moneycontrol.com 2018-12-10 23:19:00
Shyam Metalics and Energy, a leading integrated metal producing company, has received SEBI's go-ahead to raise Rs 909 crore through an initial public offer (IPO). The company, which had filed IPO papers with the capital markets watchdog in August, obtained its "observations" on December 7, as per the latest update with the Securities and Exchange Board of India (SEBI). The regulator's observations are necessary for any company to launch public issues like IPO and rights issue. According to the draft papers,"the company's IPO comprises fresh issue of shares worth up to Rs 909 crore". It plans to utilise the proceeds for payment of debt, including that of its subsidiary SSPL and for other general corporate purposes. ICICI Securities, Edelweiss Financial Services, IIFL Holdings and JM Financial are the merchant bankers to the issue.
moneycontrol.com 2018-12-10 22:36:00
Urjit Patel has resigned as the Reserve Bank of India (RBI) governor, nine months before his tenure was to end in September 2019, ending a 27-month long stint at Mint Street rocked by a testy debate on the central bank's autonomy. "On account of personal reasons, I have decided to step down from my current position effective immediately. It has been my privilege and honour to serve in the RBI in various capacities over the years," Patel said in a statement. Meanwhile, DEA Secretary Subhash Chandra Garg said the government will decide the next RBI governor. The timing of Patel's resignation is crucial. It comes four days ahead of the RBI's scheduled board meeting on December 14, slated to discuss several contentious issues. Patel has cited "personal reasons", but it is anybody's guess why he chose to pull the plug. "The support and hard work of RBI staff, officers and management has been the proximate driver of the Bank's considerable accomplishments in recent years. I take this opportunity to express gratitude to my colleagues and Directors of the RBI Central Board, and wish them all the best for the future," Patel said. Since August, the RBI's relationship with the government has been anything but cordial. The government did not state the reasons for Patel's resignation. "The government acknowledges with a deep sense of appreciation the services rendered by Dr Urjit Patel to this country, both in his capacity as a governor and the deputy governor of the RBI. It was pleasure for me deal with him and benefit from this scholarship," Finance Minister Arun Jaitley tweeted. Patel's deputy Viral Acharya first flagged the government's reported attempt to tread onto the central bank's territory. The RBI Act, the key legislation that defines the central banks functioning, role and reporting relationship with government, has become part of mainstream public discourse, with a strong body of opinion on both sides of the fence. The key question is: What triggered the resignation? Has the finance ministry again written to the RBI seeking to invoke "Section 7" of the RBI Act that allows the government to ask the RBI take certain decisions after consulting the central bank? Has the finance ministry sought more funds from the surplus RBI capital to plug its fiscal deficit? The finance ministry wants the funds need to keep rolling for NBFCs, not just to keep the big projects on track, but also to add fuel to India's consumption spending machine, as well as to aid the small traders and businessmen. The RBI has made it clear it doesn't believe that NBFCs need more funds now. Has the government again written to the RBI to open a special window of credit to NBFCs? One would never know, until one of the two parties clearly states it. After a marathon board meeting that lasted more than nine hours on November 19, RBI made concessions on capital adequacy of banks, while two contentious issues of transfer of surplus reserves and relaxing norms for weak banks were referred to committees. The board has advised RBI to let banks recast loans up to Rs 25 crore given to micro, small and medium enterprises (MSMEs). One would have expected that the festering tension between North Block and Mint Street would have blown over without serious consequences. That's not quite case, it now appears. It is one thing to be the deputy, and quite another to be at the helm. In current times, there perhaps cannot be a better person than Patel to describe the contrasting experience between the two. Patel took over as the RBI Governor on September 4, 2016, after serving nearly four years as Deputy Governor, carving out a role of a 'go-to' person on key policy matters for Raghuram Rajan, his immediate predecessor as India's central bank chief. The stint as Rajan's deputy gave him a ring side view of what the job of the RBI governorship entails: an experience that may have come handy very early on in his tenure. Globally, most central banks have one principal responsibility: to guide the course of money and credit. The RBI, however, has to carry out a few other tasks: it is the banker's banker, the government's debt manager