

Farm output rose 2.9 percent in the three months through June from a year earlier, compared with a 1.7 percent gain in the previous quarter, today’s report showed. Manufacturing expanded 0.2 percent, while construction jumped 10.9 percent.

Budget Deficit

Singh is under pressure to achieve faster growth in a nation where the majority of people live on less than $2 per day, according to World Bank estimates.

The Reserve Bank has cited India’s fiscal gap as among inflation risks. Singh’s administration is struggling to rein in spending on a subsidy program ranging from diesel to fertilizers even as weaker expansion crimps tax revenues.

The government’s goal is to narrow the budget shortfall to 5.1 percent of GDP in the fiscal year through March 2013, from 5.8 percent. Forecasters including Citigroup Inc. predict the deficit will instead widen as expansion falters.

S&P and Fitch have said they may strip India of its investment-grade rating because of such risks. Companies such as Tata Motors Ltd. (TTMT) have felt the impact of slower growth. Deliveries from its Indian business declined 3.6 percent in the three months ended June.

Finance Minister Palaniappan Chidambaram has pledged to unveil a road map for fiscal consolidation to assuage concern that policy missteps are clouding India’s outlook.

The government has forgone increased foreign investment in industries from retailing to insurance in recent months, in part as coalition allies objected. Legislation to revamp taxes to bolster expansion is also stalled.

“The government has its back to the wall,” said N. Bhaskara Rao, chairman of the New Delhi-based Centre for Media Studies. “There is little possibility of it hitting back and taking any meaningful reforms.”

To contact the reporter on this story: Unni Krishnan in New Delhi at ukrishnan2@bloomberg.net; Kartik Goyal in New Delhi at kgoyal@bloomberg.net;

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Nadar’s HCL Cuts Rates to Tap $15 Billion Deals: Corporate India

By Jonathan Browning and Ketaki Gokhale - Aug 31, 2012

HCL Technologies Ltd. (HCLT), the Indian software developer founded by billionaire Shiv Nadar, plans to cut prices to tap $15 billion of orders as companies switch suppliers of information technology to save cash.

“Today the customer is very angry with the existing vendors and very unhappy with their level of service and support,” HCL’s Chief Executive Officer Vineet Nayar said in an interview in London. The contracts were written before the economic crisis in 2008 “and therefore their terms were one- sided, pro-vendor,” he said.

HCL’s strategy to offer lower rates to lure clients in the U.S. and Europe helped the company post record sales and profit in the year ended June 30. Customers may seek new information technology suppliers for about 30 percent of the $45 billion of orders up for renewal this year, offering business to vendors who are open to changing contract terms, Nayar said.

HCL beat analysts’ estimates by 25 percent in the three months to June 30, exceeding forecasts for the seventh straight quarter. Larger rival Infosys Ltd. (INFO) missed earnings predictions in four of the past eight reporting periods, and on July 12 said sales in the year ending March may rise to at least $7.34 billion, lower than the $7.55 billion forecast in April.

“Clients are becoming more cost conscious,” said Manoj Behera, an analyst at Equirus Securities Pvt. HCL’s global peers are “generally price insensitive. This is something that is driving sales for HCL at this point in time.”

Global spending on information technology may grow at a 3 percent pace in 2012 to $3.6 trillion this year, Gartner said in a July 9 report. That’s slower than 7.9 percent last year as the euro area crisis, a weaker U.S. recovery and a slowdown in China curb economic growth, the researcher said.

‘Crying Wolf’

Nayar said the company, spun off from computer maker HCL in 1997, won customers in 2008 after agreeing to slash its annual charge for a Boston-based client by 62 percent to $25 million after the customer’s revenue dropped to $700 million from $1.8 billion. Nayar didn’t identify the company.

“We saw it as an opportunity of getting into more doors than ever before,” Nayar, 50, said. As customers change vendors, “depending on where you’re sitting, you’re either gaining from it, which is what’s happening with HCL, or you are crying wolf and saying recession.”

