Most Indian Stocks Gain as Software Exports Climb on Weak Rupee

By Rajhkumar K Shaaw - Oct 1, 2014

Most Indian stocks rose as software exporters climbed after the rupee weakened to a seven-month low amid concern the U.S. Federal Reserve may raise interest rates.
Tata Consultancy Services Ltd. (TCS), Infosys Ltd. (INFO) and Wipro Ltd., India’s largest technology companies, were the biggest gainers on the benchmark S&P BSE Sensex. (SENSEX) Jet Airways (India) Ltd. and SpiceJet Ltd. climbed after refiners cut aviation-fuel prices. The currency dropped 0.1 percent to 61.82 per dollar.
Six stocks climbed for every five that fell on the S&P BSE 100 Index. The Sensex dropped 0.1 percent to 26,593.96 at 11:17 a.m., after changing direction at least 12 times before markets close for a five-day holiday starting tomorrow. Volume on the CNX Nifty Index was 8 percent below the 30-day average for this time of day, data compiled by Bloomberg show.
“This rare bunching of holidays that we haven’t seen in at least nine years is deterring investors from taking fresh positions,” V.K. Vijayakumar, an investment strategist with Geojit BNP Paribas Financial Services Ltd., in the southern state of Kerala, said by phone.
The Sensex lost less than 0.1 percent last month, ending seven months of advance that was the longest winning run since January 2007. The gauge has risen 26 percent this year, the top performer among the world’s 10 biggest markets, as foreigners purchased $13.8 billion of local shares, the most among eight Asian markets tracked by Bloomberg.
Tata Consultancy gained 1.6 percent, taking this year’s advance to 28 percent. Wipro (WPRO), the third-biggest software exporter, rallied 2.8 percent. Infosys Ltd. added 1.2 percent.

Fuel Prices

IPO Markets Don’t Need Alibaba for Best Third Quarter Since 2010

By Leslie Picker, Ruth David and Fox Hu - Sep 29, 2014

Ali...who? One company dominated the conversation about initial public offerings in the third quarter, and for good reason: Alibaba Group Holding Ltd. (BABA) raised a record-breaking $25 billion in the U.S. this month.
Leave it out of the total raised, though, and the three months through September were still the busiest for IPOs in four years. From German online retailer Zalando SE to WH Group Ltd. (288), the world’s largest pork producer, companies raised $41.8 billion through yesterday, data compiled by Bloomberg show. In the U.S., it was the busiest third quarter in more than a decade -- also without Alibaba included.
Record stock prices are drawing sellers to the market while investors hunting for returns have been rewarded for betting on new stocks: Globally, the median performance of newly-listed shares this year was nearly three times as much as the broader stock market. While a drop in share prices or a few high-profile flops could slow down dealmaking, the IPO market is for now feeding off of the success of deals like Alibaba’s.
“Alibaba breathed even more life into the IPO market,” said Liz Myers, global head of equity capital markets at JPMorgan Chase & Co. in New York. “It has definitely helped to enhance the sentiment for new deals in what has been a busy IPO calendar year.”
Including Alibaba, IPOs globally raised $66.8 billion during the quarter, the most during this period ever. About $40.1 billion of that was raised in the the U.S., with another $8.6 billion in Europe and $14.3 billion in Asia, data compiled by Bloomberg show. For the first nine months of the year, the global total has reached $182.7 billion.

Seller’s Market

The demand for IPOs has created an opportunity for sellers to start exiting long-standing investments. Yahoo! Inc., which invested in Alibaba in 2005, profited by selling shares of the e-commerce company to fund managers drawn to its exposure to Chinese consumers. Royal Bank of Scotland Group Plc spun off its U.S. unit Citizens Financial Group Inc. (CFG), ING Groep NV sold almost one-third of insurer NN Group NV.
Also in Europe, Germany’s Samwer brothers sold a stake in Zalando, the continent’s largest online-only fashion and shoe retailer. The company will raise as much as $768 million in Germany’s first big technology IPO since Deutsche Telekom AG listed its dial-up business in 2000.
The Samwers have another IPO in the pipeline. Rocket Internet AG, the investment vehicle that backs Zalando and replicates businesses from Groupon Inc. to Airbnb Inc., is expected to set the price of a potentially $1.8 billion sale later this week.

Gains Continue

Even though Alibaba soaked up $25 billion of investor capital, fund managers continue to put more cash toward IPOs.
“It’s not a capital-constrained market, it’s an opportunity-constrained one,” Paul Donahue, co-head of equity capital markets at Morgan Stanley in New York. “As a class, IPOs are still working. As long as underwriters and business owners remain responsible with valuation and positioning, the broader backdrop still remains conducive to IPOs.”
In the U.S., IPOs returned an average of 19 percent over the quarter, whereas the broader S&P 500 Index rose just 0.9 percent. In Europe, IPOs that started trading in the quarter were up 11 percent, compared with a 1 percent decline in the benchmark Stoxx Europe 600 Index. In Asia the jump was 64 percent over the period, when the MSCI Asia Pacific Index slipped 3.1 percent.

Potential Reversal

The IPO market remains susceptible to a reversal in stock prices and corresponding pickup in volatility, which makes pricing new deals difficult. WH Group, the owner of Smithfield Foods Inc., raised about $2.4 billion in Hong Kong in July, three months after the company and investors dropped a plan to sell more than $5 billion of stock as equities fell.
Hong Kong led a global decline in stocks again yesterday, after pro-democracy protests in the city were met with a police crackdown. Major benchmarks across the world have posted a week of losses while in the U.S., markets have become more volatile with the Dow Jones Industrial Average (INDU) alternating between gains and losses of more than 100 points the previous four days.
High-profile deals like Alibaba’s also have the power to shut the entire global IPO market if they don’t fare well, according to Goldman Sachs Group Inc.’s Richard Cormack.
“Alibaba’s success is certainly helpful for global IPO markets,” said Cormack, the firm’s co-head of equity capital markets for Europe, Middle East and Africa. “Had it not done well, the impact would have been more dramatic on the downside.”

Growth Prospects

One factor behind Alibaba’s success was its relatively conservative pricing: The company sought a lower price-to-earnings valuation than its Chinese Internet peers and raised its fundraising target by just three percent.
Like Alibaba, other companies with high growth prospects fared well in the IPO market. Mobileye NV (MBLY), the Israeli company creating software for driverless cars, raised $890 million in July after increasing the size of its IPO by 28 percent and surged on its debut.
Rocket Internet almost doubled the amount it’s seeking to raise in an initial public offering to $1.8 billion after receiving enough orders to cover the sale across its price range.
“The level of appetite and interest in IPOs post-summer has been a pleasant surprise and most of the transactions that came to the market in the quarter were well-received,” said Nick Williams, head of equity capital markets for Europe, the Middle East and Africa at Credit Suisse Group AG. “As long as companies are disciplined on pricing and deal structures, we expect that to continue for the rest of the year.”
To contact the reporters on this story: Leslie Picker in New York at lpicker2@bloomberg.net; Ruth David in London at rdavid9@bloomberg.net; Fox Hu in Hong Kong at fhu7@bloomberg.net
To contact the editors responsible for this story: Mohammed Hadi at mhadi1@bloomberg.net; Philip Lagerkranser at lagerkranser@bloomberg.net; Aaron Kirchfeld at akirchfeld@bloomberg.net Elizabeth Fournier, Ben Scent

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Palm Seen Losing 13% by Godrej’s Mistry on Oils Surplus

By Ranjeetha Pakiam and Swansy Afonso - Sep 28, 2014

Palm oil prices will decline as the world’s most-used edible oil is no longer competitive against alternatives even after dropping to the lowest level since 2009, according to Dorab Mistry, director at Godrej International Ltd. Futures retreated.
“Palm desperately needs to regain its competitiveness,” Mistry said at conference in Mumbai yesterday. Futures must drop to 1,900 ringgit ($581) a metric ton to revive consumption, he said, reiterating a forecast made on Sept. 15. The outlook compares with a price of 2,168 ringgit a ton on Bursa Malaysia Derivative at 10:52 a.m. in Kuala Lumpur after the most-active contract lost 0.4 percent.
The oil used in everything from noodles to biofuels fell 18 percent this year as surging supplies from Southeast Asia topped estimates, widening a glut in cooking oils and helping to push global food costs to the lowest level since 2010. Top growers Indonesia and Malaysia announced cuts in export taxes to zero this month to spur sales and restrain the buildup of reserves. Stockpiles will keep expanding because of better-than-expected production before peaking in December, said Mistry.
“Palm oil has lost its price competitiveness, particularly against rapeseed oil and sunflower oil,” said Mistry, who’s traded the commodities for more than three decades. “This is most apparent in a market like India, where palm has been replaced by larger imports of sunflower oil, soybean oil and even small quantities of rapeseed oil.”

