Friday, April 17, 2009
Realty, metal pull Sensex down
Realty, metal pull Sensex down
Business Standard, April 17, 2009, Section II, Page 1
BS Reporter / Mumbai
Marketmen have welcomed the first phase of voting with skepticism. Snapping an eight-day rally, the Bombay Stock Exchange (BSE) Sensitive Index, or Sensex, fell by nearly 3 per cent today due to profit-booking by domestic institutional investors (DIIs), especially observed in realty, metal and energy sectors.
The first round of voting, with 124 seats out of the 543-member Parliament began today. The Sensex closed the day at 10,947, down 2.99 per cent or 337 points. The broader index S&P CNX Nifty closed at 3,369 point, down 3.29 per cent or 115 points.
“Profit-taking will make markets more healthy. Anticipation of better-than-expected results of top US banks has been a cause for rally and, going further, this will only set the market direction rather than domestic events. However, markets would be more volatile once election results start coming in the first week of May,” said Ramdeo Agarwal, joint partner of Mumbai-based Motilal Oswal.
In today’s fall, bank stocks – such as ICICI Bank, HDFC Bank and State Bank of India – fell as they faced resistance on further up-side. Since March 30, the BSE Bankex index had leapt by 25.5 per cent.
Among the Sensex stocks, the top losers were Tata Motors (down 13.5 per cent), Tata Steel (down 8.25 per cent) and Reliance Infrastructure (down 9.36 per cent). Index heavyweight Reliance Industries fell 4.88 per cent too.
Top drug maker Ranbaxy Laboratories today fell 6.81 to Rs 186 on reports that company had lost over Rs 2,500 crore in forex hedging. It had reported foreign exchange-related loss of Rs 784 crore in the December quarter too.
Business Standard, April 17, 2009, Section II, Page 1
BS Reporter / Mumbai
Marketmen have welcomed the first phase of voting with skepticism. Snapping an eight-day rally, the Bombay Stock Exchange (BSE) Sensitive Index, or Sensex, fell by nearly 3 per cent today due to profit-booking by domestic institutional investors (DIIs), especially observed in realty, metal and energy sectors.
The first round of voting, with 124 seats out of the 543-member Parliament began today. The Sensex closed the day at 10,947, down 2.99 per cent or 337 points. The broader index S&P CNX Nifty closed at 3,369 point, down 3.29 per cent or 115 points.
“Profit-taking will make markets more healthy. Anticipation of better-than-expected results of top US banks has been a cause for rally and, going further, this will only set the market direction rather than domestic events. However, markets would be more volatile once election results start coming in the first week of May,” said Ramdeo Agarwal, joint partner of Mumbai-based Motilal Oswal.
In today’s fall, bank stocks – such as ICICI Bank, HDFC Bank and State Bank of India – fell as they faced resistance on further up-side. Since March 30, the BSE Bankex index had leapt by 25.5 per cent.
Among the Sensex stocks, the top losers were Tata Motors (down 13.5 per cent), Tata Steel (down 8.25 per cent) and Reliance Infrastructure (down 9.36 per cent). Index heavyweight Reliance Industries fell 4.88 per cent too.
Top drug maker Ranbaxy Laboratories today fell 6.81 to Rs 186 on reports that company had lost over Rs 2,500 crore in forex hedging. It had reported foreign exchange-related loss of Rs 784 crore in the December quarter too.
Basic drivers of global outsourcing remain intact
Basic drivers of global outsourcing remain intact
Business Standard, April 17, 2009, Page 12
BS Reporter / Mumbai
A worldwide survey on outsourcing shows there were 12 “mega deals” in 2008 for a total contract value (TCV) of $17.1 billion (bn), compared with $12 billion for 2007, despite the slowdown in the global economy. The number of reported outsourcing mega deals awarded to a single service provider in 2008 was 12, an increase from 10 in 2007, said Gartner, the research and analysis firm.
A mega deal is worth more than $1 bn. And, while 2008 saw an increase in the TCV of such deals over 2007, it is still lower than the amounts realised prior to 2007.
“While outsourcing held up in 2008, we expect to see a slowdown in contract signings during the first half of 2009 and possibly extending into the third quarter, largely due to the tightening of IT budgets in the fourth quarter of 2008 and slow loosening of budgets in early 2009,” said Allie Young, vice-president and analyst for Gartner.
“Long sales cycles for outsourcing are the norm, depending on the complexity, scale and scope of the deals, which may lead to delayed signings. However, organisations with approval to outsource, and desperate to save money, may seek to move rapidly and shorten some steps of due diligence just to get the deal into place,” she said.
The largest IT outsourcing (ITO) or business process outsourcing (BPO) contract signed in 2008 was for a TCV of $2.5 bn. There were two of these deals, one of which was awarded to Tata Consultancy Services.
