Shares in Oberoi Realty gain as much as 17.6 per cent after the real estate developer emerged as the highest bidder for an industrial land parcel being sold by Tata Steel Ltd with a final bid of 11.55 billion rupees.The land purchase could be a boost to Oberoi's profit margins should the real estate developer prevail in the auction, analysts say.Kotak Institutional Equities estimates Oberoi can start monetising the acquired land from fiscal 2016, calling the deal "value-accretive."(Reuters)
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An unexpected request by the Election Commission for the government to defer a rise in gas prices until after a looming general election hit shares in Reliance Industries Ltd and Oil and Natural Gas Corp on Tuesday (25 March). A price increase had been due to come into effect on April 1, just days before India starts voting in an election that starts on April 7 and will end on May 12. The Election Commission gave no reason for its decision late on Monday. But Supreme Court on Tuesday resumed a hearing on two petitions to strike down the cabinet's June 2013 approval of a doubling in the gas price on grounds that it favoured a corporate house and was against the interests of the nation. The government told the court on Tuesday that it would comply with the Commission's request. Arvind Kejriwal, the head of the Aam Aadmi Party (AAP), which briefly controlled the state government in New Delhi, last month called for a criminal investigation into government officials and Reliance Industries Chairman Mukesh Ambani over the matter. Kejriwal had also called for the Election Commission to stall the price rise. Reliance Industries is India's second most valuable company, and Ambani is the country's richest man. The cabinet last year approved a near-doubling of gas prices from the current $4.20 per million British thermal units to spur investment in exploration for gas. Following the Election Commission's action, shares in Reliance fell as much as 3.8 per cent to Rs 872.50, on a day when the Mumbai share markets were trading broadly flat. ONGC was also down 3.8 per cent and state-run Oil India Ltd was trading down 2.5 per cent. "It sends a very bad signal to the outside world. In this country, due to elections even the commercial decisions can be postponed," said Deven Choksey, managing director at Mumbai brokerage K.R. Choksey Securities. Many brokerages had upgraded earnings estimates for Reliance and ONGC after the cabinet approved the price hike last year. "Thank you Election Commission for saving the people of India from huge price rise that would have happened if gas prices had increased from 1 Apr," Kejriwal tweeted after the commission announced it had called for a delay. Reliance says Kejriwal's allegation that it created an artificial gas shortage to "blackmail" the government into raising prices is baseless. It has long maintained that geological complexities have pushed production lower and costs up, warranting an increase in prices in order to boost investment that will lead to higher output. "A political party has written to the Election Commission (EC) to keep on hold a bona fide decision of the Union Cabinet on gas pricing. The party has a history of ill-informed diatribe," Reliance said in a statement issued on Sunday. The company declined to comment after the Election Commission announced its decision late Monday. High Demand, Low PriceAnalysts noted that the cabinet approval was granted long before the election dates were announced, and some said the Commission's intervention could further undermine sentiment towards an energy sector that has struggled to attract investment. The election commission can ask the government to put on hold any decision that comes into effect after announcement of the poll schedule if the move is seen influencing voters or benefitting any particular political party, but it did not explain its reasoning in this case. In a letter to the petroleum ministry's secretary, the commission said it had decided the proposed price increase could be deferred, without elaborating. In its statement on Sunday, Reliance said the government's decision to implement the new price from April 1 was part of a "contractual obligation", as current gas prices are valid until March 31. Demand for gas in India far outstrips consumption and domestic supply, but the government has kept prices below global market levels for producers of fertiliser and electricity, which has deterred investment in domestic exploration and production. India, the world's fourth-largest energy consumer, has few energy resources other than coal, which meets 56 per cent of its energy needs. Oil, mostly imported, accounts for 26 per cent. Gas output from wells operated by Reliance and its partner BP off India's east coast, has fallen sharply since 2010. The companies say the decline in due to the geological complexity of the KG D6 block. (Reuters)