The company has signed $2.5 billion of deals in the last six months, he said. HCL has gained 33 percent in the past year compared with a 2.1 percent increase at Infosys. HCL, based in the New Delhi suburb of Noida, fell 0.3 percent to 544.9 rupees at 9:42 a.m. in Mumbai.

Earnings Margin

The company, that sold shares in an initial public offering in 1999, had an earnings margin before interest and taxes of 16.5 percent, lower than the average of 19.5 percent margin among the 10-company BSE IT Index (BSET), according to data compiled by Bloomberg.

The measure for the year ended March 31 was 29 percent at Infosys, the highest among India’s four largest software exporters. Tata Consultancy Services Ltd. (TCS) reported a margin of 28 percent, data show.

“HCL’s volatile margin history makes us wary,” Abhiram Eleswarapu, a Mumbai-based analyst with BNP Paribas Securities India Pvt. said in a July 26 note to clients. “HCL expects to maintain an annual EBIT margin of 16.5 percent at current foreign-exchange rates. However, its margins have historically been volatile, making extrapolations risky.”

Eleswarapu recommends investors reduce their holdings in HCL’s stock and has a hold rating for Infosys.

Cheaper Locations

To maintain margins HCL may propose billing the client on a fixed-price rather than time-and-materials basis or moving work to cheaper locations such as the Philippines from Singapore, as well as automating more processes, Nayar said.

HCL also plans to reevaluate its acquisition strategy to boost growth and be “relevant in 2015,” Nayar said. The company may purchase rivals that will help give it a new technology platform, or expand its geographical presence.

In 2008, HCL outbid Infosys to buy Axon Group Plc, a U.K. business management software provider by agreeing to pay 407 million pounds ($644 million). Nadar, the company’s founder, set up Hindustan Computers Ltd. in 1976 and began selling micro- computers two years later.

“If as an IT services company you’re not going to keep yourself current and you believe that your business model or your technology competence are going to continue to be relevant, then you’re going to become obsolete,” Nayar said. “Your perception of your invincibility is your biggest threat and your biggest competition.”

To contact the reporters on this story: Jonathan Browning in London at jbrowning9@bloomberg.net; Ketaki Gokhale in Mumbai at kgokhale@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Infosys Seeks Product Deals as Customers Delay: Corporate India By Ketaki Gokhale - Aug 29, 2012

Infosys Ltd. (INFO), India’s second-largest software developer by value, needs to make acquisitions to meet a goal of earning a third of its revenue from products in five years as clients delay new projects.
The company’s “aspiration” is to boost business selling banking products such as Finacle and WalletEdge, used to transfer money over mobile phones, from 6.1 percent of sales in the three months ended June 30, Chief Executive Officer S.D. Shibulal said. Infosys in July cut its sales forecast for the year that began April 1 amid weaker spending by customers.
Infosys, which has 151,151 employees, is targeting software products to help it reduce its dependence on writing customized code to boost revenue, said Ankur Rudra, an analyst with Ambit Capital Pvt. in Mumbai. The first Indian company to sell shares on the Nasdaq is open to purchasing a firm that’s a 10th of its size in revenue, Shibulal said. Infosys’s sales rose 22 percent to $7 billion in the year ended March 31.
“It’s about increasing our revenue share from non- commoditized areas,” Shibulal, 57, said in an interview at Bloomberg’s office in Mumbai yesterday, adding that boosting product revenue wasn’t in his plan 18 months ago. The company will this year “hire 35,000 people, if you continue on this path in about seven years we’ll be recruiting about 200,000 people. This is not a viable option.”
Infosys shares have dropped 14 percent this year, compared with a 16 percent increase at larger rival Tata Consultancy Services Ltd. The benchmark BSE India Sensitive Index has risen 13 percent. Infosys, based in Bangalore, fell 1.4 percent to 2,388.3 rupees in Mumbai yesterday.

