Friday, May 22, 2009
Why FIIs are buying
Why FIIs are buying
Business Standard, May 22, 2009, Page 9
There is a huge opportunity to bring about structural change, but the new govt must deliver
Akash Prakash / New Delhi
There is a huge opportunity to bring about structural change, but the new government must deliver, says AKASH PRAKASH
The markets have given a resounding thumbs up to the strengthened mandate given to the Congress party and Dr Manmohan Singh. Equity markets were up 17 per cent on Monday and then kept their gains the following day, with record volumes driven by a billion dollars of FII buying. FII flows look to remain strong, and it seems as if the markets have entered a new and sustained higher base level.
What accounts for this renewed FII interest? Why is everyone so excited about India once again?
FIIs are basically making the bet that in their new term, Dr Manmohan Singh and his cabinet will move ahead decisively on economic reform and policy action. The government knows what needs to be done, there are enough committees and commissions whose recommendations are lying unimplemented and investors are making the bet that the new government has the political will to push ahead. This government has the chance to fundamentally strengthen the country’s structural growth outlook.
There is a clear feeling that the quality of the mandate is vastly different today compared to 2004, both in terms of the relative strength of the Congress vis-a-vis its allies and the credibility of Dr Manmohan Singh within the Congress party itself. There are no excuses for non-performance this time. Many serious investors are also drawing positive longer term conclusions from the revival of national parties, greater correlation at the state level between governance and votes and the Indian public’s desire for a stable and centrist government. Talk of a maturing of the Indian democracy is all pervasive.
There were three main reasons why investors were cautious on India.
One was the proximity to Pakistan and the related geo-political risks.
The second was the risk of a severely fractured electoral verdict leading to a compromise candidate for PM, and the Third Front led by the Left coming to power. The risk of weak governance threatened to derail the country’s long-term outlook in the minds of investors. A weak government would not be able to tackle structural issues like the fiscal deficit or targeting of subsidies.
Third, the bears have been going on about the risks to the India growth story if global capital flows were to remain negative. The idea being, how will India fund its infrastructure deficit, given the limited local sources of long-term capital? Without strong inflows we cannot finance the fiscal deficit and 8 per cent GDP growth simultaneously.
Of the three bear arguments only Pakistan remains, as the electoral verdict has been far clearer than expected, and already Indian companies have regained access to global capital. In the last 10 days alone Indian companies have raised almost $2 billion of equity. Strong inflows, both FII and FDI, will restart a positive feedback loop of rising investment driving strong earnings, leading back to investment.
Investors now once again seem willing to place India along with China as one of the handful of countries which can get back to trend growth rates in 2010. Global players seem to be willing to re-rate the country and have the confidence to look through the short-term growth slowdown and focus once again on the long-term picture.
A second related issue driving market performance is the level of under-investment among investors. Most India dedicated funds are either too defensively positioned in terms of sectors and stocks or have too high a cash level. Among the regional funds, India for most shops had been an underweight, and now most are scrambling to catch up and in fact go overweight. A lot of regional investors are a little worried on China and seem willing to take some money off the table there and redeploy it to India. The India dedicated hedge funds are at best 30-35 per cent net long, and once again have the potential to up their exposure. Even locally one can expect the surge in confidence to push money into the markets either directly or through insurance and mutual funds.
Therefore one can expect to see continued strong FII inflows into India, as investors play catch up. At every dip one can expect strong buying. India’s very strong performance year to date (especially after the elections) only adds further pressure to not be seen being underweight.
There is also the strong possibility that many of the India funds will now get inflows, as retail flows chase performance, and most investors bet on further convergence between India and China’s market performance.
What can go wrong? Obviously, the new government can fail to act and continue dithering on policy action. If we see no action and just continued setting up of committees and groups of ministers, then that would be extremely unfortunate and set us up for huge disappointment.
Sign posts that investors will be using to calibrate the heightened expectations begin with the new cabinet. Obviously a technocrat becoming the FM would be seen as a big positive both from a capability perspective and in sending a clear signal that the Prime Minister is in charge. Investors will also want to see greater representation of youth as well as the critical infrastructure ministries going to capable ministers. There remains some doubt on Dr Manmohan Singh’s assertiveness and willingness to tackle entrenched political equations, and the new cabinet formation will answer many of these questions.
The next important milestone will be the budget itself. What is the game plan to tackle fiscal issues, better targeting of subsidies, infrastructure funding, the GST, etc?
Independent of the government being indecisive and frittering away the mandate, the only other negative in this scenario is the huge and almost inexhaustible supply of paper in the pipeline. Corporate India has already raised about $2 billion in the last 10 days, and the tap is now wide open. Combined with some disinvestment from the government, we could easily see $8-10 billion being raised in equity capital this year. This will act as a natural cap on the markets, though it will be great in boosting domestic capital formation and growth.
Valuations are not really cheap either, though earnings are likely to get upgraded, and this can also cap the markets upside, at least in the short term.
This election is being seen by many as a game changer. India has a real chance of breaking out, attracting strong inflows and being positioned in investors’ minds alongside China. We were always supposed to have an economic model more suited to today’s economic realities but with much weaker governance, could the governance handicap be reduced?
