ABG to counter Bharati's bid for Great Offshore

The bidding war for Great Offshore ratcheted up a notch with ABG Shipyard saying it would come out with a counter-offer to rival Bharati Shipyard's offer of Rs 560 a share announced on Wednesday after it acquired 3.1 per cent from the open market to take its total holding to 22.4 per cent.

"We are definitely in the race to buy a controlling stake," said Dhananjay Datar, chief financial officer of ABG Shipyard. "The price and date of the counter offer will be decided later," he added.

Great Offshore is the target of a bidding war in which India's two largest private ship builders are trying to take control. On August 5, ABG Shipyard, the largest private sector shipbuilder, raised the open offer price for Great Offshore to Rs 520 from Rs 450 announced earlier.

This was the second increase in the open offer price by ABG in a week, even as it continued to buy shares from the open market to outbid its rival. ABG Shipyard's holding in Great Offshore reached 8.28 per cent.

Bharati Shipyard responded after over a month by increasing its stake for the second time on Wednesday.  Earlier, the company had revised its offer price from Rs 344 to Rs 405 a share.

Bharati acquired 14.89 per cent in Great Offshore in May, at a price of Rs 315 per share, from the latter's vice chairman and managing director, Vijay Sheth, by invoking shares he had pledged against a loan. This left Sheth with less than one per cent in the company and he lost control. According to the analysts, Bharati's primary interest in acquiring the stake was to save its order book.

Bharati is currently at an advantage because it is closer to the 26 per cent stake that  would give it veto power to block any board resolution. Counterbids from the rival companies continue as they await the mandatory approval for their respective open offers.

Bharati Shipyard's open offer was supposed to run from July 25 to August 13. But the company is yet to get approval from the Securities and Exchange Board of India. ABG Shipyard's open offer was to run from August 13 to September 1. It is also waiting for approval from the market regulator.

Great Offshore stock gained 0.3 per cent to Rs 566.7 a share on the Bombay Stock Exchange on Thursday. ABG Shipyard gained 0.3 per cent to Rs 266.1 and Bharati Shipyard gained 2.64 per cent to Rs 214 a share.

Ministry order kills pay rise hopes for IIT, IIM faculty

The Union Ministry of Human Resource Development (MHRD) has killed hopes of an immediate pay rise for the faculty of centrally funded technical institutions like the Indian Institutes of Technology (IITs), Indian Institutes of Management (IIMs) and Indian Institute of Science.

The Centre's modified order dated September 16 has only allowed for a pay increase for assistant professors after they complete three years of service but has ignored most other demands.

For the last few years, the IIT faculty associations have been disgruntled about their pay structures being too inadequate to attract quality faculty and had held protests earlier this month demanding higher compensation. The IITs had hoped that the Govardhan Committee report submitted this February — which recommended higher salaries for all technical education teachers — would help resolve the issue.

However the notified revised pay structure announced by HRD in early August was much lower than expectation. The remuneration for directors was fixed at Rs 80,000 for the IITs, IIMs, the Indian Institutes of Science Education and Research (IISc) in Bangalore and the National Institute of Industrial Engineering, which did not go down well. For, unlike the IIM professors who earn through consulting assignments, salary is an IIT professor's only income.

Faculty associations were also unhappy with an HRD clause that said there would be a 40 per cent cap on professors who are eligible to receive higher pay after six years in the post. Also, at assistant professor level, the ministry had notified qualifications of a minimum three years work experience and a PhD.

This meant that IITs were not be able to take fresh graduates or doctorates as permanent faculty members.

The IITs also found disparities in the pay structure between the University Grants Committee (UGC) system and the IITs. While a BTech-level assistant professor could start on Pay Band 3 in a university, at the IITs only PhDs joined this band on a contract basis and had to work for three years to become an associate professor.

The institutes also protested that the Central Pay Commission had given all employees of the Indian Space Research Organisation (Isro), Defence Research and Development Organisation have been given special additional pay ranging from about Rs 2,000 per month to about 10 per cent of basic pay as a special grant for special achievements. Premier educational institutions, on the other hand, had not been granted any such special treatment for the highly-valued brands they have created, including mentoring new IITs.

Other demands included that the professional development allowance of Rs 300,000 (for international/national conferences, contingencies, membership fees) be increased to Rs 500,000 for a block of three years; that the 'lecturer' position be abolished and lecturers re-designated 'assistant professors' at an appropriate scale; and that the recruitment of faculty with PhD degrees with less than three years of experience start with a minimum pay of Rs 30,000 and academic grade pay of Rs 8,000.

The IITs had also demanded a scholastic pay of Rs 15,000 per month to attract fresh PhD scholars into the teaching profession. This special pay is expected to compensate the IIT faculty for the "notional" financial loss they incur compared to people of comparable qualifications in other sectors.