Unitech raises $325 mn from QIP
Unitech raises $325 mn from QIP
Business Standard, April 17, 2009, Page 4
BS Reporter / Mumbai
The issue was subscribed more than two times
Unitech Ltd, the country’s second-biggest real estate developer, said it raised $325 million (Rs 1,625 crore) from selling new shares to qualified institutions to repay a part of its debt of over Rs 8,900 crore and strengthen capital.
The shares were sold at Rs 38.50 a piece, or 11 per cent discount to the company’s closing share price on the Bombay Stock Exchange today. Unitech shares today ended trading 10 per cent lower, at Rs 43.20, on the BSE.
The New Delhi-based developers’ issue, which was subscribed more than two times, was 90 per cent lapped up by overseas investors, a company official said. Domestic investors bought the remaining shares.
HSBC, Prudential, Och-Zif, Orient Global and Sandstone Capital were some of the investors which participated in the offer. After the issue, the promoters’ stake in the company would fall to 51 per cent from 64 per cent, indicating a 13 per cent dilution post issue, the official said. The company will issue 420 million new shares, after which the equity is expected to rise to 2.02 billion shares.
Unitech managed to complete its QIP issue on a day when General Growth Properties Inc, the second-biggest mall owner, filed for the biggest real estate bankruptcy in US history after amassing $27 billion in debt.
Unitech has been struggling to repay a part of its burgeoning debt, which spurted to Rs 10,907 crore by December 2008. The company has divested a part of its non-core business, namely telecommunication and a hotel property, for repaying the debt.
The total debt on the company’s books as on March 2009 stood at Rs 8,900 crore, of which it has to repay Rs 2,500 crore in this fiscal year. The developer is expected to repay a part of the short-term debt on April 19 and restructure the balance for 6-12 months.
Unitech’s debt to equity ratio is expected to drop to 1.4 after the equity infusion. It was 2.4 on December 2008.
The company plans to use the money to develop its affordable housing segment. It plans to launch 40 such projects during the fiscal year ending 2010, aggregating 30 million square feet.
“Unitech continues to remain focused on cash-flow management, with a well-defined plan to pursue selective asset sales and repay debt,’’ said a top company official.
The developer plans to complete the sale of four hotels in Noida, Kolkata and Gurgaon in the next six months. It also expects to sell stake to private equity in several projects, according to investment bankers.
Unitech expected to complete the sale of its Saket office in the next quarter, said a banker. It had already signed agreements for sale of its Kochi projects and school plots in Gurgaon, they said.
Unitech’s QIP issue is the first such placement in as many as eight months after the Securities and Exchange Board of India changed the QIP (qualified institutional placement) norms.
Last August, Sebi had amended the pricing norms for QIPs by allowing companies to fix the price based on the average price of two weeks. Earlier, companies had to fix the price based on the average price of the last six months. Not a single QIP issue, however, has hit the market since then.
PTI reports: The Unitech Corporate Parks Plc said the global financial firm, HSBC Holdings, has acquired over 16 per cent stake in the company.
Unitech Ltd QIP raises $325 m
Unitech Ltd QIP raises $325 m
The Financial Express, April 17, 2009, Page 1
Corporate Bureau, New Delhi
The country’s second-largest real estate firm, Unitech Ltd, on Thursday raised $325 million (around Rs 1,567.75 crore) through the qualified institutional placement (QIP) route, mainly to service debt of nearly Rs 9,000 crore. The one-day placement was priced at Rs 38.50 a share and was oversubscribed two times.
Following the QIP, the promoters’ stake is expected to come down to around 51% from the current 67.46%. According to sources, FIIs subscribed to 92-95% with the remainder going to domestic funds. The major FIIs are HSBC, Prudential, Och-Ziff, Orient Global and Sandstone Capital.
However, a Unitech spokesperson could not be contacted for comment.
The QIP and ongoing debt restructuring is expected to strengthen the capital structure and improve cash flows of the company, whose debt burden increased from Rs 8,552 crore on March 31, 2008 to Rs 10,907 crore by December 31, 2008. This was reduced to Rs 8,900 crore as on March 31. With the QIP equity infusion, Unitech’s debt-to-equity ratio is expected to fall from 2.4 on December 31, 2008 to 1.4 on March 31.
Sources said all Unitech’s near-term repayment liabilities have now been addressed. Overall, it now has a higher proportion of long-term debt with only Rs 2,500 crore due for repayment in the current financial year. Part of the near-term debt due on April 19 will be repaid on time and the rest rescheduled by 6-12 months.
“Even in these times of depressed valuation if such huge funding can be raised, then one needs to take a relook at the sector,” said Amitabh Chakraborty, president-Equity at Religare Capital Markets.
Unitech’s shares closed down 9.78% at Rs 43.35 on the BSE on Thursday.
