Infosys Surges Most in Three Years on Forecast: Mumbai Mover

By Kartikay Mehrotra - Jan 10, 2013

Infosys Ltd. (INFO), India’s second-largest software exporter, jumped the most in more than three years in Mumbai trading after raising its full-year sales forecast.
The company gained as much as 13 percent, the biggest advance since May 2009. It was the largest gainer on the BSE India Sensitive Index, (SENSEX) followed by competitors Wipro Ltd. (WPRO) and Tata Consultancy Services Ltd. (TCS)
Infosys increased its sales forecast about 3 percent to 407.5 billion rupees ($7.5 billion) as it reported better-than- expected profit for the third quarter. The company signed eight large outsourcing deals in the period, worth a total of $731 million, as it cuts prices to boosts its competitiveness amid the slowing global economy.
“This was a very positive quarter compared to expectations,” Bhavan Suri, an analyst at William Blair & Co., told Bloomberg TV India from Chicago. “The stock will bounce back.”
Management had also lowered expectations “tremendously” in the weeks before the results, he said.
Net income was 23.7 billion rupees in the three months ended December, little changed from a year earlier, Bangalore- based Infosys said today. That surpassed the 22.4 billion-rupee median of 42 analyst estimates compiled by Bloomberg.
“We have done well in this quarter despite an uncertain environment,” Infosys Chief Executive Officer and Managing Director S. D. Shibulal said in the statement. “We continue to gain confidence from a strong pipeline of large deals.”
The company is “cautiously optimistic” about the January- March quarter, he added.

Tata, Wipro

The software developer was up 9.9 percent at 2,552.35 rupees as of 9:17 a.m. Tata Consultancy and Wipro both gained about 3.5 percent.
Infosys added 53 clients during the quarter, it said. It also completed the acquisition of management consultancy Lodestone Holding AG. The developer has also pared hiring plans by about 5,000 people to limit costs.
The company writes software programs, as well as providing IT and outsourcing services for customers including BP Plc (BP/) and AT&T Inc.
To contact the reporter on this story: Kartikay Mehrotra in New Delhi at kmehrotra2@bloomberg.net
To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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India Said to Speed Plan to Save $300 Billion Burning Coal Belt

By Rajesh Kumar Singh - Jan 9, 2013

India will consider speeding up relocation of more than half a million people living atop mines where $300 billion worth of coal is burning away, said three people familiar with the plan.
Inhabitants of the 110 square mile (280 square kilometer) Jharia coal fields, who make a living from illegal mining of coal, refused earlier offers to relocate to government-built housing. The main complaint was the units were too small and the area had no jobs. Coal ministry spokesman N.C. Joshi declined to comment before a cabinet meeting scheduled for today.
Vacating the area is critical to the government’s efforts to douse the century-old mine fire and use the coal to run India’s steel mills for the next two decades, and replace imports from companies including BHP Billiton Ltd. The residents suffer from respiratory diseases and face the threat of mine collapse that has swallowed houses.
“The biggest reason why people don’t want to shift is the lack of employment at the new sites,” said Prashant Kumar, managing director at the Jharia Rehabilitation Development Authority, one of the two agencies executing the project. “Residents have been demanding they be given money and jobs, instead of houses.”
The revised proposal will increase the size of the houses near Jharia in eastern India to 25 square meters (269 square feet) from 18 square meters, said the people, who asked not be identified, pending an announcement. Larger homes without work may not be enough.
“On the one hand we are importing more coal and on the other we are letting our best reserves burn,” said Prasad Baji, an analyst with Edelweiss Financial Services in Mumbai, who tracks metals and mining companies. “Saving Jharia can be a significant step toward building steel projects in India.”

Coal Exposure

India imports about 80 percent of its coking coal, an estimated 1.9 billion metric tons of which are buried under the Jharia and Raniganj mines in the adjacent states of Jharkhand and West Bengal. At the current spot price of $160 a ton, the reserves hold more than $300 billion of coal.
Coal imports climbed 63 percent to 32 million tons, costing steel mills a record 424.7 billion rupees, in the year ended March 31 as contract prices rose to a record $330 a ton.
India’s steelmaking capacity is expected to rise 50 percent to 120 million tons by 2020, said A.S. Firoz, chief economist at the steel ministry.
“The nation’s steel industry is overly dependent on imported coking coal, which exposes them to price and supply volatilities,” Firoz said in a phone interview. “There’s a genuine demand from steelmakers to save Jharia.”

Illegal Trade

In 2009, the government approved a 97.7 billion rupee project to relocate the residents and divert railway tracks and roads passing over the mines. The plan is slated for completion in 2020, a timeline the coal ministry and the state governments consider unrealistic.
Half the funding will come from the federal government, while the rest will be raised through a 6 rupee a ton tax that Coal India Ltd. (COAL), the state-run monopoly which owns the fields, collects from customers.
People living on the Jharia mines survive by selling the coal they extract illegally to the depots run by local politicians, said a coal ministry official, requesting anonymity.
The illicit coal trade, which has spawned an alternate economy comprising transport services, groceries, garment shops and food outlets, encourage the residents to brave the health hazards and the mine accidents.