Record Output

World production of 10 major oilseeds is forecast to climb 4.3 percent to a record in 2014-2015, with the outlook for soybeans raised on increased estimates for the U.S. and Brazil, according to Oil World. Oilseed output may rise to 519.7 million tons from 498.2 million tons in 2013-2014, the Hamburg-based researcher said in a report Sept. 23.
Palm oil fell to 1,914 ringgit on Sept. 2, the lowest since March 2009, then rebounded to 2,177 ringgit last week after Malaysia scrapped its tax on exports for two months through October. Indonesia, applying a formula to set export tariffs, said last week that the tax on its shipments will be set at zero percent in October. Palm’s discount to soybean oil -- which was $40.31 a ton on Sept. 26, the narrowest since February 2011 -- widened to $41.61 today.
The tropical oil may drop to 2,000 ringgit a ton by the year-end, according to the median of estimates from 10 refiners, traders and analysts who attended the conference addressed by Mistry. That would be a 25 percent retreat this year, the biggest annual loss since the financial crisis in 2008.

‘Come Down’

“The world has surplus soybean crops and Malaysia and Indonesia also have higher production” of palm oil, said Dinesh Shahra, managing director of Ruchi Soya Industries Ltd., India’s biggest palm oil importer. “Therefore prices need to come down and what we see is not enough.”
If palm’s discount to soybean and other oils doesn’t widen, “demand will gravitate toward soft oils and away from palm,” said Mistry. “The removal of export duty is meant to make palm oil more competitive.”
A bottom for prices can be predicted only after a clearer picture of output in October emerges and of how the weather impacts Brazil’s soybean crop, said Mistry. Palm oil may find support at 2,000 ringgit a ton if the ringgit weakens against the dollar, he said.
Output in Malaysia this year will probably reach a record 19.8 million tons to 20 million tons, higher than the earlier estimate of 19.7 million tons to 19.9 million, said Mistry. Indonesian production will exceed 30.5 million tons, he said.

Expanding Stockpiles

Reserves in Malaysia jumped 22 percent to 2.05 million tons in August from July, the highest level since March 2013, as production expanded and exports fell, according to official data from the largest producer after Indonesia.
Soybeans in Chicago slumped 30 percent this year, dropping to $9.055 a bushel today, the lowest since July 2010. Soybean oil tumbled 19 percent in 2014, and dropped on Sept. 10 to 31.52 cents a pound, the lowest since March 2009.
“After several years of prosperous growth, the oilseeds and palm industry are in a bear market,” said Mistry. “We must batten down the hatches and be resilient.”
To contact the reporters on this story: Ranjeetha Pakiam in Kuala Lumpur at rpakiam@bloomberg.net; Swansy Afonso in Mumbai at safonso2@bloomberg.net
To contact the editors responsible for this story: Jake Lloyd-Smith at jlloydsmith@bloomberg.net Ovais Subhani

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Billionaire Agarwal to Donate Most of Wealth After Meeting Gates

By Netty Ismail and Firat Kayakiran - Sep 26, 2014

Anil Agarwal, the billionaire founder of Vedanta Resources Plc, said he and his family decided to donate 75 percent of their wealth to charity after meeting Bill Gates, the world’s richest person.
Agarwal has a fortune of $3.3 billion that includes an almost 70 percent stake in London-listed mining and energy group Vedanta, according to the Bloomberg Billionaires Index. Gates, the co-founder of Microsoft Corp., has a fortune valued at $84.7 billion.
“What we earn must be returned for the greater good of society,” the 62-year-old said at an event yesterday to celebrate the 10th anniversary of Vedanta’s (VED) listing on the London Stock Exchange. “Life is not only about wealth.”
Interest in charitable giving is growing in Asia. In 2013, Azim Premji, chairman of Bangalore-based software exporter Wipro Ltd., became the first Indian to join the Giving Pledge program, which seeks to encourage the world’s wealthiest people to give away half of their wealth to charity.
The program was founded by Gates and U.S. investor Warren Buffett, the world’s 3rd-richest person with $67.3 billion, according to the index.
Agarwal said Gates and his wife, Melinda, discussed their philanthropic causes with him in Seattle last summer.
“After that, I had a meeting with my family and we decided to donate 75 percent of our wealth,” the Indian billionaire said.
To contact the reporters on this story: Netty Ismail in Singapore at nismail3@bloomberg.net; Firat Kayakiran in London at fkayakiran@bloomberg.net
To contact the editors responsible for this story: Robert LaFranco at rlafranco@bloomberg.net Andrew Heathcote

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Jaiprakash Sells Indian Power Assets to JSW in Third Try

By Unni Krishnan and George Smith Alexander - Sep 26, 2014

Jaiprakash Associates Ltd. (JPA), the builder of India’s only Formula One race track, agreed to sell some of its assets to JSW Energy Ltd. (JSW) in its third attempt to raise funds and pare debt.
JSW signed a memorandum of understanding to acquire one thermal and two hydropower plants operated by Jaiprakash Power Ventures Ltd., the companies said in statements late yesterday, without disclosing terms. Shares of both the Jaiprakash companies rebounded after the announcement.
Two failed attempts earlier had eroded confidence in Jaiprakash’s ability to find buyers, and investors will watch closely if the latest preliminary agreement will translate into a real deal, said Deepak Agrawala, an analyst at Elara Securities Pvt. in Mumbai. Success may help Chairman Manoj Gaur to cut debt after expanding the cement maker’s power, sports and construction businesses, including an F1 race track on the outskirts of India’s capital, New Delhi.
“As has happened in the past, there is and will be skepticism on whether or not the deal can fructify,” Agrawala said. “Everyone would wait for the actual transaction to happen before they start building this in their earnings estimate.”

Shares Recover

Jaiprakash Power (JPVL) jumped as much as 15 percent after tumbling 14 percent yesterday to a 13-month low. It traded at 12.65 rupees as of 11:25 a.m. in Mumbai, up 8.1 percent from yesterday’s close. Jaiprakash Associates climbed 4.7 percent to 27 rupees after plunging 19 percent yesterday, the most since January 2009. JSW Energy slumped 8.3 percent to 66.15 rupees.
Jaiprakash Associates’ debt climbed 64 percent over three years to 726 billion rupees ($11.8 billion) in March, according to data compiled by Bloomberg.
A unit of billionaire Anil Ambani’s Reliance Power Ltd. scrapped a deal on Sept. 24 to buy three of Jaiprakash’s hydropower plants, citing regulatory uncertainties and tariff issues.
In July, Abu Dhabi National Energy Co., known as Taqa, withdrew from an agreement to buy two hydropower projects after having signed a deal in March to take over the assets at an enterprise value of $1.6 billion along with a Canadian institutional investor and Indian infrastructure finance fund, IDFC Ltd.

Target Cut

The sale of the hydro units would have helped bring down the debt of the Jaiprakash group by 58 billion rupees, according to a company presentation in June. Jaiprakash aims to reduce its debt to 450 billion rupees by the end of this fiscal year in March 2015, it said in July after the Taqa deal fell through.
Kim Eng Securities Pvt. cut its rating on Jaiprakash Associates to “hold” from “buy” yesterday and reduced its target price by 58 percent to 39 rupees. Deutsche Bank AG also cut its target price to 32 rupees.
JSW will add 1,891 megawatts of generating capacity from the deal. Currently, JSW produces 3,140 megawatts of power, with a capacity for another 8,630 megawatts under implementation, according to the company’s website.
JSW Energy’s balance sheet allows it to raise as much as 100 billion rupees, assuming a 3:1 net debt to equity ratio, Bhargav Buddhadev, an analyst at Ambit Capital Pvt., said on the phone from Mumbai. “If they want to raise further they will have to dilute equity.”
The Mumbai-based company’s debt fell to 91 billion rupees in March as against 95 billion rupees last year, according to data compiled by Bloomberg.