and lender of last resort as well as the banking regulator. Some of these roles can pull the central bank in opposite directions. It is anybody's guess which of these functions Patel would have found the most challenging and the most rewarding in the last two years. What is clear, however, is that Patel is his own man, who hasn't hesitated to mince words. Demonetisation is a case in point. Patel steadfastly chose to ignore repeated calls by Parliamentarians, politicians, and experts to disclose the volume and value of outlawed Rs 500 and Rs 1,000 notes that people returned during the 50-day window till December 30, 2016. He did disclose it eventually, but in a manner that he perhaps thought was most appropriate: in the RBI's Annual Report for 2017 and 2018. The disclosure came without any interpretative flourishes, in the form of pithy numbers"”99.3 percent of the Rs 15.3 lakh crore of demonetised notes came back to the banking system. This was quite unlike his predecessor Rajan, who did not dither to comment on non-economic and non-central bank related matters. Inflation focus It was only fitting that Patel, as RBI governor, oversaw India's transition to a new interest rate decision system that established the primacy of price control as the central bank's main responsibility. In January 2014, Patel had headed a committee that recommended targeting retail inflation within a well-defined monetary policy structure. Under the new framework, the government set a retail inflation target of 4 percent for next five years, with an upper tolerance level of 6 percent and lower limit of 2 percent. Barely a month into office, Patel presented his maiden monetary policy review, amid mixed signals from the broader economy. Unlike his predecessors who had the final say on interest rate cut decisions, he became the first governor to go by the advice of a newly set up six-member Monetary Policy Committee (MPC) North Block blues On more occasions than one, Patel made clear his unease about North Block's (Finance Ministry) attempts to get overbearingly close to Mint Street (RBI). In December 2016, even as the world's largest currency culling exercise was underway, RBI in an unexpected hawkish move kept its policy rate unchanged at 6.25 percent dashing hopes of lower borrowing costs to arrest the demonetisation-induced slide in spending and investment. Two months later, in February, Patel conceded demonetisation's 'transient' impact on spending and investment, and in the MPC meeting voted for a status quo on rates, choosing to ignore calls from business leaders for cheaper loans. He clarified that he was in favour of low inflation to persist longer before reducing rates, and changed the monetary policy stance from 'accommodative' to 'neutral', meaning lower scope for a rate cut in the near future given growing inflationary risks. There was also an instance in June last year when a Finance Ministry official favoured a meeting with MPC members days before the monetary policy review. "All MPC members declined the request," Patel said at the post-policy media interaction, clearly conveying to the government where the buck stopped. In another instance, days after RBI held rates in June last year, the Chief Economic Adviser Arvind Subramanian said falling inflation rates warranted a rate cut and RBI had erred on its inflationary forecasts. "There is a plausible alternative macroeconomic assessment... In this view, inflation forecast errors by the RBI have been large and systematically one-sided in overstating inflation," a comment that Patel chose to ignore. Earlier this year, many apportioned a large part of the blame to the RBI in diamantaire Nirav Modi and Mehul Choksi's Rs 11,300-crore defraud of Punjab National Bank (PNB). "Regulators ultimately decide the rules of the game and regulators have to have a third eye, which is to be perpetually open. But unfortunately, in the Indian system, we politicians are accountable, the regulators are not," Finance Minister Arun Jaitley said on February 23. Patel responded three weeks later, in unequivocal expression. "There has been the usual blame game, passing of the buck and a tone of honking, mostly short term and knee-jerk reactions. These appear to have prevented the participants in this cacophony from deep reflection and soul-searching." He has been clear in communicating RBI's discomfiture over state government-sponsored farm debt waivers. Economists and bankers loathe the idea of loan write-offs as these create a perverse incentive structure, distort the loan market and undermine the credit culture. Economists sometimes refer to the impossible trinity or trilemma that central banks face. Three objectives"”free capital movement, an independent monetary policy and a fixed exchange rate"”are impossible to achieve at the same time. Only two of these goals can be achieved optimally. During the last 24 months, Patel has encountered this trilemma on a few occasions, and it would be fair to say that he has managed to strike the right equilibrium.
