Goldman Sachs says Reliance Industries can potentially become a $100 billion stock by fiscal 2017 from its current market capitalisation of around $46.6 billion.To accomplish that, Goldman says Reliance needs to get government approvals on investments and gas prices, restrict its focus to core businesses, and return some of its surplus cash in the form of dividends or buybacks, among other measures.Investor concerns such as on returns from new capital spending or the cyclical downturn are already largely discounted, Goldman also argues.BW had reportes earlier, (Read: Lifeline For RIL's Gas Project) that the friction between Reliance Industries (RIL) and the government seems to be easing. The government-led management committee (MC) approved field development investments for RIL’s Krishna Godavari (KG) D6 block for three years, but with riders. The MC approved the pending budget for the past two financial years and gave consent to $1.06-billion expenditure for 2012-13. “Whatever the contractor needs technically and administratively to raise production, we will do. Approvals will be given subject to conditions,” petroleum minister S. Jaipal Reddy had said.Sources say, the MC headed by director-general of hydrocarbons Rajiv Nayan Choubey allowed RIL and BP to develop three other gas fields in the same block, but said that the operator would be able to recover costs only after extensive appraisal of these discoveries to establish commercial viability. "Current share price is giving little credit to mgmt for refocusing investment in core activities and its potential impact on cash returns, in our view," Goldman said in the note dated on Thursday.Goldman maintains its "buy" rating on the stock and raises its sum-of-the-parts target price to Rs 936 from Rs 870 to reflect improved refining and exploration and production valuations.Reliance shares last up 1.3 per cent at Rs 810.10.
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CBI has shortlisted the people who are likely to be called for recording their statements in connection with five cases registered by it for alleged irregularities in allocation of captive coal blocks.Agency sources said in the first batch, the accused named in the FIRs against JLD Yavatmal Energy Limited, JAS Infrastructure Capital Private Limited and AMR Iron and Steel are likely to be called at its headquarters here for examination.In its FIR against JLD Yavatmal Energy Limited, which bagged Fatehpur East Coal Block in Chhattisgarh, CBI has named Vijay Darda along with his son Devendra and other former and present directors including brother Rajendra Darda, Manoj Jayaswal, Anand Jayaswal and Abhishek Jayaswal, they said.The allegations of any wrong doing in getting coal blocks have been refuted by Dardas and Jayaswals."I am shocked to hear about the development," Darda had said after FIRs were filed.The sources said the questioning might involve seeking information about alleged role Dardas played in getting the coal block for JLD Yavatamal.The agency would also question Manoj Jayaswal who is also one of the main accused who appeared in three of the five FIRs filed by it.The agency would also question those named in FIRs against Nav Bharat Power Private Limited and Vini Iron and Steel Limited, the sources said.CBI sources said the officials of screening committee in which the coal blocks were cleared and officials who screened the applications would also be asked to record their statements in connection with the probe.They said the teams which had gone for raid have collected documents, laptops, hard drives from various locations and were scrutinising the details from them.(PTI)
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Reliance Industries' flagging KG-D6 gas field may see larger than previously projected drop in production as the company shut eight wells due to water and sand ingress.The company, before the beginning of the current fiscal, had projected an output of 27.6 million standard cubic meters per day for 2012-13. This, as per its own projections, was to further dip to 22.6 mmscmd in 2013-14 and then to 20.4 mmscmd.But the fields have seen the output drop to 27.65 mmscmd before the end of August itself, sources privy to the development said.The production has fallen by about one mmscmd since July and at this rate the output may be less than the projected output by the end of current fiscal.Sources said the day can be saved if the government allows the company to do well interventions to revive sick wells.Dhirubhai-1 and 3 (D1&D3) gas fields in KG-D6 block and MA oilfield in the same area produced about 30 mmscmd on debut in April 2009 and reached 61.5 mmscmd in March 2010 before water and sand ingress gradually brought down the output.In the week ending August 26, D1&D3 produced 22.11 mmscmd and MA another 5.54 mmscmd, according to a status report filed by the company with the Oil Ministry and DGH.Sources said RIL had in its projections stated that output from D1&D3 in 2012-13 would be 20.20 mmscmd and another 7.40 mmcmd would come from MA oilfield. In