Reliance Industries will open its share buyback from February 1, and close the offer on January 19 next year, it said in an advertisement in the Times of India newspaper on Tuesday.Reliance, India's biggest company by market value, said late last week it will spend up to Rs 10,500 crore to buy back shares at a maximum price of 870 rupees each, or about 10 per cent premium over its current share price, as it looks to prop up its underperforming shares.It will buy back up to 120 million shares, or 3.7 per cent of outstanding equity. Its controlling shareholders, who own 44.7 per cent of the equity, will not participate in the offer.Shares fell 2.7 per cent on Monday after the energy major posted its first drop in quarterly profit in more than two years. By 0423 GMT on Tuesday, the stock was up 1.8 per cent at 785.45 rupees.Reliance's market value tumbled 35 per cent in 2011, mainly because of worries that falling output from its offshore gas fields would hurt its long-term growth.The stock underperformed the main Mumbai market, which fell nearly 25 per cent in the same period.The share buyback is expected to increase shareholder value by reducing the number of shares and increasing earnings per share, Reliance said in the advertisement.This is the company's first share buyback since 2005 and the biggest ever in India.Citigroup and Bank of America-Merrill Lynch are the managers for the buyback offer.(Reuters)
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Reliance Industries Ltd (RIL) assured the Supreme Court that it would start paying Value Added Tax (VAT) to UP government on sale of gas in the state from February one till a decision by the Allahabad High Court on its plea against the tax imposition.Taking note of RIL's submission, a bench headed by Justice Altamas Kabir asked the high court to decide expeditiously the company's plea against state government's decision to impose VAT.The company also submitted that the VAT imposed on its product would be passed on to the consumers.The court's order came on an appeal by the state government challenging the high court's interim order staying imposition of the tax on the sale of gas by RIL.The UP government had challenged a July 26, 2011 order of the high court which granted stay on levy of Rs 724 crore as VAT for sale of the gas during 2009-2010.The Supreme Court had on August 23, 2011 issued notice and sought responses of the Centre.According to the state, RIL, which is engaged in extracting and refining petroleum and petrochemical products, was supplying natural gas to various fertiliser companies in Uttar Pradesh and, hence ,the state was entitled to levy VAT on the company.RIL had taken the plea in the high court that the transaction in question is central sale made by it from the state of Andhra Pradesh and it is not liable to pay local tax (VAT) to the state government.(PTI)
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In a rare deal in times of investor caution, IL&FS recently picked up a 9.36 per cent stake for Rs 200 crore in Indiabull's Bharat Mills Mumbai project located in upscale Worli. The deal pegged the residential realty project at Rs 2,136 crore, but initial media reports mistakenly projected this as "35 per cent premium" to the Rs 1,580 crore paid by Indiabulls in August 2010 for acquiring the 8.4-acre mill land. One cannot calculate ‘premium' by comparing the total value of a project — the projected realisation on sales on completion — with the purchase cost of land. In August 2010, the projected value of the residential project planned by Indiabulls was closer to Rs 3,000 crore assuming a conservative sale value of about Rs 30,000 per sq. ft. At Rs 2,136 crore, IL&FS has got a 25 per cent discount on 2010 valuations.As this private equity deal indicates, prices for land and built-up estate can only move south over most of this year. If there was any doubt that the real estate sector was in the grip of severe recession, recent data emerging on uptake of office space is an eye-opener. According to a CB Richard Ellis (CBRE) study, there has been a 12 per cent decline in the absorption of prime office space in the country in 2011 with leasing and purchases falling to 28 million sq. ft compared to 32 million sq. ft in 2010. According to a survey by DTZ Consultants, the cumulative absorption across India's seven largest cities was up a "modest 8 per cent to 36 million sq. ft." "We expect a further dip in demand in 2012 by 10 per cent. Absorption may fall to about 32 million sq. ft this year," says Anshul Jain, CEO of DTZ Consultants.With corporates, especially IT companies, pruning or postponing expansion plans, builders have cut back supply and completion targets, leading to a huge slowdown in the construction industry. The CBRE report indicates supply addition in "leading Indian cities declined by almost 50 per cent touching about 30 million sq. ft in 2011, compared to more than 55 million sq. ft added last year.That stagnation has hit the commercial and office space market is corroborated by DTZ whose extensive survey shows that total available office stock in 2011 has gone up 9.4 per cent from 335 million to 370 million. This is despite project completions falling 45 per cent compared to the previous quarter.Given the recessionary data, lease rentals and property prices should be falling faster than they are. "Builders have protected themselves by selling off chunks to individual investors or private equity