Top Europeon fund may invest Rs 300 cr in Sobha
Top Europeon fund may invest Rs 300 cr in Sobha
Business Standard, April 17, 2009, Page 6
Raghuvir Badrinath / Bangalore
Redevco, one of Europe’s largest real estate investment and development firms, with a $10 billion portfolio, is understood to be looking at investing around Rs 300 crore in various projects of Bangalore-based Sobha Developers.
Redevco, part of the diversified Cafro Holdings, which is into private equity, retail, financial services and renewable energy, in addition to real estate development, set up office in India in late 2008. If the discussions with Sobha fructify, it will be its first investment in India.
Investment banking sources indicated that Redevco has had initial discussions with the management of Sobha Developers, which is mired in debt like many of its peers. The investment, if it materialises, is expected to be tied up by September 2009, they say.
Private equity investments into Indian real estate have been slowing over the past three quarters and this deal is expected to be a major one. While Redevco said it had nothing to comment, Sobha has been maintaining that it is in talks with various funds and nothing has been finalised.
Over the past two quarters, Sobha has been aggressively looking at three options to reduce its debt burden of close to Rs 1,900 crore, a leverage of 1.6 times.
The company, which has Infosys as one of its major clients, is looking to raise around Rs 850 cr by selling around 200 acres of its 3,000 acre land bank, offloading up to 49 per cent stake through special purpose vehicles and to offload up to 25 per cent stake at the enterprise level.
Sobha is understood to have identified around 150 acres of land on which projects can be implemented through special purpose vehicles by divesting stakes.
The company is also engaged with around 12 banks and financial institutions to restructure around Rs 850 cr of debt that will be due for payment during the next 18 months.
Banking sources indicate Sobha has been able to get a nod for a part of that sum and talks are also on with mutual funds to roll over Rs 350 cr of debt.
Business Standard, April 17, 2009, Page 6
Raghuvir Badrinath / Bangalore
Redevco, one of Europe’s largest real estate investment and development firms, with a $10 billion portfolio, is understood to be looking at investing around Rs 300 crore in various projects of Bangalore-based Sobha Developers.
Redevco, part of the diversified Cafro Holdings, which is into private equity, retail, financial services and renewable energy, in addition to real estate development, set up office in India in late 2008. If the discussions with Sobha fructify, it will be its first investment in India.
Investment banking sources indicated that Redevco has had initial discussions with the management of Sobha Developers, which is mired in debt like many of its peers. The investment, if it materialises, is expected to be tied up by September 2009, they say.
Private equity investments into Indian real estate have been slowing over the past three quarters and this deal is expected to be a major one. While Redevco said it had nothing to comment, Sobha has been maintaining that it is in talks with various funds and nothing has been finalised.
Over the past two quarters, Sobha has been aggressively looking at three options to reduce its debt burden of close to Rs 1,900 crore, a leverage of 1.6 times.
The company, which has Infosys as one of its major clients, is looking to raise around Rs 850 cr by selling around 200 acres of its 3,000 acre land bank, offloading up to 49 per cent stake through special purpose vehicles and to offload up to 25 per cent stake at the enterprise level.
Sobha is understood to have identified around 150 acres of land on which projects can be implemented through special purpose vehicles by divesting stakes.
The company is also engaged with around 12 banks and financial institutions to restructure around Rs 850 cr of debt that will be due for payment during the next 18 months.
Banking sources indicate Sobha has been able to get a nod for a part of that sum and talks are also on with mutual funds to roll over Rs 350 cr of debt.
DLF may pull out of Infopark project
DLF may pull out of Infopark project
Business Standard, April 17, 2009, Page 6
Jayajit Dash / Bhubaneswar
DLF, India’s biggest real estate developer, is likely to pull out of its Rs 1,000 crore Infopark project in the city which was to be developed over 54 acres in an approved special economic zone for information technology projects.
The company, which has already taken possession of land for the project — it was inaugurated just two months ago — is facing a cash crunch amid the prevailing economic downturn, which has slackened the demand for commercial real estate projects.
A sources close to the development said DLF was unlikely to go ahead with the project as its cash position was not comfortable and it did not expect many takers for the project due to the economic downturn. The company was exploring the option of seeking an extension of about two years for the project but was more in favour of pulling out, he added.
DLF had already paid the entire deposit of Rs 15 lakh an acre for the project. In the event of withdrawal, it will forfeit Rs 8 crore.
When asked by Business Standard, a DLF official said, “We don’t comment on anything being speculated in the market. DLF’s Infopark project is on track and we expect to commence construction soon.”
DLF Infopark was to be developed in three phases. It is to comprise an IT block, a luxury hotel, a retail chain, service apartments and recreational facilities, with a total built-up space of about 5.5 million sq ft. For the luxury hotel, DLF has tied up with Hilton, an international hotel chain.
In the first phase, it committed an investment of Rs 300 crore for developing an IT workspace of international standards, with a built-up area of 5.7 lakh sq ft.
