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

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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

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