players. It is these stakeholders who are taking the biggest hit," says DTZ's Jain. On the other hand, Pankaj Kapoor, CEO of property market tracker Liases Foras, says: "Residential prices have peaked and we will now see a gradual decline over three years." Given a sharp slowdown in sales and funding for builders becoming scarce, HDFC CEO Keki Mistry predicts "a 5 to 15 per cent fall in the property prices" over the next year.In this scenario, it is strange how government revenue authorities have jacked up the ready reckoner (RR) or property circle rates. These are used to compute stamp duty and registration charges for property transactions. From 1 January, in Mumbai the RR rates have been hiked 46 per cent while in the Delhi-National Capital Region, circle rates have gone up 250 per cent for residential property over one year. This has only stymied demand further. (This story was published in Businessworld Issue Dated 30-01-2012)
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Reliance Industries, India's biggest company by market value, reported a 13.6 per cent fall in October-December net profit, its first quarterly profit drop in more than two years, as refining margins fell sharply. Reliance also said its board approved spending up to Rs 10,440 crore ($2.1 billion) to buy back shares, as it sought to bolster its underperforming stock.Reliance said it will buy back up to 12 crore equity shares from the open market at a maximum price of Rs 870 apiece in its first share buyback since 2005. The current share price is Rs 793 per share. This is the fourth time the company has announced a buyback of shares. The company's buyback offer is less than the street expectations.Controlled by Mukesh Ambani, the world's ninth richest person according to Forbes, Reliance's market value tumbled 35 per cent in 2011, mainly over growth worries as output from its offshore gas fields slowed sharply from the previous year.The stock has underperformed the main Mumbai market, which fell nearly 25 per cent in the same period.The last time Reliance Industries announced a share buyback was in December 2004. The maximum buyback price announced in 2004 buyback program was at Rs 285 per share (that is, prebonus price of Rs 570 per share). The stock has been under-performing the broader market by a wide margin in recent months, but has been on an upward journey in last couple of trading sessions. In the recent past, it has traded below Rs 700 level also for the first time in last few years.Late last month, RIL was also briefly replaced by Tata group firm TCS as the country's most valued firm, while earlier in December it was overtaken by IT giant Infosys as the most influential stock on the market barometer Sensex.Falling ProfitsReliance, India's biggest company by market value, said net profit fell to Rs 4,440 crore or Rs 13.6 a share, in the third quarter ending December 31 from Rs 5,136 crore a year earlier. Net sales rose 42 per cent to Rs 85,135 crore.It reported gross refining margins of $6.8 a barrel for the quarter, compared with $9 a barrel a year earlier, and sharply lower from the $10.1 per barrel it reported in the September quarter."The global nature of our businesses and weakness in economic conditions resulted in reduced earnings in the quarter, particularly in our refining and petrochemicals businesses," Reliance Chairman Mukesh Ambani said in a statement.The company operates the world's biggest refining complex in western India, which can handle less costly high-sulfur crude oil, giving it among the best refining margins in the industry. The refining segment accounts for nearly 80 per cent of Reliance's revenues.The margins, a key measure of profitability, were impacted by higher crude prices and narrowing spread between light and heavy crude prices.Reliance's oil and gas exploration business posted a 32 per cent decline in revenue, mainly on account of lower production at its main D6 offshore block.The company's growth outlook has been marred by falling gas output from its huge gas fields off India's east coast. The company is producing around 40 mscmd (million standard cubic metres per day) of gas, sharply lower than the 60 mscmd it was producing a year earlier.The lacklusture quarterly earnings and the below market expectation share buyback plan were announced after the close of trading on the stock exchanges, where the company stock closed at Rs 792.65, up 0.9 per cent.RIL earned $6.80 on turning every barrel of crude oil into petroleum products (fuel) in Q3, FY'12, compared to a $9 a barrel gross refining margin in the corresponding period of the previous fiscal.The refining margins were lower than the Singapore benchmark average of $7.3-7.4 per barrel, a phenomenon which the firm blamed on lower demand and weaker product cracks.The company had earned $10.1 a barrel in the preceding July-September quarter.Natural gas production from its showpiece KG-D6 fields off the Andhra coast fell by 23 per cent to 136 billion cubic feet per day (41.92 million cubic metres per day) in Q3 from 54.5 mmcmd a year ago. (With Agencies)