Mine Deaths

A bid to forcibly shift the people two years ago led to police firing on a crowd, killing three people, JRDA’s Kumar said. In 2007, a family of seven was buried in a mine that caved in.
“These people would rather die of the coal fires than from hunger,” said Satya Bhushan Singh, the editor of a local newspaper run by his family.
Bigger houses and delays can raise the cost of the project substantially, considering that the prices of land, raw materials and machinery have risen since the first estimate was made three years ago, Kumar said.
Bharat Coking Coal Ltd. and Eastern Coalfields Ltd., the two Coal India units that operate the Jharia mines, employ a combined 40 percent of the group’s workforce and produce 7 percent of its coal.
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

®2013 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Cold Weather to Aid India Wheat Crop to Record for Seventh Year

By Prabhudatta Mishra - Jan 8, 2013

Wheat output in India, the world’s second-biggest producer, may reach a record for a seventh year as cold weather boosts yield prospects and record domestic prices spur planting, potentially boosting exports.
Better soil moisture and below-average temperatures in the main growing states of Punjab and Haryana in the past three weeks have been beneficial for the crop, said Indu Sharma, director at the state-owned Directorate of Wheat Research. The harvest starting from April may climb from an all-time high of 93.9 million metric tons in 2011-2012, she said.
A bigger harvest may force the government to pare stockpiles through exports and vacate warehouses for the new crop, pressuring futures in Chicago which fell to a six-month low last week. Rising supplies from India may help partly make up for the potential crop losses from the U.S. to Argentina and Australia to dry weather and cap global food costs tracked by the United Nations’ Food & Agriculture Organization.
“With elections scheduled for next year, the government will like to buy more of the new crop,” said Faiyaz Hudani, a senior analyst at Mumbai-based Kotak Commodity Services Ltd. “It will have to liquidate the old crop to create space. When the purchase is going to be high, the government’s only option is to export.”
India may find it easier to export after drought reduced wheat output in Australia and Argentina, while Russia and China were set for smaller crops, Hudani said. The country may ship more than 5 million tons in the year from April, he said. Exports have surged to 5.2 million tons, including 1.23 million tons from state stockpiles, since a ban on sales was scrapped in September 2011, according to data from India’s food ministry.

Declining Inventories

Global production may drop 5.9 percent to 655.11 million tons in the year ending May 31, according to the U.S. Department of Agriculture. Inventories are declining for a third year and seen at the lowest level relative to consumption since 2008, when wheat prices surged to a record $13.495 a bushel. Futures advanced 19 percent to $7.78 in 2012 on the Chicago Board of Trade, having risen as high as $9.4725 in July.
Prices in India jumped 29 percent last year after exports rose and the government increased the minimum price paid to farmers to a record.
Farmers planted wheat in 28.6 million hectares (70.7 million acres) as of Jan. 4 compared with 28.2 million hectares a year earlier, according to the farm ministry. Weather is set to remain favorable for crop development in the coming weeks, said L.S. Rathore, director general of the India Meteorological Department.

Crop Condition

“The wheat crop is likely to be good this year,” Rathore said in an interview. “There is no signal of abnormal weather prevailing until March. If the area goes up, the output will increase.”
The crop is in good conditions in the main producing states of Punjab, Haryana and western parts of Uttar Pradesh, according to the wheat directorate’s Sharma. The climate during the grain formation stage from the second half of February will be key to boosting yields, she said.
State inventories of wheat totaled 34.4 million tons as of Jan. 1, more than the minimum 11.2 million tons required to be held for emergencies and strategic reserves, according to the Food Corp. of India. The government bought 38.1 million tons of wheat from farmers in 2012-2013.
To contact the reporter on this story: Prabhudatta Mishra in New Delhi at pmishra8@bloomberg.net
To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

®2013 BLOOMBERG L.P. ALL RIGHTS RESERVED.

StanChart-Backed Ramky Enviro Plans $200 Million IPO By Sharang Limaye and Archana Chaudhary - Jan 7, 2013

Ramky Enviro Engineers Ltd., an Indian waste management company, plans to raise $200 million in the nation’s first initial share sale to finance a power plant fueled by urban refuse.
The company, backed by Standard Chartered Plc (STAN)’s private equity unit, will file its application for the initial public offering next month, Executive Director Goutham Reddy said in an interview in his office in Hyderabad. The company has hired Kotak Mahindra Bank Ltd. (KMB), JPMorgan (JPM) Chase & Co., Bank of America, IDFC Capital Ltd., SBI Capital Markets Ltd. and Edelweiss Capital Ltd. to manage the share sale, he said.
Ramky Enviro, based in the southern Indian city of Hyderabad, is seeking to tap investor demand after a 26 percent surge in the benchmark stock index last year, the best among the world’s four biggest emerging markets, helped revive IPOs. The waste manager plans 17 billion rupees ($308 million) of investment in the next three years to help almost triple sales to 50 billion rupees by March 2018.
“Once I invest the money I have committed, the company will grow at a rapid pace,” Reddy said. “It’s going to be one of the most promising sectors as the government gets stricter about environmental regulations.”