From the financial markets perspective, everything now depends on execution. The new government has the mandate, there is a huge opportunity to bring about structural change across sectors, and the policy road map is also clear. We need the new government to deliver.
Business Standard, May 22, 2009, Page 9
There is a huge opportunity to bring about structural change, but the new govt must deliver
Akash Prakash / New Delhi
There is a huge opportunity to bring about structural change, but the new government must deliver, says AKASH PRAKASH
The markets have given a resounding thumbs up to the strengthened mandate given to the Congress party and Dr Manmohan Singh. Equity markets were up 17 per cent on Monday and then kept their gains the following day, with record volumes driven by a billion dollars of FII buying. FII flows look to remain strong, and it seems as if the markets have entered a new and sustained higher base level.
What accounts for this renewed FII interest? Why is everyone so excited about India once again?
FIIs are basically making the bet that in their new term, Dr Manmohan Singh and his cabinet will move ahead decisively on economic reform and policy action. The government knows what needs to be done, there are enough committees and commissions whose recommendations are lying unimplemented and investors are making the bet that the new government has the political will to push ahead. This government has the chance to fundamentally strengthen the country’s structural growth outlook.
There is a clear feeling that the quality of the mandate is vastly different today compared to 2004, both in terms of the relative strength of the Congress vis-a-vis its allies and the credibility of Dr Manmohan Singh within the Congress party itself. There are no excuses for non-performance this time. Many serious investors are also drawing positive longer term conclusions from the revival of national parties, greater correlation at the state level between governance and votes and the Indian public’s desire for a stable and centrist government. Talk of a maturing of the Indian democracy is all pervasive.
There were three main reasons why investors were cautious on India.
One was the proximity to Pakistan and the related geo-political risks.
The second was the risk of a severely fractured electoral verdict leading to a compromise candidate for PM, and the Third Front led by the Left coming to power. The risk of weak governance threatened to derail the country’s long-term outlook in the minds of investors. A weak government would not be able to tackle structural issues like the fiscal deficit or targeting of subsidies.
Third, the bears have been going on about the risks to the India growth story if global capital flows were to remain negative. The idea being, how will India fund its infrastructure deficit, given the limited local sources of long-term capital? Without strong inflows we cannot finance the fiscal deficit and 8 per cent GDP growth simultaneously.
Of the three bear arguments only Pakistan remains, as the electoral verdict has been far clearer than expected, and already Indian companies have regained access to global capital. In the last 10 days alone Indian companies have raised almost $2 billion of equity. Strong inflows, both FII and FDI, will restart a positive feedback loop of rising investment driving strong earnings, leading back to investment.
Investors now once again seem willing to place India along with China as one of the handful of countries which can get back to trend growth rates in 2010. Global players seem to be willing to re-rate the country and have the confidence to look through the short-term growth slowdown and focus once again on the long-term picture.
A second related issue driving market performance is the level of under-investment among investors. Most India dedicated funds are either too defensively positioned in terms of sectors and stocks or have too high a cash level. Among the regional funds, India for most shops had been an underweight, and now most are scrambling to catch up and in fact go overweight. A lot of regional investors are a little worried on China and seem willing to take some money off the table there and redeploy it to India. The India dedicated hedge funds are at best 30-35 per cent net long, and once again have the potential to up their exposure. Even locally one can expect the surge in confidence to push money into the markets either directly or through insurance and mutual funds.
Therefore one can expect to see continued strong FII inflows into India, as investors play catch up. At every dip one can expect strong buying. India’s very strong performance year to date (especially after the elections) only adds further pressure to not be seen being underweight.
There is also the strong possibility that many of the India funds will now get inflows, as retail flows chase performance, and most investors bet on further convergence between India and China’s market performance.
What can go wrong? Obviously, the new government can fail to act and continue dithering on policy action. If we see no action and just continued setting up of committees and groups of ministers, then that would be extremely unfortunate and set us up for huge disappointment.
Sign posts that investors will be using to calibrate the heightened expectations begin with the new cabinet. Obviously a technocrat becoming the FM would be seen as a big positive both from a capability perspective and in sending a clear signal that the Prime Minister is in charge. Investors will also want to see greater representation of youth as well as the critical infrastructure ministries going to capable ministers. There remains some doubt on Dr Manmohan Singh’s assertiveness and willingness to tackle entrenched political equations, and the new cabinet formation will answer many of these questions.
The next important milestone will be the budget itself. What is the game plan to tackle fiscal issues, better targeting of subsidies, infrastructure funding, the GST, etc?
Independent of the government being indecisive and frittering away the mandate, the only other negative in this scenario is the huge and almost inexhaustible supply of paper in the pipeline. Corporate India has already raised about $2 billion in the last 10 days, and the tap is now wide open. Combined with some disinvestment from the government, we could easily see $8-10 billion being raised in equity capital this year. This will act as a natural cap on the markets, though it will be great in boosting domestic capital formation and growth.
Valuations are not really cheap either, though earnings are likely to get upgraded, and this can also cap the markets upside, at least in the short term.