‘Risky Business’

“Infosys’s focus on growing its products and platform- based businesses is risky,” said Rod Bourgeois, a New York- based analyst at Sanford C. Bernstein & Co. “If Infosys were thriving better in its core services businesses, it would have less need for products and platform-based growth.”
Finacle, used by companies including Rabobank Groep of the Netherlands and Denmark’s Nykredit Group, accounts for the majority of Infosys’s product revenue.
The software has approximately 70 percent market share in India, Chief Financial Office V. Balakrishnan said in an interview in February. Revenue from the 15-year-old product rose 7.8 percent to $318.75 million in the year ended March 31, from $295.6 million the year before.
The company, started by seven people including Shibulal with $250 borrowed from their wives in 1981, is targeting emerging markets for its products and platforms including WalletEdge.

Cash Pile

GlaxoSmithKline Plc uses Infosys’s marketing tool BrandEdge, which competes with Sapient Corp. (SAPE)’s SapientNitro, Accenture’s Accenture Interactive and a digital advertising suite from Adobe Systems Inc. (ADBE)
Reaching the company’s goal “isn’t going to happen overnight, unless we do an acquisition,” Shibulal, who took over as head in August last year, said. Infosys had a cash pile of 206 billion rupees ($3.7 billion) as of June 30, the largest among Indian software developers.
Buying a product company may be expensive, said Ambit’s Rudra.
“They will have to pay a massive premium to acquire anything of size and scale,” said Rudra, who recommends investors sell the stock. “One would imagine they would not be ready to spend as much, given their relatively conservative track record.”
In 2008, Infosys decided against pursuing a plan to buy Axon Group Plc for 407 million pounds ($644 million) after its bid was trumped by New Delhi-based HCL Technologies Ltd. (HCLT) In 2006, Infosys spent $115 million to purchase Citigroup Inc.’s stake in Progeon Ltd., a back-office service provider controlled by Infosys.

Missed Estimates

The company, which has missed earnings estimates for four of the past eight quarters, on July 12 said sales in the year ending March may rise to at least $7.34 billion, lower than the $7.55 billion forecast in April. In contrast, Tata Consultancy’s earnings lagged behind analysts’ forecasts twice in the past eight quarters.
Shibulal blamed the difference on Infosys’s portfolio and the company’s dependence on so-called discretionary spending by companies, which has slowed.
Customers are facing “a lack of confidence about where to invest,” Shibulal said. “I don’t see any events on the horizon which will build confidence.”
For the year ending March, Infosys has forecast dollar- denominated sales growth below an estimate of 14 percent expansion for the Indian information technology services industry by the National Association of Software & Services Companies.
“In our 30-year history, one year and one quarter doesn’t mean much,” Shibulal said. “You don’t go in and reassess the entire strategy of a corporation and what we have achieved just because of a couple quarters.”
To contact the reporter on this story: Ketaki Gokhale in Mumbai at kgokhale@bloomberg.net
To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

Maoist Hideout Threatens $3 Billion Steel Plant: Corporate India By Rajesh Kumar Singh - Aug 28, 2012

Attacks by Maoist rebels in India are preventing the nation’s second-largest maker of steel from mining an iron-ore reserve it says is vital to feed a planned $3 billion expansion of its biggest plant.
The Rowghat mine in the central state of Chhattisgarh is crucial for Steel Authority of India Ltd.’s adjacent Bhilai plant, which will run out of ore in about five years, Chairman C.S. Verma said. The company has failed to remove forest cover to mine the 2,030 hectares (5,016 acres) of deposit because of “violent reprisals” from Maoist rebels who, according to Jitendra Singh, junior minister for home affairs, use the area as their hideout.
“It’s hard to imagine running the plant without this mine,” Verma said in an interview. “We’re doing everything possible to increase security to start work. Rowghat will be the lifeline for Bhilai.”
Steel Authority’s challenge will be to secure an alternate supply of iron ore should it fail to start Rowghat in time for the expanded production at Bhilai. Rowghat is one of several industrial projects that have been stymied by the Maoists, who run a parallel regime in some of India’s richest mining regions, as lack of jobs and poverty draws locals to their ranks.
“The clock is ticking,” said Giriraj Daga, an analyst at Nirmal Bang Equities Pvt. in Mumbai. “Steel Authority’s earnings will be at stake if Rowghat is not ready in time.”
Rowghat will produce 12 million tons of ore a year, making it the company’s biggest mine, according to Steel Authority’s website.
Steel Authority shares declined 1.1 percent to 82.85 rupees in Mumbai yesterday, the lowest level in a month. The stock has risen 1.7 percent this year, compared with a 14 percent gain in the benchmark Sensitive Index. (SENSEX)