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While it is common knowledge that the real estate sector is in the midst of its worst-ever slump, Noida-based Jaypee Infratech (JIL) seems to have bucked the trend. The infrastructure company’s net sales revenues stood at Rs 3,318.69 crore in March 2014, up from Rs 550 crore in 2009. All this, with a simple strategy — selling real estate in bulk. The opening of the six-lane 165-km Yamuna Expressway, connecting Greater Noida to Agra and radically reducing travel time between the two cities to just 90 minutes, too, contributed to the company’s good fortunes. The expressway project was awarded to Jaypee on a build-operate-transfer model. When the expressway was inaugurated in 2012 the areas adjoining it began appreciating. This meant good times for JIL. Till March 2014, the company had sold 56.60 million sq. ft of real estate space. Concurrent to the expressway, the Formula 1 races, brought to India by Jaypee in 2011, also contributed to the group’s turnover. The race track created a buzz that led to real estate in its vicinity being considered prime property and, thus, helped JIL notch up sales of a further 25 million sq. ft, says Manoj Gaur, chairman and managing director, JIL.“There are two revenue streams for JIL — one from the sale of real estate and the other from expressway toll,” says Gaur. The company currently holds land parcels in Noida, Jaganpur, Mirzapur, Tappal and Agra. Toll on the expressway, initially in the range of Rs 23 lakh to Rs 25 lakh a day, now yields Rs 45 lakh to Rs 50 lakh a day on an average.Going forward, JIL has a target of building more than 27,000 homes, with 107 million sq. ft already under construction. “Once these are completed, we will be able to recognise the revenue streams,” says Gaur. JIL has recently ventured into the healthcare segment as well. Jaypee Hospital, a wholly owned subsidiary at Wish Town, a Jaypee-built township in Noida, is what Gaur considers a “very positive thing for shareholders of Jaypee Infratech”. The group expects a turnover of Rs 800 crore in two years’ time from the hospital. (This story was published in BW | Businessworld Issue Dated 11-08-2014)
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Iran exported oil at levels higher than allowed under Western sanctions for a fourth straight month in February, ship loading data seen by Reuters showed, raising the risk of a crackdown if Washington feels economic pressure is being relaxed too quickly. The higher sales to Iran's main clients, mostly in Asia and including Turkey, have come after a temporary agreement eased some sanctions aimed at undermining Tehran's nuclear programme. Under the deal, Iran's exports are supposed to be held at an average 1 million barrels per day (bpd) for the six months to July 20. But shipments to Asia have topped that level at least since November, according to customs and ship tracking data. As talks on a final nuclear deal resumed in Vienna on Tuesday (18 March), US President Barack Obama was again facing pressure from US lawmakers to be tougher on Iran. US senators have written to Obama to say Tehran should not be allowed to circumvent sanctions as world powers work towards a lasting agreement with the Middle East country. "Iran cannot be allowed to be open for business," 83 senators wrote in a letter. "We view this period as one fraught with the danger of companies and countries looking to improve their commercial position in Tehran." February crude loadings by Iran's top four buyers - China, India, Japan and South Korea - rose to 1.16 million bpd versus 994,669 bpd in January, according to the loading plan. Adding in oil lifted by Turkey - which came in at 105,824 bpd in January and 117,857 bpd in February - Tehran's exports have busted the sanctions limits at least since November. The loading volumes exclude condensate, a light oil, that Iran exports to China and others. Since sanctions were imposed in 2012 and more than halved Iran's oil exports, China, India, South Korea, Japan and Turkey have bought nearly all Iranian crude exports. The Obama administration believes Iran's exports will fall in coming months and exports through late July will average 1 million bpd. To ensure that happens, Washington could put more pressure on Iranian crude buyers to slash purchases. Indian government sources have said refiners there must cut their Iranian oil imports by nearly two-thirds from the first quarter after the United States urged New Delhi to hold the shipments at end-2013 levels. The temporary deal between Iran and world powers, struck in November and implemented on January 20, also freed up $4.2 billion in back oil payments to Tehran in return for curbs on its