This election is being seen by many as a game changer. India has a real chance of breaking out, attracting strong inflows and being positioned in investors’ minds alongside China. We were always supposed to have an economic model more suited to today’s economic realities but with much weaker governance, could the governance handicap be reduced?
From the financial markets perspective, everything now depends on execution. The new government has the mandate, there is a huge opportunity to bring about structural change across sectors, and the policy road map is also clear. We need the new government to deliver.
Rupee rises to 5-month high as stock inflows jump
Rupee rises to 5-month high as stock inflows jump
Business Standard, May 22, 2009, Section II, Page 3
AGENCIES
The rupee rose to a five-month high as optimism the economy will rebound in Prime Minister Manmohan Singh’s second term prompted overseas investors to buy more of the nation’s shares.
The currency is set for its best week in 13 years as foreign funds bought $1.1 billion more Indian equities than they sold on May 19, the most since June 2007.
The rupee strengthened 0.2 per cent to 47.385 a dollar at the close of trade in Mumbai, according to data compiled by Bloomberg. It touched 47.29 on May 19, the strongest level since December 19. The rupee’s 5.7 per cent gain this month is the best in Asia.
Money managers based abroad are betting Singh will push reforms and unveil more stimulus packages to bolster Asia’s third-biggest economy.
“The overall sentiment is bullish on the rupee because the prospects of growth fundamentals are getting stronger,” said Sanjay Arya, treasurer at state-owned Bank of Maharashtra in Mumbai. “The rupee is going to remain attractive in the short term.” Offshore contracts indicate traders bet the rupee will trade at 47.53 to the dollar in a month, compared with expectations for arate of 47.67 yesterday.
Bonds decline
Indian bonds fell on speculation that some investors had trimmed their holdings to raise funds before a government debt auction tomorrow.
Benchmark 10-year bond yields climbed to the highest level in more than a month after the government increased the size of both the debt sales this month by 25 per cent, raising concerns the additional supply will overwhelm demand. India plans to raise a record Rs 2.41 lakh crore ($51 billion) from bond sales in the six months through September as it increases spending to revive growth in Asia’s thirdlargest economy.
“There is added pressure now on bond yields and there is no reason why it should subside in the immediate future,” said SSrikumar, chief debt trader at state-owned Corporation Bank in Mumbai. The yield on the 6.05 per cent note due February 2019 rose seven basis points to 6.43 per cent at the close of trade in Mumbai, according to the central bank’s trading system. The price fell 0.52, or 52 paise per 100-rupee face amount, to 97.29. The government will auction Rs 15,000 crore of debt tomorrow as part of its annual borrowing program.
Bonds also dropped after the central bank purchased fewer securities than it had planned. RBI bought Rs 3,642 crore of notes in open-market operations, less than the originally scheduled Rs 6,000 crore.
Call rates barely moved
Cash rates were little changed from the central bank’s main borrowing rate of 3.25 per cent on Thursday as a huge cash surplus in the system easily offset banks’ funding needs. The overnight money was trading at 3.20/25 per cent, scarcely moving from its previous close of 3.20/30 per cent.
Rates were steady near 3.25 per cent because banks having excess funds could park it with the central bank at that rate, while for banks short of cash, it was available at lower rates in collateralised borrowing and lending obligation (CBLO).
Business Standard, May 22, 2009, Section II, Page 3
AGENCIES
The rupee rose to a five-month high as optimism the economy will rebound in Prime Minister Manmohan Singh’s second term prompted overseas investors to buy more of the nation’s shares.
The currency is set for its best week in 13 years as foreign funds bought $1.1 billion more Indian equities than they sold on May 19, the most since June 2007.
The rupee strengthened 0.2 per cent to 47.385 a dollar at the close of trade in Mumbai, according to data compiled by Bloomberg. It touched 47.29 on May 19, the strongest level since December 19. The rupee’s 5.7 per cent gain this month is the best in Asia.
Money managers based abroad are betting Singh will push reforms and unveil more stimulus packages to bolster Asia’s third-biggest economy.
“The overall sentiment is bullish on the rupee because the prospects of growth fundamentals are getting stronger,” said Sanjay Arya, treasurer at state-owned Bank of Maharashtra in Mumbai. “The rupee is going to remain attractive in the short term.” Offshore contracts indicate traders bet the rupee will trade at 47.53 to the dollar in a month, compared with expectations for arate of 47.67 yesterday.
Bonds decline
Indian bonds fell on speculation that some investors had trimmed their holdings to raise funds before a government debt auction tomorrow.
Benchmark 10-year bond yields climbed to the highest level in more than a month after the government increased the size of both the debt sales this month by 25 per cent, raising concerns the additional supply will overwhelm demand. India plans to raise a record Rs 2.41 lakh crore ($51 billion) from bond sales in the six months through September as it increases spending to revive growth in Asia’s thirdlargest economy.