The first phase was scheduled to be operational within 18 months to two years of the start of the construction.
The Infopark project was to generate direct and indirect job opportunities for over 40,000 people in sectors like IT and ITes (IT-enabled services), retail and hospitality.
Business Standard, April 17, 2009, Page 6
Jayajit Dash / Bhubaneswar
DLF, India’s biggest real estate developer, is likely to pull out of its Rs 1,000 crore Infopark project in the city which was to be developed over 54 acres in an approved special economic zone for information technology projects.
The company, which has already taken possession of land for the project — it was inaugurated just two months ago — is facing a cash crunch amid the prevailing economic downturn, which has slackened the demand for commercial real estate projects.
A sources close to the development said DLF was unlikely to go ahead with the project as its cash position was not comfortable and it did not expect many takers for the project due to the economic downturn. The company was exploring the option of seeking an extension of about two years for the project but was more in favour of pulling out, he added.
DLF had already paid the entire deposit of Rs 15 lakh an acre for the project. In the event of withdrawal, it will forfeit Rs 8 crore.
When asked by Business Standard, a DLF official said, “We don’t comment on anything being speculated in the market. DLF’s Infopark project is on track and we expect to commence construction soon.”
DLF Infopark was to be developed in three phases. It is to comprise an IT block, a luxury hotel, a retail chain, service apartments and recreational facilities, with a total built-up space of about 5.5 million sq ft. For the luxury hotel, DLF has tied up with Hilton, an international hotel chain.
In the first phase, it committed an investment of Rs 300 crore for developing an IT workspace of international standards, with a built-up area of 5.7 lakh sq ft.
The first phase was scheduled to be operational within 18 months to two years of the start of the construction.
The Infopark project was to generate direct and indirect job opportunities for over 40,000 people in sectors like IT and ITes (IT-enabled services), retail and hospitality.
'We will continue to support DLF'
'We will continue to support DLF'
Business Standard, April 17, 2009, Page 8
Q&A: Anil Chawla
Surajeet Das Gupta / New Delhi
It has invested heavily in the real estate sector which has been hit badly by the slowdown. DE Shaw, which has over $29 billion invested across the globe, has invested around $2bn in India. DE Shaw India Advisory Services has invested $400 million in property fund DLF Assets Limited (DAL) — DAL, which is mostly-owned by DLF promoter KP Singh, is likely to be taken over by DLF as part of a restructuring of the cash-strapped group. Another $250 mn has been invested in Mac Star Marketing, a subsidiary of realty giant HDIL. DE Shaw India’s CEO Anil Chawla speaks to Surajeet Das Gupta about the future of his firm’s investments in India, the crisis in the real estate sector as well as what he thinks are promising investment areas. Chawla is clear his company is not exiting DLF. Excerpts:
DE Shaw has large investments in the real estate sector which has seen a huge drop in valuations. How has that affected you, and will you invest in the sector again?
The current global downturn has had an impact on players in all sectors, but real estate has arguably been hit the hardest. We’ve partnered with whom we believe are some of the best companies in the real estate sector, and we’ve invested in specific projects which are currently doing well. We’re comfortable both with the initial valuations of these companies and with the quality of the projects in which we have invested. It’s important to note that we are long-term investors — we generally invest with a time-horizon of four to five years. The current economic situation requires us to work closely with investee companies to see how we can best support them, and that is exactly what we are doing.
What went wrong in the real estate sector and the companies in which you invested? How did they get in the cash crunch they’re in — was the land bank they declared accurate? How long will it take for the sector to get back on the rails?
Many companies in the real estate sector were valued based on inflated expectations of earnings, which were, in turn, based on the assumption that the economic boom would continue for the foreseeable future. As a result, the management of these companies over-extended their balance sheets to take advantage of the expected growth. When the downturn came, it was so rapid and unexpected, that most companies were caught off-guard and did not have time to de-leverage their balance sheets, leaving them with massive commitments on debt-servicing as well as on unfinished projects.
At the same time, because of the erosion of confidence in the markets, real estate sales declined, income from new projects decreased severely, and developers found themselves in a cash crunch. The drop in valuations was an inevitable outcome of this situation.
There are signs that the industry is trying to get back on its feet with innovative efforts to refinance or raise fresh capital, as well as to get the cash flow cycle going by launching new projects at significantly discounted prices. If the very recent surge in confidence persists for a few more months, it is quite possible that the industry will start seeing better days in the near future.
You have also invested in SEZ projects through some companies. However many of these companies in which you have invested have asked for permission to denotify their SEZs. Is the great SEZ story over?
I think that the benefits of world-class infrastructure coupled with attractive fiscal benefits and incentives should allow well-planned SEZs to continue to do well.
Companies, including some in which you have invested, are now talking of low-cost housing as a way out — is this sustainable as all they are doing is selling smaller-sized houses. Many of them are also returning the money that they had taken from those who had booked flats. Will this damage the market further?