‘Immense Opportunity’

India’s urban areas generate about 55 million tons of municipal solid waste and 38 billion liters of sewage every year, and waste output per capita is growing as much as 1.33 percent annually, according to the website of Chennai-based consultants Energy Alternatives India. Federal and state governments offer incentives to help harness energy from waste material, while cutting environmental pollution.
“The overall space is lucrative and the opportunity is immense,” said Mangesh Bhadang, a research analyst at Mumbai- based Quant Broking Pvt. “Environmental issues will keep coming up and we need companies that take care of garbage collection to effluent treatment.”
An erosion of the market value of other renewable energy companies because of their inability to benefit from government policies to promote clean energy may deter investors from buying Ramky Enviro shares, said Sitaraman Iyer, an analyst with MSFL Research.
Orient Green (OGPL) Power Co., whose shares started trading in October 2010 after raising 9 billion rupees from an IPO, has declined 77 percent below its IPO price of 47 rupees, while Indowind Energy Ltd. (IEL) has plunged 93 percent from the offer price of 65 rupees after its debut in September 2007, according to data compiled by Bloomberg.

Facing Challenge

“The renewables sector isn’t doing very well in India,” said Mumbai-based Iyer. Lack of development of the Indian renewable credit market, no government support and unorganized raw material suppliers are some of the challenges facing the industry, he said.
India requires power distributors, steelmakers and miners to either produce or buy as much as 10 percent of their annual electricity from clean sources. Companies aren’t taking the regulation seriously, which is undermining the one-year-old market for trading renewable-energy credits, Tarun Kapoor, joint secretary in the Ministry of New and Renewable Energy, said in November.
Each credit represents one megawatt-hour of clean electricity fed into the grid. Companies facing the target include Coal India Ltd. (COAL), Oil & Natural Gas Corp. (ONGC), Tata Power Co. (TPWR) and Reliance Infrastructure (RELI) Ltd. Those failing to secure enough renewable power locally to meet the target can opt to buy credits sold by wind farms, hydropower and biomass plants over the country’s two power exchanges.

State Firms

“While the private sector companies are buying the credits as per the targets set for them, it is the state-owned companies that aren’t keeping up,” MSFL’s Iyer said.
Ramky Enviro, led by Chairman Ayodhya Rami Reddy, plans to invest 5 billion rupees from the IPO proceeds to set up a 48 megawatt “waste-to-energy” plant in Hyderabad, said Executive Director Reddy. The company forecasts sales will increase 21 percent to 17 billion rupees in the year ending March 31.
The company reported profit after tax of 2.1 billion rupees in the year ended March 31, compared with 1.5 billion rupees in the previous 12 months, according to a report dated Dec. 6 by Crisil Ltd. (CRISIL), the local unit of Standard & Poor’s.
The company plans to complete the share sale in the second quarter of this year, and raise debt to finance the rest of its investment plans, Reddy said. Share sales by Indian companies almost doubled to 573 billion rupees in 2012 as the benchmark BSE Ltd. Sensitive Index reached a two-year high last week, according to data compiled by Bloomberg.
Ramky Infrastructure Ltd. (RMKY), a group company, went public in October 2010, and its shares have slumped 72 percent from an offer price of 450 rupees, according to data compiled by Bloomberg.
“There are only a handful of companies in India setting up projects using waste to produce energy,” said Shantanu Jaiswal, a New Delhi-based analyst at Bloomberg New Energy Finance. “The sector is still developing. If Ramky and similar companies manage to generate profits from their projects, there are chances investors may look at these markets favorably.”
To contact the reporters on this story: Sharang Limaye in Hyderabad at slimaye@bloomberg.net; Archana Chaudhary in New Delhi at achaudhary2@bloomberg.net
To contact the editor responsible for this story: Arijit Ghosh at aghosh@bloomberg.net

Gas at $8 May Lure Reliance to Start New India Fields By Rakteem Katakey - Jan 6, 2013