“There is added pressure now on bond yields and there is no reason why it should subside in the immediate future,” said SSrikumar, chief debt trader at state-owned Corporation Bank in Mumbai. The yield on the 6.05 per cent note due February 2019 rose seven basis points to 6.43 per cent at the close of trade in Mumbai, according to the central bank’s trading system. The price fell 0.52, or 52 paise per 100-rupee face amount, to 97.29. The government will auction Rs 15,000 crore of debt tomorrow as part of its annual borrowing program.
Bonds also dropped after the central bank purchased fewer securities than it had planned. RBI bought Rs 3,642 crore of notes in open-market operations, less than the originally scheduled Rs 6,000 crore.
Call rates barely moved
Cash rates were little changed from the central bank’s main borrowing rate of 3.25 per cent on Thursday as a huge cash surplus in the system easily offset banks’ funding needs. The overnight money was trading at 3.20/25 per cent, scarcely moving from its previous close of 3.20/30 per cent.
Rates were steady near 3.25 per cent because banks having excess funds could park it with the central bank at that rate, while for banks short of cash, it was available at lower rates in collateralised borrowing and lending obligation (CBLO).
FDI growth up 85% in ’08, highest globally
FDI growth up 85% in ’08, highest globally
The Financial Express, May 22, 2009, Page 3
fe Bureau, New Delhi
India achieved a stunning 85.1% increase in foreign direct investment flows in 2008, the highest increase across all countries, even as global flows declined by 14.5%, says the findings of the Unctad study — Assessing the impact of the current financial and economic crisis on global FDI flows.
The study, which updates the organisation’s January assessment, estimates that the FDI investments into India went up from $25.1 billion in 2007 to $ 46.5 billion in 2008 even as global flows declined from $1.9 trillion to $1.7 trillion during the period. It also cautions of a further decrease in FDI flows in 2009 as the full consequences of the crisis on transnational corporations’ (TNCs) investment expenditures continues to unfold
Surprisingly FDI increased by a much slower 10% in China, pushing up the inflows from $83.5 billion in 2007 to $ 92.4 billion in 2008. What is, however, significant is that India’s FDI flows which was just a fraction of that of China just a few years back has now touched half the levels. More importantly that ratio of FDI to GDP in India would now exceed that of China, indicating its larger role in the Indian economy, as the size of the Chinese economy is around three times higher than that of India.
India’s achievement in mobilising FDI is all the more significant because the inflows into the developed countries have declined by 25.3% in 2008. In contrast the overall FDI flows to developing countries increased by 7.2% in 2008. The report warns that though developing and transition economies were quite resilient in 2008, during the downturn in global foreign direct investment (FDI) flows, they will be increasingly affected in 2009 as international investment continues to decline.
However it also noted that some large emerging economies, such as Brazil, China and India, still remain favourable locations for FDI, particularly market-seeking FDI. They maintained relatively high economic growth rates in 2008 compared with advanced economies. As prospects continue to deteriorate more markedly in developed countries, investors are likely to favour the relatively more profitable options available in the developing world.
The fall in global FDI in 2008-2009 is the result of two major factors affecting domestic as well as international investment. First, the capability of firms to invest has been reduced by a reduction in access to financial resources, both internally — due to a decline in corporate profits — and externally - due to lower availability and higher costs of finance. Second, the propensity to invest has been diminished by negative economic prospects, especially in developed countries hit by the most severe recession of the post-war era.
The setback in FDI has particularly affected cross-border mergers and acquisitions (M&As), the value of which was in sharp decline in 2008 and 2009 as compared to the previous year´s historic high. Practically all sectors have been affected by a decrease in cross-border M&As in 2008, with the exception of oil, mining, and agrifood businesses.
The Financial Express, May 22, 2009, Page 3
fe Bureau, New Delhi
India achieved a stunning 85.1% increase in foreign direct investment flows in 2008, the highest increase across all countries, even as global flows declined by 14.5%, says the findings of the Unctad study — Assessing the impact of the current financial and economic crisis on global FDI flows.
The study, which updates the organisation’s January assessment, estimates that the FDI investments into India went up from $25.1 billion in 2007 to $ 46.5 billion in 2008 even as global flows declined from $1.9 trillion to $1.7 trillion during the period. It also cautions of a further decrease in FDI flows in 2009 as the full consequences of the crisis on transnational corporations’ (TNCs) investment expenditures continues to unfold
Surprisingly FDI increased by a much slower 10% in China, pushing up the inflows from $83.5 billion in 2007 to $ 92.4 billion in 2008. What is, however, significant is that India’s FDI flows which was just a fraction of that of China just a few years back has now touched half the levels. More importantly that ratio of FDI to GDP in India would now exceed that of China, indicating its larger role in the Indian economy, as the size of the Chinese economy is around three times higher than that of India.
India’s achievement in mobilising FDI is all the more significant because the inflows into the developed countries have declined by 25.3% in 2008. In contrast the overall FDI flows to developing countries increased by 7.2% in 2008. The report warns that though developing and transition economies were quite resilient in 2008, during the downturn in global foreign direct investment (FDI) flows, they will be increasingly affected in 2009 as international investment continues to decline.