Coal Permits

Jaiprakash Associates also had coal mining permits canceled Sept. 24 by India’s Supreme Court, which annulled 98 percent of extraction licenses issued from 1993 until now.
The cancellation of the four coal blocks alloted to Jaiprakash Associates was “negative as it takes away the captive mines linked to its power and central India-based cement capacities, and in turn, takes away its supply of inexpensive fuel,” Pulkit Patni and Mohit Soni, Mumbai-based analysts with Goldman Sachs Group Inc., wrote in a research note yesterday.
“There are gray areas and whether JSW is able to successfully close it or not, only time will tell,” Ambit’s Buddhadev said. “There could be regulatory issues and knowing JSW they have so far stayed away from assets that are not clear in terms of regulatory requirements.”
Jaiprakash Associates sold its Gujarat cement unit to billionaire Kumar Mangalam Birla’s UltraTech Cement Ltd. for 38 billion rupees. It also sold its 74 percent stake in Bokaro Jaypee Cement Ltd., a joint venture with Steel Authority of India Ltd., to Dalmia Bharat Ltd. for 11.5 billion rupees in March.
To contact the reporters on this story: Unni Krishnan in New Delhi at ukrishnan2@bloomberg.net; George Smith Alexander in Mumbai at galexander11@bloomberg.net
To contact the editors responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net; Daniel Ten Kate at dtenkate@bloomberg.net Sam Nagarajan, Abhay Singh

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Coal India Promises Higher Bonuses to Woo Staff Before Sale

By Rajesh Kumar Singh - Sep 24, 2014

Coal India Ltd. (COAL) is offering higher payouts and family benefits to workers to avoid any unrest before the government sells a stake worth $3.5 billion in the state-run miner.
Bonuses will be increased by almost 30 percent to 13 billion rupees ($213 million), Personnel Director R. Mohan Das said in an interview. The company will improve post-retirement health benefits and assure female workers taking early retirement that one of their children will get a job with the company, Das said.
Trade unions have vowed to go on an indefinite strike should the government proceed with the planned 10 percent stake sale. The success of the sale is crucial for Finance Minister Arun Jaitley to meet almost a third of his 634 billion rupee asset-sale target in the year to March 31.
“The government is going to follow a carrot and stick approach with the workers and unions to make the plan a success,” said Deven Choksey, managing director at Mumbai-based KR Choksey Shares & Securities Pvt. “The government is also engaging in more constructive communication with the unions so that they don’t come in the way of economic goals. Raising public shareholding will improve corporate governance in the company.”
Coal India gained as much as 2 percent to 341.90 rupees, the most in three weeks, in Mumbai. They traded at 339.25 rupees as of 10:23 a.m. local time, boosting this year’s gain to 17 percent. The key S&P BSE Sensex fell as much as 0.5 percent. The stake sale will raise about 214 billion rupees at today’s price.

Public Holding

The government, which owns 89.65 percent in the company, also needs to comply with a June 19 ruling by the capital markets regulator that requires state-owned companies to increase public shareholding to at least 25 percent within three years. A timeline for the sale has yet to be set.
Coal India’s moves aren’t convincing some unionists.
“Stake sales raise the ownership of foreign institutions in the company and we fear the company will curtail workers’ benefits to protect those shareholders’ interests,” said Jibon Roy of the All India Coal Workers Federation, a group of five major trade unions at the coal miner. “There’s an effort to dilute worker resistance but we will not agree to any disinvestment in the company.”
The cabinet on Sept. 10 approved share sales in Coal India, Oil & Natural Gas Corp. and hydropower-producer NHPC Ltd.
To contact the reporter on this story: Rajesh Kumar Singh in New Delhi at rsingh133@bloomberg.net
To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net Indranil Ghosh, Abhay Singh

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India’s Rupee Snaps Five-Day Gain on Month-End Dollar Purchases

By Kartik Goyal - Sep 23, 2014

India’s rupee fell for the first time in six days on speculation importers boosted dollar purchases to pay month-end bills.
The Indian currency weakened 0.2 percent to 60.9100 per dollar as of 9:47 a.m. in Mumbai, according to prices from local banks compiled by Bloomberg. The rupee has gained 1.4 percent this year, after plunging 11 percent in 2013, supported by $34 billion of inflows into local stocks and bonds.
“Month-end dollar demand by importers is impacting the rupee,” said Ankur Jhaveri, co-head of currency and rates at Edelweiss Financial Services Ltd. in Mumbai. “The rupee’s direction is highly dependent on foreign flows.”
Improving economic growth and slowing inflation are attracting overseas investment. Consumer-price inflation eased to 7.8 percent in August, from 7.96 percent in July, and the economy expanded 5.7 percent in the second quarter, the fastest pace since 2012.
The rupee should outperform regional currencies including Malaysia’s ringgit and Indonesia’s rupiah as lower commodity prices will help curb India’s import bill and reduce inflationary pressure, Jonathan Cavenagh, a foreign-exchange strategist at Westpac Banking Corp. in Singapore, wrote in a research note last week.
One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, rose eight basis points, or 0.08 percentage point, to 7.03 percent.
Three-month offshore non-deliverable forwards fell 0.1 percent to 61.82 per dollar, according to data compiled by Bloomberg. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.
To contact the reporter on this story: Kartik Goyal in Mumbai at kgoyal@bloomberg.net
To contact the editors responsible for this story: James Regan at jregan19@bloomberg.net Andrew Janes

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Singapore Overtaking Mumbai for India Futures: Chart of the Day

By Santanu Chakraborty - Sep 21, 2014

Singapore is overtaking Mumbai as the biggest market for Indian stock-index futures, a sign of foreign investors’ growing influence over equities in the world’s second-most populous nation.
The CHART OF THE DAY shows open interest, or the number of outstanding contracts, for CNX Nifty Index futures on the Singapore Exchange Ltd. climbed 55 percent during the past four years to about 345,000. That compares with a 60 percent decline for similar contracts traded on the National Stock Exchange of India Ltd., according to data compiled by Bloomberg. Singapore is luring foreign investors with longer hours and lower trading costs, Kotak Institutional Equities said in a report this month.
International money managers have bought more than $14 billion of Indian shares this year, helping fuel a 29 percent rally in the Nifty index. Much of the gains have come since Prime Minister Narendra Modi’s landslide election victory in May, with investors betting the new premier will boost growth in Asia’s third-largest economy.
“New offshore investors have started nibbling at India,” said A.S. Thiyaga Rajan, a senior managing director at Aquarius Investment Advisors Pte in Singapore, which has $450 million in Indian stocks. “Already-invested guys are also increasing exposure on optimism the new administration will boost growth.”
Divya Malik Lahiri, an NSE spokeswoman in Mumbai, declined to comment.
“NSE and SGX have been in long-term partnership to develop the global Nifty franchise,” the Singapore Exchange wrote by e-mail. “SGX provides a convenient access point for offshore investors seeking exposure to Indian equity and complements the already deep liquid equity and derivatives markets in India.”
To contact the reporter on this story: Santanu Chakraborty in Mumbai at schakrabor11@bloomberg.net
To contact the editors responsible for this story: Michael Patterson at mpatterson10@bloomberg.net Ravil Shirodkar

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Rio Tinto Sees China, India Driving Demand Growth for Diamonds

By Aibing Guo and David Stringer - Sep 20, 2014

Surging demand for diamonds in China and India may see the two countries match the size of market in the U.S., the biggest consumer, by 2020.
“We will see strong growth in India as soon as the country gets its house in order with the new government,” Jean-Marc Lieberherr, managing director of Rio Tinto Group (RIO)’s diamonds unit, said in an interview. “With China, policy is moving more toward encouraging domestic consumption rather than infrastructure and that’s going to have a positive impact.”
The middle class in China and India, the world’s fastest growing jewelry market, may double by 2015 compared with 2010, boosting demand for diamonds, according to WWW International Diamond Consultants Ltd. Global demand will probably rise 4 percent to 4.5 percent this year with U.S. consumption increasing as much as 6 percent, according to De Beers, the biggest producer.
China and India, where about 21 million marriages take place each year, may account for half of the growth in diamond demand in the five years from 2013, WWW International said in a January 2013 presentation.
Rio Tinto may bring its Bunder diamond project in central India’s Madhya Pradesh state into production as early as 2019, Lieberherr said. The Bunder deposit, found in 2004, was the first diamond discovery in India in about 40 years and is one of only four new diamond mines likely to enter production in the next decade, according to the world’s second-biggest miner.
Total spending by Rio Tinto on projects and expansions across its commodities is expected to be $8 billion in 2015, less than half its outlay in 2012, as it lowers costs amid a decline in commodity prices, the London-based producer said last month.
Rio opted in June 2013 to retain its diamond unit after failing to find a buyer and deciding not to pursue an initial public offering.
“We like diamonds, we think the fundamentals are very, very strong,” Lieberherr said at a Sept. 18 press conference in Hong Kong.
To contact the reporters on this story: David Stringer in Melbourne at dstringer3@bloomberg.net; Aibing Guo in Hong Kong at aguo10@bloomberg.net
To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net Andrew Hobbs, Indranil Ghosh