moneycontrol.com 2018-12-10 22:16:00
SEBI is considering steps to strengthen the framework for debenture trustees, including raising minimum net worth requirement for registration of such entities and introducing e-voting provision to obtain consent of the unitholders. The proposal is likely to be discussed at SEBI's board meeting this week. In order to secure the interests of debenture holders and to enable debenture trustees (DTs) to perform their duties effectively and promptly in the interests of investors, SEBI had floated a public consultation paper on the proposed changes in October. The board of SEBI may make the new framework for debenture trustees based on the public comments received on the consultation paper. The proposed changes include raising minimum net worth requirement for registration of debenture trustees to Rs 10 crore from the current Rs 2 crore. Further, a three-year time would be given for attaining this net worth requirement. The new criteria will help in restricting registration of debenture trustees to financially sound entities. It has been proposed that there should be no requirement of calling for a meeting of debenture holders in the event of default by the issuer in case of public issues. The DT can directly enforce the security without obtaining any consent from the debenture holders. Among others, it has been proposed that DTs should disclose the nature of compensation arrangements with their clients on their websites. The disclosure include the minimum fee that a DT will charge and factors determining the fee charged. Also, e-voting has been proposed as a valid option for obtaining the consent of debenture holders wherever applicable. A debenture trustee, in market parlance, is a person or entity that serves as the holder of debenture stock for the benefit of another party. Debenture is a debt instrument that is not secured by physical assets or collateral. According to SEBI, there have been cases of delay in enforcing the security in the event of default, which is detrimental to the interests of the investors. Data received from the Trustee Association of India (TAI) indicates that DTs have been able to enforce the security successfully in around 35 percent of the issues that have defaulted in the past five financial years, thereby building the the case for strengthening the framework for DTs by Sebi. Under the proposal, DTs should display on their website the details of interest/ redemption due to the debenture holders in respect of all issues during a financial year within five working days of start of financial year. Besides, status of payment should be updated in the calendar by the DT not later than one day from the due date of payment. In case an issuer is unable to create the charge on security in favour of DT within the timelines specified, the issuer should pay additional interest to the debenture holders for the period till such charge is created. The additional interest should be specified in the Trust Deed and disclosed in the offer document, as per the proposal. For creation of charge on the security in favour of DT, a no-objection certificate needs to be obtained from other charge holders on a security before opening of the issue, it added. After intimation to stock exchanges, the issuer should furnish its financial results to its DT on the same day. The issuer should have seven working days from the date of submission of financial results to the bourses to file the certificate from the debenture trustee.