Campaign of Violence

The Maoist guerrillas are active in a dozen of India’s 28 states, many of which are rich in iron ore, coal, bauxite, manganese and other minerals. The rebels have pressed a campaign of violence against the government, police and landowners since a peasant uprising in the eastern state of West Bengal in 1967. They have been accused of raising funds through extortion.
Maoist rebels killed 15 members of India’s security forces in two attacks in June last year in Chhattisgarh. In April the previous year, the rebels killed 76 policemen in the same Dantewada district, the deadliest attack on security forces in the decades-long conflict.
Bhilai accounts for 36 percent of Steel Authority’s 13.4 million metric ton capacity and about 35 percent of its profit, according to the company’s website. The plant, which started production in 1961, makes rails, steel plates as well as rods.
New Delhi-based Steel Authority is investing 172.7 billion rupees ($3 billion) to expand Bhilai, part of a $13 billion plan to increase capacity 60 percent, improve products and develop mines. The company spent 403.2 billion rupees as of March 31 on the expansion, which has been delayed by at least two years.

Own Ore

Steel Authority’s profitability emanates from its own source of iron ore for its entire requirement. The company imports almost 70 percent of its coking coal, which makes it the second-biggest spender on raw material among the three biggest steelmakers in the country.
“The company’s profits have already borne the brunt of the increase in coking coal prices,” said Niraj Shah, an analyst at Fortune Equity Brokers India Ltd. in Mumbai. “The absence of iron ore mines can further dent margins, especially because its conversion cost is fairly high.”
Steel Authority’s cost of turning iron ore into a ton of steel was 16,464 rupees in the year ended March 31, more than double that of JSW Steel Ltd. (JSTL)’s 8,105 rupees, according to Shah. Tata Steel Ltd. (TATA), the country’s largest producer of the alloy, incurred 21,703 rupees.

Falling Profit

Steel Authority’s profit fell in eight of the past nine quarters on higher import costs of coking coal and currency losses on overseas loans taken to buy fuel and plant equipment.
India could lose $80 billion of investment in developing mineral deposits should the government fail to stop rebel violence, London-based investment banking and securities firm Execution Noble Ltd. has said.
Inventories piled up at NMDC Ltd. (NMDC), which runs the biggest iron ore deposit in Chhattisgarh, after Maoists in 2009 blew up an underground pipeline that transported iron ore to Essar Steel Ltd.’s pellet plant in the adjoining state of Andhra Pradesh. The repaired pipeline was damaged again last year.
State-run National Aluminium Co. (NACL)’s expansion of its alumina refinery suffered delays, after Maoists invaded the company’s bauxite mines in 2009 and captured workers to grab explosives used in mining. The incident spread fear among workers, who would not turn up for work until the police declared the area safe almost after two weeks, C.R. Pradhan, then chairman of the company, said yesterday in a phone interview.

‘Fear of Life’

“Even after the area was declared safe, mine workers stopped work after sunset,” Pradhan said. “Almost 5,000 construction workers at the refinery site fled to their native places fearing for their lives.”
Such threats have often deprived Indian companies of the resources the land holds. Local steelmakers have started importing iron ore, despite the country’s capacity to produce almost twice its requirements.
Spot prices of iron ore with 62 percent metal content at China’s Tianjin port have declined 32 percent this year to $94.8 a ton a yesterday, the lowest level in almost 34 months, according to data compiled by Bloomberg.
“Imports of iron ore will increase in times to come,” said Shah of Fortune Equity Brokers. “It’s the most plausible solution.”
To contact the reporter on this story: Rajesh Kumar Singh in New Delhi at rsingh133@bloomberg.net
To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

