British financial market regulator FSA has imposed a fine of $9.6 million (about Rs 50 crore) on a Dubai-based Indian investor for manipulating UK-listed securities of Mukesh Ambani-led Reliance Industries Ltd (RIL).This is one of the biggest penalties imposed abroad for manipulation of foreign-listed securities of an Indian company. Besides, it is also the biggest ever fine imposed by the FSA on an individual for market abuse.The wrongdoing was found to be committed by the investor alone and the company, India's most valued firm, whose securities were manipulated, itself has not been implicated in the case.The British market watchdog Financial Services Authority (FSA) said in its order that it has fined Ramesh Kumar Goenka, an Indian businessman living in Dubai for past 12 years, $9,621,240 (about six million British pounds).Goenka was found to be manipulating the securities of RIL by inflating the closing price of the company's GDRs (Global Depository Receipts), listed on the London Stock Exchange, on October 18, 2010.The shares of RIL, the flagship company of the Indian business conglomerate led by India's richest person Mukesh Ambani, are primarily listed in India, but their GDRs are traded on the LSE also.GDRs are like certificates of shares of a foreign company that can be issued and traded on international exchanges outside the company's home country.Announcing the penalty order, FSA said that "in publishing its findings against Goenka, the FSA is not in any way criticising Reliance." (PTI)
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Indian Oil Corp, the country's biggest fuel retailer, swung to a quarterly loss and warned rising under-recoveries on sale of petroleum products at subsidised rates may force it to cut its capital expenditure plan for this fiscal year and impact its ability to import crude oil.The state-run firm posted a net loss of Rs 7,486 crore ($1.5 billion) in its fiscal second quarter ended September, much wider than anticipated, and said it would find it difficult to borrow funds beyond December."We will review our capex plans in end-December or the first week of January, and if our borrowing continues to remain high, we will cut our capex plan," Finance Director P. K. Goyal told reporters.The company had planned capital expenditure of Rs 14,800 crore this fiscal year.India freed gasoline prices in June 2010, but prices for diesel, cooking gas and kerosene, which account for three-fourths of all petroleum products used in the country, are still regulated, forcing state-run oil firms to sell at losses.The costs of these price caps have climbed as international oil prices have risen.New Delhi aims to loosen control of fuel prices, but has found this difficult with benchmark global crude prices staying well above $100 a barrel most of this year. At 1034 GMT, Brent crude traded at $114.50, and has risen nearly 6 percent in November alone.India's state-run fuel retailers IOC, Hindustan Petroleum Corp Ltd and Bharat Petroleum Corp Ltd last week raised petrol prices by about 2.7 per cent, their fourth increase in prices this year.The government has drawn criticism for allowing the price increase despite stubbornly high inflation in Asia's third-largest economy. India's food inflation accelerated to a nine-month high of 12.21 per cent in late October.Indian state-run oil companies are expected to rack up revenue losses of $26.4 billion in the fiscal year ending March 2012, India's oil minister S. Jaipal Reddy had said last week.Q2 Loss Worse Than ExpectedIOC, which controls nearly half the market for petroleum products in India, said the September quarter was hit by increase in under-recoveries and rising interest expenditure. It had posted net profit of Rs 5294 crore a year earlier.Net sales at the company rose 28 per cent to Rs 88,725 crore.A Reuters poll of brokerages had estimated quarterly net loss of Rs 283 crore on net sales of Rs 98,677 crore.The company absorbed revenue losses of Rs 7,837 crore in the quarter on account of subsidised sale of fuel. Interest costs nearly tripled to Rs 1,484 crore.It had borrowings of Rs 73,296 crore at end-September, and it had a debt equity ratio of 1.66 times, Chairman R.S. Butola said.IOC, which is also India's biggest refiner with a total capacity of 1.294 million barrels per day, declined to give gross refining margins for the quarter, but said they were likely to be negative. It had posted margins of $6.63 a barrel in the same quarter last year.Shares in IOC closed down 3.8 per cent at Rs 287.90 in a weak Mumbai market. The stock, valued by the market at $14.8 billion, has declined nearly 16 per cent so far in 2011, slightly worse than the 15.3 per cent fall in the main stock index.(Reuters)