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On a fleeting visit to India Jeremy Rifkin, Founder & President, Foundation on Economic Trends, USA, shares his revolutionary ideology of the "Third Industrial Revolution" business model for the world's largest democracy. Formally sanctioned in 2007 by the European Parliament the Third Industrial Revolution is now being implemented by various agencies within the European Commission as well as in the 27 member-states. The Revolution aims at a long-term economic sustainability plan to address the triple challenge of the global economic crisis, energy security, and climate change. Here he discusses the basis of the TIR and its adaptability to the Indian economy with Yashodhara Dasgupta and Suneera Tandon.Why do we need the Third Industrial Revolution?The second industrial revolution is on life support right now. Fossil fuel energies are getting more expensive. The more scarce ones such as kerosene, shale gas etc and the technologies that invent these are exhausted. The whole infrastructure around the global economy is made out of carbon, which is more expensive to bill and therefore it is getting more expensive to maintain infrastructure.We've hit peak prooduction for fossil fuels in the second industrial revolution; at $150 a barrel for oil it's going to shut down the economy every time. This is an end game that's going to play itself out for the next 25 years.For years the international energy agencies thought that it won't to make a peak around 2035. The International Energy Agency dropped the bombshell in their 2012 energy report. They said "looks like we peaked". We peaked in 2006. The business community was blown away by this. It will cost us $7trillion to get the remaining oil out in the next 15-20 years.When India and china moved in the last decade to the 2nd industrial revolution, at 8-12% growth rate, you were the last players in the game. The aggregate demand was just too much pressure against the supply. Oil prices go up, inflation goes up and purchasing power shuts down. Every time we try to re-grow this global economy at the same rate of pre July 2008, it is going to happen. It is happening now. The next slowdown starting right now people are going to realize that this was the earthquake. The second problem is climate change which is now in impacting agriculture dramatically. It's the most dangerous period in human history. If we go up 3 degrees in a century it takes us back 3 million years. The big deal here is the water cycle. Everything survives by the way water cycle is conditioned. For every 1 degree that temperature goes up the atmosphere absorbs 7% more precipitation from the ground and the whole water cycle becomes unstable. The eco-system can't catch up to that dramatic shift in the hydrological cycles. Scientists in the UN Panel say we are in the early stages of the 6th extinction of life in 450 million years. That's unbelievable.Could you elaborate on its Five-pillars?The EU in 2007 committed to the 5 pillar theory for the parliament which is working its way through the commission and the member states.Pillar 1: A commitment of 20% renewable energy by 2020. That's a mandate.Pillar 2: How do we collect the new energies? Today a 3rd of the Indian population has never had electricity.. The question is, if renewables are distributed and found everywhere why are we only collecting them at a few central points? We are using 20th century centralized thinking. We have 191 million buildings in the EU. The goal is to convert every building to your own green power plant. Collect solar off the room, wind off the side walls, geo-thermal heat in the basement, convertible garbage and so on. It jumpstarts the economy it's going to require millions and millions of jobs and 1000's of SME's over 40 years till they've converted all buildings.Pillar 3: We have to store these energies. The way it works for a business community is if you have surplus electricity from your rooftop solar panels, put it in hydrogen. When the electricity is not there on the roof, convert the hydrogen back into electricity.Pillar 4: is where the internet connects with new distributive energy. We transform the power grid of Europe to act exactly like the internet. So millions of buildings are creating electricity on sight and storing it in hydrogen. If you don't need some of the electricity your software can direct it across an energy internet. Pillar 5: Plug in transport, electricity vehicles came out this year. We'll be able to plug in anywhere there is a building and get green electricity out of it. Or if price is right, you plug it in to a computer which will monitor the price of electricity in the grid and kick in when the price is high. Alone they are simply components, only when you phase them in the synergies they work. Its distributive capitalism and democratizes energy. Sharing renewable energy laterally, in power, communications and transport networks that stretch across continents, is going to radically transform the political world. The scale of this is the first and 2nd revolutions are top down and central because the synergies are expensive, and you create national markets and national governments. The 3rd Industrial Rev plays laterally, you have millions of little players coming together and you have a lot more power than you can get with nuclear and coal fire. How does it fit in emerging economies like India and China?What India has going for it is deficit. That is, you have no infrastructure. You have 400mn people who have never had electricity. They've never taken part in the previous industrial revolutions. The key is how you get electricity to people. You cannot get out of poverty without having electricity. It also liberates women - half of the human race. They carry the energy - literally. The rural areas can move