However it also noted that some large emerging economies, such as Brazil, China and India, still remain favourable locations for FDI, particularly market-seeking FDI. They maintained relatively high economic growth rates in 2008 compared with advanced economies. As prospects continue to deteriorate more markedly in developed countries, investors are likely to favour the relatively more profitable options available in the developing world.
The fall in global FDI in 2008-2009 is the result of two major factors affecting domestic as well as international investment. First, the capability of firms to invest has been reduced by a reduction in access to financial resources, both internally — due to a decline in corporate profits — and externally - due to lower availability and higher costs of finance. Second, the propensity to invest has been diminished by negative economic prospects, especially in developed countries hit by the most severe recession of the post-war era.
The setback in FDI has particularly affected cross-border mergers and acquisitions (M&As), the value of which was in sharp decline in 2008 and 2009 as compared to the previous year´s historic high. Practically all sectors have been affected by a decrease in cross-border M&As in 2008, with the exception of oil, mining, and agrifood businesses.
Inflation climbs to 0.61% on higher food, metal prices
Inflation climbs to 0.61% on higher food, metal prices
The Financial Express, May 22, 2009, Page 2
fe Bureau, New Delhi
Inflation rose to 0.61% for the week ended May 9 from 0.48% in the previous week on higher food and metal prices, but analysts said it could turn negative in June and give more freedom to the Reserve Bankof India (RBI) to cut rates for stimulating a slowing economy. The inflation was at 8.57% during the corresponding week of the previous year.
A survey of professional forecasters by the RBI said the wholesale price index based inflation may decline 1.4% in the June quarter, as the base effect kicks in from May onwards.
While projecting a 4% inflation rate by the year end, the RBI has ruled out chances of a sustained deflation. The government has revised the inflation figure for the March 14 week to 0.71% from 0.27%.
Analysts note that forecasts of normal monsoon could boost agricultural production, easing pressure on food prices, which have been holding up.
The RBI and the new government to be sworn in on Friday are likely to focus on boosting growth, which has slipped below 7% in 2008-09.
The central bank is widely expected to cut its policy rates by another 50 basis points in the near term. The RBI has projected a GDP growth of 6% in this fiscal. This is the 10th week in a row when inflation stood below the 1% indicating softer instance towards interest rate.
“There is room for cutting rates if inflation remains low during the year,” said Punjab National Bank CMD KC Chakrabarty.
The average inflation during 2009-10 is projected to remain negligible at 0.1% as against 8.3% in 2008-09, according to the Centre for Monitoring Indian Economy (CMIE). “Expectation of inflation slipping into the negative terrain remains intact, though with a slight delay.
It remains well below the RBI’s comfort zone and amidst positive news on monsoons upside risk remain limited,” said Standard Chartered Bank economist Anubhuti Sahay.
The yield on the benchmark ten year government bond closed at 6.43%, above previous close of 6.35%, ahead of the Rs 15,000 crore bond auction on Friday. The rupee rose for the fifth day in a row closing at Rs 47.37 a dollar on Thursday, taking its gains to as much as 4.3% this week, on the back of a weakening dollar, and expectations of a sharp increase in capital inflows into the Indian economy after the Congress government won a decisive mandate to run a stable government.
The Financial Express, May 22, 2009, Page 2
fe Bureau, New Delhi
Inflation rose to 0.61% for the week ended May 9 from 0.48% in the previous week on higher food and metal prices, but analysts said it could turn negative in June and give more freedom to the Reserve Bankof India (RBI) to cut rates for stimulating a slowing economy. The inflation was at 8.57% during the corresponding week of the previous year.
A survey of professional forecasters by the RBI said the wholesale price index based inflation may decline 1.4% in the June quarter, as the base effect kicks in from May onwards.
While projecting a 4% inflation rate by the year end, the RBI has ruled out chances of a sustained deflation. The government has revised the inflation figure for the March 14 week to 0.71% from 0.27%.
Analysts note that forecasts of normal monsoon could boost agricultural production, easing pressure on food prices, which have been holding up.
The RBI and the new government to be sworn in on Friday are likely to focus on boosting growth, which has slipped below 7% in 2008-09.
The central bank is widely expected to cut its policy rates by another 50 basis points in the near term. The RBI has projected a GDP growth of 6% in this fiscal. This is the 10th week in a row when inflation stood below the 1% indicating softer instance towards interest rate.
“There is room for cutting rates if inflation remains low during the year,” said Punjab National Bank CMD KC Chakrabarty.
The average inflation during 2009-10 is projected to remain negligible at 0.1% as against 8.3% in 2008-09, according to the Centre for Monitoring Indian Economy (CMIE). “Expectation of inflation slipping into the negative terrain remains intact, though with a slight delay.
It remains well below the RBI’s comfort zone and amidst positive news on monsoons upside risk remain limited,” said Standard Chartered Bank economist Anubhuti Sahay.
The yield on the benchmark ten year government bond closed at 6.43%, above previous close of 6.35%, ahead of the Rs 15,000 crore bond auction on Friday. The rupee rose for the fifth day in a row closing at Rs 47.37 a dollar on Thursday, taking its gains to as much as 4.3% this week, on the back of a weakening dollar, and expectations of a sharp increase in capital inflows into the Indian economy after the Congress government won a decisive mandate to run a stable government.