the subsequent year, production from D1&D3 would further drop to 14 mmscmd while MA oilfield is expected to produce 8.60 mmcmd.The output from KG-D6 is short of the 86.73 mmscmd (about 80 mmscmd from D1&D3 and the rest from MA field) level envisaged by now as per the field development plan approved in 2006.This output was envisaged from a total of 31 wells.But so far, RIL has drilled only 22 wells on D1&D3 and only 18 of them have been put on production.Of the 18 wells, six have ceased production due to high water/sand ingress.MA oilfield in the same block had seen two out of the six stopping production due to the same reasons.RIL is the operator of the 7,645-sq-km D6 block with 60% stake while London-based BP plc has 30% interest. The remaining is with Niko Resources of Canada.The firm had made a total of 18 gas and one oil finds in the block. Of these, two gas finds - D1&D3, and one oil - MA, have so far been put on production.(PTI)
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The Inter-Ministerial Group (IMG) on the allocation of coal blocks will decide this week the fate of 29 mines given to companies such as Jindal Steel and Power and Reliance Power, following its last week's review of the progress made in developing them. "The next meeting of the IMG will be held on September 12 ...to deliberate and finalise its recommendations in respect of allocatees/companies which made presentations before it," an official statement said. The panel undertook the review of the blocks from September 6-8. "Presentations were made by the allocatees of 29 coal blocks in reply to show cause notices issued to them (for failure to develop the blocks as per stipulated timeframe)," the statement said. It added that the allocatees were asked to provide documents indicating the current status, duly certified by the authorised representative, besides the details of investment made vis-a-vis the plans for developing the blocks, certified by Chartered Accountant. They were also required to submit investment details in respect of end-use plant, the statement said, adding, "The self certification as per CA certificate and physical progress reported by the companies was taken on record and the authorised representatives were given an opportunity to be heard by the IMG." To facilitate further deliberations, the IMG said that coal controller/Ministry of Coal will provide a status paper for each case including history of previous reviews and action. The IMG meeting is being held against the backdrop of the CAG estimating that private companies are expected to make undue gains to the extent of Rs 1.86 lakh crore as the government did not conduct auctions while allotting mines to them. During the three-day IMG meeting, allottes of 29 blocks gave progress reports of their mines and several of them said delays in starting the production resulted due to lack of various clearances from different state governments. Tata Steel, Reliance Power, JSW, Grasim Industries, Kesoram Industries, IST Steel & Power, SKS Ispat and Power, Bihar Sponge Iron, among others, had appeared before the panel. Before the start of the review exercise, the Coal Ministry had said on September 3 that the latest progress as reported by the Coal Controller would also be taken into account by the IMG "before recommending on the action against the coal block allottees". Meanwhile, sources said that the IMG in its meeting on September 12 may also decide the dates for assessing the performance of the PSUs which were given the blocks without auction. Around 30 coal blocks, of the 58 that have been issued showcause notices, are with public sector firms such as MMTC, Chhattisgarh Mineral Development Corporation (CMDC), Jharkhand State Mineral Development Corporation (JSMDC) and Orissa Mining Corporation.(PTI)
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In a surprise announcement, Cairn India said on 8 August its managing director and CEO of six years Rahul Dhir has quit the company.Dhir, who was the face of Cairn India since the time the firm's British promoters listed it on Bombay Stock Exchange to make the company more local, quit in less than eight months of London-based mining group Vedanta taking over the firm.With Dhir, the entire top management of Cairn India has quit the company since billionaire Anil Agarwal-owned Vedanta announced buying majority stake in the firm from Scottish explorer Cairn Energy Plc."The board of Cairn India announces that Dhir has decided to step down as managing director and chief executive officer of the company effective August 31, 2012 to pursue his entrepreneurial interests," the company said in a statement.Rick Bott, who was Executive Director and Chief Operating Officer of Cairn India, quit the firm from June 15, 2011 while its Executive Director and Chief Financial Officer Indrajit Banerjee resigned with effect from August 23, 2011.Recently, David Ginger, Cairn India's director of exploration and new ventures, quit the firm.It is unclear if Dhir's exit voilates the preconditions set by the Government for Vedanta