Thursday, May 21, 2009
Bullish trend signals global markets rebound in a year
Bullish trend signals global markets rebound in a year
The Financial Express, May 21, 2009, Page 3
fe Bureau, Mumbai
The strong bullish sentiment being created in India post the elections is not restricted to India alone and for that matter restricted to India only. Fund managers had already factored in the positive changes and had begun allocating accordingly. Bullishness in global markets has reached new heights with seven out of 10 investors who predict the world economy will improve in the next 12 months, according to the Merrill Lynch Survey of Fund Managers for May.
Supported by positive expectations on corporate profits, portfolio managers are backing their optimism with action by putting their money to work, said the survey. Average cash holdings have fallen to 4.3% from 4.9% of allocations in April it adds. Equities, while underweight, are more popular, especially cyclical sectors that are expected to perform best in a recovery. Investors have moved to a net underweight position in bonds for the first time since last August. Many are rushing to emerging markets as investor optimism on China’s economy is higher than at any point in the past six years.
“Investors are finally opening their wallets and reducing cash balances to mid-cycle levels to buy equities, cyclical stocks and risky assets,” said Michael Hartnett, Banc of America Securities-Merrill Lynch co-head of international investment strategy.
“However, this rush to take on risk, especially in emerging markets, is reminiscent of bubble-like behavior. A record net 40% of fund managers are looking to overweight the region in the next 12 months.” “Having addressed their most urgent priority by returning to financial stocks, this month investors have added exposure to cyclical, real economy stocks and further purged defensive overweight positions,”said Gary Baker, Banc of America Securities-Merrill Lynch co-head of international investment strategy.
Nowhere has the reversal in economic outlook been more pronounced than in Europe. A net 35% of respondents to the Regional Fund Manager Survey expect Europe’s economy to improve in the coming year. That’s in sharp contrast to April when a net 26% forecasted further deterioration.
A total of 220 fund managers, managing a total of $617 billion, participated in the global survey from 8 May to 14 May. A total of 182 managers, managing $355 billion, participated in the regional surveys.
The survey was conducted by Banc of America Securities–Merrill Lynch Research with the help of market research company TNS. Through its international network in more than 50 countries, TNS provides market information services in over 80 countries to national and multi-national organisations. It is ranked as the fourth-largest market information group in the world.
Barclays Cap revises GDP growth to 7%
Barclays Cap revises GDP growth to 7%
The Financial Express, May 21, 2009, Page 2
Press Trust of India, Mumbai
Financial services provider Barclays on Wednesday revised India's growth projection for 2009-10 to 7% from the earlier forecast of 5.5% on the prospects of a stable government. With the return of the UPA government to power, a stable government at the centre is expected to trigger demand and this too would contribute to higher growth, Barclays Capital senior regional economist Sailesh K Jha said. “In our view, this (poll outcome) improves the short and medium term outlook for GDP growth...the risks to our FY 9-10 and FY 10-11 GDP growth forecasts of 5.5% and 6% could be tilted to the upside by around 150 basis points,” Jha said. The Reserve Bank, which had used its policy tools to support a sagging economy since October last year, is likely to shift its focus to inflation by late third quarter of this year, he said. Jha also expects the rupee to appreciate to 45 against the US dollar by December 2009 as the Reserve Bank's exchange rate policy will 'tolerate' a significant appreciation in the currency value. Also, a positive GDP outlook, an expected surplus in the country's balance of payments in the second half of this year amongst other global factors are likely to contribute to a sharp appreciation in home currency, he said. The new government, which is less dependent on allies, is expected to attract large foreign investments in the country, which may result in a surplus in capital account in the latter half 2009, Jha said.
CMIE projects inflation at 0.1% this fiscal on higher base effect
CMIE projects inflation at 0.1% this fiscal on higher base effect
The Financial Express, May 21, 2009, Page 2
Press Trust of India, Mumbai
The average inflation during 2009-10 is projected to remain negligible at just 0.1% as against 8.3% in 2008-09, Centre for Monitoring Indian Economy (CMIE) has said.
The wholesale price index for the week ended April 18 was 0.26% and it is expected to hover around this level in most months of fiscal 2009-10, CMIE said in its monthly review.
During the year, prices of fuel products and manufactured goods are expected to see a fall while inflation in primary articles will remain firm, it said. The RBI has projected lower money supply growth during FY 2010. Capacity expansion is expected to continue during FY 2010. All these factors are expected to keep downward pressure on inflation in 2009-10.
In addition to these factors, a higher base will also play a role in bringing down inflation in 2009-10, CMIE said.