Realty stocks witness renewed interest
Realty stocks witness renewed interest
The Hindu Business Line, May 22, 2009, Page 10
Broking firms upgrade realty majors.
Our Bureau, Mumbai
As things start to look better for the economy and capital markets, brokers’ outlook for real estate sector stocks have also taken a positive turn.
The BSE realty index surged 40.89 per cent in the last week as against 15.7 per cent rise in the Sensex.
These scrips are also among the most traded.
While most of the index heavyweights in the Sensex such as Reliance, L&T, SBI and ICICI Bank saw a two-week average traded quantity between 9.5 lakh and 36.3 lakh shares; DLF’s two-week average traded quantity was 2.29 crore shares, while Unitech saw an average of 2.2 crore.
On the NSE, DLF and Unitech figured in the most traded list on Thursday. A total of 6.7 crore Unitech shares exchanged hands today and 2.05 crore of DLF.
Marketmen said that realty stocks were among the most beaten down in the market fall.
Good recovery
“From their peak, the values of the realty stocks have fallen by 95 per cent and from the lows these stocks have recovered quiet well,” said Mr Vishal Goenka, Chief Executive Officer at Kantilal Chhaganlal Securities. “People might feel that the corrections in these stocks were over done and there could not be much downside from here on,” Mr Goenka said.
Marketmen also attributed the rise in realty stocks to a string of good news that has come for the realty sector.
QIP placements
“The successful qualified institutional placements (Unitech) and stake sales of some key real estate companies (DLF) have led to investors thronging to these counters,” said an official with a US-based investment bank.
“These are very liquid counters and are also very high beta stocks, and with the markets all pepped up these are the stocks which will see major action ,” said Mr Hardeep Dayal, Managing Director at Centrum Realty and Infrastructure.
Broking firms have become positive towards the realty stocks now.
Macquarie had recently upgraded its rating on DLF from “Underperform to Neutral”.
“DLF has now come out of ‘the boy who cried wolf’ phase with this capital raising. The de-leveraging story is clearly under way. From an operating cash flow perspective, initial signs are encouraging,” stated the report.
Enam Securities has upgraded Unitech and HDIL from “Underperformer to Neutral”.
Indiabulls Real Estate and DLF are among the real estate scrips on Motilal Oswal’s “Buy” lists.
The Hindu Business Line, May 22, 2009, Page 10
Broking firms upgrade realty majors.
Our Bureau, Mumbai
As things start to look better for the economy and capital markets, brokers’ outlook for real estate sector stocks have also taken a positive turn.
The BSE realty index surged 40.89 per cent in the last week as against 15.7 per cent rise in the Sensex.
These scrips are also among the most traded.
While most of the index heavyweights in the Sensex such as Reliance, L&T, SBI and ICICI Bank saw a two-week average traded quantity between 9.5 lakh and 36.3 lakh shares; DLF’s two-week average traded quantity was 2.29 crore shares, while Unitech saw an average of 2.2 crore.
On the NSE, DLF and Unitech figured in the most traded list on Thursday. A total of 6.7 crore Unitech shares exchanged hands today and 2.05 crore of DLF.
Marketmen said that realty stocks were among the most beaten down in the market fall.
Good recovery
“From their peak, the values of the realty stocks have fallen by 95 per cent and from the lows these stocks have recovered quiet well,” said Mr Vishal Goenka, Chief Executive Officer at Kantilal Chhaganlal Securities. “People might feel that the corrections in these stocks were over done and there could not be much downside from here on,” Mr Goenka said.
Marketmen also attributed the rise in realty stocks to a string of good news that has come for the realty sector.
QIP placements
“The successful qualified institutional placements (Unitech) and stake sales of some key real estate companies (DLF) have led to investors thronging to these counters,” said an official with a US-based investment bank.
“These are very liquid counters and are also very high beta stocks, and with the markets all pepped up these are the stocks which will see major action ,” said Mr Hardeep Dayal, Managing Director at Centrum Realty and Infrastructure.
Broking firms have become positive towards the realty stocks now.
Macquarie had recently upgraded its rating on DLF from “Underperform to Neutral”.
“DLF has now come out of ‘the boy who cried wolf’ phase with this capital raising. The de-leveraging story is clearly under way. From an operating cash flow perspective, initial signs are encouraging,” stated the report.
Enam Securities has upgraded Unitech and HDIL from “Underperformer to Neutral”.
Indiabulls Real Estate and DLF are among the real estate scrips on Motilal Oswal’s “Buy” lists.
DLF consolidates all realty verticals under 2 divisions
DLF consolidates all realty verticals under 2 divisions
The Economic Times, May 22, 2009, Page 6
Abhishek Gupta ET NOW
DLF, India’s largest realty company, has consolidated all its real estate verticals under two divisions as part of a restructuring exercise aimed at leveraging synergies and imparting greater customer focus.