nodally. Indians now, are spending more money on kerosene than they'll ever spend on renewable. That's the tragedy of it. From what I understand, they're spending a fifth of their income on kerosene. They can spend much less if they get the upfront cost in to bring solar and geothermal heat pumps. These are going to get cheaper. And they're automatically saving electricity all the time and they have power to be off-grid. Then they can connect as a micro-grid like wi-fi. When someone has a little surplus, you can share it through these micro-grids. There's no way to grow this economy with everybody migrating to cities. So how do you reverse migration? The 3rd industrial revolution wants people to have electricity so they can have their own businesses.We have more pressing immediate concerns. How do you fit in a model that might seem pretty futuristic to people here?First of all, if you're from rural areas and you're on subsistence, you have two choices. You can either work at an farm as a paid employee. You'll never get out of subsistence. Or you can have your own little farm. You have to transport your produce in fuel driven vehicles, which is too expensive. So if you create your own green electricity on site, you can survive, prosper and then move on to the market. India could lead this revolution tailored to the developing nations. Germany is leading the way for the developed countries. You're going to see Japan and Korea head on head with Germany by next year. India is in a position to lead this revolution because you have the most renewable energy in any single geo-political jurisdiction in the world. You're importing 80 per cent of your oil at an enormous price.Your second asset is you're the largest democracy in the world. The revolution is based on democratizing information, energy, manufacturing, distribution and the social space. You think big authoritative centralized governments want to do that?Finally, you have a hidden treasure - the Gandhian tradition. What's interesting about Gandhi is his economic philosophy. He was there when the 1st industrial revolution gave way to the second. He could see the pyramid with centralized energy production. If you're at the bottom of the pyramid which India was as a colony, the resources get taken and people are marginalized. He thought Adam Smith's theory was nuts. He thought of a flat or lateral economy. This is a neo-Gandhian vision. Do not underestimate this power you have. Will you do it? I don't know. Are you potential leaders to do it? Absolutely.Do you think it's economically feasible? Our GDP is about only one-tenth of EU's. You're one-tenth of their GDP but you're much faster growing. But you still think that you can grow faster within the frame of the 2nd industrial revolution. It can't be done. So you may grow 8-10 per cent but it will shut down every four years and then you're back to square one. The faster you move to the third industrial paradigm, you create jobs and businesses overnight. Does it not require a certain consciousness that is perhaps already there in the West?In terms of consciousness, I think you're correct. I don't think it's possible even with a good game plan (which exists) to get there without a change in consciousness. The 5 pillars are just common sense. And if there is some other plan, I'm absolutely lost as to what it might be to get us away from carbon and climate change and move the economy. But even with a good vision (3rd industrial revolution) of democratizing energy and with the five pillar infrastructure (that's technology and economics), if there isn't a radical change in consciousness to go with it, it won't happen.(This story was published in Businessworld Issue Dated 20-02-2012)
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With Rio +20 — the UN Conference on Sustainable Development — due in June, the world is abuzz with talks of energy and resource security and protecting environment while ensuring economic development. BW's Yashodhara Dasgupta spoke to international leaders gathered at the 12th Delhi Sustainable Development Summit organised by research organisation Teri to know their concerns, actions and views on sustainable development. Here is what they shared. Also, an interview with economist Jeremy Rifkin, who was here for a brief visit prior to the Teri summit, and a column by Bjorn Stigson, former president of World Business Council for Sustainable Development.1. MIKE RANN, Former Premier of the state of South AustraliaThe scepticism towards sustainable development comes down to complete ignorance. People have managed to con many politicians that if you take action on climate change it is bad for jobs. South Australia, the driest state in the driest continent, has shown you can have the strongest growth ever, have a drop in emissions and embrace clean industries. We have to stop listening to myth-makers and start listening to the truth.2. ANNIKA MARKOVIC, Environment ambassador, ministry of environment, Sweden We have a roadmap for 2050 where we will be free of CO2 emissions. We will also get rid of our dependency on fossil fuels. We are working hard with investments in the renewable energy sector... We believe sustainable development goals are a possible way forward where we can come together on a global initiative to pin point where we should go in important sectors like energy, food security, water etc. Sustainable cities are another important concept we take great interest