Prices of fuel and electricity as a group are projected to see a decline of six% as against 7.4% rise in FY'09. Electricity prices are expected to rise during the year but a decline in petroleum product prices will more than compensate for the rise in electricity prices. WPI of manufactured goods is projected to fall 0.5% during FY 2010. This will be the first decline after 1955-56 when WPI of manufactured goods had fallen 5.1%, CMIE said in its review.
WPI of manufactured goods had fallen by 5.1%. In recent years, the lowest inflation in manufactured goods was 1.8% that was recorded in 2001-02, it added.
Among the manufactured goods, wholesale prices of textiles, rubber and plastic products, chemicals and basic metals and metal products will see a decline in the range of 1.0-10.5%, the think-tank said.
Prices of textile products are projected to see a fall of 1% while prices of the basic metals group will dip by 10.5%.
Prices of food articles have not been affected by the global liquidity crisis as much as the prices of other product groups. The year-on-year rise in foodgrain prices remained above 10% every month since November 2008.
Prices of foodgrain are projected to remain firm in FY10 too.
CMIE pointed out that the WPI of primary articles is projected to see a six% rise in FY 10. This group will be solely responsible for overall positive inflation, albeit negligible at 0.1% in FY 10.
The Financial Express, May 21, 2009, Page 2
Press Trust of India, Mumbai
The average inflation during 2009-10 is projected to remain negligible at just 0.1% as against 8.3% in 2008-09, Centre for Monitoring Indian Economy (CMIE) has said.
The wholesale price index for the week ended April 18 was 0.26% and it is expected to hover around this level in most months of fiscal 2009-10, CMIE said in its monthly review.
During the year, prices of fuel products and manufactured goods are expected to see a fall while inflation in primary articles will remain firm, it said. The RBI has projected lower money supply growth during FY 2010. Capacity expansion is expected to continue during FY 2010. All these factors are expected to keep downward pressure on inflation in 2009-10.
In addition to these factors, a higher base will also play a role in bringing down inflation in 2009-10, CMIE said.
Prices of fuel and electricity as a group are projected to see a decline of six% as against 7.4% rise in FY'09. Electricity prices are expected to rise during the year but a decline in petroleum product prices will more than compensate for the rise in electricity prices. WPI of manufactured goods is projected to fall 0.5% during FY 2010. This will be the first decline after 1955-56 when WPI of manufactured goods had fallen 5.1%, CMIE said in its review.
WPI of manufactured goods had fallen by 5.1%. In recent years, the lowest inflation in manufactured goods was 1.8% that was recorded in 2001-02, it added.
Among the manufactured goods, wholesale prices of textiles, rubber and plastic products, chemicals and basic metals and metal products will see a decline in the range of 1.0-10.5%, the think-tank said.
Prices of textile products are projected to see a fall of 1% while prices of the basic metals group will dip by 10.5%.
Prices of food articles have not been affected by the global liquidity crisis as much as the prices of other product groups. The year-on-year rise in foodgrain prices remained above 10% every month since November 2008.
Prices of foodgrain are projected to remain firm in FY10 too.
CMIE pointed out that the WPI of primary articles is projected to see a six% rise in FY 10. This group will be solely responsible for overall positive inflation, albeit negligible at 0.1% in FY 10.
Liquidity starts seeping back into India Inc
Liquidity starts seeping back into India Inc
Business Standard, May 21, 2009, Page 1
BS Reporters / Mumbai/ New Delhi
After a near six-month drought, India Inc is finding some takers for debt and equity issues
If trends over the past few weeks are anything to go by, banks are slowly shedding their aversion to financing new projects and foreign investors are heading back to India.
Though private and the foreign banks are yet to step up lending in a big way, public sector banks have started financing projects.
The result: Funding of over Rs 58,000 crore for large projects has been tied up in the last six weeks.
The list includes Indian Oil’s Paradip refinery (Rs 14,900 crore), State Bank of India’s loan to NTPC (Rs 8,500 crore), Krishnapattnam Port (Rs 3,000 crore), BGR Energy’s engineering, procurement and construction work (Rs 4,000 crore), SBI’s loans to Vodafone (Rs 10,000 crore) and the Anil Dhirubhai Ambani group’s three projects (Rs 14,500 crore for the Sasan Ultra Mega Power project, Rs 2,000 crore for Delhi Metro Express and around Rs 1,000 crore for transmission projects in the west).
“With interest rates falling, lenders are locking in deals at higher yields on the project finance side,” said Ravi Kapoor, Managing Director of Citigroup Global Markets.