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Coal India Said to Cut Auctions to Meet Power Demand

By Rajesh Kumar Singh and Debjit Chakraborty - Sep 18, 2014

Coal India Ltd. (COAL) has cut the amount of the fuel it’s selling at competitive auctions to bolster supplies to power stations to meet demand, said people familiar with the matter.
The government has asked the state-run monopoly to cut the quantity auctioned to increase coal supplies at power plants, which fetch the company almost half the price of open sales. Spot electronic auction sales in the two months to Aug. 31 dropped 70 percent to 2.52 million metric tons from the same period a year ago, according to two people, who asked not to be identified as the information isn’t public.
Greater supplies to utilities are critical to Prime Minister Narendra Modi’s goal of accelerating economic growth and providing round-the-clock electricity to every household in the country. The revenue loss from lower auction sales may prompt the company to raise prices, said Giriraj Daga at Mumbai-based Nirmal Bang Equities Pvt.
“Everyone is betting on a price hike,” he said. “Even a 50 rupees-a-ton increase will give Coal India the delta to offset lower e-auction sales.”
A.K. Dubey, Coal India’s chairman, and Marketing Director B.K. Saxena couldn’t be reached at their office phones.
Kolkata-based Coal India sells a part of its output through auctions to customers that don’t have long-term purchase contracts. These sales, which account for about 10 percent of its production, contributed 40 percent to the miner’s earnings before interest, tax, depreciation and amortization in the year to March 31, 2013.

Supply Bottlenecks

A surge in economic activity has led to higher demand for the fuel, exacerbating supply bottlenecks caused by heavy rains at some mines and slow railway transport. The national peak shortage in August expanded to 6 percent from an average 3.5 percent in July, according to the Power Ministry.
Coal India has been asked to halve e-auction sales in the year that began April 1 from 58 million tons in the previous period to reduce shortages at power plants, Coal and Power Minister Piyush Goyal told lawmakers in parliament on Aug. 6.
While fewer stocks for auctions is leading to a spike in prices, it may not be enough to compensate for the lower volume being sold, said Viresh Oberoi, managing director of Mjunction Services Ltd., which auctions the commodity.
“There’s a definite risk of a hit to the company’s profitability,” said Prasad Baji, an analyst at Edelweiss Financial Services Ltd. (EDEL) in Mumbai. “There’s some room to increase prices, but pressure to keep power prices in check may deter such plans.”
Maintaining Coal India’s profitability is crucial to the success of a planned 10 percent share sale by the government, said Daga. India, which owns 89.65 percent in the miner, approved a share-sale plan for the company on Sept. 10.
“A price increase will immediately call for re-rating of the stock and this will fetch higher returns for the government during the share sale,” Daga said.
To contact the reporters on this story: Rajesh Kumar Singh in New Delhi at rsingh133@bloomberg.net; Debjit Chakraborty in New Delhi at dchakrabor10@bloomberg.net
To contact the editors responsible for this story: Andrew Hobbs at ahobbs4@bloomberg.net Abhay Singh, Indranil Ghosh

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Xi to Meet Modi for Dinner as Economy Tops Agenda

By Bibhudatta Pradhan - Sep 16, 2014

Chinese President Xi Jinping heads to India today as the world’s two most populous countries look to bolster economic ties and resolve a long-running border dispute.
Prime Minister Narendra Modi will receive Xi this afternoon in the western state of Gujarat, which he ran before taking office in May. The leaders will share a private meal along a riverfront in the state’s former capital of Ahmedabad and also hold talks in New Delhi tomorrow.
“It’s a very significant visit as leaders of Asia’s two BRIC countries want to create more economic momentum in the bilateral relationship,” Rajiv Biswas, IHS Global Insight’s Asia-Pacific chief economist, said by phone from Singapore. “Modi is trying to improve India’s exports to China to reduce the trade deficit, and also to boost Chinese investment flows into the country in infrastructure and urban development.”
Modi is seeking Chinese support for his moves to revive Asia’s third-biggest economy while deterring it from asserting control over disputed land along the border. He met Japanese leader Shinzo Abe in Tokyo earlier this month and will visit President Barack Obama at the White House two weeks from now.
Modi told Chinese journalists yesterday that the two countries “can create a better tomorrow for all of mankind.” More than a third of the world’s people can have better lives if India and China boost economic cooperation, he said, according to an Indian government statement. The BRIC grouping, also comprising Russia and Brazil, will grow faster in 2014 than the global average, according to data compiled by Bloomberg.

Investment, Trade

China is India’s largest commercial partner, and also accounts for its biggest trade deficit. While bilateral commerce exceeded $68.5 billion last year, India posted a trade shortfall of $34.4 billion on imports of Chinese-made heavy machinery, telecom equipment and home appliances, according to data compiled by Bloomberg.
India is seeking greater market access in China and will probably sign an agreement for China to set up industrial parks, Indian Trade Minister Nirmala Sitharaman told reporters in New Delhi on Sept. 10. Xi will also announce investments in India’s railways, the Press Trust of India reported.
In the 14 years through June, China was India’s 28th largest source of foreign direct investment with inflows worth $411 million, or 0.18 percent of the total, government data show. Japan was fourth and the U.S. was fifth.

‘Territorial Mindset’

Tensions have simmered in the past few years over claims to disputed territory on their mountainous border. In campaign speeches earlier this year, Modi warned China to drop its “mindset of expansion.”
India accuses China of occupying 38,000 square kilometers (15,000 square miles) in Jammu and Kashmir, while Beijing lays claim to 90,000 square kilometers of land in the Indian state of Arunachal Pradesh.
Chinese incursions have occurred in the area this month, PTI reported, and the countries have seen sporadic border clashes over five decades. They fought a war in 1962 and China opposes the Dalai Lama, Tibet’s spiritual leader, who campaigns for Tibetan autonomy and human rights while in exile in India.
“Regarding the border issue, the Chinese stance has always been consistent and clear,” Chinese Foreign Ministry spokesman Hong Lei said in a briefing in Beijing yesterday. “The Sino-Indian borders have been peaceful for a long while and the border issue hasn’t affected the development of the Sino-Indian relations. We hope both countries can keep it up to maintain this healthy momentum.”

Sea Exploration

China also warned that it would oppose any Indian agreements with Vietnam to explore for oil and gas in disputed areas of the South China Sea, Times of India reported, citing Hong.
India will discuss “all substantive issues of interests” including the border dispute, India’s Foreign Ministry Spokesman Syed Akbaruddin, said in New Delhi on Sept. 15. Investment in smart city projects, railways and cooperation on nuclear energy will probably be included, he said.
Xi’s first visit to India as head of state follows Modi’s visit to Japan, which has its own territorial dispute with China. Abe pledged a sweeping upgrade of economic and security ties with India, offering 50 billion yen ($480 million) in infrastructure loans and pledging 3.5 trillion yen of public and private investment and financing over five years.

Candlelight Meal

The meeting between Modi and Xi is “unlikely to result in meaningful progress towards any bilateral strategic partnership,” Arvind Ramakrishnan, head of India at U.K.-based risk adviser Maplecroft, said in an e-mail. “Modi is far more inclined to cultivate strategic ties with Japan and the U.S. in order to make India a counter-balance against Chinese influence in the Asian region.”
Still, the countries have links going beyond 145 B.C., with China exporting silk to India in exchange for pearls and coral. Modi, who turns 64 today, is India’s first prime minister born after independence in 1947. Xi, 61, is China’s first leader born after the 1949 revolution.
Xi and Modi will walk along a river and share a candlelight dinner that will feature more than 100 dishes, Xinhua reported. Performances during the meal will feature traditional Indian dancing and automated lions, it said.
India can benefit from China’s strength in creation of infrastructure and development of the manufacturing sector, while India’s strength in software can help Chinese companies become more efficient and competitive, Modi said yesterday.
“India and China are bound by history and connected by culture,” he told reporters in New Delhi. “The arithmetic and chemistry of our relations convinced me that together we can script history and create a better tomorrow for all of mankind.”
To contact the reporter on this story: Bibhudatta Pradhan in New Delhi at bpradhan@bloomberg.net
To contact the editors responsible for this story: Daniel Ten Kate at dtenkate@bloomberg.net Jeanette Rodrigues, Dick Schumacher

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India CPI Holds Near 8%, Output Slows Before RBI Decision

By Jeanette Rodrigues - Sep 12, 2014

Indian retail inflation held near 8 percent while growth in factory output slowed more than economists had estimated before the central bank reviews one of Asia’s highest interest rates.
Consumer prices rose 7.8 percent in August from a year earlier, compared with 7.96 percent in July, the Statistics Ministry said in New Delhi today. The median of 37 estimates in a Bloomberg survey had been for a 7.83 percent increase. Industrial production rose 0.5 percent in July, compared with 1.8 percent predicted in a separate survey and a revised 3.94 percent gain in June.
The $1.9 trillion economy will benefit if the Reserve Bank of India cools inflation, Governor Raghuram Rajan said last month after keeping interest rates unchanged for a third straight meeting. The RBI is battling Asia’s strongest price pressures, which are damping investment essential for Prime Minister Narendra Modi to meet tax revenue targets.
“Both data sets clearly signal that the RBI is headed for an extended pause,” said Rupa Rege-Nitsure, a Mumbai-based economist at Bank of Baroda. “The government has to address the problem of food inflation on a war footing, otherwise we will not see any material change here.”
Food and beverage prices rose 9.16 percent year-on-year, led by a 24 percent surge in fruits and 15 percent in vegetables. Fuel costs climbed 4.15 percent, today’s data showed.