in.3. CONNIE HEDEGAARD, Commissioner for climate action at the European CommissionWe are at a stage where we still have a choice. We can choose a much smarter, sustainable future. If we do it now, we can still keep our lives, our possibilities, our options, our mobility and the creative life many of us want to have. If we postpone action and wait for the consequences to grow even more enormous, we will find ourselves in a much worse situation. And it is also much more cost efficient if we start to act right now. 4. GRO HARLEM BRUNDTLAND, Former Prime Minister of Norway and member of UN secretary general's global sustainability panelThe idea that you can continue doing business as usual is flawed. Science shows this is not possible. We need to have renewable energy and not to continue warming the world... there are many solutions out there. It's not impossible to increase energy-use globally. We need to get more energy efficiency, more renewable in such a way that competition of enemies becomes difficult.break-page-break5. GHULAM MOHD MALIKYAR, Deputy director general of the National Environment Protection Agency in AfghanistanWe are a land-locked country. We have very low vegetation and forest cover. In the past 30 years, we have lost a significant portion of that cover. These challenges could affect Afghanistan and its neighbouring countries. It is difficult to restore all that within a few years. But there is hard work going on in several sectors to restore it. 6. TEWOLDE BERHAN GEBRE EGZIABHER, Director general of Ethiopian Environmental Protection Authority Small hold farmers cannot deal with climate change by themselves. Now that they are allowed to organise, local communities take decisions and implement it themselves. Land degradation is now reducing very fast in Ethiopia.7. MALIK AMIN ASLAM, Senior member of climate core advisory group to the government of PakistanFor us, the most urgent agenda is climate change and how to adapt to the problems. In the past two years, we have been hit by serious climate impacts. We are one of the high climate-risk countries. We have had 3-5 per cent of our GDP being washed away by climate change impacts. So, it is on the top of our agenda. 8. HENRI DJOMBO, Minister of sustainable development, forestry and environment, Republic of the Congo We lack electricity hugely. Hopefully, the hydropower plant we built with China will help us here. We are also using natural gas to create power. We will be able to use forest biomass to make it... Our public are not well-informed of sustainable development, but due to global and local efforts, they have an idea now. 9. MOHAMED ASLAM, Minister of housing and environment, The Maldives We focus very much on energy production and renewable energy. Fortunately, we have been able to provide reliable electricity for all our communities. But all of that is from fossil fuels. We want to convert that to renewable. Because it will contribute to global efforts and it has an economic sense for us. We spend about 35-45 cents to 1kwh power by burning fossil fuel. We can produce electricity at about 25 cents per 1 kw per hour by using solar power.10. MARIA MUTAGAMBA, Minister for water and environment in UgandaIt is a bit difficult to control industries. The majority go to wetlands thinking it is wasteland. Stakeholders such as the civil society and government try to make sure that industries appreciate these efforts so that we can utilise the space available for industries without jeopardising the ecosystem.(This story was published in Businessworld Issue Dated 20-02-2012)
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Privately held conglomerate Sahara India and U.S.-based Turner Construction Co have formed a construction joint venture that plans to build projects worth Rs 122,500 crore over 20 years in India, the companies said on Thursday.Sahara, with assets of Rs 127,400 crore, has global interests in finance, infrastructure and real estate, hospitality and media and entertainment. Turner, a subsidiary of German construction group Hochtief, builds about Rs 39,200 crore worth of projects every year.The joint venture, Sahara Turner Construction Ltd, aims to complete projects worth Rs 12,250 crore over five years, the companies said.Sahara India will initially invest Rs 490 crore and will hold 63 per cent of the joint venture, Chairman Subrata Roy told reporters, adding the group could raise its investment to more than Rs 1,470 crore later.Nicholas Billotti, chief executive of Turner Construction International, the company's overseas business unit, declined to provide details of its investment or shareholding in the joint venture.(Reuters)
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India plans to frame broader guidelines and prescribe timelines for issuing environment clearances to power sector projects, the federal environment minister said on Wednesday."Within my mandate to protect the environment, our policy will be to have consistent, transparent guidelines," Jayanthi Natarajan told reporters.India holds about 10 per cent of the world's coal reserves, but has struggled to provide enough fuel to its under-performing power sector, because of policy challenges.State-run miner Coal India has said it may miss production targets this year because of delays in environmental clearances at some of its mines, even as demand rises from power plants and industries.(Reuters)
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