Infrastructure developers aren’t the only ones finding it easier to raise resources; companies such as Tata Motors are finding takers, too. A banker associated with the Rs 4,200-crore debenture issue, said the auto major had placed its entire debt in a day.
Construction major J P Associates is also in the process of raising nearly Rs 4,000 crore from debentures.
Companies that failed to raise equity in the aftermath of the September crisis — when several global investment banks crumbled under the sub-prime loan crisis in the West — had to opt for non-convertible debentures to meet their funding requirements. Although this market remained strong, with companies raising funds at up to 12 per cent, participation was limited to state-owned Life Insurance Corporation.
Now, other banks are back in the market, said market participants. In April, companies collectively raised NCD issues worth Rs 25,000 crore.
There are signs that the equity market is looking up too. Overall, bankers estimated that over Rs 40,000 crore of rights, QIP and debenture issues are in the pipeline.
In the last six weeks, Unitech, DLF and Indiabulls — all real estate players — have together raised Rs 8,000 crore through qualified institutional placements (QIPs).
“The private placement by the three realty companies is an example of foreign investors willing to invest in a sector that was perceived to be the most risky,” said Enam Securities Vice-president Yogesh Kapoor.
He predicted that other sectors considered less risky will attract investment more easily from overseas investors.
“The underlying sentiment has changed dramatically. Indian stocks, which were punished severely in comparison to other emerging markets, provide attractive value propositions for investors,” Kapoor added.
Also, the election mandate that returned a less fragmented government at the Centre is expected to facilitate the reform process, so some state-owned companies will enter the capital market, which will increase the supply of good quality papers, Kapoor said.
Some constraints, however, remain. “On the equity side, companies with good assets and a good track record on returns to shareholders are able to raise funds now. But the gate is not so widely open that anyone can get through,” said Gagan Banga, director, Indiabulls Real Estate, which raised Rs 2,585 through a QIP issue on Tuesday.
Also, he said the cost of debt remains high “We have seen sentiments improve for the short-term but we have not found a solution for the medium to long term,” Banga said.
Indiabulls Power Services is looking to raise around Rs 5,200 crore of debt to achieve financial closure for its upcoming thermal power plant. It has already raised its equity contribution of Rs 800 crore.
Though Banga did not name any projects, funds for Sasan were tied up at 12.5 per cent, while SBI’s five-year loan to Vodafone will cost 13.25 per cent during the first two years.
Going forward, however, things are likely to improve. “Investment in infrastructure projects will pick up substantially shortly. It was expected to start early this year but got caught in the election process. The National Highway Authority of India had stopped the award of new projects owing to the election code of conduct, but it is expected to start soon. This time, the response is going to be overwhelming as most of the projects have been redesigned,” said India Infrastructure Finance Company Chairman and Managing Director, S S Kohli.
He added that benign interest rates will also make infrastructure projects more economically viable. “With enough liquidity in the system, there will be no paucity of resources,” he predicted.
According to government estimates, infrastructure projects worth nearly Rs 46,000 crore will be awarded in the coming months.
“The pipeline of projects, from sectors like power and gas, to raise funds is strong. In the current financial year, we expect to arrange around Rs 100,000 crore for infrastructure projects,” said A P Verma, managing director & CEO of SBI Caps, which was associated with the Tata Motors and Sasan fund-raising.
Though companies are still under pressure and demand remains subdued, the sentiment, bankers said, has changed because the worst seems to be over, at least in the domestic market.
“The mood was really down in the last quarter of 2008. By mid-January, it had started improving and by March there was clear visibility of the mood changing,” ICICI Bank Chairman K V Kamath told Business Standard in a recent interview.
Although overseas fund-raising remains tough, given the high credit spreads, domestically banks are flush with funds, which can be gauged from the fact that for nearly six weeks now, they have been consistently parking around Rs 125,000 crore on a daily basis through the Reserve Bank of India’s reverse repo window.
Business Standard, May 21, 2009, Page 1
BS Reporters / Mumbai/ New Delhi
After a near six-month drought, India Inc is finding some takers for debt and equity issues
If trends over the past few weeks are anything to go by, banks are slowly shedding their aversion to financing new projects and foreign investors are heading back to India.
Though private and the foreign banks are yet to step up lending in a big way, public sector banks have started financing projects.
The result: Funding of over Rs 58,000 crore for large projects has been tied up in the last six weeks.