Group to takeover Cairn India. The Government had among other things pre-conditioned approval to the acquisition on Vedanta Group retaining the entire management team at Cairn India for three years.Vedanta completed the $8.67 billion acquisition of Cairn India in December 2011."The search for Dhir's successor is underway and an announcement is expected soon. During this intervening period, the Board has appointed P Elango, Director - Strategy and Business Services and a member of Cairn India's Executive Committee, as the interim CEO," it said.Dhir took over as the Chief Executive of the company in March 2006 and spearheaded its listing on local bourses in January 2007.Since then he has guided the firm and even helped Cairn Energy win tough regulatory approvals for sale of shareholding to Vedanta Group.Under him, Cairn India began crude oil production from its showpiece Rajasthan oilfields three years back. The fields are currently producing 175,000 barrels per day and stage is set for the firm to achieve 300,000 bpd output.Dhir was the only executive director on Cairn India board which is headed by Anil Agarwal's brother Navin Agarwal. Anil Agarwal's daughter Priya is a Non-Executive Director on the board.The board has Aman Mehta, Naresh Chandra, Omkar Goswami, Edward T Story as independent directors.The company is likely to shortly announce appointment of Sudhir Mathur as the Chief Financial Officer (CFO). Mathur currently is CFO at Aircel.(PTI)
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A proposed debt restructuring package for India's struggling power distributors will not impact the country's sovereign ratings and instead could be positive in the medium-to-long term, Standard and Poor's said on 10 September. India plans to restructure part of the debt that state-owned power distribution companies owe to financial institutions, in a bid to reform the power sector and improve capacity. According to S&P, Indian banks have a total exposure to the overall power sector of 3.3 trillion rupees, which equals 7.2 per cent of all their loans. The restructuring could provide the loss-making distribution companies temporary relief and help them to cover costs in the short-term, S&P said, though it warned that India needs to provide more lasting solutions to its power problems. India last month experienced one of the world's worst blackouts following a breakdown of transmission grids, and rolling power cuts are part of daily life. The proposed debt restructuring "does not significantly affect our sovereign rating on India," S&P said in its report. S&P roiled domestic markets in April when it cut India's sovereign outlook to "negative", putting at risk the country's current rating of "BBB-", the lowest investment-grade rating by the agency. India needs to improve the credit quality of the distributors and allow greater private sector participation in power transmission and distribution in order to provide a long-term solution to power shortages, the agency said. "The cost of doing business in India could increase if the cycle of high system inefficiencies, technical and commercial losses, and under investment in capacity continues," S&P said. "This could in turn affect the country's growth prospects in the long run and weigh on the sovereign rating on India." (Reuters)
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If in the future, monorail’s history in India is written, jailed Pakistani terrorist Ajmal Kasab will feature prominently in the write-up. Consider this: the Mumbai terror attack by Kasab and his fellow terrorists on 26 November 2008 came just two days before a function to mark the start of construction of the Mumbai monorail, where Prime Minister Manmohan Singh was supposed to be the chief guest. Needless to say, the grand launch was delayed by three months. Then, almost a year was lost because security concerns stalled the monorail line near Arthur Road Jail, in which Kasab is housed under heavy security. Despite these hiccups and a few environmental issues, by early next year, the city of Mumbai will boast of the first modern monorail system in India — if all goes as planned. It will be the harbinger of a wave that is set to sweep across India in the field of monorail systems and transportation infrastructure. If the plans take off, India will become the monorail capital of the world. At present, 13 projects, covering between 300 and 350 km, at a cost of Rs 30,000-Rs 35,000 crore over the next 3-5 years, are in either the planning or implementation stage across the country. But is it all worth it? “We expect an investment of a minimum of $5 billion in the coming years in India on monorail systems on some 21 projects that are in the pipeline,” says Kanesan Veluppillai, president of Scomi International, the Malaysian monorail systems maker which is implementing the Mumbai monorail along with its consortium partner Larsen & Toubro (L&T). Such a mad rush for monorail — no longer preferred as a mode of mass transportation the world over due to its low passenger capacity — is unheard