Solar Panel Maker Doubles Output as Prices Drop: Corporate India By Sharang Limaye - Aug 27, 2012

Surana Ventures Ltd. (SURA), an Indian maker of solar panels, is planning to double production after oversupply from Chinese manufacturers pushed prices down by almost 34 percent in the past year.
The company, based in the southern city of Hyderabad, plans to increase output of panels to 30 megawatts this year and invest 250 million rupees ($4.5 million) in a solar cell plant, Managing Director Narender Surana said in an interview. Rising demand for alternative energy driven by coal supply bottlenecks and blackouts may help reverse a slide in revenue, he said.
Surana is counting on one of the fastest-growing solar markets where larger local rivals including Moser Baer India Ltd. (MBI), the country’s biggest maker, and Indosolar Ltd. (ISLR) are struggling to cope with the crash in prices. Prime Minister Manmohan Singh’s government seeks to turn India into a global hub with rules to help almost triple manufacturing capacity to 5 gigawatts by 2020.
“The shortage in coal supply is a great opportunity for us as more and more people are looking at solar energy as a viable alternative,” Surana said. “As India’s energy needs rise, the shift towards solar power shall become more pronounced.”
Sales, which slid 29 percent in the year ended March 31 to 727 million rupees, may jump 38 percent in the current financial year to 1 billion rupees, Surana said.

Stock Slide

Shares of the company have slumped 71 percent since touching 65 rupees on its debut in Mumbai on Jan. 7, 2011, according to data compiled by Bloomberg. The stock rose 0.3 percent to 19 rupees yesterday.
India is struggling to add electricity generation capacity to meet peak demand. Power cuts are common across the country, which battles an average 9 percent shortfall that the government says shaves about 1.2 percentage points off annual economic growth. The South Asian country has missed every annual capacity target since 1951, with 76,000 megawatts targeted for the five years ending March 2017.
A shortage of coal and gas used in conventional thermal plants has prompted the government to set a sun-power generation target of 20 gigawatts by 2022, a 20-fold increase. Welspun Energy Ltd., the country’s biggest developer of solar projects, said last month that the nation will surpass the target in the next decade by twofold.

Idle Capacity

The biggest panel suppliers including China’s Suntech Power Holdings Co. (STP) and Tempe, Arizona-based First Solar Inc. (FSLR) say India is about to become one of the fastest-growing solar markets, countering waning demand in Europe where governments are cutting back clean-energy subsidies.
Surana may be putting up the investment, anticipating such a surge in demand, even though solar-panel makers in India have almost 80 percent of their capacity lying idle now, said Bharat Bhushan, a New Delhi-based analyst for Bloomberg New Energy Finance.
India is soon set to release a 3 gigawatt capacity plan for the next four years and it will have a domestic content requirement, Bhushan said.
“The home market is the big hope for solar manufacturers in India,” Bhushan said. “The government has already been promoting the use of locally made cells and modules,” which will be extended in the next phase, he said.
First Solar, the only profitable panel maker among the 10 biggest in the world, plans to develop solar farms in India, with demand coming from industrial and commercial users without any government subsidies involved, Sujoy Ghosh, the India head of the world’s biggest thin-film panel maker, said last week.

Debt Revamp

A lot of investment planned for thermal projects will go to renewables, Welspun Energy’s Managing Director Vineet Mittal said last month. Indian power utilities have stalled plans to invest about $34 billion to build 42 gigawatts of capacity as coal output fails to meet demand.
The oversupply of solar panels has claimed at least 14 U.S., German and French makers, while prices have plunged 34 percent in the past year amid dwindling demand in Europe, the largest market for the equipment. Moser Baer said in May that it was revamping 35 billion rupees of secured debt and selling bonds to pay off dollar-convertible notes.
Surana faces the threat of competition from Chinese makers that are bigger in size and capacity, said Vishal Kothari, a power analyst at JHP Securities Pvt. in Mumbai, adding it will be difficult for a small company to succeed when bigger ones have failed.