nuclear program. Breaching CeilingThe intake of Iranian oil by Asian buyers alone has topped 960,000 bpd since November, government and industry data has shown, and adding in an average 100,000 bpd of crude for Turkey, exports have breached 1 million bpd at least since then. With loadings for the first two months of the year - for February and March arrivals - also holding above 1 million bpd, according to the loading document, exports look set to breach the cap for the first quarter of the year, allowing up to three weeks for shipments to China, Japan and South Korea. China lifted 502,500 bpd in February, again taking its purchases back to pre-sanctions levels. The nation's refiners received 564,536 bpd in January. In comparison, China imported 428,840 bpd of Iranian oil for all of 2013, according to customs data. China's February import numbers are not due out until later this week. China's total oil imports from Iran may rise in 2014 as state-run trader Zhuhai Zhenrong Corp is negotiating a new condensate contract, Reuters has reported. India lifted 304,286 bpd of crude in February, according to the loading data. Iran's second-biggest client imported 412,000 bpd in January and averaged 195,600 bpd in arrivals in 2013. South Korea loaded 214,286 bpd in February, mostly for March arrival dates. February arrivals from Iran, meanwhile, doubled from a year earlier as refiners hiked purchases ahead of maintenance shutdowns starting from March. Japan loaded 140,000 bpd in February, according to the loading programme. It purchased 210,517 bpd from Iran in January, after reducing imports by 6 per cent in 2013, marking its lowest daily crude imports from Iran in more than 30 years. Japan's February import numbers are due later this month. Condensate ExportsIran's exports to Asia, including condensate, were 1.25 million bpd in February, up 62,000 bpd from the previous month, the loading document showed. That was on par with a 13-month high in oil and condensate arrivals in Asia in January. Including Turkey, Iran's crude and condensates exports rose to 1.37 million bpd in February, up 74,000 bpd from January. (Reuters)
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Jindal Steel and Power Ltd will stop buying coking coal from Australia in three months from now as its own mines there start shipping, a top company official said, a move that could further soften prices of the commodity. Recent coking, or metallurgical, coal price settlements by major miners showed a fall in the price of all coal types for the first quarter of 2014, underscoring a weak demand outlook from steelmakers in Asia. "We get 50,000 tonnes per month from our mine in Mozambique and another 50,000 tonnes we buy from Australia," said V.R. Sharma, deputy managing director of Jindal Steel. "But after three months we will not be buying because we have our own mines there," he told Reuters late on Tuesday (18 march). Jindal Steel, headed by billionaire lawmaker Naveen Jindal, got access to 650 million tonnes of coking coal resources in October after buying a majority stake in Gujarat NRE Coking Coal, the Australian unit of Gujarat NRE Coke Ltd. Gujarat NRE Coking's two mines, located in New South Wales, are currently producing 1.5 million tonnes per year and are expected to have an output of 5 million tonnes by 2016. Australia is the world's largest coking coal exporter, with shipments expected to rise 6 per cent to 163.9 million tonnes this fiscal year ending March 31. Sharma said Jindal Steel's coking coal consumption will more than double to 2.6 million tonnes by 2016 as it expands capacity. About 80 per cent of the coal will come from its mines abroad and the rest it will buy from the open market. But unlike other Indian companies such as Steel Authority of India Ltd and Neyveli Lignite Corp, Sharma said Jindal Steel was no longer looking to buy coal mines overseas as it has enough coking coal resources now. India's coking coal imports are set to rise 6 per cent to 35 million tonnes this fiscal year ending March 31. Domestic output has been stagnant at 18 million tonnes per year as most reserves are in thickly populated areas. (Reuters)