The list includes Indian Oil’s Paradip refinery (Rs 14,900 crore), State Bank of India’s loan to NTPC (Rs 8,500 crore), Krishnapattnam Port (Rs 3,000 crore), BGR Energy’s engineering, procurement and construction work (Rs 4,000 crore), SBI’s loans to Vodafone (Rs 10,000 crore) and the Anil Dhirubhai Ambani group’s three projects (Rs 14,500 crore for the Sasan Ultra Mega Power project, Rs 2,000 crore for Delhi Metro Express and around Rs 1,000 crore for transmission projects in the west).
“With interest rates falling, lenders are locking in deals at higher yields on the project finance side,” said Ravi Kapoor, Managing Director of Citigroup Global Markets.
Infrastructure developers aren’t the only ones finding it easier to raise resources; companies such as Tata Motors are finding takers, too. A banker associated with the Rs 4,200-crore debenture issue, said the auto major had placed its entire debt in a day.
Construction major J P Associates is also in the process of raising nearly Rs 4,000 crore from debentures.
Companies that failed to raise equity in the aftermath of the September crisis — when several global investment banks crumbled under the sub-prime loan crisis in the West — had to opt for non-convertible debentures to meet their funding requirements. Although this market remained strong, with companies raising funds at up to 12 per cent, participation was limited to state-owned Life Insurance Corporation.
Now, other banks are back in the market, said market participants. In April, companies collectively raised NCD issues worth Rs 25,000 crore.
There are signs that the equity market is looking up too. Overall, bankers estimated that over Rs 40,000 crore of rights, QIP and debenture issues are in the pipeline.
In the last six weeks, Unitech, DLF and Indiabulls — all real estate players — have together raised Rs 8,000 crore through qualified institutional placements (QIPs).
“The private placement by the three realty companies is an example of foreign investors willing to invest in a sector that was perceived to be the most risky,” said Enam Securities Vice-president Yogesh Kapoor.
He predicted that other sectors considered less risky will attract investment more easily from overseas investors.
“The underlying sentiment has changed dramatically. Indian stocks, which were punished severely in comparison to other emerging markets, provide attractive value propositions for investors,” Kapoor added.
Also, the election mandate that returned a less fragmented government at the Centre is expected to facilitate the reform process, so some state-owned companies will enter the capital market, which will increase the supply of good quality papers, Kapoor said.
Some constraints, however, remain. “On the equity side, companies with good assets and a good track record on returns to shareholders are able to raise funds now. But the gate is not so widely open that anyone can get through,” said Gagan Banga, director, Indiabulls Real Estate, which raised Rs 2,585 through a QIP issue on Tuesday.
Also, he said the cost of debt remains high “We have seen sentiments improve for the short-term but we have not found a solution for the medium to long term,” Banga said.
Indiabulls Power Services is looking to raise around Rs 5,200 crore of debt to achieve financial closure for its upcoming thermal power plant. It has already raised its equity contribution of Rs 800 crore.
Though Banga did not name any projects, funds for Sasan were tied up at 12.5 per cent, while SBI’s five-year loan to Vodafone will cost 13.25 per cent during the first two years.
Going forward, however, things are likely to improve. “Investment in infrastructure projects will pick up substantially shortly. It was expected to start early this year but got caught in the election process. The National Highway Authority of India had stopped the award of new projects owing to the election code of conduct, but it is expected to start soon. This time, the response is going to be overwhelming as most of the projects have been redesigned,” said India Infrastructure Finance Company Chairman and Managing Director, S S Kohli.
He added that benign interest rates will also make infrastructure projects more economically viable. “With enough liquidity in the system, there will be no paucity of resources,” he predicted.
According to government estimates, infrastructure projects worth nearly Rs 46,000 crore will be awarded in the coming months.
“The pipeline of projects, from sectors like power and gas, to raise funds is strong. In the current financial year, we expect to arrange around Rs 100,000 crore for infrastructure projects,” said A P Verma, managing director & CEO of SBI Caps, which was associated with the Tata Motors and Sasan fund-raising.
Though companies are still under pressure and demand remains subdued, the sentiment, bankers said, has changed because the worst seems to be over, at least in the domestic market.
“The mood was really down in the last quarter of 2008. By mid-January, it had started improving and by March there was clear visibility of the mood changing,” ICICI Bank Chairman K V Kamath told Business Standard in a recent interview.
Although overseas fund-raising remains tough, given the high credit spreads, domestically banks are flush with funds, which can be gauged from the fact that for nearly six weeks now, they have been consistently parking around Rs 125,000 crore on a daily basis through the Reserve Bank of India’s reverse repo window.