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Oil prices could reach $150 per barrel in the near term if investment in the Middle East and North Africa (MENA) oil-producing region falls significantly, the International Energy Agency (IEA) said on Wednesday."If between 2011 and 2015 investment in the MENA region runs one-third lower than the $100 billion per year required, consumers could face a near-term rise in the oil price to $150 per barrel," the IEA said in its annual World Energy Outlook.The IEA, adviser on energy policy to major oil-consuming countries, said world oil demand would rise steadily over the next two decades to reach around 99 million barrels per day (bpd) by 2035.It said short-term pressures on oil prices were easing as global economic growth slowed and Libyan oil began to return to the market after months of civil war, but in the longer term prices were likely to rise.The IEA raised its assumptions for the price of oil in 2035 to $210 per barrel from $204 a year ago.Production of conventional oil will fall gradually, it said, to around 68 million bpd by 2035, 0.5 million bpd lower than its forecast last year.(Reuters)
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Environment ministry on Wednesday gave conditional clearance to a $31-billion hillside township being developed by Hindustan Construction Co's unit Lavasa Corp, the ministry said in a letter posted on its website.The long-running dispute is one of many high-profile clashes over land acquisition between big business and authorities in the rapidly-developing economy.The ministry of environment and forests declined to give approval to the township last month, saying it had not complied with conditions specified by a ministerial panel probing the project's violation of green rules.(Reuters)
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For the third time in the past few months, estimates of global oil demand have been revised upwards. Added to the impact of a severe winter, crude oil prices are now being projected at $100 a barrel (it is already too high at $90). Oil producing countries — represented by the OPEC cartel — are comfortable at these prices; OPEC ministers have said that they are not thinking about upping production because there are adequate inventories.Which is not very surprising. Even during past episodes of demand increases, oil producers from the Persian Gulf, which together account for 40 per cent of global supply, haven't upped production to expected levels. In the oil price run-up during 2004-08, the increase in production from the Persian Gulf was a mere 1 million barrels a day.Some analysts believe that keeping production low contributed to the price increases in no small measure. Looking back 35 years, today's production from the Persian Gulf (at roughly 22 million barrels a day) is the same as it was in 1974. What has happened since the 1980s is that most of the countries from this region have been increasing the estimates of their oil reserves. Oddly, though, not many seem to be worried that oil may touch $100 soon: many see it as a brief spike stemming from winter conditions in Europe and the US, and liquidity from QE2 (the second round of quantitative easing by the US Federal Reserve).Global growth is going to be slower, reducing demand. More significant, China is expected to slow down, which could lead to lower oil prices. But others believe that the price increase is more structural, and that oil at $100 a barrel — or at least $90 — is here to stay.But this much is clear: oil at such high prices is not good for the Indian economy. At the macroeconomic level, a higher oil import bill would widen the current account deficit further. This week, the government postponed action on diesel price deregulation. Chances are that reform of pricing policy for liquefied natural gas and kerosene will be subject to a similar fate. The consequences for the country's fiscal health are detrimental.At the microeconomic level, input costs for most manufacturing industries would have an adverse impact on bottom lines. Prices of naphtha and bitumen — by products in petroleum refining — will also go up, as will fertiliser prices, perhaps electricity prices as well. The prices of other commodities like metals also rise when oil rises. Manufacturing inflation, which was originally expected to moderate, may instead stay stubborn. Food price inflation, already a big worry, could get higher. Two states — West Bengal and Tamil Nadu — go to the polls soon, and incumbent governments will feel the angst of consumers. From a policy standpoint, the worries for the Reserve Bank of India will intensify before its January-end policy review. Already, most analysts and observers anticipate a policy rate hike of a quarter of a percentage point. Now, they worry about the risks of a bigger hike necessitated by inflation.Tighter monetary conditions could be ameliorated by higher capital inflows, but a strengthening dollar — stemming from an increase in oil prices — could dent those expectations. Taken together, all these effects could result in one thing no one wants: India's economic growth, which most project at nearly 9 per cent in 2011-12, could end up at slightly less than 8 per cent. High oil prices could throw sand into the wheels of India's growth story.(This story was published in Businessworld Issue Dated 10-01-2011)