Without getting into company-specific decisions, which should be studied on a case-by-case basis, I think the theme you’re describing is likely to be the result of tactical steps being taken by developers to get through the current situation. Whether this will develop into a sustainable trend will depend on how the market plays out over the next year or two.
You have a substantial exposure to DLF Assets Limited (DAL). There has been news that DLF is planning to merge the company with itself — reportedly, DE Shaw will sell its DAL stake and the cash from the deal will be invested in other group companies. What is the progress on this?
Business Standard, April 17, 2009, Page 8
Q&A: Anil Chawla
Surajeet Das Gupta / New Delhi
It has invested heavily in the real estate sector which has been hit badly by the slowdown. DE Shaw, which has over $29 billion invested across the globe, has invested around $2bn in India. DE Shaw India Advisory Services has invested $400 million in property fund DLF Assets Limited (DAL) — DAL, which is mostly-owned by DLF promoter KP Singh, is likely to be taken over by DLF as part of a restructuring of the cash-strapped group. Another $250 mn has been invested in Mac Star Marketing, a subsidiary of realty giant HDIL. DE Shaw India’s CEO Anil Chawla speaks to Surajeet Das Gupta about the future of his firm’s investments in India, the crisis in the real estate sector as well as what he thinks are promising investment areas. Chawla is clear his company is not exiting DLF. Excerpts:
DE Shaw has large investments in the real estate sector which has seen a huge drop in valuations. How has that affected you, and will you invest in the sector again?
The current global downturn has had an impact on players in all sectors, but real estate has arguably been hit the hardest. We’ve partnered with whom we believe are some of the best companies in the real estate sector, and we’ve invested in specific projects which are currently doing well. We’re comfortable both with the initial valuations of these companies and with the quality of the projects in which we have invested. It’s important to note that we are long-term investors — we generally invest with a time-horizon of four to five years. The current economic situation requires us to work closely with investee companies to see how we can best support them, and that is exactly what we are doing.
What went wrong in the real estate sector and the companies in which you invested? How did they get in the cash crunch they’re in — was the land bank they declared accurate? How long will it take for the sector to get back on the rails?
Many companies in the real estate sector were valued based on inflated expectations of earnings, which were, in turn, based on the assumption that the economic boom would continue for the foreseeable future. As a result, the management of these companies over-extended their balance sheets to take advantage of the expected growth. When the downturn came, it was so rapid and unexpected, that most companies were caught off-guard and did not have time to de-leverage their balance sheets, leaving them with massive commitments on debt-servicing as well as on unfinished projects.
At the same time, because of the erosion of confidence in the markets, real estate sales declined, income from new projects decreased severely, and developers found themselves in a cash crunch. The drop in valuations was an inevitable outcome of this situation.
There are signs that the industry is trying to get back on its feet with innovative efforts to refinance or raise fresh capital, as well as to get the cash flow cycle going by launching new projects at significantly discounted prices. If the very recent surge in confidence persists for a few more months, it is quite possible that the industry will start seeing better days in the near future.
You have also invested in SEZ projects through some companies. However many of these companies in which you have invested have asked for permission to denotify their SEZs. Is the great SEZ story over?
I think that the benefits of world-class infrastructure coupled with attractive fiscal benefits and incentives should allow well-planned SEZs to continue to do well.
Companies, including some in which you have invested, are now talking of low-cost housing as a way out — is this sustainable as all they are doing is selling smaller-sized houses. Many of them are also returning the money that they had taken from those who had booked flats. Will this damage the market further?
Without getting into company-specific decisions, which should be studied on a case-by-case basis, I think the theme you’re describing is likely to be the result of tactical steps being taken by developers to get through the current situation. Whether this will develop into a sustainable trend will depend on how the market plays out over the next year or two.
You have a substantial exposure to DLF Assets Limited (DAL). There has been news that DLF is planning to merge the company with itself — reportedly, DE Shaw will sell its DAL stake and the cash from the deal will be invested in other group companies. What is the progress on this?
We generally don’t comment in detail on specific investments. As a firm, though, we believe that DLF is a strong player and we expect to continue our support to the company.
Has there been any change in the overall private equity (PE) space in the last two months. Is there any indication of recovery? Are the valuations more reasonable today? How is the deal-flow?
While the last year has been a relatively quiet one in the PE space, the last month or two have shown some signs of an increase in the levels of activity. There could be a couple of reasons for this. First, a feeling amongst investors that they have seen the bottom; and, two, the inability of investee companies to defer the fund-raising process any further. When it comes to valuations, having experienced the highs of just a year ago, several promoters are still unable to come to terms with the low valuations currently on offer. However, where the need for funds is real and pressing, promoters are willing to come to the negotiation table with a more realistic mindset now.