of in the history of monorail systems. Most monorail experts of yesteryear have, over the past 3-4 decades, either exited the business or moved to other advanced transportation techniques due to lack of clientele. However, sensing an opportunity in India, most of those remaining in the field are flocking to the country — including the three major players: Scomi, Bomabardier and Hitachi. Some are even looking to set up their own rake-manufacturing facilities in the country. But the moot question remains, is monorail the right mass transportation medium for populas Indian cities? Waning PopularityInterestingly, no country has had a monorail network of the scale that Indian cities are looking to build. COUNTRYWIDE CONNECT: Monorail has lost out on appeal in most parts of the world, but in India it appears set to grow with many plans afoot(Click to view enlarged image)According to the Monorail Society, an organisation that pushes for its wider acceptance, Asia’s first such project was opened in 1986 at the Lotte World in South Korea, a three-car train carrying 18 passengers and connecting two stations: an indoor amusement park to an outdoor island. China’s first monorail project was a similar small 1.7-km project at a theme park in 1993. Its first urban monorail started in 1998 at Shenzhen, covering 3.8 km; but its first major monorail system was opened only by 2005 in Chongqing, a 55.5- km stretch connecting 43 stations and carrying 30,000 passengers per hour during peak rush. Other than that, not many new projects have come up in Asia, with the possible exception of an 8.6-km-long project in Kuala Lumpur. Of the seven new monorail projects under construction in Asia, the longest stretch is at Daegu in South Korea: a 24-km length that is being managed by Hitachi. Africa is yet to see a monorail in operation (at Port Harcourt in Nigeria, a 6.4-km project is in progress). Australia has just three monorail lines, all started in the 1988-89 period. In Europe — where the first monorail system was started in 1901 at Wuppertal in Germany — only one project is coming up, a 5-km solar-powered monorail to connect Bologna airport with its central railway station. In Japan, where 11 monorail systems operate, the last one to come up was back in 2003. In 1959, Disneyland made monorail systems popular in North America. However, just nine monorail systems have come since then, the last in 2004 in Las Vegas.Apart from India, the only other nation where a larges-cale monorail project is coming up is Brazil. The city of Manaus will construct a 20-km-long monorail with nine stations in time for the soccer World Cup in 2014. Scomi is implementing the project. Sao Paulo is alos working on implementing a monorail network, with three lines covering nearly 100 km. Monorail Versus Metro“Monorail is a suitable system for urban transportation. There are many opportunities for us to introduce monorail systems the world over; not just in India, but also in China, South-east Asian countries, etc.,” says Satoko Yasunaga, a spokesperson for Hitachi Asia (Singapore). Hitachi is one of the largest players in this field, having constructed monorail systems in Singapore, Tokyo, Osaka, Chongqing (China) and South Korea. Harsh Dhingra, chief country representative of Bombardier Transportation India, says that India, with its congested cities, where alignment of metro routes is not always possible, monorail is the most obvious alternative. He notes that some nine Indian cities have a population of more than 5 million and, by 2051, more than 35 cities will reach that figure. To cater to such a large urban population, India needs a comprehensive, sustainable and integrated rail transportation system, says Dhingra. Veluppillai of Scomi notes that with 40 per cent of India’s population set to live in urban areas, there will be a need for extensive transportation infrastructure: more metro and railway lines, roads, sidewalks, foot overbridges and cycle tracks. “It is not possible to acquire large tracts of land by displacing people in thickly populated areas for a mass rapid transportation system such as the metro. One practical solution is to create connectivity to existing suburban railheads with monorail, which requires less space,” he says. Philippe Delleur, senior vice-president, international network, Alstom, another global mass transportation provider, says metros and monorail are complimentary to each other and one is not a substitute for the other; each has its own advantages and disadvantages. “Globally, monorail is suited for small capacity routes and as feeder to the existing metro network. Increasingly, Indian cities, especially tier-2 cities, are looking at monorail as a means of urban transportation. Monorail is being considered as a feeder to the metro,” he says. For Delleur, the advantage of monorail lies in its ability to operate in restricted spaces. Monorail can be incorporated into a conventional rail-based design without the disadvantages of having proprietary trains. Globally, more than 50 monorail systems are in