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Cairn india is not only India’s fastest growing company in BW | Businessworld’s Middleweight category (revenues in the range of Rs 5,000 crore to Rs 9,999 crore) for FY2014 but also the fastest growing oil and gas explorer globally over the past two years. The company has achieved this feat on the back of a mega oil discovery at its Rajasthan oilfield, located near Barmer.The Cairn India management’s belief in its abilities led it to persist with a field in which global major Shell had failed to find oil in the 1990s. “We drilled 13 dry wells when we took over the Barmer oilfield from Shell. We succeeded in the 14th and named it Mangala, the auspicious. We always believed that we could make it happen. And, in 2004, we made the largest oil discovery in India in over two decades after Bombay High,” says Sudhir Mathur, CEO, Cairn India. To succeed in one of India’s toughest fields, the company deployed advanced technology from North America.In the past two years, the company has brought four fields into production and there has been a 300 per cent increase in its crude output over four years. The result: a Rs 38,500 crore reduction in India’s crude oil imports in FY2013.Cairn India is among the top 20 global independent exploration and production companies, with a market capitalisation of $10 billion. At the moment, the company accounts for 25 per cent of India’s total crude oil production. It has made 40 discoveries so far with 1.3 billion barrels of oil equivalent (BoE) of gross proved and probable reserves and resources.At a time when other oil companies in India are struggling to meet production targets from oil and gas blocks, Cairn India has achieved 100 per cent reserve replacement ratio — which effectively increases the life of oilfields. “Reservoir management is key to sustained production in the oil and gas business. We have tied up with the University of Texas to develop technology to increase the life of our oilfields,” informs Mathur.An example of Cairn’s use of technology to increase output from its oilfields is its Ravva block, located in Andhra Pradesh. The block currently produces 29,151 BoE per day. So far, the company has extracted around 250 million barrels of oil from the field as against its total reserve estimates of 100 million barrels of oil. Cairn India’s portfolio has nine blocks — one in Rajasthan, two on the west coast, four on the east coast and one each in Sri Lanka and South Africa. The company has three producing assets: Rajasthan and Cambay in the west and Ravva in the east. In Rajasthan, the company has five producing fields — Mangla, Saraswati, Bhagyam, Raageshwari and Aishwariya. The block currently produces around 200,000 BoE per day. The company has invested over $4.5 billion as capital expenditure. “In three years, we aim to produce 300,000 BoE per day from our Rajasthan field. The output will double three years from now, taking our share of the country’s total production to 40 per cent,” says Mathur.Cairn India has drilled over 100 exploration and appraisal wells in its Rajasthan oilfield, and the number of wells will be increased to 450 over the next three years, says Mathur. “Drilling wells is a costly business. So, as an explorer our success depends on finding oil or gas with the least number of wells. Our technology has kept us ahead of our peers in striking oil from wells,” adds Mathur.Oil’s well for Cairn India! (This story was published in BW | Businessworld Issue Dated 11-08-2014)
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This January, then Prime Minister Manmohan Singh inaugurated a 5 million tonne per annum (mtpa) terminal at Kochi by Petronet LNG, India’s largest liquefied natural gas (LNG) regasification company. For the company, the new terminal was a step closer to achieving its targeted capacity of 30 mtpa by 2020. In a business where demand is huge and rising but supply is limited, Petronet sources 7.5 mt of gas from RasGas in Qatar and another 2.5 mt annually from across the world. “In the long run, domestic gas will not be able to meet the continuously rising demand in India. Imported gas is the solution. That’s where our business model, which is based on regasification charges, comes in handy,” says A.K. Balyan, CEO and MD, Petronet LNG. Besides its own imports, Petronet is open to regasifying LNG imported by others. It’s no surprise the company has achieved an average four-year sales growth of 38.57 per cent. However, for its model to work best, Petronet needs a network of pipelines to supply gas to customers. Its 10 mtpa Dahej terminal in Gujarat is connected to five pipelines that move gas across north and west India. The Kochi terminal is currently linked by a 44-km pipeline to Cochin Refinery. In the second phase, two pipelines are planned for Kochi— Tamil Nadu to Bangalore and from Kerala to Mangalore. Petronet is also working to set up another 5 mtpa terminal on the east coast at Gangavaram in Andhra Pradesh.“We need to multiply the length of pipelines so that the current grid in north-west India is connected to the southern grid.”Petronet, which sources the bulk of LNG from Qatar, is looking to diversify its gas imports as more and more gas assets start production. For that, the government needs to first finalise the price of domestic gas. Once that happens, things should become clearer for Petronet.The company has already found buyers for its Kochi terminal for the next 20 years. Besides, a combination of low domestic natural gas output and ever-increasing demand from companies helped Petronet LNG maintain an over 100 per cent utilisation of its Dahej terminal. That’s huge considering LNG regasification plants the world over work at 50-55 per cent of their capacity. (This story was published in BW | Businessworld Issue Dated 11-08-2014)