RBI Targets

The central bank is within reach of its goal of capping the inflation rate at 8 percent by January 2015, while there are upside risks to the 6 percent target by January 2016, according to an Aug. 21 RBI report. Growth concerns are broadly balanced, it said. The monetary authority is scheduled to review borrowing costs on Sept. 30.
The rupee strengthened 0.5 percent to 60.66 per dollar in Mumbai before the data were released, the S&P BSE Sensex index of stocks gained 0.2 percent and the yield on the benchmark 10-year sovereign bond fell to 8.50 percent from 8.51 percent.
A dip in crude oil prices and a pick-up in monsoon rainfall, which has the potential to raise farm output, may help contain inflation only in the short-term, Upasna Bhardwaj, an economist at ING Vysya Bank Ltd. in Mumbai, said by phone before the data. The government needs to rein in subsidies instead of counting on taxes to meet its budget deficit target of 4.1 percent of gross domestic product, a seven-year low, she said.
The economy expanded 5.7 percent in the quarter through June 30 from a year earlier, the fastest pace since 2012. GDP will grow 5.6 percent in the fiscal year through March 2015 and 6.5 percent in the following 12 months, according to Goldman Sachs Group Inc.
Goldman has scrapped its rate-increase forecast, Mumbai-based economist Tushar Poddar wrote in a Sept. 9 report. “We now expect the policy repo rate to stay at 8 percent for a protracted period of time -– through 2014 and 2015.”
The U.S. bank had earlier expected a 50-basis-point increase in the benchmark repurchase rate this year followed by a reduction of the same magnitude in the second half of 2015.
To contact the reporter on this story: Jeanette Rodrigues in New Delhi at jrodrigues26@bloomberg.net
To contact the editors responsible for this story: Daniel Ten Kate at dtenkate@bloomberg.net Sam Nagarajan, Dick Schumacher

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India’s Rupee Heads for Weekly Loss on U.S. Rate-Rise Prospects

By Shikhar Balwani - Sep 12, 2014

India’s rupee headed for the biggest weekly drop in six on concern an improving U.S. economy will spur the Federal Reserve to raise interest rates sooner than planned, reducing the allure of emerging-market assets.
Fed officials led by Chair Janet Yellen next meet Sept. 16-17. The dollar has rallied in the past four weeks as U.S. economic reports boosted speculation the central bank will act on borrowing costs sooner than estimated while continuing to pare its record bond purchases. India will release data on consumer prices and industrial production later today.
“Asian currencies, including the rupee, have been weighed down by the overall strength seen in the dollar,” Naveen Raghuvanshi, a Mumbai-based currency trader at DCB Bank Ltd., said by phone. “Investors in India will keenly watch the inflation and factory output numbers for cues.”
The rupee declined 0.9 percent this week, the most since the period ended Aug. 1, to 60.9800 per dollar as of 9:49 a.m. in Mumbai, prices from local banks compiled by Bloomberg show. The currency, which fell 0.1 percent today, touched 61.0350 on Sept. 10, the weakest level since Aug. 14.
India’s government bonds gained this week, with the yield on the benchmark 8.4 percent sovereign notes due July 2024 dropping two basis points, or 0.02 percentage point, to 8.51 percent, according to the central bank’s trading system. The rate was unchanged today.
One-month implied volatility in the rupee, a measure of expected exchange-rate swings used to price options, jumped 99 basis points from Sept. 5 to 7.04 percent, according to data compiled by Bloomberg. Three-month offshore non-deliverable forwards dropped 1.3 percent to 61.92 per dollar. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in the U.S. currency.
One-year interest-rate swaps, derivative contracts used to guard against swings in funding costs, were little changed this week at 8.47 percent, data compiled by Bloomberg show.
To contact the reporter on this story: Shikhar Balwani in Mumbai at sbalwani@bloomberg.net
To contact the editors responsible for this story: James Regan at jregan19@bloomberg.net Robin Ganguly

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Singapore Air India Venture Said to Miss October Start

By Anurag Kotoky - Sep 10, 2014

Singapore Airlines Ltd. (SIA)’s India venture is set to miss a target of starting operations in October because more regulatory approvals are needed, a government official with direct knowledge of the situation said.
Getting all certifications for Vistara, as the airline is called, would require a further two or three months, said the person, who asked not to be identified as the information isn’t public. Singapore Air owns 49 percent of the carrier with Indian conglomerate Tata Sons Ltd. owning the rest.
Vistara, which has a preliminary approval from the Indian government, needs to conduct the so-called proving flight before it gets the air-worthiness certificate and the final signoff from the government, the person said. Vistara is getting its first Airbus Group NV (AIR) A320 aircraft this month, and plans to expand fleet size to 20 in five years, the company said Aug. 11.
“Vistara is working very closely with the regulators to ensure all requisite requirements and processes are being complied with,” Rashmi Soni, a spokeswoman for Vistara, said in an e-mailed response to questions. She declined to comment on the start date.
Nicholas Ionides, a spokesman for Singapore Air, directed queries to Vistara. Sanjay Singh, a vice president for public affairs at Tata-SIA Airlines Ltd., directed queries to Vistara spokeswoman. Uday Moray, a spokesman at India’s civil aviation ministry did not respond to two calls to his mobile phone.
Singapore Air and Mumbai-based Tata are starting the full-service carrier to tap travel demand among India’s more than 1.2 billion people. India eased foreign investment rules in 2012, enabling foreign carriers to invest in local airlines after almost two decades.
To contact the reporter on this story: Anurag Kotoky in New Delhi at akotoky@bloomberg.net
To contact the editors responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net Subramaniam Sharma

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Goldman Scraps RBI Interest-Rate Increase View on Better Monsoon

By Anil Varma - Sep 10, 2014

Goldman Sachs Group Inc. has scrapped its forecast for the Reserve Bank of India to raise borrowing costs after a pickup in monsoon rains and a drop in oil prices tempered the inflation outlook.
The U.S. lender, which had expected a 50-basis-point increase in the benchmark repurchase rate this year followed by a reduction of the same magnitude in the second half of 2015, now sees the RBI staying on hold through the end of next year, it said in a report. Consumer-price (INFUTOTY) gains slowed to 7.8 percent in August, from as high as 11.16 percent in November, the median estimate in a Bloomberg survey shows before data due Sept. 12.
“Near-term risks to inflation have receded due to weaker oil prices and a significantly improved monsoon,” Tushar Poddar, an economist at Goldman in Mumbai, wrote in the report dated yesterday. “While our base case is now for the RBI to remain on hold, the probability of a rate hike is higher than that of a rate cut. The biggest change under the new government has been a more investor-friendly mindset.”
Measures taken by Prime Minister Narendra Modi, who took office after a landslide election win in May, will spur economic growth, lure capital inflows and support the rupee, Goldman said in the report. A shortfall in India’s annual rains, crucial for crops from sugar to rice and cotton, has narrowed to 11 percent from more than 40 percent in June, official data show, and Brent crude prices have retreated 14 percent from this year’s high of $115.71 per barrel in June.