moneycontrol.com 2018-12-10 21:01:00
Multiple factors such as a sell-off in global markets, hike in crude prices along with exit polls projections weighed on equity markets on Monday. The indices saw a gap-down opening of about 1.5 percent each, with the Nifty giving up 10,550-mark. The SGX Nifty had hinted at a cut of over 100 points. At the close of market hours, the Sensex was down 713.53 points or 2.00% at 34959.72, and the Nifty down 205.20 points or 1.92% at 10488.50. The market breadth was negative as 647 shares advanced, against a decline of 1870 shares, while 134 shares were unchanged. Here are five factors that have impacted the market. Global sell-off Equity markets in Asia plummeted in early morning trade following weak trends in the US equity futures market. Investors are said to be worried about US-China trade tensions coming at the forefront again. The arrest of Huawei CFO as well as fresh import tariff rhetoric by the White House are dragging the markets in Asia. Reuters reported that White House trade adviser Peter Navarro's has hinted at raising tariff rates on Chinese imports if the two countries could not come to an agreement during the 90-day negotiating period. Crude price increase After the much-awaited meeting of Organisation of Petroleum Exporting Countries (OPEC), a supply cut was announced. OPEC and other producers said they would cut supply of 1.2 million barrels per day from January. International Brent crude oil futures were at $62.21 per barrel at 0218 GMT, up 54 cents, or 0.9 percent, from their last close. Read Moneycontrol's Market Live blog to stay updated "Our key conclusion is that oil prices will be well supported around the $70 per barrel level for 2019," analysts at Bernstein Energy told Reuters on Monday. Exit polls With politics taking charge of cues for D-Street, exit polls is a crucial key for the market to react. Exit polls released by various news organisations and survey agencies for the assembly elections in five states revealed on December 7 mixed results for the Bharatiya Janata Party (BJP) and the Indian National Congress. The exit poll results were declared minutes after voting concluded in Rajasthan and Telangana. Macros Investors could also be reacting to the ballooning current account deficit during the September quarter. India's current account deficit (CAD) widened to 2.9 percent of the GDP in the second quarter of the fiscal compared to 1.1 percent in the year-ago period, mainly due to a large trade deficit, the RBI said on December 7. The CAD, or the difference between outflow and inflow of foreign exchange in the country's current account, was $19.1 billion during the quarter ended September 30, 2018. It increased from $6.9 billion, or 1.1 percent of GDP, in the second quarter of 2017-18. The CAD stood at $15.9 billion (2.4 percent of GDP) in the April-June quarter. Technical factors Technical factors are likely to have played on equity markets. Experts suggest investors to watch out for 10,580, a break below which could send the market to 10,540 and 10,490. "However, a break below 10,490 would result in real panic in the market. Below 10,490, it would eventually fall to minimum 10,200/10,250. On the other side, 10,660 and 10,725 would be hurdles. In case Nifty crosses 10,660 without breaking 10,600, which is unlikely but still if it happens then it would help markets to move towards 10,800/10,850 again," Shrikant Chouhan, Senior VP (technical research), Kotak Securities said in a statement. Strategy should be to trade short if Nifty breaks 10,580 at the beginning for the target 10,540. Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on Moneycontrol are their own, and not that of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
moneycontrol.com 2018-12-10 20:37:00
India Inc's demand for credit is rising, with capacity utilisation of manufacturing companies touching 76.1 percent in the September quarter and many companies planning to launch new projects over the next few months, top bankers said at an event. Rajkiran Rai G, Managing Director and Chief Executive Officer (MD and CEO) of Union Bank of India reportedly said the capex cycle is witnessing traction, citing investment proposals received from firms in the steel, textile, cement, oil and gas sectors. Capacity utilisation rose from 73.8 percent in Q1 FY19 to 76.1 percent in Q2 FY19, higher than the long-term average of 74.9 percent. Data compiled by the Reserve Bank of India (RBI) suggests that seasonally adjusted capacity utilisation also increased to 76.4 percent. RBI, in its monetary policy statement on December 5, indicated that industrial activity has been healthy in the ongoing quarter and that core industries' growth has recovered due to double-digit expansion in coal, cement and electricity. Gross fixed capital formation (GFCF) expanded for the third consecutive quarter on the back of the public sector's push for rural infrastructure and national highway projects. This can be seen in the significant increase in cement production and steel consumption. "I think we are now the lender of the last resort. The 14 percent year-on-year growth for SBI was a very good number. We are seeing demand from across sectors"”government, roads and renewable. There are proposals from the oil and gas and even non-banking finance companies (NBFCs)," said State Bank of India Chairman Rajnish Kumar. Top Indian companies have been reluctant to announce new projects over the past few years due to low capacity utilisation. They were exploring the new acquisition opportunities that followed the implementation of the Insolvency and Bankruptcy Code (IBC). Aditya Birla group took over cement plants of Jaypee group and Binani Cement , Tata Group acquired Bhushan Steel and Usha Martin's steel business and Reliance Industries rolled out its telecom business, all in the past two years. "It's not brownfield, it's greenfield. Power transmission has taken lot of money. Generally, we are seeing a pull beyond working capital. There is capex which is coming back. We are also seeing expansion in the bankable market as a consequence of events like goods and services tax," Romesh Sobti, MD and CEO of IndusInd Bank , said at the event.