While the deal-flow is still substantially lower than what was seen at the peak, there has been a pick up in activity of late. The good news is that we don’t see too many of the half-baked deals that were quite the norm earlier. All in all, I think most investors are still cautious, and while activity is picking up, we need to see some more evidence of the sustainability of this recovery before the money starts to flow again.
Which are the areas you will avoid in a slowdown, and which are the areas you will invest in?
We are open to any opportunity which we believe is accurately valued and provides us an attractive risk-return reward. Having said that, we keep researching different sectors to identify any fundamentally attractive stories we can go after. As an example, we have been looking closely at the education space for a while now and are looking to make some long-term bets in this sector. We are definitely looking at new opportunities and are presently at advanced stages of the process with respect to a couple of deals. I think sectors like hospitality, education, and power are good long-term investment opportunities.
When do you see a recovery?
The global downturn has proved difficult for nearly all market participants. The DE Shaw group has always placed preservation of capital ahead of outsized gains, especially during stressful scenarios. From an Indian perspective, the one thing the present situation has made amply clear is that the ‘decoupling theory’ does not hold much water, and India is also exposed to global ups and downs.
'Bottom formation complete, revival in next six months'
'Bottom formation complete, revival in next six months'
The Financial Express, April 17, 2009, Page 3
fe Bureau, Chennai
“The bottom formation is being completed. The fundamentals are in place and every risk factor has been factored into it. It is time for economy as well as markets to revive. Irrespective of whichever party/parties form the next government at the Centre, the growth prospects of the corporate India can be seen from October-December quarter onwards,” said Dinesh Thakkar, Angel Broking firm chairman and managing director.
It is expected that the indices will hover between 10,000 and 12,500 for the next few months. Anything under the book value of Rs 2 is ideal for an investor to make equity investment. If March and the last few days of April are of any indication, one would not rule out the flows from the FIIs in due course of time. “We see more and more FIIs are expected to take part in the markets growth momentum in a big way over a period of time,” he said.
“One cannot even rule out the bad times, at least not for another few months. There will be equally knee-jerking reactions from across all the sections. However, one has to look at the long-term perspective than the short-term crisis, which may last for another six to eight months,” he pointed out.
According to him, whichever political party/ parties form the next government, the reform policies will continue to be there. There may be slight changes but the reforms continue to happen. So the investors should not show any strong reaction to the new government at the Centre. “With its unique model, India is next major country after China to attract $14 trillion funds lying unutilised across the globe,” he said. In March alone, FIIs have pumped in Rs 5,000 crore followed by mutual funds with Rs 2,500 crore,” he said.
“We expect interest rates, both lending as well as deposit, will come down in a few months. RBI will continue to monitor the situation and ensure the credit offtake picks up while ensuring growth retail spending,” he said. This time the revival would be of a long one and will be more structured and robust one, he added.
Sectors such as infrastructure, IT, telecom are expected to see revival in the near future while commodities and capital goods will have to wait for some more time, he said. Having completed their capital expenditure, it is time for corporates to look forward for better P/E as well as increasing EPS, he said.
Sub-prime dead, American mortgage business reviving
Sub-prime dead, American mortgage business reviving
Financial Express, April 17, 2009, Page 11
Overland Park, KansasBelinda Hollins considered herself the “queen of sub-prime.” The Kansas City-area mortgage broker rode the boom, then held on through the bust. Now she sees the good times starting to return.
“We are so busy. It’s crazy,” said Hollins, who has worked in the mortgage business for 20 years. “The past two years were really miserable. But now it’s starting to get better.”
It has been a long, dark downturn for the US mortgage industry. Years of free-wheeling operations came to an abrupt halt a little over a year ago and left the industry scarred by scandal, soured loans and sinking home values.
Last year, with banks clamping down on credit, unemployment skyrocketing and billions in savings erased in stock market declines, consumers largely backed away, or were turned away, from new mortgages.
Also declared dead were the sub-prime loans made to borrowers with poor credit and sometimes unreliable income. The loans allowed many banks and mortgage brokers to book big profits but led later in many cases to steep losses.
Now, thanks to a mix of market factors, signs of life are returning to the mortgage business even as the economy remains mired in recession and foreclosures remain a problem. Many experts believe the renewed activity in the mortgage business could help plummeting home values bottom out as early as this summer and give at least a light boost to the economy. “Is it a return of the good old days? No, but it is picking up,” said University of Maryland professor Peter Morici.
Aided by low interest rates and government incentives, refinancings have been climbing rapidly. Home purchase mortgage applications are also showing signs of a rebound, although at a slower pace.
Mesirow Financial chief economist Diane Swonk said the fundamentals driving the housing market had become much more positive in recent months and she expected housing to swing “from a drag to a push” on overall GDP growth in 2009 for the first time in four years. “It is a little good news. It doesn’t feel like we are in free fall anymore,” said Swonk. US mortgage applications for the week ended April 10, were up 45.6% from a year earlier, according to the Mortgage Bankers Association. Refinancings make up the bulk of the business, but mortgages for new purchases are gaining ground, the association said.