RBI gets reminder on SEZs’ core status
RBI gets reminder on SEZs’ core status
The Financial Express, May 21, 2009, Page 3
Arun S, New Delhi
Referring to an empowered Group of Ministers’ (eGoM) decision that conferred the coveted ‘infrastructure’ status on Special Economic Zones (SEZ), the commerce ministry has reminded the Reserve Bank of India (RBI) that even six months after the eGoM move, the central bank had not issued a notification to that effect.
‘Infrastructure’ status to SEZ projects will help developers access external commercial borrowings (ECBs or foreign funds at lower interest rates) and cheaper domestic credit.
But RBI treats lending to SEZs on a par with loans given to the commercial real estate (CRE) sector, which carries much higher risk weightage than the infrastructure sector and therefore makes credit costlier. RBI fears that granting core sector status to SEZs would only make it a pure-play real estate business, resulting in a realty bubble in the country.
But in its letter to the RBI earlier this month, the commerce ministry pointed out to the RBI that SEZs also perform the same functions as industrial parks and integrated townships, which have already been classified as infrastructure projects by the central bank.
Citing the ongoing financial crisis, the commerce ministry has also informed the RBI about the difficulties being faced by SEZ developers in completing their projects on time and the need for access to funds at lower interest rates. The recent fall in property prices in the realty segment and high interest rates have adversely impacted several real estate majors. Due to this, realty majors developing SEZs are mulling surrendering the SEZ status of their land.
In October last year, in a big boost to the SEZ development in the country, the eGoM on SEZs had decided to grant infrastructure status to all activities concerning these tax-free enclaves, except ‘purchase of land.’ Sources said the RBI’s objection regarding SEZs becoming a pureplay realty business was the reason for keeping out ‘purchase of land’ from the ‘infrastructure’ status.
According to SEZ developers, the central bank’s reluctance in notifying the same is denying them the ability to access these cheaper funds.Late last year, the RBI had issued draft guidelines on ‘classification of exposures as CRE'. In the guidelines, the central bank acknowledged the demands of the developers and commerce ministry by treating exposure towards purchase of land for setting up SEZs and its development as “Infrastructure Lending". But, the RBI also issued a rider saying that financial exposure to the tax-free enclaves is CRE.
Classifying SEZs as CRE exposure prevents them from accessing ECBs. According to ECB guidelines, CRE is not entitled to such funds. SEZ developers and the Export Promotion Council for SEZs and EOUs had taken it up with the commerce ministry saying SEZs should be treated as infrastructure projects to enable its developers to access cheaper credit.
The SEZ Act and Rules came into operation in February 2006. At that time, thanks to the booming economy, the country received massive foreign and domestic funds. Several companies, realising the huge potential of SEZs, were beginning to take the development of such zones seriously.
But fearing that SEZs would end up as a real estate business, the RBI in September 2006, in a circular said exposure to SEZs should be treated as exposure to CRE. However, in November 2007, the central bank issued a circular giving a list of projects that are entitled for the facility of infrastructure lending. In this SEZs also found a place along with industrial parks. Then in its subsequent annual report, the RBI clarified that the exposure to SEZs should be treated as CRE.
While the government—particularly the prime minister and other ministries like commerce and IT—has been bullish about these tax-free enclaves boosting investment and exports, the finance ministry and the RBI have been wary about SEZs right from the beginning.
The finance ministry has been peeved about the revenue losses due to the tax sops enjoyed by the SEZs, while the RBI has been wary about the zones becoming a pure play realty business and thereby pushing up inflation beyond permissible limits. RBI is also worried that bursting of the realty bubble would trouble those in the financial services sector with exposures to SEZs.
Raheja may co-develop factories, housing units at Gurgaon SEZ
Raheja may co-develop factories, housing units at Gurgaon SEZ
The Hindu Business Line, May 21, 2009, Page 3
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“We hope to tie up Rs 300-500 crore of debt in the coming two-three months for complexes and processing units.” – Navin M. Raheja, Managing Director
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Moumita Bakshi Chatterjee, New Delhi
Delhi-based Raheja Developers Ltd said it may soon create a Special Purpose Vehicle within its Gurgaon engineering SEZ project, and rope in an industrial house for co-development of the space for factories and affordable housing units.
“We may create an SPV within the overall SEZ project. That particular area including flatted (ready-to-move-in) factories and affordable housing units can then be co-developed. We are in an advanced stage of talks with an industrial house for a 50:50 joint venture for this portion, but we cannot reveal the name yet,” Mr Navin M. Raheja, Managing Director of Raheja Developers, said, adding that the rest of the SEZ project will continue under Raheja SEZ Ltd.