moneycontrol.com 2018-12-10 20:09:00
CPI(M) General Secretary Sitaram Yechury Monday alleged that the BJP government at the Centre has been resorting to "illegal diversion" of clean energy funds to pay the states their share of Goods and Services Tax (GST). Reacting to media reports that a parliamentary panel has objected to diversion of clean energy funds to compensate states for the GST, Yechury alleged that the economy of the country has been destroyed by Prime Minster Narendra Modi and his associates. "Economy destroyed single-handedly by Modi and co. Now resorting to illegal diversion of clean energy fund to even pay the states their share of GST. An all-round disaster from this thoroughly corrupt, inept and incompetent govt (sic)," he tweeted.
moneycontrol.com 2018-12-10 19:07:00
Kotak Mahindra Bank shares plunged over 6 percent intraday on December 10 after the lender filed writ petition before Bombay High Court to validate its position w.r.t perpetual non-convertible preference shares (PNCPS) used for stake dilution. It moved Bombay HC against the RBI which said dilution stake through PNCPS is not meeting the public shareholding norm. "RBI has today communicated to us that our PNCPS issuance does not meet their promoter holding dilution requirement. We continue to believe that we have met the requirement and will engage with the RBI in this behalf," the bank said in its BSE filing. Regulation Act. "We have also shared with the RBI the opinions of eminent jurists and senior most legal counsels of the country, which confirm our understanding." Hence to validate its stance with respect to PNCPS, the country's third largest lender by market capitalisation moved High Court as it did not hear from RBI after it shared legal opinion. "Given the milestone of December 31, 2018, the bank has been left with no option but to protect its interest. By way of abundant caution, the bank has today filed a writ petition with the Bombay High Court to validate the bank's position," it said. As per RBI shareholding norms, every bank or any firm which directly owns stake in a bank, whether it is listed or unlisted, has to reduce stake gradually to 20 percent. Yes Bank and IndusInd Bank promoters already brought down their shareholding below 20 percent. Kotak Mahindra Bank, Bandhan Bank , Equity Small Finance Bank etc are among lenders wherein promoters have to cut down their stake to 20 percent within the stipulated timeline set by the RBI. The RBI had asked Kotak Mahindra Bank to meet public shareholding norm by December 31, 2018. Hence, to meet the public shareholding norm, the NCPS issuance committee of the board of directors of the bank, on August 2, had declared the closure of the issue and approved the allotment of 100 crore PNCPS to eligible investors at the issue price of Rs 5 per PNCPS, aggregating to Rs 500 crore pursuant to the issue. Subsequent to this issue of Rs 500 crore of PNCPS, the paid-up capital of the bank has increased from Rs 953.16 crore to Rs 1,453.16 crore, Kotak Bank said. Post this issuance of PNCPS, promoter holding is 19.70 percent of the paid-up capital which meets the RBI's communications in this behalf for December 31, 2018. But the RBI disagreed with the bank's way of stake dilution through PNCPS, saying it should be done through ordinary shares or equity shares. The current market capitalisation of the bank stands over Rs 2.3 lakh crore, which values the 10 percent stake of Kotak's promoter and promoter group at around Rs 23,000 crore and total 30.02 percent over Rs 69,000 crore. Uday Suresh Kotak himself owns 29.73 percent stake in the bank out of total promoter shareholding of 30.02 percent. The above paid-up capital, which the bank is using as a base for stake dilution, is just a 0.41 percent of market capitalisation. As per shareholding pattern, if we assume the bank dilutes 10 percent stake through PNCPS route, then the promoter shareholding at the end of December 2018 quarter would remain as it is"”30.02 percent. If in case the court verdict comes in favour of Kotak, then every bank which has been directed by RBI to bring down stake to 20 percent over the time, can follow the Kotak route and not equity dilution. Kotak Mahindra Bank stock had rallied 8.5 percent on December after sources told CNBC-TV18 that Warren Buffett-owned Berkshire Hathaway is in talks buy a stake in the private sector lender. Sources told the news channel that Berkshire Hathaway wants to buy at least 10 percent in Kotak Mahindra Bank and is looking to invest $4-6 billion, but that it has not decided to go through with the investment as yet. However, in its clarification, the bank informed the exchanges that it is unaware of any plans by Warren Buffett-owned Berkshire Hathaway to buy a stake in it.