Dim Outlook

“I don’t see any major growth in this sector as the cost of generation is too high and competition is too much,” said Kothari, who doesn’t have a rating for the stock. “Surana’s performance has been volatile historically.”
Surana Ventures was spun off from the solar business of Surana Telecom & Power Ltd. (SRTL) in November 2009 and started trading about a year later. Bhagyanagar India Ltd. (BHIL), the parent company, holds about 24 percent of the solar-panel maker, while the phone company owns about 18 percent.
Access to the group’s cash will allow Surana Ventures to buy raw materials from distressed European companies at half the cost, said Surana. Cash reserves and equivalent at Bhagyanagar rose sevenfold to 95 million rupees as of March 31 from 12 months earlier, according to data compiled by Bloomberg. Surana Ventures had 252 million rupees of debt in the period.
“This gives us an edge when we bid for contracts,” Surana said. “It also helps in pricing our products competitively.”
The company is also exploring opportunities after the country’s phone regulator this year recommended that carriers shift to renewable energy from diesel to power their communication towers, he said.
“With the cost of equipment coming down drastically, the cost of generating solar power has also fallen,” he said. “Solar is more attractive than other forms of alternative energy and we expect state governments to encourage setting up of projects as well. That will provide a big boost to us.”
To contact the reporter on this story: Sharang Limaye in Hyderabad at slimaye@bloomberg.net
To contact the editor responsible for this story: Arijit Ghosh at aghosh@bloomberg.net

Hedge Fund Bets Jump to 15-Month High on Bull Rally: Commodities By Tony C. Dreibus - Aug 26, 2012

Hedge funds boosted bets on rising commodities to the highest in 15 months, driving prices into a bull market as the U.S. drought worsened and the Federal Reserve signaled it may take more steps to spur economic growth.
Money managers’ net-long position across 18 U.S. raw materials rose 10 percent to 1.32 million futures and options in the week ended Aug. 21, U.S. Commodity Futures Trading Commission data show. Holdings doubled in two months to the highest since May 2011. Bets on corn are the most bullish in 15 months amid the worst U.S. drought in 56 years, while wagers on gold rebounded and platinum more than doubled.
The Standard & Poor’s GSCI Spot Index of 24 raw materials ended the week up 20 percent from a June low, the common definition of a bull market. Minutes of the Fed’s last meeting, released Aug. 22, showed many policy makers favored “additional monetary accommodation” soon unless growth strengthens. Purchases of new U.S. homes rose more than forecast in July, matching a two-year high. People’s Bank of China Governor Zhou Xiaochuan said Aug. 23 that stimulus measures “can’t be ruled out” in the world’s second-largest economy.
“The economic situation globally has improved,” said Adrian Day, the president of Adrian Day Asset Management in Annapolis, Maryland. “You have global growth, and prospects for added stimulus, and that’s good for commodities.”

Extending Rally

The S&P GSCI gained 0.4 percent last week, the fourth consecutive weekly gain, after touching a three-month high Aug. 23. The MSCI All-Country World Index of equities slid 0.4 percent, and the dollar lost 1.2 percent against a measure of six major trading partners. Treasuries gained 0.7 percent, a Bank of America Corp. index showed.
Fifteen commodities tracked by the gauge rose last week, led by metals and soybeans. Silver futures jumped 9.3 percent, the biggest weekly gain since October, and gold’s 3.3 percent rally was the most since January. Bullion holdings in exchange- traded products backed by the precious metal rose to a record four times last week, reaching 2,448.64 metric tons on Aug. 24, data compiled by Bloomberg showed.
Evidence that the Fed stands ready to deliver additional growth measures “should be very good for markets,” Warren Hogan, the chief economist at Australia & New Zealand Banking Group Ltd., said in a Bloomberg Television interview Aug. 23. Credit Suisse Group AG said in a report the same day that increased expectations for so-called quantitative easing by central banks will boost prices.