operation and it is generally perceived as a leisure park technology because of its attractive looks and small passenger capacities. The capacity of a monorail typically ranges from 2,000 passengers per hour per direction (pphpd) to a maximum of 48,000 pphpd when a monorail is used for mass transportation, depending on the number of cars. As against this, mass transportation systems such as the metro can carry over 70,000 pphpd. The question is: what happens when cities need higher carrying capacity while the central channel of major roads of the city are occupied by low capacity monorail? break-page-break In the case of the Mumbai monorail, the plan is to have 15 trains of four cars each, which will carry around 1.25 lakh people every day. In comparison, the Mumbai suburban railway carries 72.4 lakh commuters daily, while the Mumbai Metro One, the Versova-Andheri-Ghatkopar Corridor Mass Rapid Transit System (MRTS) project being developed by Reliance Infrastructure, is expected to carry six lakh commuters per day on completion. Viability Question“Worldwide, monorail has found far less acceptance than metros or trams as an urban rail transport mode,” admits Delleur. In fact, more than 50 monorail projects in different parts of the world have been decommissioned in the past for various reasons, chief among them being economic unviability. “Monorail is seen as a good option only for the last-mile connectivity and its viability is dependent on the traffic density of each corridor. Such feeder systems cannot survive only on revenues from passenger traffic and require a viable economic model such as public funding (like viability gap funding) or subsidies or other streams of revenue such as real estate development,” says Sanjay Sethi, senior executive director and head of the infrastructure group at Kotak Investment Banking. In fact, India had two monorail systems earlier: the first being the one that was used by the British to transport tea from Kundala Valley in Munnar in Kerala. The second was the Patiala State Monorail Trainways (PSMT) — a partially road-borne railways system running in Patiala from 1907 to 1927. While the former was stopped due to a flood in 1924, the latter was abandoned following the death of its patron, Maharaja Sir Bhupinder Singh of Patiala. The period between 1950 and 1980 was bad for monorail. City planners preferred to invest in cheap transport systems such as buses that could ferry more passengers instead of investing in monorail that incurred high costs, and carried fewer passengers. Experts says that most of the surviving monorail systems are dependent on revenues from the tourism industry. The coming of mass rapid transport systems such as the metro virtually killed the market for monorail. (L-R) BW Pics By Tribhuwan Sharma and Subhabrata Das However, the industry revived post the 1980s with the development of modern mass transit monorail systems, running on elevated beams. “With improvement in technology and higher passenger capacity options, the cost of construction of a monorail network has come down,” says Veluppillai. The Indian StoryLike most Indian infrastructure projects, the upcoming monorail projects are also experiencing delays, cost escalation and viability issues. In Mumbai, initially the Mumbai Metropolitan Region Development Authority (MMRDA) wanted to construct eight monorail lines at a cost of more than Rs 20,000 crore. MMRDA’s plan to construct a second monorail connecting Kalyan-Bhiwandi-Thane was suspended after the consulting agency, RITES, said it would require 90 per cent viability gap funding to make the project viable. Later, the MMRDA dropped its plans to add new lines and decided to concentrate only on the first line, a 19.5-km stretch from Chembur to Wadala and then to Jacob Circle, with an investment of over Rs 2,460 crore. The line between Chembur and Wadala is expected to be operational by December this year or January and the line from Jacob Circle to Wadala is to be ready a year later. MMRDA has planned the line as a feeder service to the existing suburban railway network. L&T and Scomi have been contracted to build and operate the monorail until 2029. Similarly, the Delhi administration’s plans to construct a 90-km, six-line monorail network have been whittled down to 1-2 lines — one in East Delhi, linking Shastri Park with Laxmi Nagar via Trilokpuri in an 11-km route. Experts say that while a 4-car metro train would require an expenditure of over Rs 200 crore per km on elevated lines (in the case of an underground metro, it can cost up to Rs 600 crore), the cost for a monorail would range between Rs 120 and Rs 150 crore per km on elevated lines, depending on land costs. “Mumbai monorail’s cost is nearly Rs 123 crore per km (worked out about five years ago) and with new construction technologies and opportunities for rolling stock makers like manufacturing options in India, it can further come down for new projects,” says Scomi’s Veluppillai. The construction time is also comparatively lesser for monorail, which is built using either