Reliance Industries Ltd. (RIL), sitting on untapped natural gas reserves off India’s east coast, will be able to generate profit from new fields if the government agrees to double prices, a person familiar with the matter said.
At $8 per million British thermal units Reliance will earn a profit margin of about 15 percent from fuel trapped more than a mile deep in the newer pockets of KG-D6, said the person, who asked not to be identified, citing rules. While Reliance sells gas from the basin at a government-set price of $4.20, at least $7 is required to break even on the new wells, the person said.
Output from India’s biggest natural gas block slid more than 60 percent since 2010 as the reserves proved more difficult to recover than estimated, eroding supplies to power and fertilizer producers, and prompting high-cost imports. A panel led by Chakravarthy Rangarajan, chief of the prime minister’s Economic Advisory Council, last month recommended prices be linked to global rates, which brokerage Emkay Global Financial Services Ltd. estimates may push local prices to $8.
“A higher price will make smaller discoveries more economical to start and go a long way toward lifting India’s production,” Oil & Natural Gas Corp. Chairman Sudhir Vasudeva said in an interview in New Delhi, where the company is based. “It’ll also bring in an environment of investment.”
Reliance spokesman Tushar Pania didn’t reply to an e-mail seeking comments on the impact of higher gas prices on the company’s earnings.

Adjacent Reserves

State-run ONGC, which found reserves adjacent to Reliance’s fields in the Bay of Bengal six years ago, has said deepwater drilling is unviable at current prices. Gujarat State Petroleum Corp., an explorer controlled by the Gujarat state government, is also developing a field in the area.
Shares of billionaire Mukesh Ambani-controlled Reliance gained 5 percent and ONGC climbed 11 percent since Dec. 24, when Rangarajan submitted his report to the prime minister. The key Sensitive Index (SENSEX) gained 2.7 percent in the period.
“We’re going through the Rangarajan report,” Oil Minister Veerappa Moily said at a conference in New Delhi on Jan. 4. “We’re trying to see if it can be implemented.”
While the three fields Reliance now operates produce about 23 million cubic meters (812 million cubic feet) a day, the company’s discoveries around this area can add as much as 30 million cubic meters daily, the person said. ONGC in December 2006 said it discovered 2 trillion cubic feet of gas reserves in a block next to Reliance’s.
“Reliance will be the biggest immediate beneficiary if gas prices are increased,” analysts led by Jagdish Meghnani at Mumbai-based Emkay wrote in a Jan. 3 report. “ONGC is expected to benefit gradually in the long run.”

Henry Hub

The panel recommended India set gas prices at a 12-month average of the U.S. Henry Hub, the U.K. National Balancing Point and Japan’s liquefied natural gas price minus freight and insurance costs, Rangarajan said on Jan. 2 in New Delhi. The government could also take an average of the price of India’s LNG imports, excluding transportation costs, he said.
“Prices will rise, but that’s necessary because we’re already spending a lot to import gas,” he said. “This method is the best way to go.”
Prime Minister Manmohan Singh is seeking to boost energy exploration and production and cut an import bill that’s widened the current account deficit to a record. The government needs to allow explorers higher selling prices to attract overseas companies to invest and encourage Indian explorers to produce from discovered reserves, said R.S. Sharma, chairman of the Federation of India Chambers of Commerce and Industry’s Hydrocarbon Committee and former chairman of ONGC.

‘Clarity, Visibility’

“The doubling of prices will make all of Reliance’s and ONGC’s deepwater discoveries viable,” Sharma said in an interview. “Higher prices will bring clarity and visibility and explorers will be clamoring to drill.”
Reliance’s selling price of KG-D6 gas comes up for revision in April next year. The company last month began drilling its first well in the KG-D6 block in more than a year.
About two-thirds of the gas available in India is used by plants that produce electricity and fertilizers, prices of which are controlled by the government. Higher gas prices will increase costs for these factories and result in a higher subsidy bill for the government even as it attempts to cut the fiscal deficit, which Finance Minister Palaniappan Chidambaram has pledged to narrow to 5.3 percent of gross domestic product this fiscal year from 5.8 percent in 2011-2012.
“While power generation cost would increase necessitating an increase in power tariffs, increase in feedstock cost for fertilizer sector would lead to increase in government’s outlay on fertilizer subsidy,” according to the Emkay report.

Slower Expansion

In May 2010, India’s cabinet agreed to more than double the price to the equivalent of $4.20 per million Btu for gas produced from fields that were awarded before 1999 to state explorers ONGC and Oil India. This price, based on the government’s Administered Pricing Mechanism, is unrelated to Reliance’s selling price.
Slower Indian expansion and threats from trade and budget deficits have increased the economic risks the nation faces, the Reserve Bank of India said in its biannual Financial Stability Report last month. The current-account deficit widened to a record $22.31 billion in the quarter ended Sept. 30.
“All the data shows that India needs to reduce its fiscal deficit and cut import spending and that can be done by producing more oil and gas here,” Sharma said. “We need to really step on that.”
To contact the reporter on this story: Rakteem Katakey in New Delhi at rkatakey@bloomberg.net
To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net