Quickening Growth

Goldman predicts Asia’s third-largest economy will expand 5.6 percent in the fiscal year through March 2015. Gross domestic product increased 4.7 percent in the previous period, a pace that was near the decade-low 4.5 percent recorded the year before. The U.S. lender still sees the rupee weakening to 61 per dollar, 62 and 63 in three, six and 12 months. The currency fell 0.4 percent to 60.8225 as of 9:21 a.m. in Mumbai, according to prices from local banks.
RBI Governor Raghuram Rajan, who raised borrowing costs three times in the past year to combat inflation, has left them unchanged since January. The central bank will hold the benchmark rate at 8 percent through the end of 2014, according to 16 of 26 analysts surveyed by Bloomberg. Four see a reduction to 7.75 percent, while five estimate a 25-basis-point increase and one expects an advance to 8.5 percent.
Modi’s decisions to cut red tape and allow more foreign investment in industries including railways and defense have buoyed investor confidence, Goldman said in the report. The rupee has rebounded 13 percent from a record low of 68.845 per dollar reached in August 2013, the world’s best-performing emerging-market currency over that period, data compiled by Bloomberg show.
“We think the Indian rupee will continue to trade in a narrow range, with the RBI intervening to prevent any sharp appreciation,” Goldman’s Poddar wrote.
To contact the reporter on this story: Anil Varma in Mumbai at avarma3@bloomberg.net
To contact the editors responsible for this story: James Regan at jregan19@bloomberg.net Andrew Janes, Simon Harvey

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Rupee Volatility Declines for Fourth Week on Economic Optimism

By Kartik Goyal - Sep 5, 2014

A gauge of expected swings in India’s rupee fell for a fourth week on optimism the nation’s improving economy will draw capital from abroad.
Gross domestic product increased 5.7 percent from a year earlier in the April-June period, the most since the first quarter of 2012, official data showed Aug. 29. Global funds have pumped more than $10 billion into the nation’s bonds and stocks this quarter, exchange data show.
“Higher foreign inflows into debt and equities, spurred by faster economic growth is supporting the rupee,” said Anish Vyas, a Mumbai-based currency analyst at Angel Broking Ltd. Gains in the dollar amid expectations that U.S. interest rates are set to rise will cap the rupee’s appreciation, he said.
Three-month implied volatility in the rupee, a measure of expected fluctuations used to price options, dropped 39 basis points from a week ago to 6.79 percent, according to data compiled by Bloomberg. It rose two basis points, or 0.02 percentage point, today.
In the spot market, the Indian currency rose 0.1 percent this week to 60.4350 per dollar as of 10:15 a.m. in Mumbai, according to prices from local banks compiled by Bloomberg. It fell 0.1 percent today. The Bloomberg Dollar Spot Index, which tracks the greenback against 10 developed-market peers, climbed today to the highest level since July 2013.
Three-month offshore non-deliverable forwards were little changed today at 61.34 per dollar and advanced 0.1 percent from Aug. 29. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in the U.S. currency.
To contact the reporter on this story: Kartik Goyal in Mumbai at kgoyal@bloomberg.net
To contact the editors responsible for this story: James Regan at jregan19@bloomberg.net Anil Varma

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India Rupee Volatility Drops to One-Month Low on Risk Appetite

By Kartik Goyal - Sep 4, 2014

A gauge of expected swings in India’s rupee fell to a one-month low on signs growth in Asia’s third-biggest economy is picking up and as Russia agreed to a cease-fire with Ukraine.
Most Asian currencies gained on speculation the European Central Bank will announce quantitative easing measures at a meeting today, a move that may spur inflows to emerging markets, according to Andhra Bank Ltd. India’s $1.9 trillion economy expanded 5.7 percent in the April-June period, the most since the first quarter of 2012, official data showed Aug. 29.
“The theme of improving economic fundamentals attracting higher inflows remains intact for India and that is supporting the rupee,” said Vikas Babu, a foreign-exchange trader in Mumbai at state-run Andhra Bank. Developing-nation currencies are rising today on expectations ahead of the ECB, while there’s also an easing in geopolitical tensions, he said.
Three-month implied volatility in the rupee, a measure of expected exchange-rate swings used to price options, dropped five basis points to 6.80 percent as of 10:31 a.m. in Mumbai, according to data compiled by Bloomberg. That’s the lowest level since July 31. In the spot market, the currency was little changed at 60.4588 per dollar.
Three-month offshore non-deliverable forwards advanced 0.1 percent to 61.36 per dollar. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in the U.S. currency.
To contact the reporter on this story: Kartik Goyal in Mumbai at kgoyal@bloomberg.net
To contact the editors responsible for this story: James Regan at jregan19@bloomberg.net Simon Harvey, Anil Varma

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India Bonds Advance as Growing Cash Supply Seen Boosting Demand

By Shikhar Balwani - Sep 3, 2014

India’s 10-year government bonds gained for a third day on speculation an increasing cash supply will drive demand for sovereign debt.
The nation’s lenders parked a net 225.6 billion rupees ($3.7 billion) via daily liquidity auctions at the Reserve Bank of India on Sept. 1, the most since October 2011, data compiled by Bloomberg show. They added another 201.85 billion rupees yesterday, signaling increased availability of funds. The growing cash supply is probably because of government spending at the beginning of the month, Harish Agrawal, a fixed-income trader at FirstRand Ltd. in Mumbai, said yesterday.
“Liquidity is abundant and that’s helping the bond markets,” said Sagar Shah, deputy vice-president for treasury at RBL Bank in Mumbai. “Continuous buying by foreign funds is boosting confidence.”
The yield on the 8.4 percent notes due July 2024 fell two basis points, or 0.02 percentage point, to 8.50 percent as of 10:06 a.m. in Mumbai, prices from the RBI’s trading system show. The yield has fallen six basis points this week to the lowest level since Aug. 20.
Overseas investors bought a net $2.8 billion of rupee corporate and government securities last month, exchange data show. That was the fourth straight month of inflows and boosted foreign holdings of Indian debt to a record $42 billion.
Standard Chartered Plc favors local-currency sovereign notes as India’s new government accelerates economic reforms amid expectations that inflation will ease, Chief Investment Strategist Steve Brice in Singapore said last week. Money managers at Amundi Asset Management and Union Investment Privatfonds also said last week that they consider Indian bonds attractive.
One-year interest-rate swaps, derivative contracts used to guard against swings in funding costs, were unchanged from yesterday at 8.45 percent, data compiled by Bloomberg show.
To contact the reporter on this story: Shikhar Balwani in Mumbai at sbalwani@bloomberg.net
To contact the editors responsible for this story: James Regan at jregan19@bloomberg.net Andrew Janes, Anil Varma

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India Recommends Canceling 172 Coal Mining Permits

By Pratap Patnaik and Rajesh Kumar Singh - Sep 2, 2014

India proposed canceling 172 unused permits to mine coal, while allowing 46 operational mines to keep working to address a Supreme Court ruling that struck down all coal-mine allocations made since 1993.
The government is prepared to auction off new licenses for the canceled mines, Attorney General Mukul Rohatgi said in his argument to court in New Delhi yesterday. The court said “it was leaving its options open” and set Sept. 9 for a final hearing.
The proposal would keep production of the fuel that powers more than 60 percent of India’s generation capacity going, while potentially jeopardizing several projects, including power plants, steel mills and aluminum smelters. Hindalco Industries Ltd. (HNDL) and Jindal Steel & Power Ltd. (JSP) may be the most affected, Morgan Stanley said after the court’s ruling last week.
“We should be careful of considering auctions as a solution for the natural-resources sector,” said Kameswara Rao, executive director for energy and utilities at PricewaterhouseCoopers LLP. “The sector is dominated by some large players, and an auction policy can discourage competition.”
Because the court ruled that all coal allocations were illegal, it wasn’t clear how the 46 mines could be given legal validity, Rao said.
Of the 46, 40 are already in operation and six are on the verge of starting. Rohatgi didn’t identify the 46 mines or their owners by name.

Additional Royalty

The government suggested the court impose an additional royalty of 295 rupees ($4.87) a metric ton for coal that has already been taken from the operational mines.
India’s coal ministry expects domestic production of 53 million tons in the year to March 2015 from captive coal blocks run by companies, including Hindalco, Jindal Steel, Reliance Power Ltd., CESC Ltd. (CESC) and Jaiprakash Associates Ltd., according to its website. That’s about 9 percent of the nation’s total annual production of the fuel.
Hindalco fell as much as 1.5 percent to 173.50 rupees as of 9:42 a.m. in Mumbai, while Jindal Steel declined 2.9 percent to 240.75 rupees.
“Irrespective of what the decision is, it will be in the interest of the nation,” Coal and Power Minister Piyush Goyal said Aug. 25, after the court’s ruling, adding the judgment will help the sector move on.
The allocations didn’t serve any common good, the court said in its 163-page ruling last week.
“The approach had been ad-hoc and casual,” the ruling said. “There was no fair and transparent procedure, all resulting in unfair distribution of the national wealth.”