Discontent over pay packages have been building up for some weeks.  In early September,  faculty at some IITs staged protests -- including going on mass casual leave -- against the new pay regime passed by the Union Cabinet last month based on the recommendations of the Goverdhan Mehta Committee report which was submitted in February.

The All India IIT Faculty Federation (AIITFF) temporarily suspended its agitation on September 5 after a meeting with Union HRD Minister Kapil Sibal suggested that the issue would be resolved, though there were no assurances from ministry.

Faculty members of the institutions view the ministry's failure to consider lifting the 40 per cent cap on tenured faculty members as a major lapse.

"There has been hardly any modification in the current notification as none of our major demands have been met. At least the ministry should not have overlooked the pay rise for senior faculty members as they will eventually be at par with the faculty of other universities which fall under UGC," rued a senior faculty member at IIM-A, which had submitted a memorandum to the ministry earlier this month.

"We reiterate the fact that IIM and IIT professors spend more years working to get to these premier institutes and deserve a better pay based on their performance. This way, we will only lose better faculty to the industry," he added.

Today, the faculty association at IIT Madras held a meeting with its members to decide the next course of action. "We were a little relieved that the demand for the pay of assistant professors has but many other factors were not considered. After discussing with our faculty members we will speak to other IITs and take the necessary steps," said a faculty member at IIT Madras.

The IIMs, meanwhile, are yet to react, but the Indian Institute of Science, Bangalore faculty association has decided to hold a meeting, probably on September 22, to discuss the issue. "We had submitted four or five major issues in our memorandum to the HRD ministry of which one has been tackled. We will take a decision on what to do next in consultation with our members," said J Nagaraju, president of the IISc faculty association.

Copper drops

Prices shed gains as inventories soar
Copper prices slipped on Thursday, 17 September, 2009 at Comex and LME. Prices fell today following two previous sessions of rise. Prices slipped due to rising inventories at LME.
At USA, copper futures for December delivery fell 3 cents (1%) to 2.9 a pound. Copper fell 0.7% last week. Copper ended August, 2009, higher by 7%.
On the London Metal Exchange, copper for delivery in three months ended lower by $35 (0.6%) at $6,385 a metric ton. On 3 July, 2008, prices had touched an all time intra day high of $8,940.
After August, it was the eighth straight monthly gain for copper. Prices gained 23% in the second quarter. On a year to date basis, prices are higher by 95.5%.
The U.S. buys about 13% of the 17 million metric tons of copper sold annually and China buys about 20%.
As per latest report, stockpiles tallied by the London Metal Exchange expanded for a 14th day to 323,225 metric tons yesterday, the highest level since 26 May, 2009. Copper inventories in Shanghai climbed for a seventh week last week to a two-year high of 97,396 tons.
The dollar, which has served as a safe-haven asset over the past year because of its low yield, fell earlier today. But then, it reversed its course. The dollar index, which measures the strength of dollar against a basket of other currencies, rose by 0.4%.
In FY 2008, copper prices dropped by 54%. Prior to 2008, copper prices ended FY 2007 with a gain of mere 5.5% after a whopping 44% gain in FY 2006. The price of copper gained every year since 2002 as global economic growth boosted demand for the metal used in pipes and wires.
At the MCX, copper for November delivery closed at Rs 308.25/Kg. The closing price was Rs 5.05/Kg (1.61%) lower than previous closing price. Prices rose to a high of Rs 313.2/ Kg and fell to a low of Rs 307.35/Kg during the day's trading.
Among other metals traded in the LME on Thursday, lead rose 1.2% to $2,320 a ton and zinc fell 0.3% to end at $1,830 a ton. Nickel rose 1.7% to end at $17,599. Aluminium rose 0.7% to $1,940 a ton.