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With food inflation at nearly 17 per cent, the Centre faces a Hobson's choice on fuel (diesel, kerosene and LPG) subsidy sharing. And the finance ministry and petroleum ministry have locked horns over this issue. The finance ministry claims that the losses of the oil marketing companies (OMCs) are inflated as they are calculated on notional costs. Petroleum ministry officials, on the other hand, argue that FinMin should follow the corporate dharma for the sector, which is among the biggest revenue earners for the exchequer. The OMCs generate nearly Rs 1.2 lakh crore for the Centre and nearly Rs 77, 000 crore for the states.In the current scenario, increasing the price of fuel would hardly be an option for the government. Global crude prices are in the region of $90-94 per barrel. That is unlikely to ease with an intense winter in Europe and the US. At this level, the under-recoveries for the OMCs is in the region of Rs 6 for every litre of diesel sold. It increases to Rs 20 per litre for kerosene and Rs 366 for each LPG cylinder of 14.2 kg. State-run OMCs including Indian Oil Corporation (IOC), Hindustan Petroleum Corporation, and Bharat Petroleum Corporation would have under-recoveries of Rs 73,000 crore this financial year, much higher than the Rs 46,000 crore in the last fiscal.The finance ministry is not willing to accept these numbers and has asked for a fresh calculation of the subsidies. The petroleum ministry points out that these are all listed companies. The impact will be visible in their third quarter results. If the government does not come up with the sharing programme, the books of all the OMCs will be splashed in red. This would be bad news for IOC, where the government is set to offload a 10 per cent stake to raise about Rs 24,000 crore. Moreover, losses would also mean low valuations; and this would make it difficult for these companies to raise funds for foreign operations and acquisitions.The finance ministry doled out Rs 13,000 crore for the first two quarters and it is open for sharing one-third of the annual losses with subsidy. And that means the balance 66 per cent of the losses would have to be cushioned by the upstream companies such as OiI India and Oil and Natural Gas Corporation, along with the OMCs.However, this is not acceptable to the petroleum ministry. It wants the finance ministry to allow it a subsidy of 55 per cent of the under-recoveries with 10 per cent borne by the OMCs themselves. The balance could be borne by the upstream companies. Petroleum minister Murli Deora met Prime Minister Manmohan Singh and demanded Rs 10,000 crore as subsidy. Although the government has deregulated petrol prices, it is unlikely that it would do the same for diesel in the near future.Another option that the government is considering is to reduce the excise duty on fuel — it is at about 40 per cent of the refinery cost. The petroleum ministry feels taxes should be reformed both at pre-refinery and post-refinery stages. These taxes form more than 50 per cent of the price of the fuel at retail outlets. The subsidy-sharing programme is likely to take some time to be finalised. The forthcoming Union Budget could bring news on the excise duty cut. Till then, you and me have to grin and bear.(This story was published in Businessworld Issue Dated 24-01-2011)
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Infrastructure firms are likely to be dominant issuers in India's corporate debt market this week, offering paper targeted at foreign investors who have won new limits to buy such debt.However, other issuers are likely to stay away as the cost of capital for private companies have surged after the government increased its fiscal second half borrowing to 2.2 trillion rupees ($44.5 billion) from the budgeted 1.67 trillion rupees."The regular bond issuances are remote as of now as corporate bond yields have gone up sharply. There is no courage seen by issuers to come forward to the market currently," said Ashish Agarwal, executive director, AK Capital.Since the announcement of enhanced borrowing limits by the government, the benchmark five-year bond has risen 16 basis points to 9.65 percent till Friday and the 10-year corporate bond yields have jumped 17 basis points to 9.67 percent."The yields of the underlying government securities as well as the corporate bonds have been fairly choppy. I don't see too many corporate issuances till such time as these yields stabilize," said Nirav Dalal, president & managing director, debt capital markets at Yes Bank in Mumbai.Infrastructure firms are however likely to take advantage of newly auctioned corporate infrastructure debt limits for FIIs which saw good demand after the lock-in period restrictions were revised. The government has lowered the lock-in period for such debt to 1-year from 3-years previously.India's auction of $5 billion in corporate infrastructure debt to FIIs was over covered, four market sources said on Friday. FIIs bid for a total of 347.11 billion rupees compared to 224.19 billion rupees on offer.Infrastructure Development Finance Co and Rural Electrification Corp are some of the firms who have announced issuances to take advantage of the new found demand from FIIs."I guess the shorter tenor bonds of infrastructure companies are the ones that will continue to happen," Dalal said.Issuers, eligible to issue tax-free bonds, may also hit the market.India has allowed four firms to raise 300 billion rupees via tax-free bonds in the current financial year that began April 1.National Highways Authority of India (NHAI) and Indian Railway Finance Corp (IRFC) can each raise 100 billion, while Housing and Urban Development Corp. (HUDCO) and