Last year, the company had outlined plans to fund the SEZ through a mix of internal accruals, debt, and by roping in a strategic partner or a PE (private equity) fund.
“Last year, we were close to signing up PE funds, but that has not materialised due to the market crash. These PE investors are still waiting for markets to revive and so we have not ruled it out completely. However, for now we have invested Rs 10-15 crore of our own for the ongoing work in the SEZ including roads and drainage system.
“We hope to tie up Rs 300-500 crore of debt in the coming two-three months for complexes and processing units. In case we get an offer where the PE fund is not looking for guaranteed IRRs, we may also go in for an equity option,” he said.
Mr Raheja said the company remained convinced about the demand pipeline for the SEZ project. “Ours is the only engineering SEZ in North India, in proximity to the Capital,” he said.
Announced plans
Last year, the company had announced that the engineering SEZ spread over 257.5 acres (103 hectares) in Gurgaon adjoining Manesar, would be launched in phases and that the first phase could be completed within three years. The total usable area would be about 21 million sq ft. Out of the total area of 103 hectares, about 50 per cent would be the processing zone and the rest would be residential, commercial, institutional and educational space, according to the master plan.
Foreign investors pick 10% in Indiabulls Real Estate
Foreign investors pick 10% in Indiabulls Real Estate
Business Standard, May 20, 2009, Page 4
Raghavendra Kamath / Mumbai
Foreign investors are aggressively renewing their interest in the Indian real estate sector. Overseas investors such as Fidelity, HSBC, TPG and Moor Capital on Monday lapped up the entire $553-million (Rs 2,656 crore) share sale issue of Indiabulls Real Estate (Ibrel).
Overseas investors bid for thrice the shares offered by Ibrel, as the outlook for the Indian real estate sector seemed to be improving. HSBC and Fidelity added to their existing stake in the company, while TPG and Moor Capital joined other investors.
While US-based Fidelity bought $50 million (Rs 240 crore) worth of shares, the UK's HSBC and private equity major TPG bought $300 million (Rs 1,440 crore) and $200 million (Rs 960 crore) worth of shares, respectively, investment banking sources said.
Ibrel received subscription worth $2 billion (Rs 9,400 crore) from investors when it opened the issue on Monday. It sold 143.59 million shares at Rs 185 a share to investors, the company told the Bombay Stock Exchange today. The issue price was 6 per cent lower than Monday's price of Rs 197.50.
The promoters have diluted their stake in the company by 10 per cent, bringing it down to 16 per cent now. Foreign institutional investors hold 37.14 per cent, as on March 31, of which HSBC and its entities own 8.28 per cent and Fidelity owns 1.94 per cent.
Foreign investors are lapping up stocks of Indian property developers in share sales. The BSE Realty Index, which tracks property stocks, went up 53 per cent in the past month. In mid-April, Unitech Ltd, the country's second-biggest real estate developer, raised $325 million (Rs 1,625 crore) from selling new shares to investors such as HSBC, Prudential, Och-Zif, Orient Global and Sandstone Capital in a qualified institutional placement. Last week, the promoters of DLF, the country's largest property developer, sold a 9.9 per cent stake to investors from Capital International, HSBC, Fidelity, Euro Pacific Growth Fund and Copthall Mauritius Investment for Rs 3,860 crore.
"FIIs are interested in those stocks which are under-owned and bullish on sectors such as real estate, banking and infrastructure, which will grow on stability," said Gagan Banga, Indiabulls director.
According to S Subramanian, head of Investment Banking at Enam Securities, nearly $1 billion (Rs 5,000 crore) of institutional money is expected to be invested in Indian equities in the next six months, of which $500 million (Rs 2,500 crore) is expected to flow into realty stocks.
"Investors have different risk appetite and, accordingly, companies are appreciated. Our strategy is that we want to raise capital from long-term investors, as against short-term funds," said Banga.
Analysts said foreign investors were bullish about Indian stocks, especially in the backdrop of signs of a stable government and likely reforms that are expected to follow.
"FIIs believe in the long-term Indian story. Since valuations were low, they wanted to invest in and capitalise later. Real estate stocks will be re-rated once more money comes in and debt levels reduce," said an analyst from a Mumbai-based brokerage, who did not wish to be identified.
Business Standard, May 20, 2009, Page 4
Raghavendra Kamath / Mumbai
Foreign investors are aggressively renewing their interest in the Indian real estate sector. Overseas investors such as Fidelity, HSBC, TPG and Moor Capital on Monday lapped up the entire $553-million (Rs 2,656 crore) share sale issue of Indiabulls Real Estate (Ibrel).