Daily News Roundup - Sep 18 2009

Reliance Industries-owned Petroleum Trust gained Rs31.9bn through the sale of 15mn treasury shares of RIL at Rs2,125. (BL)
Gas allocation for Ratnagiri Gas & Power Pvt Ltd’s from Reliance Industries KG-D6 block has been more than doubled to 5.67mmscmd. (BL)
NTPC will invest Rs177bn in the current financial year to add 3,300 MW of generation capacity. (BL)
ONGC expects to complete awarding contracts for B-193 cluster of marginal fields by early November. (BL)
Mahindra Satyam is close to getting back multi-million multi-year contracts from Telstra and Merrill. (BS)
Ten days after the West Bengal Government cancelled land allotment to Infosys and Wipro, the Government has now offered alternative plots of 45 acres each to the two IT majors. (BL)
Wipro is eyeing about Rs7bn from Government projects in the current fiscal. (BL)
HCL Technologies has bagged IT infrastructure management contracts worth US$113mn from Energy Future Holdings Corp (EFH), a Texas-based, privately-held energy company and Oncor, a listed subsidiary of EFH. (BL)
Patni targets 6% revenue from domestic market by 2012. (BS)
SBI is looking at acquisitions of up to US$1bn in UK and expected to maintain a 40% growth rate in its UK business. (BS)
Thermax has bagged an order for the turnkey project worth Rs10bn for supply of a 270 MW power plant being set up by a Hyderabad-based infrastructure company. (BL)
Hero Honda has decided to expand its Haridwar manufacturing facility after resolving issues with the State Infrastructure and Industrial Development Corporation of Uttarakhand Ltd (Sidcul) to retain its hold over the 94 acres of vacant land. (BS)
Nalco aims to scale up its annual business turnover from Rs60bn at present to Rs100bn in the next five years. (BS)
Ranbaxy Laboratories has entered into an in-licensing agreement with South Korea’s Medy-Tox Inc for marketing its anti-ageing cosmetic product Neuronox in India. (BL)
Alstom and its consortium partners have signed a contract worth Rs5.6bn with Bangalore Metro Rail Corporation Ltd (BMRCL) to supply signalling system for the first two lines of the new Bangalore metro system. (BS)
SBI plans to increase share of its profit from overseas operation to 10% as against 8% currently. (ET)
Bharti-MTN deal stalled by Indian law, says President of South Africa. (FE)
ACC has planned a capex of Rs14bn to expand its capacity to 30mtpa by 2010 end. (ET)
ACC to raise Rs3bn to retire debt. (ET)
South Africa based Millicom rejects BSNL bid; Bharti Airtel still in fray. (ET)
Axis Bank has opened its QIP and GDR issue to raise up to US$1bn. (ET)
Raymond has announced plans to enter real-estate business to capitalize on surplus land. (ET)
HCL Technologies has bagged two five year contracts worth US$110mn. (ET)
Glaxo may pick up 5% in Dr.Reddy’s for Rs7.3bn. (ET)
ABG Shipyard may revise Great Offshore bid price. (ET)
Century Textile moves Bombay High Court against Bombay Dyeing over a land dispute. (ET)
IDFC and Kribhco buy 5% each in Indian commodity exchange jointly promoted by Indiabulls and MMTC. (ET)
Aban Offshore plans to raise Rs44.2bn via ADR, GDR or QIP issue. (ET)
Dabur plans to launch OTC drugs. (BS)
AIG to sell its 26% stake in Tata AIG life insurance JV to its Indian partner. (FE)
Coal India to get prospecting license for Mozambique coal blocks soon. (BS)
Genpact and Blackstone are the frontrunners to buy majority stake in WNS. (ET)
UBS in talks with Genpact Cognizant to sell captive IT business and KPO operations in India. (ET)
Inflation for week ended September 5 stood at 0.12%; in positive after 13 weeks. (ET)
Divestment PSU to continue says PM. (ET)
CERC announces tariff norms for renewable energy sector. (ET)
CNIE has raised it FY10 GDP forecast to 5.9% from 5.8%. (ET)
RBI issues draft norms for REPO in corporate debt securities. (FE)
Rainfall deficit has increased from 20% in early September to 21% on September 16. (BL)
Steel imports in July surged 94% to 561,000 tons against 289,000 tons. (BL)
The World Bank has agreed to provide a US$3bn loan for developing national highways in India. (BS)
Government extends stock limits on sugar, pulses, rice and oil seeds upto September 2010. (ET)
As per the US Foreign Agricultural Service, rice output in India will decline 7% more than forecast next year because of a drought in the main growing regions. (BS)

And miles to go…

If all difficulties were known at the outset of a long journey, most of us would never start out at all.

We’ve bounced back from the bear market lows to reclaim a milestone. But, we are still a long way away from the all-time highs. The question now is how would the journey ahead be? There are no easy answers, though on the whole, the mood seems to be upbeat. The real test for all will be when the steroid (stimulus) is gradually withdrawn. For now, everything looks bright and beautiful so may as well enjoy it.

All the bad news seems to have been discounted and the concerns are being overlooked temporarily. The fact is we went down hard and have rebounded. The worry is whether the ascent can continue at the same pace without major reversals. Stocks could gain further ground if the pace of liquidity gush persists. Among the potential headwinds are: inflation, interest rates, uncertainty over the external environment and lofty valuations.

Today, we see another day of stock taking and consolidation. Global cues too are indecisive. Our advice is don’t get too euphoric. Avoid undue risks and enjoy the long weekend. The upcoming earnings season should provide an opportunity to assess and evaluate. The advance tax numbers do point to a healthy states of affairs for India Inc over the year-ago period. But, in most cases this could be a result of cost cutting and not due to any meaningful gains on the demand side. That will take some more time to materialise. As always there will be surprises, both negative and positive. So, brace yourself for some volatility in the near term at least.