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C P. Gurnani, chief executive officer and managing director of Tech Mahindra, spoke with BW | Businessworld from Brazil — the Latin American country that hosted the football World Cup this year. Thousands of people from across the globe were parked in the country over June-July to watch the championship. But Gurnani wasn’t in Brazil on a leisure trip. His company, Tech Mahindra, was providing back-end IT support and services for the event, just as it did the last time around. Alongside the project, Gurnani was also working on expanding the company’s footprint in Latin America. He met several clients — both current and prospective — and took in the odd game whenever he could.Indians can take heart from the fact that while the national football team did not come anywhere close to making the cut, an Indian IT company certainly did! International expansion aside, Tech Mahindra has been enjoying a good growth rate. Growing at near industry-leading rates, it is competing with established players such as Tata Consultancy Services and HCL Technologies.The company was, however, seen as a stolid one-trick pony until a few years ago. While it was successful in the global telecom services and support market, it struggled to branch out like some of its Indian peers. But much has changed. It is now part of Indian business folklore. How the Mahindras took over erstwhile IT giant Satyam amidst stiff competition and all the uncertainties that surrounded the company makes for a great case study. Battling court cases, retaining employees and clients, satisfying regulatory demands, even as they pulled off a smooth integration was no easy task. The calculated bet against all odds has paid off quite handsomely. The net sales revenues of the consolidated entity have grown three-fold between 2010-11 and 2013-14. In comparison, yesteryear industry poster-boy Infosys didn’t as much as double its revenues during the same period. Tech Mahindra today is a well-diversified IT services company across geographies. While telecom — its strong suite — continues to contribute 47 per cent revenues, it is now seen as a credible player in areas such as manufacturing, retail, logistics, banking, financial services and insurance after the Satyam acquisition. Tech Mahindra’s clients include British Telecom, AT&T, Vodafone, Honda, Mercedes Benz and Volvo.Gurnani modestly declines credit for the company’s stellar performance. “It has been a collective team effort. There has been a buy-in from all stakeholders that has enabled our growth.” Like its competitors, it, too, is making investments in the SMAC (social, mobile, analytics and cloud) stack of technologies. What sets it apart, however, are the calculated bets it is taking. For example, not many know that Tech Mahindra presently operates in 15 African countries, where it has delivery centres. While Africa still contributes only a small portion to its revenues, the company has made investments ahead of the curve. “While we currently continue to get about 45 per cent of revenues from North America and 32 per cent from Europe, Africa with its huge population and a growing economy is a very good opportunity. It is such bets that have paid off for us,” says Gurnani.Such risk-taking is doing the company wonders. Apart from Satyam, it has acquired vCustomer, Hutchinson Global Services, Comviva Technologies, Complex IT and BASF Business Services. While tripling dollar revenues in five years is an impressive task, the company has publicly stated that its goal is to reach $5 billion in revenues by 2015-16. “To reach those numbers, a part of the strategy will clearly have to be inorganic. We are working on it,” is all Gurnani is ready to say for now. He is currently sitting on a war chest of Rs 3,600 crore in cash and can clearly raise more if required. Integrating acquired companies with its current base of 630 clients and 90,000 employees will clearly be a challenge. Gurnani though sounds unfazed. “We have done a smooth integration in the past and we are confident we will do so in the future too even as we retain our unique values and DNA. The goal is to maintain the agility of a startup and have the maturity of a behemoth.”If Tech Mahindra can pull that off, Gurnani will have more reasons to enjoy the next global sports tourney, wherever it takes place.(This story was published in BW | Businessworld Issue Dated 11-08-2014)
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