moneycontrol.com 2018-12-10 19:01:00
- Crude prices see support, but we remain bearish on oil for the long term The Organisation of Petroleum Exporting Countries' (OPEC) Vienna meeting finally concluded with an agreement over production cuts till April next year. The cartel and its partners have agreed to reduce production by close to 1.2 million barrels per day (mbpd) from the market, with OPEC constituents committing 800,000 bpd. This led to a surge in crude prices on December 7, although prices have since cooled. With producers agreeing to use October production levels as baseline for calculating the cuts, actual barrels that would go off the table would be higher than cited, since production was lower in that month. But OPEC producers have been notorious in not complying with quotas in the past. Iran emerged as a winner from the tense negotiations, securing an exemption from the cuts, citing adverse impact on exports due to US sanctions. While Russia played the key broker between rivals Iran and Saudi Arabia, it negotiated an attractive deal of around a 200,000 bpd cut for itself, which is less than what was expected due to freezing of wells in approaching winters. With a production decline owing to internal challenges, Libya and Venezuela were exempted from the proposed cut. This move might see some opposition from US as President Donald Trump has been vocal against the cuts and higher crude prices for some time. Given the about $45 per barrel break-even level of US shale oil production, the move comes as a relief for shale producers, as stability in prices gives them an incentive to continue production. Though decision of a cut in production provides some support to crude oil prices in the short run, its sustainability remains to be seen. Indeed, sustaining the recent highs it scaled about two months back in the longer term would be a challenge. With US pipelines scheduled to enter production in the middle of 2019, we expect supplies to rise. On the demand side, crude oil is facing a structural demand shift to renewable energy sources. Due to this, we believe very high artificially supported crude prices levels would be difficult to sustain. The recent meeting has underlined OPEC's dependence on Russia to make production cuts work, a signal of the cartel's declining clout. In the shorter run, while crude prices might see some support, we remain bearish on the overall crude prices in the longer term. For an energy importer such as India, this should be music to her ears. Follow @Ruchiagrawal
moneycontrol.com 2018-12-10 18:50:00
Any attempt by govt to curtail central bank's independence credit negative: Moody's "Our global JV with Kubota is aimed at a technology-led collaborative growth in domestic and export markets," Escorts Chairman and Managing Director Nikhil Nanda said. Escorts has a strong technology legacy and diversified portfolio in agriculture equipment solutions market and Kubota has a proven global technology, Kubota Corporation President and Representative Director Masatoshi Kimata said. "Together we will cater to India and other growing economies which require high-end technology and new age tractors for growing demands of highly mechanised farming," he added. Kubota group specialises in agriculture, water, and living environment products and has presence in over 100 countries. Escorts shares were trading 2.72 percent down at Rs 609.15 on the BSE. First Published on Dec 10, 2018 01:45 pm
moneycontrol.com 2018-12-10 18:47:00
The Indian government must heed the RBI's message on financial stability, IMF's Chief Economist Maurice Obstfeld has said, amidst reports of friction between the central bank and the finance ministry over several issues, including how much capital the apex bank needs. Addressing a group of journalists here on Sunday, he also said the International Monetary Fund does not want politicians "manipulating" central banks for political ends. "There is debate over whether it's better for financial stability to be the remit of the central bank or an independent regulator...the UK in 1997, split them, then put them back together again," he