Unmet Demand

The coal ministry started allocating mines to companies for their own use after realizing monopoly miner Coal India Ltd. (COAL) was failing to keep pace with demand. The ministry awarded 218 coal permits from 1993 to 2011. Of those, 80 were later canceled for not meeting output targets.
Criticism of the procedure forced the previous government of Prime Minister Manmohan Singh in 2010 to amend laws and adopt an auction process. No auctions have actually occurred since the new policy was introduced.
India’s state auditor in 2012 found that allocating the mines to companies without an auction may have cost the government 1.86 trillion rupees, worth $33 billion at the time.
To contact the reporters on this story: Pratap Patnaik in New Delhi at ppatnaik2@bloomberg.net; Rajesh Kumar Singh in New Delhi at rsingh133@bloomberg.net
To contact the editors responsible for this story: Andrew Hobbs at ahobbs4@bloomberg.net Dick Schumacher, Abhay Singh

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India’s Nifty Futures Little Changed After Sensex’s Monthly Gain

By Santanu Chakraborty - Aug 31, 2014

Indian stock-index futures were little changed as valuations jumped after the benchmark equity gauges climbed for a seventh straight month.
SGX CNX Nifty Index (NIFTY) futures for September delivery fell less than 0.1 percent to 8,026.5 at 10:47 a.m. in Singapore. The underlying CNX Nifty Index on the National Stock Exchange of India Ltd. rose 0.2 percent to 7,954.35 on Aug. 28. The S&P BSE Sensex (SENSEX) gained 0.3 percent. Indian equity markets were closed on Aug. 29 for a holiday. The Bank of New York Mellon India ADR Index of U.S.-traded shares advanced 0.8 percent.
The Sensex capped its longest streak of monthly advances since 2007 in August, stretching its valuation to 15.5 times projected 12-month earnings, compared with a five-year average of 14.5 times. India’s gross domestic product increased 5.7 percent in the three months ended June from a year earlier, beating estimates, government data showed Aug. 29.
“The Reserve Bank of India may not cut rates this year as growth seems to be rebounding from the lows,” Rajendra Wadher, director at PRB Securities Ltd., said in a phone interview.
The quarterly growth accelerated from a 4.6 percent expansion in the three months to March and compared with a 5.5 percent median estimate in a survey of 48 analysts.
International investors bought a net $88 million of Indian stocks on Aug. 27, extending this year’s inflow to $13 billion, the most among eight Asian markets tracked by Bloomberg. The Sensex has jumped 26 percent this year and is the best performer among the world’s 10 biggest markets.
To contact the reporter on this story: Santanu Chakraborty in Mumbai at schakrabor11@bloomberg.net
To contact the editors responsible for this story: Michael Patterson at mpatterson10@bloomberg.net Phani Varahabhotla, Allen Wan

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India Blackouts Widen as Coal Stocks Drop at Power Plants

By Rajesh Kumar Singh - Aug 29, 2014

Blackouts in India widened as inadequate coal supplies forced plants to shut down and a monsoon deficit in many parts of the country led to extended high temperatures and greater electricity demand.
The national peak shortage yesterday expanded to more than 6 percent from the 3.9 percent average in July, according to data from the Power Ministry and Power System Operation Corp., a unit of Power Grid Corp. of India. Coal stocks at power stations run on local coal plunged. Equipment breakdowns or maintenance also caused other plants to be under shutdown, including ones operated by Tata Power Co. (TPWR) and Adani Power Ltd.
Among the worst affected states is Uttar Pradesh, India’s most populous, and Rajasthan. Several towns in Uttar Pradesh, which shares a border with national capital New Delhi, are blacked out for more than 10 hours a day, forcing people to use diesel-fired back-up power that’s at least three times more expensive.
“Coal supplies at some of our plants have been affected due to rains in coal-mining regions,” said Kulamani Biswal, finance director at state-run NTPC Ltd. (NTPC), India’s biggest power producer.
The company’s Vindhyachal plant in Madhya Pradesh has shut four units, aggregating a capacity of 1420 megawatts, according to data from the Power Ministry’s Central Electricity Authority. Three of these units are shut because of coal shortages. Two other plants of the company that supply to the capital are shut, affecting a capacity of 775 megawatts.

Six-Day Supply

The Northern Region Load Dispatch Centre, which operates the northern power grid issued an alert on its website, saying there was high demand and reduced availability in the northern region.
Power plants had a coal stock of 8.89 million metric tons as of Aug. 27, almost 65 percent lower from a year ago. The stock would last 6 days, compared with the norm of 21 days of stock advised by the Central Electricity Authority. Fifty-two power plants had less than seven days of stock, while 26 of them were running on less than four days stock.
“We have had problems due to rain the last week of July and first week of August, but our performance has picked up since,” N. Kumar, technical director at Coal India Ltd. (COAL), said by phone yesterday.
More than 55,500 megawatts of generation capacity is under outage, according to CEA data, which monitors performance of plants with a total capacity of 219,308 megawatts.
Tata Power on Aug. 28 said it had shut down two units of 800 megawatts each at its 4,000-megawatt Mundra plant in coastal Gujarat state.
To contact the reporter on this story: Rajesh Kumar Singh in New Delhi at rsingh133@bloomberg.net
To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net Dick Schumacher

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India Bonds Drop as GDP Growth Seen Easing RBI Rate-Cut Pressure

By Kartik Goyal - Aug 28, 2014

India’s 10-year government bonds fell this week before a report forecast to show the economy grew at the fastest pace in nine quarters in the April-June period, easing pressure on the central bank to cut rates.
Gross domestic product expanded 5.5 percent in India’s fiscal first quarter, up from 4.6 percent in the previous three months and the most since March 2012, according to the median estimate in a Bloomberg survey before data due tomorrow. Overseas investors’ holdings of government debt has reached about 99 percent of the $25 billion limit, according to data provided by the National Securities Depository Ltd.
“Though growth acceleration is good for the nation, in the short term the situation may not be great for the markets as there will be upward pressure on rates,” said Killol Pandya, a senior fixed-income fund manager at LIC Nomura in Mumbai. Investors will welcome any decision to increase the foreign investment limit, he said.
The yield on the 8.4 percent notes due July 2024 rose five basis points, or 0.05 percentage point, this week to 8.56 percent as of 10:31 a.m. in Mumbai, according to the central bank’s trading system. The rate was little changed today ahead of a 120 billion rupee ($2 billion) bond sale. Financial markets in Mumbai are closed tomorrow for a holiday.
One-year interest-rate swaps, derivative contracts used to guard against swings in funding costs, were unchanged at 8.46 percent, data compiled by Bloomberg show.
To contact the reporter on this story: Kartik Goyal in Mumbai at kgoyal@bloomberg.net
To contact the editors responsible for this story: James Regan at jregan19@bloomberg.net Robin Ganguly, Anil Varma

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SoftBank-Backed App Lets Indian Teens Flirt in Private

By Bianca Vázquez Toness - Aug 26, 2014

Seventeen-year-old Pranav Sahni’s father doesn’t know he has a girlfriend.
That’s because the teenager, who lives in the northern Indian town of Nainital, uses a chat application called Hike on his Moto G smartphone that lets him hide messages. The app was developed through a venture between SoftBank Corp. (9984) and New Delhi-based Bharti Enterprises Pvt and competes with Line Corp.’s messaging service and Tencent Holdings Ltd.’s WeChat.
“Most Indian parents want to know what their children are doing with their phones,” said Sahni. “My parents sit behind me on the couch and look over my shoulder. With Hike, I can just close the application and restart and the hidden chats are gone. I don’t have to delete my messages. I can read them whenever I want.”
Smartphone apps that allow free messaging and voice calls have become one of the hottest areas of competition among Internet companies as the services eat into wireless carrier revenue from traditional calls and texts. Hike’s privacy feature helped catapult it past WhatsApp Inc. and Facebook Inc.’s Messenger to the top of the Android download charts in India last month. The free app has more than 20 million users in a market with more than 1 billion mobile subscribers.
The messaging service, in which Tokyo-based SoftBank and Bharti have invested at least $21 million, doesn’t plan to allow advertising and hasn’t outlined how it plans to make money, Kavin Bharti Mittal, who runs the venture’s product and strategy business said by e-mail. Mittal is the son of billionaire Sunil Bharti Mittal, the chairman of Bharti Enterprises.