‘Crazy Low’

Further easing in the U.S. isn’t a good idea because interest rates are already “crazy low,” said Jack Ablin, who helps oversee about $60 billion of assets as chief investment officer of BMO Harris Private Bank in Chicago. Stimulus measures “should be off the table,” he said. “The super-cycle for commodities is going to flatline.”
The peak of the resources boom will probably be within one to two years, Reserve Bank of Australia Governor Glenn Stevens told a parliamentary committee in Canberra on Aug. 24.
The S&P 500 Index of U.S. equities fell 0.8 percent on Aug. 23 after the government reported that the number of Americans filing applications for unemployment benefits climbed to a one- month high, showing little progress in the labor market. Jobless claims rose by 4,000 for a second week to reach 372,000 in the period ended Aug. 18, Labor Department figures showed. The median of 41 economists surveyed by Bloomberg was 365,000.

Adding Commodities

Investors added $1.47 billion to commodity funds in the week ended Aug. 22, the third inflow of money in the past four weeks, according to data from Cambridge, Massachusetts-based EPFR Global. Precious metals including gold, silver, platinum and palladium accounted for $1.26 billion of the inflows, said Cameron Brandt, the director of research.
“I interpret that as meaning the Fed will come through for some” with regard to the “long-anticipated QE3,” said Brad Durham, a managing director for EPFR.
Bank of China’s Zhou said Aug. 23 that adjustments to borrowing costs and lenders’ reserve requirements are possible. The central bank lowered interest rates in June and July for the first time since 2008 and made three cuts in banks’ reserve requirements starting in November. China is the world’s biggest consumer of everything from copper to pork to soybeans, and the U.S. is the largest user of crude oil and corn.

Gold Bulls

Speculator holdings in gold futures and options jumped 35 percent in the week ended Aug. 22, the first increase in three weeks, to 110,623 contracts, the most since May 1, CFTC data show. Traders were the most bullish in nine months, with 29 of 35 analysts surveyed by Bloomberg expecting prices to rise this week. Three were bearish, and three were neutral, making the proportion of bulls the highest since Nov. 11.
Investors bought 53.26 metric tons of the precious metal valued at about $2.77 billion through gold-backed exchange- traded products this month, the most since November, overtaking France as the world’s fourth-largest hoard when compared with national reserves.
Bullish platinum wagers more than doubled to 15,365 contracts, CFTC data show. Prices rallied 5.5 percent last week, the most since January, on concern that clashes between police and striking miners will spread in South Africa, the biggest producer of the metal. Police killed 34 striking workers at Lonmin Plc’s Marikana mine Aug. 16.

Oil Bets

Investors raised bullish oil bets by 18 percent to 179,526 contracts, the most since early May, CFTC data show. Prices advanced 0.1 percent last week to $96.15 a barrel in New York, the fourth consecutive gain, amid speculation that European leaders will make progress in resolving the debt crisis and central banks will spur economic growth. The commodity touched a 15-week high of $98.29 on Aug. 23.
A measure of 11 U.S. farm goods showed speculators increased bullish bets in agricultural commodities by 7.1 percent to an 11-month high of 912,186 contracts, the 10th gain in 11 weeks.
Money managers raised corn holdings by 13 percent to 342,893 contracts, the most since the end of April 2011. Wagers have increased for 11 consecutive weeks, the longest stretch of gains since at least June 2006, when the data starts.
Corn surged 60 percent since June 15, reaching a record $8.49 a bushel on Aug. 10, as the drought parched millions of acres. Soybeans gained 32 percent since mid-June and reached a record $17.4475 a bushel on Aug. 23.