suspension technology or straddle beams, and with cars running on rubber tyres. “We have the capacity to complete such lines in 36 months provided land and other clearances are given,” says Veluppillai. Chennai’s plan was to construct an 111-km- long monorail project at a cost of Rs 16,650 crore, at a rate of around Rs 150 crore per km. Then the state government revised the plan to a 54-km phase-I, costing some Rs 8,050 crore. The current status is that Scomi International, Hitachi, Bombardier, L&T, Gammon and IL&FS have qualified for the final request for proposals stage. Though the Kolkata monorail project was awarded even before the Mumbai project, it is yet to reach the implementation stage. The project, awarded to Andromeda Technologies of Kolkata, was slated to get under way by 2011, but it is nowhere near completion. The project was for constructing a monorail from Budge Budge to Taratala, a distance of 20 km, on a build-own-and-operate basis at an approximate cost of Rs 60 crore per km. The National Transportation Planning and Research Centre (Natpac), which did the feasibility study of the Thiruvananthapuram monorail project, says the cost works out to Rs 125 crore a km in the first phase and Rs 118.7 crore a km in the second. The study says the financial internal rate of return will be 7-13 per cent and the economical internal rate of return will be around 12.6 per cent, which makes the project viable, on the assumption that 40 per cent of the current road traffic will move over to the monorail, once it takes off. “The major challenge we foresee for these projects will be funding to make them viable from a social and economic point of view. The second major challenge will be timely land acquisition where city municipal bodies have to play a major role,” says Dhingra of Bombardier. Sensing the opportunity, manufacturers of monorail are devising their plans around India. Scomi plans to make India its hub so that it can go looking for monorail projects in Sri Lanka and Bangladesh. In India, Scomi already has a team of 100 in place. “We have a 200 rake car- manufacturing unit in Kuala Lumpur and another one is coming up in Brazil. Once we get a sizeable order, we will think of starting a manufacturing unit in India,” says Veluppillai. Bombardier — the first multinational company to set up a wholly-owned railway manufacturing plant in India for the production and final assembly of bogies and car bodies at Savlinear Vadodara with an investment of `33 million — is currently vying for monorail projects by offering its INNOVIA Monorail 300 systems for the Kozhikode and Thiruvanthapuram monorail projects, as well as for those planned in Delhi, Mumbai and Chennai. Bombardier has an order book of more than 600 cars from the Delhi Metro alone. “Our recent investments demonstrate that we are committed to the development of rail transportation in India. Bombardier is always exploring opportunities to bring in advanced global rail technologies in all countries that it operates in,” says Dhingra. Alstom has a wait-and-watch policy to tap the Indian monorail opportunity. “We will closely watch the experience of the first monorail projects in India and refine our strategy accordingly. Meanwhile, we will have the ability to participate in projects by providing signalling and train control systems,” says Delleur. Hitachi’s spokesperson says the company is now looking for opportunities in India. The company is also looking at partnering local players as an option. “It is a very important alternative. Generally speaking, the partnership with a local entity will be very important to contribute to each country’s social infrastructure,” says Hitachi’s Yasunaga. While the enthusiasm of city planners and monorail makers augurs well for the ever-growing number of urban Indian commuters, it remains to be seen how many of these projects actually become a reality. With inputs from Joe C. Mathew p(dot)jayakumar(at)abp(dot)in (This story was published in Businessworld Issue Dated 17-09-2012)
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Deutsche Bank says India's cement stocks are in for a potential re-rating, citing the pickup in merger and acquisitions (M&A) in the sector.The brokerage says any enterprise value greater than $150 per tonne for the CRH and Jaiprakash Associates transaction could trigger a re-rating for a number of midcap stocks.Irish building materials group CRH Plc said it was in talks to pick up an equity stake in Jaiprakash Associates' cement operations in Gujarat."Historically, large-ticket M&A transactions, in particular Ambuja buying a stake in ACC in 1999, Grasim buying a stake in L&T's cement business (now UltraTech) in 2004, and Holcim buying stakes in ACC and Ambuja in 2005 and 2006, have led to improvements in profitability and valuations in the sector," Deutsche adds.The brokerage has reiterated Ambuja Cements and Shree Cement as its preferred picks in the sector.Ambuja Cements was up 1.3 per cent, while Shree Cement fell 0.8 per cent.
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