said, responding to a specific question on the recent developments in India regarding the RBI and the Government. "I'm not going to take a position on that...But I think...the central bank does have to be intimately concerned with financial stability to some degree and with the payment system," he added. "We need to think about what is the best institutional framework in which financial policy can be set with regard to long term stability of the economy, not just to performance over political horizon," Obstfeld said. "Well, I think they (the RBI and the Indian government) have reached an agreement on how to proceed. I think their (RBI) message that financial stability is important is correct. And it is important for the government to heed that," he added. In November, the Reserve Bank of India (RBI) board held a marathon meeting amid a rift between the central bank and the government over several issues, including how much capital the RBI needs, lending norms for small and medium enterprises (SMEs) and rules for weak banks. The Reserve Bank of India (RBI) has massive Rs 9.59 lakh crore reserves and the government, if reports are to be believed, wants the central bank to part with a third of that fund -- an issue which along with easing of norms for weak banks and raising liquidity has brought the two at loggerheads in recently. The next board meeting would be held later this week. Responding to a series of questions on the attempt in certain countries like the US, India, Argentina and Turkey to curb independence of central banks, Obstfeld said central banks' role as a financial regulator is critical. Central banks have "much greater power than you thought". They are fundamentally involved in financial stability policy, in fiscal policy, he said. Obstfeld said if one looks at the record, the decisions taken by central banks worldwide did stabilise the economy by avoiding much worse losses in output and employment. However, at the same time, he said, their moves also raised questions of transparency and accountability. "So, it's not a shock that people raise these questions and it does create a challenge for central banks to be more transparent and to communicate more effectively with a broader public about what they are about and what they are doing," Obstfeld said. If the central bank cannot communicate more effectively about what it is doing, then there is a possibility of political manipulation where politicians attack the central bank and undermine it, he said. "Clearly, we don't want politicians manipulating the central bank for political ends," Obstfeld added.
moneycontrol.com 2018-12-10 18:39:00
India's coal imports rose 9.7 percent to 156.08 million tonne (MT) in the April-November period of the ongoing fiscal, as against 142.25 MT in the year-ago period, according to a report by mjunction services. Coal imports in November increased 10.1 percent to 19.47 MT, over 17.68 MT in the same period a year ago. mjunction -- a joint venture between Tata Steel and SAIL -- is a B2B e-commerce company and also publishes research reports on coal and steel verticals. "Imports during November 2018 stood at 19.47 MT (provisional)... Earlier, coal and coke imports in November 2017 stood at 17.68 MT," it said. Of the total imports last month, import of non-coking coal was at 14.24 MT, against 15.23 MT imported in October 2018. "The significant correction in thermal coal prices in November prompted buyers to take a wait and watch approach. There, however, was a stable trend in met coal market and this was reflected in the buying pattern," mjunction CEO Vinaya Varma said. The import of coking coal was at 3.93 MT in November 2018, almost flat against 3.94 MT imported a month ago. "Metallurgical coke imports during the month were at 0.50 MT, while 0.53 MT was imported in the previous month," it said. India's coal and coke import during November 2018 through 31 major and non-major ports is estimated to have decreased by 5.32 percent over October 2018, according to provisional figures compiled by mjunction, based on monitoring of vessels' positions and data received from shipping companies.