In another indication of an upturn, a March report from the US commerce department said sales of newly built US single-family homes rose in February to 337,000, a 4.7% increase from the previous month. Sales rose at their fastest pace in 10 months and their increases were seen across the country, with the highest uptick in the South and notable gains on the west coast, the Midwest and Northeast.
Home sales have been bolstered by an $8,000 tax credit for first-time home buyers initiated by the Obama administration. To qualify, buyers must purchase a principal residence between January 1 and December 1, 2009.
“A lot of first-time buyers are getting off the fence. An extra $8,000 in their pocket after they file their tax returns doesn’t hurt them,” said Nick Heth of Legacy Home Mortgage in Phoenix , who estimates his business is up about 40% since last year. “As well, the prices have come down to the point they can afford.”
Refinancing has been spurred by the Federal Reserve’s slashing of interest rates and by Treasury department incentives to lenders and servicing companies to modify loans to avoid foreclosure, among other factors.
The fresh activity is keeping mortgage brokers and home lenders busy -- new loans now can take a month or more to close. Applications are stacking up both because of a shortage of manpower after widespread layoffs in the industry over the past year and because of increased scrutiny and heavy documentation now required for loans, according to brokers. Borrowers need proof of adequate income, low debt ratios and a good credit history or they are turned away.
Buyers are also more conservative. Where in past years they might have stretched to move into homes they could barely afford, many brokers say buyers are now giving themselves more cushion. Buyers who might be able to afford a $2,600 monthly payment, for instance, are opting for a mortgage that obligates them to pay less.
“You are starting to see some good stuff out there. We’re now looking at April closings and we’re into the fifth month of being very, very busy,” said Matthew Locke, president of the mortgage division for St Louis-based Pulaski Bank.
Gary Piacentini, president of home lender CapCenter in Richmond , Virginia , said his company was “swamped” with new business. “There is plenty of liquidity out there for people who are normal bill-paying folks,” he said.
Despite the optimistic signs, clouds of worry still hang over the housing market. Unemployment keeps mounting as the recession curtails business prospects. Home values continue to slide in many cities and towns and foreclosures continue in many states, including Florida , California and New York .
But at her desk at Signature Mortgage Group in Overland Park , Kansas , Hollins said she saw a distinct turnaround, with her monthly volume roughly doubling since December. “Our phone is ringing a lot,” she said.
—Reuters
Inflation dips to 0.18% despite costlier food, fuels
Inflation dips to 0.18% despite costlier food, fuels
The Hindu Business Line, April 17, 2009, Page 7
Wholesale Price Index for all commodities at 228.2.
--------------------------------------------------------------------------------
Inflation was recorded at 7.71 per cent during the corresponding week of the previous year.
--------------------------------------------------------------------------------
Our Bureau, New Delhi
The annual Wholesale Price Index-based inflation inched closer to zero in early April, which could give the Reserve Bank of India a room to cut interest rates when it reviews policy next week.
Headline inflation rose 0.18 per cent during the week ended April 4, below the previous week’s annual rise of 0.26 per cent.
The dip in the year-on-year inflation rate was despite a marked upward pressure in items such as food items and fuels during the latest reported week.
Inflation was recorded at 7.71 per cent during the corresponding week of the previous year.
The official WPI for ‘All Commodities’ for the latest week rose by 0.4 per cent to 228.2 points from 227.3 points for the previous week.
On a disaggregated basis, inflation in the Primary Articles group increased to 4.5 per cent in the latest reported week, up from 3.5 per cent in the previous week.
Food articles
In ‘food articles’, inflation rose by 100 basis points to 7.3 per cent from 6.3 per cent in the week ended March 28. In ‘non-food articles’, it turned positive at 1.0 per cent compared to (-) 0.1 per cent last week.
Minerals group
In ‘minerals’, the rate of inflation held steady at (-) 12.8 per cent in the current week. In the fuel and power group, inflation, though continuing in the negative zone, eased to (-) 5.9 per cent in the week under reference, as against (-) 6.1 per cent in the previous week.
In the Manufactured Products group, the year-on-year inflation rate decreased to 0.8 per cent in the current week, from 1.4 per cent last week, following reduced inflation in nine out of the 12 sub-groups.
Food products, rubber and plastic products, and wood and wood products were the notable exceptions. Inflation in the combined food index (which has a weightage 25.43 per cent in the overall WPI) for the week ended April 4 increased by 100 basis points to 6.8 per cent compared to 5.8 per cent last week.