The company till now had six verticals in the real estate division: retail, offices, commercial, homes, SEZs and hotels. Now, the retail, offices, IT parks and SEZ verticals will form part of the rental division, headed by A S Minocha, chairman of DLF Commercial Developers. The homes and commercial complex verticals will move to sale division headed by the MD of the company TC Goyal.
Confirming the development, DLF group CFO Ramesh Sanka, told ET NOW: “We have aligned some of our departments such that we could improve operational efficiency of the company”. Sanka added that this is only an operational restructuring with no plans of job reduction. In 2008-09, the company reduced its employee strength from 3700 to 2882.
DLF formed these six verticals during its IPO in 2007. Each of them were supposed to be listed at a later stage. With a crash in the real estate market and the stock markets not conducive for listing, the company has put these plans on hold. After the restructuring, the verticals will still remain legal entities, but will work in a more collaborative manner.
According to a company executive, the reason for the restructuring was to tap synergies in sales, marketing, construction and new product launches. The executive added that DLF believes relationships with its customers can be strengthened by approaching them as a single unit. With central decision making, the company can also focus more on divisions which will give better returns and faster cash flows. This move comes a few months after the company had merged its non core functions like HR, Legal and Accounting into a single team.
Both Goyal and Minocha are veterans in DLF and have spent more than a decade in the company. Recently two of its group heads; AD Rebello and Yogesh Verma quit. Rebello who headed the homes division has now joined Bharti while Verma, who headed DLF’s SEZ division, has joined the P R Jindal group.
Company insiders say after the departure of these two senior executives, the restructuring will not ruffle too many feathers in the company. Another top level executive told ET NOW on condition of anonymity that TC Goyal will look after the larger chunk of the business once the two verticals are firmed up.
This restructuring comes in the wake of DLF beefing up its balance sheet in a difficult business environment. The promoters recently sold around 9.9% stake for nearly Rs 3900 crore. The company has also decided to sell its wind power business, a large chunk of its hotel business, and various other assets to raise more than Rs 10,000 crore.
The realty slowdown hit DLF hard and made the company scale down its plans. Its total developable area has fallen by more than 40%, from 751 million sq ft to 425 million square feet, mainly due to its exit from the Bidadi & Dankuni projects. Even the area under development has fallen from 61.4 million sq ft to 36 million sq ft with DLF putting several of its office building projects on hold.
The Economic Times, May 22, 2009, Page 6
Abhishek Gupta ET NOW
DLF, India’s largest realty company, has consolidated all its real estate verticals under two divisions as part of a restructuring exercise aimed at leveraging synergies and imparting greater customer focus.
The company till now had six verticals in the real estate division: retail, offices, commercial, homes, SEZs and hotels. Now, the retail, offices, IT parks and SEZ verticals will form part of the rental division, headed by A S Minocha, chairman of DLF Commercial Developers. The homes and commercial complex verticals will move to sale division headed by the MD of the company TC Goyal.
Confirming the development, DLF group CFO Ramesh Sanka, told ET NOW: “We have aligned some of our departments such that we could improve operational efficiency of the company”. Sanka added that this is only an operational restructuring with no plans of job reduction. In 2008-09, the company reduced its employee strength from 3700 to 2882.
DLF formed these six verticals during its IPO in 2007. Each of them were supposed to be listed at a later stage. With a crash in the real estate market and the stock markets not conducive for listing, the company has put these plans on hold. After the restructuring, the verticals will still remain legal entities, but will work in a more collaborative manner.
According to a company executive, the reason for the restructuring was to tap synergies in sales, marketing, construction and new product launches. The executive added that DLF believes relationships with its customers can be strengthened by approaching them as a single unit. With central decision making, the company can also focus more on divisions which will give better returns and faster cash flows. This move comes a few months after the company had merged its non core functions like HR, Legal and Accounting into a single team.
Both Goyal and Minocha are veterans in DLF and have spent more than a decade in the company. Recently two of its group heads; AD Rebello and Yogesh Verma quit. Rebello who headed the homes division has now joined Bharti while Verma, who headed DLF’s SEZ division, has joined the P R Jindal group.
Company insiders say after the departure of these two senior executives, the restructuring will not ruffle too many feathers in the company. Another top level executive told ET NOW on condition of anonymity that TC Goyal will look after the larger chunk of the business once the two verticals are firmed up.
This restructuring comes in the wake of DLF beefing up its balance sheet in a difficult business environment. The promoters recently sold around 9.9% stake for nearly Rs 3900 crore. The company has also decided to sell its wind power business, a large chunk of its hotel business, and various other assets to raise more than Rs 10,000 crore.
The realty slowdown hit DLF hard and made the company scale down its plans. Its total developable area has fallen by more than 40%, from 751 million sq ft to 425 million square feet, mainly due to its exit from the Bidadi & Dankuni projects. Even the area under development has fallen from 61.4 million sq ft to 36 million sq ft with DLF putting several of its office building projects on hold.
DLF close to wind power arm deal
DLF close to wind power arm deal
The Financial Express, May 22, 2009, Page 1
Kakoli Chatterjee, New Delhi
DLF is in the final stages of negotiating a deal to sell off its subsidiary, DLF Wind Power, to French company Eole-Res, which specialises in wind and solar energy. Though the exact value of the transaction is not clear, sources close to the development said the figure is close to Rs 1,000 crore.