New Investment

Chase Coleman’s New York City-based Tiger Global Management LLC, and BhartiSoftbank will together invest an additional $65 million in the app, Hike communications manager Vartika Verma said by phone yesterday. She declined to say what value investors gave Hike in the latest fundraising round.
“India has a big population and low smartphone penetration, so it will obviously become a big market,” Justin Lee, a Seoul-based analyst with BNP Paribas SA, said by phone. “There is no single dominant messaging app player in India.”
WhatsApp, which Facebook agreed to buy for as much as $19 billion, has more than half a billion users globally and had 48 million active users in India as of April, according to Praveen Menon, an analyst with Bloomberg Intelligence. The country is the second-largest wireless market by users.

SMS in Retreat

Services like Hike offer a way for wireless carriers like SoftBank and Bharti to recoup money lost from a decline in revenue from traditional short message service texts, known as SMS, and voice calls, said Rahul Raghavan, a Chennai-based digital technology investor with Ventureast.
“If I’m Bharti, I’m thinking I’m losing all of this SMS revenue, how do I get back in the game?,” Raghavan said. “The answer is I create my own WhatsApp.”
Free messaging services are also taking off in more developed markets such as Japan.
Tokyo-based Line Corp. has almost 500 million users and said second-quarter revenue from its core business more than doubled to 18.2 billion yen ($175 million) as it expands globally. Sales of digital stickers, used to embellish chats, to Line users generates about 1 billion yen a month, a spokeswoman, Hazuki Yamada, said.
The company submitted an application for an initial public offering to the Tokyo Stock Exchange, people familiar with the matter have said.
“Our goal right now is to build Hike into a highway for the Internet,” said the younger Mittal. “We’re currently building our infrastructure, that being our users. We’ll talk more about monetization around the 100 million user mark.”

Secret Sweetheart

Hike launched its Hidden Mode feature this summer with a marketing campaign targeted at young people living at home.
“What’s that? A dirty joke?” read one promotion on Hike’s website. “A secret sweetheart? Ooh, late night plans! Hey, we’re not judging. But your mom and dad might.”
The hidden feature allows users to protect messages via a password and is available for phones that use Google Inc.’s Android operating system. Hike will soon release a version for mobiles running Microsoft Corp.’s Windows system. The version currently available through Apple Inc. doesn’t conceal chats.
Forty percent of Hike users are hiding more than one conversation, according to Verma. “The need for privacy is heavily felt in this market,” she said.

The Future

Young adults in India often live with their parents until marriage and family homes frequently accommodate several generations.
“As we can see in Japan and the U.S. mobile instant messenger services are one of the most popular apps for smartphones,” Mariko Osada, a spokeswoman for SoftBank, said by phone. “They are also expected to play an important role in the prospective mobile Internet markets in India from now, so we invested in the venture.”
Osada declined to provide a valuation for Hike.
Hike’s platform also allows messaging between traditional texting and smartphones, which is building appeal in India, where about 70 percent of the population still use phones with limited Internet capability, according to PricewaterhouseCoopers.
While 26-year-old software engineer Saurabh Chawla used WhatsApp for years to message his friends and family, he recently moved some conversations to Hike to keep them private.

Music, Games

“I hide my chats from my parents,” Chawla said dressed in jeans and a T-shirt with the words “Nothing 2 Lose” at the entrance of an upscale mall in South Delhi. “I don’t have a girlfriend, but I want one, so obviously I chat with girls. My parents wouldn’t like that.”
Hike could generate revenue through music or games, said Neha Dharia, an analyst with Bengaluru-based Ovum. The service might also follow the route of Line and South Korea-based Kakao Corp., which have tied up their messaging apps with e-commerce platforms, according to the analyst.
The app may expand into other developing markets such as Africa or East Asia and will likely find it difficult to grow in other places where established services already dominate, said Donghwan Oh, an analyst at Samsung Securities.
Twenty-one-year-old Sonal Dhanjal shares a room and bed with her sister in her family’s home in South Delhi and says she downloaded Hike because her younger sister looks at her phone.
“I still use WhatsApp more,” she said while waiting for the subway in New Delhi. “But now everyone is getting Hike, too. You can hide your chats. No other app will let me do that.”
To contact the reporter on this story: Bianca Vázquez Toness in New Delhi at btoness@bloomberg.net
To contact the editors responsible for this story: Michael Tighe at mtighe4@bloomberg.net Aaron Clark

®2014 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Citigroup Prefers India Stocks as Inflation Cuts Bond Gains

By Shikhar Balwani - Aug 25, 2014

India’s stocks are a better bet than bonds as the fastest inflation in Asia erodes fixed-income returns and deters interest-rate cuts, Citigroup Inc. says.
“If you’re talking about the next six to 12 months, yes, the preference would be for equities over bonds,” Pankaj Vaish, Mumbai-based head of markets for South Asia at the third-biggest U.S. bank, said in an Aug. 22 phone interview from New York. “It’s hard to expect a huge return out of bonds immediately because we have to wait for this whole disinflation process to yield results.”
Equities would be the better performers should Prime Minister Narendra Modi deliver on a pledge to revive India’s $1.88 trillion economy, he said. Debt gains are seen limited as the central bank will probably hold borrowing costs until mid-2015 to quell price pressures, according to Vaish, who said that prior to an Aug. 5 policy meeting he’d been expecting a reduction as early as the coming quarter.
Reserve Bank of India Governor Raghuram Rajan flagged risks to his goal to slow consumer-price gains this month, as a weak monsoon threatened to boost food costs in a nation where more than 800 million people live on less than $2 a day. Local stocks rallied 25 percent this year, the best performance among the world’s 10 largest markets, as Modi unveiled plans to allow more foreign investment and to improve public finances.
International investors have pumped $12.6 billion into Indian equities this year and the S&P BSE Sensex (SENSEX) climbed to a record today. The nation’s government bonds returned 8.4 percent, the biggest gain in Asia’s local-currency debt markets, as global funds boosted their holdings by $16.5 billion, according to exchange data compiled by Bloomberg.

Rising Yields

The yield on 10-year sovereign notes has climbed nine basis points since sinking to 8.44 percent in July, the lowest level since September 2013. The spread over similar-maturity U.S. Treasuries widened to 612 basis points, or 6.12 percentage points, from this year’s low of 571 in January.
The RBI’s target to rein in gains in the consumer-price index to 6 percent by 2016, from almost 8 percent last month, “looks difficult” to achieve, according to Vaish. Local interest rates may even rise as policy makers step up the fight against inflation, fueling bond declines, he said.
“We had hoped that we would wait only another six months but I think we have to wait another 12 months” to see the results of steps to temper CPI increases, said Vaish. “Before that, it may become hard for the bond market to get too excited.”

‘Break Glass’

The 10-year yield will be at 8.45 percent by year-end, compared with 8.53 percent today, according to the median estimate in a Bloomberg survey of five banks and mutual funds. The 30-stock Sensex may climb to 28,143, or about 6 percent, by then, a separate survey of seven strategists showed last month.
Stocks advanced this year as Modi’s government eased the foreign-investment cap in the defense industry and announced plans to build more highways, coal-fired power plants, airports and ports. Economic growth slid to below 5 percent in the last two years from 9.6 percent in 2006-2007.
“Equities have rallied a lot on expectations and I think what will be important now is that the pace of reforms has to be maintained,” Vaish said. “Given the bold promises that Mr. Modi laid out, there is an agreement with voters that you will break glass, take some bold decisions. There are a couple of things they have done well. My view is if you have political capital, you use it. If you don’t, it actually disintegrates.”

Bond Inflows

Even as stocks rallied to an all-time high, foreigners plowed more money into Indian bonds than shares this year for the first time since 2011. Investments quickened as optimism about an economic recovery buoyed the rupee, adding to the appeal of Asia’s highest investment-grade yields. The currency gained 2.3 percent this year to 60.4375 per dollar.
India’s 10-year bond yield compares with 2.40 percent in the U.S., 0.98 percent in Germany and is more than double China’s 4.20 percent, according to data compiled by Bloomberg.
Last month, India eased foreign-investment rules for government debt, raising a cap on overseas ownership by $5 billion to $25 billion. While that allowed global asset managers to buy more bonds, quotas for sovereign wealth funds were simultaneously cut to $5 billion from $10 billion, keeping the ceiling for total foreign holdings unchanged at $30 billion.
India should consider gradually raising the limits for foreign institutional investors, or FIIs, said Vaish.
“We tend to be very skeptical of debt inflows,” he said. “FIIs actually are friends and well-wishers of India. They are not necessarily fair-weather friends who will run out.”
To contact the reporter on this story: Shikhar Balwani in Mumbai at sbalwani@bloomberg.net
To contact the editors responsible for this story: James Regan at jregan19@bloomberg.net Anil Varma

®2014 BLOOMBERG L.P. ALL RIGHTS RESERVED.