Most of the sub-components of primary food articles and of manufactured food products have recorded increases in the week under reference relative to the previous week
For the week ended February 7, the final WPI for ‘All Commodities’ stood revised at 227.5 points, as compared to the provisional estimate of 228 points and the annual rate of inflation based on final index, calculated on point-to-point basis, stood at 3.69 per cent as compared to 3.92 per cent reported provisionally.
The Hindu Business Line, April 17, 2009, Page 7
Wholesale Price Index for all commodities at 228.2.
--------------------------------------------------------------------------------
Inflation was recorded at 7.71 per cent during the corresponding week of the previous year.
--------------------------------------------------------------------------------
Our Bureau, New Delhi
The annual Wholesale Price Index-based inflation inched closer to zero in early April, which could give the Reserve Bank of India a room to cut interest rates when it reviews policy next week.
Headline inflation rose 0.18 per cent during the week ended April 4, below the previous week’s annual rise of 0.26 per cent.
The dip in the year-on-year inflation rate was despite a marked upward pressure in items such as food items and fuels during the latest reported week.
Inflation was recorded at 7.71 per cent during the corresponding week of the previous year.
The official WPI for ‘All Commodities’ for the latest week rose by 0.4 per cent to 228.2 points from 227.3 points for the previous week.
On a disaggregated basis, inflation in the Primary Articles group increased to 4.5 per cent in the latest reported week, up from 3.5 per cent in the previous week.
Food articles
In ‘food articles’, inflation rose by 100 basis points to 7.3 per cent from 6.3 per cent in the week ended March 28. In ‘non-food articles’, it turned positive at 1.0 per cent compared to (-) 0.1 per cent last week.
Minerals group
In ‘minerals’, the rate of inflation held steady at (-) 12.8 per cent in the current week. In the fuel and power group, inflation, though continuing in the negative zone, eased to (-) 5.9 per cent in the week under reference, as against (-) 6.1 per cent in the previous week.
In the Manufactured Products group, the year-on-year inflation rate decreased to 0.8 per cent in the current week, from 1.4 per cent last week, following reduced inflation in nine out of the 12 sub-groups.
Food products, rubber and plastic products, and wood and wood products were the notable exceptions. Inflation in the combined food index (which has a weightage 25.43 per cent in the overall WPI) for the week ended April 4 increased by 100 basis points to 6.8 per cent compared to 5.8 per cent last week.
Most of the sub-components of primary food articles and of manufactured food products have recorded increases in the week under reference relative to the previous week
For the week ended February 7, the final WPI for ‘All Commodities’ stood revised at 227.5 points, as compared to the provisional estimate of 228 points and the annual rate of inflation based on final index, calculated on point-to-point basis, stood at 3.69 per cent as compared to 3.92 per cent reported provisionally.
Builders accuse cement cos of unfair practices
Builders accuse cement cos of unfair practices
The Hindu Business Line, April 17, 2009, Page 17
Say prices have gone up due to cartelisation.
Our Bureau, Mumbai
The Builders Association of India has alleged that cement prices had risen by Rs 15-30 a bag on account of ‘cartelisation’ among some manufacturers.
BAI said current prices were Rs 265-275 a bag in most places in the western and northern parts of the country.
This, they said, was despite a drop in demand with the overall slowdown impacting the economy. The cement industry was an exception to the slowdown witnessed since October 2008. While price reductions were seen all around to stimulate demand, cement manufacturers had resorted to price hikes from February.
“Prices of all commodities except gold and cement have dropped. In an environment where the industry as a whole is trying to lower prices to stimulate demand, cement prices continue to rise,” Mr Anand J. Gupta, General Secretary, Builders Association of India, said.
Mr Gupta said the domestic cement industry appears to have ignored the earlier order by the Monopolies and Restrictive Trade Practices Commission and pleas from the construction sector.
Slowdown in housing
With the housing segment experiencing slowdown, the capacity utilisation of cement companies have come down to 86 per cent in 2008-09 and set to decline further in the first quarter of the current fiscal due to capacity addition of 28.55 million tonnes.
He charged that by and large cement companies produced blended cement by adding 25 per cent fly ash to Portland cement and production cost worked out less in the process.
Mr Sunil Mantri, President-elect, Maharashtra Chamber of Housing Industry, said prevailing prices of Rs 265-270 a cement bag would raise the price a sq.ft. by Rs 50-Rs 75, at a time when builders were trying to induce demand with reduced prices. Mr Mantri said this would raise the prices of low cost housing that the developers were trying to provide. A sq.ft. of built-up area needed half a bag (50 kg) of cement.
WAGON SHORTAGE
Asked whether they had requested cement manufacturers to reduce prices, the members said they were told that coal and shortage of railway wagons had led to the price hike. This apart, the Construction Industry Development Council had also represented to the cement manufacturers the plight of the developers.
The BAI demanded a ban on cement exports and removal of import duties, appointment of a cement regulatory authority to monitor demand and supply and ensure fair trade practices, besides operationalising the Competition Commission.
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