Power Finance Corp (PFC) can each raise 50 billion rupees, the Central Board of Direct Taxes said in a notification posted on its website.PFC, HUDCO and IRFC have already hit the market with small borrowings via tax free private placements, while NHAI is working on a retail issue.Fears the Reserve Bank of India (RBI) may continue to raise policy rates to tame inflation despite domestic growth worries may also keep yields from slipping lower, traders said. However, market participants are slowly moving towards expecting the central bank to pause on the back of the global turmoil.Analysts polled after the central bank's mid-September policy expected the RBI to deliver the last blow in its current tightening cycle which has lasted over 18 months when it reviews policy on Oct. 25.The spread between the five-year corporate bond and government bond was 81.54 points on Friday, from 88.81 basis points on Wednesday.The spread between the 10-year corporate bond and government bond at 79.79 basis points on Friday from 85.23 basis points at its previous close."Corporate issuers are likely to wait for the monetary policy to be out of the way before they come back to the markets," Dalal added.(Reuters)
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Reliance Industries Ltd (RIL) on Sunday reported 16 per cent rise in net profit to Rs 5,703 crore for the quarter ended September 30. This was in line with expectations.RIL, which had in July-September quarter of previous fiscal reported a net profit of Rs 4,923 crore, said it earned $10.1 on turning every barrel of crude oil into fuel.Its turnover rose to Rs 80,790 crore in the second quarter (Q2) of the current fiscal, as against Rs 59,962 crore in the same period a year ago, the company said in a statement.Analysts polled by Reuters had said Reliance, controlled by billionaire Mukesh Ambani, was expected to report a 16 per cent rise in September-quarter profit on strong refining margins. Commenting on the results, Mukesh Ambani, Chairman and Managing Director, RIL said: "Our first half financial performance has been consistent. The increase in profits was largely driven by improved performance in the refining and petrochemicals business. All our manufacturing facilities operated at record levels with refineries achieving operating rates of 110 per cent. RIL has strong balance sheet and sustained earning base to pursue growth opportunities."RIL achieved a record turnover for the half year ended September 30, 2011 of Rs 164,479 crore ($33.6 billion), an increase of 36 per cent on a year-on-year basis. Increase in volumes accounted for 3.5 per cent growth in revenue and higher prices accounted for 32.5 per cent growth in revenue. Exports were higher by 52.2 per cent at Rs 101,872 crore ($20.8 billion) as against Rs 66,936 crore in 1H FY10-11. Higher crude prices resulted in consumption of raw materials increasing by 44.4 per cent to Rs 129,104 crore ($26.4 billion) on a year-on-year basis.Employee costs were at Rs 1,593 crore ($ 325 million) for the half year as against Rs 1,277 croreOther expenditure increased by 17.3% from Rs 7,452 crore to Rs 8,743 crore ($ 1.8 billion) due to higher power & fuel expenses and exchange difference.Operating profit before other income and depreciation increased by 5.5 per cent from Rs 18,738 crore to Rs 19,770 crore ($ 4.0 billion). Net operating margin was lower at 12.0% as compared to 15.5 per cent in the corresponding period of the previous year due to base effect.Other income was higher at Rs 2,180 crore ($ 445 million) as against Rs 1,394 crore on a year-on-year basis primarily due to higher average liquid investments.Depreciation (including depletion and amortization) was lower by 10.2% at Rs 6,164 crore ($ 1.3 billion) against Rs 6,862 crore in 1H FY 2010-11 due to lower depletion charge in oil & gas as a consequence of the transfer of 30% Participating Interest (PI) in 21 blocks to BP.Interest cost was higher at Rs 1,205 crore ($ 246 million) as against Rs 1,083 crore in 1H FY 2010-11 principally due to higher foreign exchange difference. This resulted in gross interest cost being higher at Rs 1,481 crore ($ 302 million) as against Rs 1,311 crore in 1H FY 2010-11. Interest capitalized was higher at Rs 276 crore ($ 56 million) as against Rs 228 crore.Profit after tax was Rs 11,364 crore ($ 2.3 billion) as against Rs 9,774 crore for the corresponding period of the previous year.Basic earnings per share (EPS) for the half year ended 30 th September 2011 was Rs 34.7 ($ 0.70) against Rs 29.9 for the corresponding period of the previous year.Outstanding debt as on 30 th September 2011 was Rs 71,399 crore ($ 14.6 billion) compared to Rs 67,397 crore as on 31 st March 2011. Net gearing as on 30 th September 2011 was 5.4% as against 13.5% as on 31 st March 2011.Production from KG-D6 was 2.7 million barrels of crude oil, and 303.4 BCF of natural gas, a reduction of 42.1% and 20.3% respectively on a year-on-year basis. The reduction in production was mainly due to reservoir complexity. Production of gas condensate was 0.40 million barrels, an increase of 26.3 % over the previous period.Gas was sold as per the Government?s Gas Utilization Policy and at a price of $ 4.2 /MMBTU.(Agencies)
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