Crop Yields

Yields from this year’s corn harvest probably will drop to 120.25 bushels an acre, down 18 percent from 2011 and less than forecast Aug. 10 by the U.S. Department of Agriculture, the Professional Farmers of America said Aug. 24 after a weeklong sampling of fields in seven states. Soybean growers may harvest 34.8 bushels an acre, down 16 percent, the farmers said.
“The stage is set for commodities to continue higher,” said Jason Votruba, the co-manager for small-cap equities at Scout Investment Advisors in Kansas City, Missouri, which manages about $22 billion of assets. “If we get more stimulus in the U.S., that’s going to be bullish.”
To contact the reporter on this story: Tony C. Dreibus in Chicago at tdreibus@bloomberg.net
To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

Asian Currencies Advance in Week on Global Stimulus Speculation

By Jiyeun Lee and Liau Y-Sing - Aug 24, 2012

Asian currencies gained this week on signs policy makers in Europe and the U.S. will increase efforts to revive growth, boosting fund flows into emerging-market assets.
Many U.S. policy makers favored a new large-scale asset- purchase program to “provide additional support for the economic recovery,” according to minutes from the Federal Reserve’s latest meeting released this week. German Chancellor Angela Merkel said Aug. 23 that her country and France will coordinate on their approach to keep pressure on Greece to overhaul its economy. Stock markets in South Korea and Taiwan attracted a total $916 million of foreign capital this week through Aug. 24, exchange data show.
“There are some positive signs coming from Greece, and the Fed said further easing may be warranted soon,” said Choong Yin Pheng, senior manager for fixed income and economic research at Hong Leong Bank Bhd. (HLBK) in Kuala Lumpur. “This is keeping risk currencies supported.”
The Bloomberg-JPMorgan Asia Dollar Index rose 0.2 percent this week to 115.39 in Hong Kong, the biggest advance since the five-day period ended Aug. 3. The ringgit climbed 1 percent since Aug. 17 to 3.1018 per dollar, according to data compiled by Bloomberg. Thailand’s baht gained 0.9 percent to 31.24, while the Philippine peso appreciated 0.6 percent to 42.167. India’s rupee advanced 0.5 percent to 55.4950 in Mumbai.

Thai GDP

The baht completed its biggest weekly gain since February after a report showed the economy expanded more than economists estimated in the second quarter. Gross domestic product increased 4.2 percent from a year earlier, beating the 3.1 percent gain forecast in a Bloomberg survey, according to official figures released on Aug. 20.
“The stronger GDP data was additional support for the baht this week amid not-so-bad risk sentiment due to some monetary stimulus speculation,” said Tohru Nishihama, an economist at Dai-ichi Life Research Institute Inc. in Tokyo.
The peso had its best week in more than a month after the government said it plans to increase spending to spur growth. Finance Secretary Cesar Purisima said Aug. 23 that last month’s budget deficit was within expectations and the government has fiscal space to pump prime the economy.
South Korea’s won and the ringgit weakened yesterday after Federal Reserve Bank of St. Louis President James Bullard said Aug. 23 that recent signs of improvement in the economy would prompt him to oppose any new Fed program to buy bonds.

China Manufacturing

China’s yuan rose 0.06 percent this week to 6.3545, headed for a fourth week of strengthening, the longest run of gains since April 2011. The currency weakened yesterday as central bank governor Zhou Xiaochuan said the country still faces relatively big pressure on economic growth, according to a statement posted on the central bank’s website. A preliminary reading on China’s manufacturing fell to 47.8 in August, compared with July’s final 49.3 figure, data showed Aug. 23.
“The manufacturing data demonstrate the growth outlook isn’t bright,” said Stella Lee, president of Success Futures & Foreign Exchange Ltd. in Hong Kong. “That’ll continue to weigh on the yuan unless China has more decisive actions.”
Elsewhere, Indonesia’s rupiah was unchanged from Aug. 17 at 9,528 and Taiwan’s dollar strengthened 0.1 percent this week to NT$30.002, respectively. The Singapore dollar gained 0.2 percent to S$1.2497 and the Korean won was little changed at 1,134.15. Vietnam’s dong fell 0.1 percent to 20,875.
-- With assistance from Yumi Teso in Bangkok, Fion Li in Hong Kong, Elffie Chew in Kuala Lumpur, Jeanette Rodrigues in Mumbai. Editors: Anil Varma, Amit Prakash
To contact the reporters on this story: Jiyeun Lee in Seoul at jlee1029@bloomberg.net Liau Y-Sing in Kuala Lumpur at yliau@bloomberg.net
To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net.

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