India’s largest real estate company by market cap has been in talks with many European and Indian companies for selling the unit, as part of its strategy to hive off non-core businesses to clear its debts.
“Wind Power has met with a good response from strategic partners wherein the due diligence of the assets is currently underway,” DLF had said while declaring its financial results in April.
Ernst & Young is advising DLF on the sale of the 250-mw company, which has wind turbines in Rajasthan, Gujarat, Tamil Nadu and Karnataka.
Rajeev Talwar, group executive director, DLF, said he had no comments to offer, in response to a query from FE. An e-mail sent to Eole-Res remained unanswered. The company has in March this year become a subsidiary of Res-Mediterrranee SAS, which develops and builds renewable energy plants across the Mediterranean basin and the Middle East.
The parties that had shown interest in buying DLF Wind Power include Adani Group, Essar Power, IL&FS from India, CLP Group of Hong Kong and BG Group Plc of the UK.
Like most firms in the realty sector, DLF is plagued by the twin problems of worsening bottom lines and enormous debts. Its net debt stands at Rs 13,958 crore, the company said last month.
DLF’s net profit dropped 41% to Rs 4,629 crore in 2008-09, compared with Rs 7,812 crore in the previous fiscal. The KP Singh-led company, as part of its plans to service debts, has recently raised Rs 3,860 crore through the qualified institutional placement route.
Big realtors infuse cash to ride downturn
Big realtors infuse cash to ride downturn
Hindustan Times – Business, May 22, 2009, Page 21
Things have started to look up real estate developers who for the last few months were reeling under the double whammy of poor buyer demand and low availability of funds.
In a month’s time, three major developers including DLF, Unitech and Indiabulls Real Estate have raised money through the financial market indicating the beginning of a revival of investor confidence. They are using the money to restructure business, cut debt and expand projects.
“Availability of credit, for both developers and buyers, and an improvement in demand are essential for a complete recovery,” Anshuman Magazine, managing director, South Asia, at real estate consulting firm CB Richard Ellis.
Indiabullls this week announced an institutional placement of shares to raise Rs. 2,656 crore.“Indiabulls is a debt-free company and we will use the funds to fund our real estate and power business,” Gagan Banga, director, Indiabulls told Hindustan Times.
Hindustan Times – Business, May 22, 2009, Page 21
Things have started to look up real estate developers who for the last few months were reeling under the double whammy of poor buyer demand and low availability of funds.
In a month’s time, three major developers including DLF, Unitech and Indiabulls Real Estate have raised money through the financial market indicating the beginning of a revival of investor confidence. They are using the money to restructure business, cut debt and expand projects.
“Availability of credit, for both developers and buyers, and an improvement in demand are essential for a complete recovery,” Anshuman Magazine, managing director, South Asia, at real estate consulting firm CB Richard Ellis.
Indiabullls this week announced an institutional placement of shares to raise Rs. 2,656 crore.“Indiabulls is a debt-free company and we will use the funds to fund our real estate and power business,” Gagan Banga, director, Indiabulls told Hindustan Times.
Last month, Unitech raised Rs. 1,621 crore through a qualified institutional placement (QIP) which led to the promoters’ stake falling to 51 per cent. They now plan to inject Rs 1,000 crore through convertible warrants to take it to 61 per cent, informed sources said.
Last week, DLF’s promoters diluted 10 per cent stakes to aid promoter-controlled leasing affiliate DLF Assets Limited (DAL). “We are pleased to follow through our commitments with this game changing transaction” Rajiv Singh, vice chairman, DLF had said.
Big realtors infuse cash to ride downturn
Big realtors infuse cash to ride downturn
Hindustan Times – Business, May 22, 2009, Page 21
Things have started to look up real estate developers who for the last few months were reeling under the double whammy of poor buyer demand and low availability of funds.
In a month’s time, three major developers including DLF, Unitech and Indiabulls Real Estate have raised money through the financial market indicating the beginning of a revival of investor confidence. They are using the money to restructure business, cut debt and expand projects.
“Availability of credit, for both developers and buyers, and an improvement in demand are essential for a complete recovery,” Anshuman Magazine, managing director, South Asia, at real estate consulting firm CB Richard Ellis.
Indiabullls this week announced an institutional placement of shares to raise Rs. 2,656 crore.“Indiabulls is a debt-free company and we will use the funds to fund our real estate and power business,” Gagan Banga, director, Indiabulls told Hindustan Times.
Last month, Unitech raised Rs. 1,621 crore through a qualified institutional placement (QIP) which led to the promoters’ stake falling to 51 per cent. They now plan to inject Rs 1,000 crore through convertible warrants to take it to 61 per cent, informed sources said.
Last week, DLF’s promoters diluted 10 per cent stakes to aid promoter-controlled leasing affiliate DLF Assets Limited (DAL). “We are pleased to follow through our commitments with this game changing transaction” Rajiv Singh, vice chairman, DLF had said.
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