Overseas investors bid for thrice the shares offered by Ibrel, as the outlook for the Indian real estate sector seemed to be improving. HSBC and Fidelity added to their existing stake in the company, while TPG and Moor Capital joined other investors.
While US-based Fidelity bought $50 million (Rs 240 crore) worth of shares, the UK's HSBC and private equity major TPG bought $300 million (Rs 1,440 crore) and $200 million (Rs 960 crore) worth of shares, respectively, investment banking sources said.
Ibrel received subscription worth $2 billion (Rs 9,400 crore) from investors when it opened the issue on Monday. It sold 143.59 million shares at Rs 185 a share to investors, the company told the Bombay Stock Exchange today. The issue price was 6 per cent lower than Monday's price of Rs 197.50.
The promoters have diluted their stake in the company by 10 per cent, bringing it down to 16 per cent now. Foreign institutional investors hold 37.14 per cent, as on March 31, of which HSBC and its entities own 8.28 per cent and Fidelity owns 1.94 per cent.
Foreign investors are lapping up stocks of Indian property developers in share sales. The BSE Realty Index, which tracks property stocks, went up 53 per cent in the past month. In mid-April, Unitech Ltd, the country's second-biggest real estate developer, raised $325 million (Rs 1,625 crore) from selling new shares to investors such as HSBC, Prudential, Och-Zif, Orient Global and Sandstone Capital in a qualified institutional placement. Last week, the promoters of DLF, the country's largest property developer, sold a 9.9 per cent stake to investors from Capital International, HSBC, Fidelity, Euro Pacific Growth Fund and Copthall Mauritius Investment for Rs 3,860 crore.
"FIIs are interested in those stocks which are under-owned and bullish on sectors such as real estate, banking and infrastructure, which will grow on stability," said Gagan Banga, Indiabulls director.
According to S Subramanian, head of Investment Banking at Enam Securities, nearly $1 billion (Rs 5,000 crore) of institutional money is expected to be invested in Indian equities in the next six months, of which $500 million (Rs 2,500 crore) is expected to flow into realty stocks.
"Investors have different risk appetite and, accordingly, companies are appreciated. Our strategy is that we want to raise capital from long-term investors, as against short-term funds," said Banga.
Analysts said foreign investors were bullish about Indian stocks, especially in the backdrop of signs of a stable government and likely reforms that are expected to follow.
"FIIs believe in the long-term Indian story. Since valuations were low, they wanted to invest in and capitalise later. Real estate stocks will be re-rated once more money comes in and debt levels reduce," said an analyst from a Mumbai-based brokerage, who did not wish to be identified.
Unitech sells office space for Rs 500 cr to repay debt
Unitech sells office space for Rs 500 cr to repay debt
Business Standard, May 20, 2009, Page 4 and Economic Times, May 21, 2009, Page 25
BS Reporter / New Delhi
Unitech, the country’s second-largest real estate developer, said it sold an office space in Saket, New Delhi for Rs 500 crore as part of a plan to raise money from asset sales to repay debt.
Unitech sold the office space, which was originally built as the company’s corporate office, to a high networth individual. The entire money is expected to be received by June, a source involved with the sale said.
The realtor has been negotiating the sale of the office property for a few months now and has finally closed the deal, the source said declining to give further details. A company spokesperson declined to comment on the sale.
This is the second such sale by the Sanjay Chandra-owned company in the past two months. Unitech raised Rs 231 crore in April from sale of its 199 room Marriott Courtyard hotel in Gurgaon for Rs 231 to a Delhi based auto Dealer Roop Madan.
Unitech, DLF and other real estate developers are stepping up asset sales in an attempt to cut debt and generate cash to complete unfinished projects. Realtors have relied heavily on borrowed funds to spur expansion in the past but were caught in a trap after a global slowdown curbed demand for office, shop and residential properties.
Unitech, which has about Rs 7,800 crore worth of debt on its books, plans to cut the debt burden by at least by Rs 1000 crore by the end of the fiscal year. Most of the repayment is expected to come from additional capital infusion into the company by promoters and asset sales.
The company aims to raise Rs 1600 crore in the fiscal year ending March 31 from sale of non-core assets including Saket office complex and four additional hotel properties located in Noida, Kolkata and Gurgaon. The developer had earlier indicated plans to raise at least Rs 900 crore by June from such asset sales.
“The cash flow from asset sales will put the company’s financial condition back on track”, said a Mumbai based analyst.
Unitech’s promoters in April raised Rs 1625 crore from sale of shares to qualified institutional investors. The company’s board yesterday approved a plan to allow promoters of the company to infuse an additional Rs 1000 crore into the company through issue of warrants that are convertible into shares at a later date.