moneycontrol.com 2018-12-10 18:26:00
Highlights: - Valuations reasonable at 17 times FY20 estimated earnings Stylam Industries , the Punjab-based laminate manufacturer, has been growing at a healthy clip. The company is expanding capacity and should start reaping the benefits of scale. The market is moving towards organised players and this should augur well for Stylam. The recent decline in crude prices should support future margins. At 17 times FY20 estimated earnings, the stock is trading at a steep discount to other listed plywoods and laminate manufacturers and looks ripe for accumulation from a long term perspective. Stylam operates in the building material space and is engaged in the manufacture of high pressure laminates for exterior cladding of furniture, cubicles and interior furnishing. The company has been a consistent performer over the past few years. Between FY14 and FY18, revenue has grown at a compounded annual growth rate (CAGR) of 16 percent. While the company derives majority (over 65 percent) of its revenue from international markets, growth in topline has been driven by deeper penetration in the domestic laminates market. Operating leverage and cost efficiencies have aided margin expansion, thereby resulting in a nearly three-fold jump in earnings before interest, tax, depreciation and amortisation (EBITDA) over the same period. The global market for laminates is currently pegged at Rs 50,000 crore and is growing at 5-6 percent per annum. On a regional basis, the US leads the market with a share of around 20 percent. In comparison, the Indian laminates market is nearly half the size of the US market and is estimated at Rs 5,000 crore. For India, exports contribute around Rs 1,000 crore, with the balance being met by domestic demand. The industry has traditionally remained largely unorganised, but the share of organised players has seen a gradual rise in recent years. Greenlam Industries and Merino Laminates are two of the largest players in the domestic market. Both these companies have a large product portfolio and are nearly 3 times the size of Stylam in terms of total revenue. In terms of growth rates, it has outperformed its listed peer Greenlam owing to its small revenue base. Based on FY18 financials, Greenlam scores over Stylam on the operational front. However, parameters for the latter are expected to improve as the business attains economies of scale. The company has expanded its sheets capacity to 11 million (from 4.5 million) over the course of FY17-18. The new 6.5 million unit at Manak Tabra entailed an investment of Rs 75 crore, funded through a combination of debt and equity. Plant expansion was completed towards the end of last fiscal and full benefit of the same would start accruing from this fiscal. It also plans to enhance its product finishing through installation of a hot coating line. The project is estimated to cost at Rs 20 crore and will turn operational in FY20. New capacities and enhancements would allow Stylam to broaden its product portfolio and fortify its presence in the domestic and international laminates market. In December 2017, Stylam announced the amalgamation of Golden Chemtech with itself via equity dilution. Under Stylam, Golden Chemtech has discontinued production and sale of chemicals and will focus on manufacture of acrylic solid surfaces. Commercial production of the same is expected to commence in Q3 FY19 and the product will be sold under the Granex brand name. Stylam has a land bank of around 5,500 square meters at Technology Park Panchkula in Haryana. The land was purchased in 2012-13 with an aim to diversify in the IT/BPO sector. However, the management wants to focus on core building materials business and intends to divest its land bank. It expects to garner Rs 45-50 crore from the sale of this asset and plans to repay borrowings from the proceeds. Given the subdued real estate scenario, the transaction is unlikely to fructify in near term, but remains a key trigger for deleveraging the business in the medium term. With the onset of capacity expansion, the debt reached peak levels of Rs 184 crore (debt-to-equity of 2.4 times) at the end of FY17. Capital infusion from private equity-firm Lighthouse and cash flow from operations has helped the company deleverage its balance sheet since then. At the end of Q2 FY19, it reduced its net debt to Rs 124 crore and improved its D/E ratio to 0.8 times. Operating margin contracted in FY18 due to higher raw material cost. Stores, chemicals and packing expenses doubled from Rs 12 crore to Rs 21.4 crore last fiscal. The rise in input costs is linked to a jump in crude prices and rupee-dollar movements as imports constitute 70-75 percent of its total raw material cost. Stylam being a net exporter (earnings of Rs 206 crore versus import of Rs 112 crore in FY18) has a positive correlation with a weaker rupee, but margin has an inverse correlation with the movement in crude oil prices. Stylam delivered a strong performance during the first half of this fiscal. Revenue in H1 increased 41 percent year-on-year to Rs 216 crore. Operating profit rose 55 percent over the same period on higher topline and expansion in operating margin. Performance has been aided by multiple factors including favourable base, capacity expansion and higher export realisations resulting from weaker rupee. We remain optimistic on its long term prospects as Stylam has a proven execution track record. Incremental capacity would allow it to pick-up revenue share in the domestic as well as international market. Despite the surge in oil prices, operating margin expanded in H1 FY19. While oil prices continue to remain volatile, price hikes by domestic players should lend support to margin in coming quarters.