Parsvnath, Omaxe plan QIP route
Parsvnath, Omaxe plan QIP route
The Economic Times, May 20, 2009, Page 5
Sanjeev Choudhary NEW DELHI
CASH-strapped Delhi-based property developers Parsvnath and Omaxe have initiated moves to raise at least Rs 1,000 crore each by way of share sales to qualified institutional buyers, hoping to capitalise on the recent success of their peers in raising funds, officials at the two firms said.
Senior executives at the two companies, who asked not to be named, said separately plans were being firmed up by them to raise between Rs 1000-2000 crore each through the qualified institutional placement (QIP) route.
The two firms did not respond to separate ET queries asking them to comment on any QIP plans, although analysts said it would not be surprising if they took advantage of the rising appetite among investors for real estate stocks.
Earlier this week, Indiabulls Real Estate successfully raised Rs 2,656 crore through the QIP route, the third company to have raised funds in recent weeks. Last week, promoters of the country’s largest real estate firm DLF sold a 9.9% stake in the company and raised Rs 3,860 crore. Unitech was the first to do a QIP in a turbulent market last month and raised Rs 1,600 crore.
Shares of Omaxe and Parsvnath closed 20% higher on the BSE at Rs 84.75 and Rs 75.15, respectively, on Wednesday, contrasting a 1.69% drop in the benchmark 30-share BSE index. Parsvnath’s shares are up 57% since last Friday, with Omaxe having risen 51%.
The Economic Times, May 20, 2009, Page 5
Sanjeev Choudhary NEW DELHI
CASH-strapped Delhi-based property developers Parsvnath and Omaxe have initiated moves to raise at least Rs 1,000 crore each by way of share sales to qualified institutional buyers, hoping to capitalise on the recent success of their peers in raising funds, officials at the two firms said.
Senior executives at the two companies, who asked not to be named, said separately plans were being firmed up by them to raise between Rs 1000-2000 crore each through the qualified institutional placement (QIP) route.
The two firms did not respond to separate ET queries asking them to comment on any QIP plans, although analysts said it would not be surprising if they took advantage of the rising appetite among investors for real estate stocks.
Earlier this week, Indiabulls Real Estate successfully raised Rs 2,656 crore through the QIP route, the third company to have raised funds in recent weeks. Last week, promoters of the country’s largest real estate firm DLF sold a 9.9% stake in the company and raised Rs 3,860 crore. Unitech was the first to do a QIP in a turbulent market last month and raised Rs 1,600 crore.
Shares of Omaxe and Parsvnath closed 20% higher on the BSE at Rs 84.75 and Rs 75.15, respectively, on Wednesday, contrasting a 1.69% drop in the benchmark 30-share BSE index. Parsvnath’s shares are up 57% since last Friday, with Omaxe having risen 51%.
Tax exemption limit may go up
Tax exemption limit may go up
Times of India, May 21, 2009, Page 25
Budget May Hike It To Rs 1.75-Rs 2 Lakh From Rs 1.5 Lakh, FBT Could Go
TIMES NEWS NETWORK
New Delhi: The full budget to be presented by the new government in the forthcoming session of Parliament to begin sometime next month may come packed with some concessions for the middle class by way of raising the tax exemption limit to up to Rs 1.75-Rs 2 lakh from the current Rs 1.50 lakh.
The other benefit in the direct tax segments could be withdrawal of the Fringe Benefit Tax. If through, both these measures will result in a tax outgo of around Rs 10,000 crore. Proposals in this regard are under active consideration, indicated a senior official in the finance ministry.
Raising of the tax exemption limit along with the withdrawal of FBT will act as another stimulus since the large middle class population will be left with more money in hand, especially at a time when the government is likely to release the remaining 60% salary arrears of the 6th Pay Commission. The removal of FBT has also been mooted by the commerce ministry. It had also sought continuation of interest rate subsidy while seeking to further raise it from the existing 2% to 4%.
Sources in the finance ministry said there is no scope for any further cuts in excise duty, customs or service tax as the indirect tax collections had slipped into negative domain towards the end of the last fiscal. With the widening fiscal gap, it is equally important for the government to keep its revenue stream rejuvenated to fund its developmental and social schemes.
The commerce ministry is firmly backing industry's proposals for extending tax sops to export-oriented units, besides the continuation of interest rate subvention till March 2010. In their proposals to the finance ministry, industry chambers had asked the government to include measures in the budget that would promote investment and create additional demand.
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