US stocks ended slightly down on Thursday as sales from FedEx and Oracle missed analysts’ estimates. Investors struggled to balance hopes for an economic recovery with fears that equities have surged too far, too fast.

The Dow Jones Industrial Average lost 8 points, or 0.1%, at 9,783.92 after ending the previous session at its highest point since last Oct. 6. The S&P 500 index fell about 3 points, or 0.3%, at 1,065.49 after ending the previous session at its highest point since Oct. 3 of last year.

The Nasdaq Composite lost 6 points, or 0.3%, at 2,126.75 after closing at its highest point since last Sept. 26.

The three major US indexes have ended higher in 8 of the last 10 sessions.

US stocks surged to almost one-year highs on Wednesday on continued optimism about the economy. Thursday brought new reports supporting hopes that a recovery is holding firm, but investors turned cautious after the recent spurt.

US stocks have surged over the last six months as investors have welcomed a string of improving economic news and better than expected corporate earnings. Since bottoming at a 12-year low in March, the Dow has gained about 50% and the S&P 500 is up 58%, as of Wednesday's close. Since bottoming at a six-year low, the Nasdaq has advanced 68%.

Trading could be volatile and volume could be higher through the quarterly options expiration on Friday when stock index futures and options, and individual stock futures and options all expire at the same time.

The number of Americans filing new claims for unemployment fell last week to 545,000 from a revised 557,000 in the previous week, the Labor Department reported Thursday morning. Economists forecast that claims would rise modestly. Continuing claims, a measure of Americans who have been filing claims for unemployment for a week or more, rose to 6.23 million versus forecasts for a rise to 6.1 million.

A rise in apartment construction helped push August housing starts to the highest point in roughly nine months, the Commerce Department reported. Starts rose 1.5% to an annual unit rate of 598,000 from a revised 589,000 in July, the government said. That was in line with economists' forecasts.

Building permits, a measure of builder confidence, rose 2.7% to 579,000 from a revised 564,000 in July.

The Philadelphia Fed index rose to a 27-month high in September, adding to other evidence that the manufacturing sector is recovering. The index, a regional read on manufacturing, rose to 14.1 in September from 4.2 previously. Economists thought it would rise to 8, on average.

FedEx said fiscal first-quarter earnings fell 53% from a year ago, meeting the forecast it issued last week. The package delivery firm reported weaker earnings that met forecasts on lower revenue that was shy of expectations. Shares fell 2.2%.

Oracle reported weaker quarterly revenue that missed forecasts late on Wednesday. The software maker also reported higher quarterly earnings of 30 cents per share that were in line with forecasts. Shares fell 2.8%.

American Airlines parent AMR said it raised $2.9 billion, including cash and financing. The airline also said it will shift some flights to more profitable hubs such as Chicago and New York and away from St. Louis and other places. Shares rose almost 20%.

The dollar hit a fresh 9-month low against the euro and bounced after hitting a 7-month low against the yen. The falling greenback has been lifting dollar-traded commodities including oil and gold lately, but prices were muted on Thursday.

US light crude oil for October delivery fell 4 cents to settle at $72.47 a barrel on the New York Mercantile Exchange.

COMEX gold for December delivery fell $6.70 to $1,013.50 an ounce after settling Wednesday at a record high of $1,020.20.

Treasury prices gained, lowering the yield on the benchmark 10-year note to 3.40% from 3.46% on Wednesday.

European shares rose for third straight session and the tenth time in eleven days. After gaining 1.4% in the previous session, the pan-European Dow Jones Stoxx 600 rose 0.5% to 246.15, another fresh 2009 high.

Advancers far outnumbered decliners in London, Frankfurt and Paris, with gainers in particular in the aviation sector.

The UK's FTSE 100 index rose 0.8% to 5,163.95, the German DAX index climbed 0.5% to 5,731.14 and the French CAC-40 index was up 0.6% to 3,835.27.

It was a momentous day for the Indian markets as NSE Nifty hit the 5,000 levels for the first time since May 23, 2008. Bulls were indeed in high spirits in the morning trades led by firm global cues and buying witnessed all over. However, the joy was very short lived as index heavyweight Reliance Industries fell over 5% dragging the index by 103 points single handedly. Sentiments further got a hit after inflation broke in to positive territory fir the first time in 13-weeks.

The BSE Sensex fell nearly 110 points while, the NSE Nifty gave away nearly 40 points from their respective intra-day high’s.

Aviation stocks were in the linelight led by Jet Airways on speculation taxes on jet fuel may be cut. Shares of Jet Airways shot up by over 18% to end at Rs315, Kingfisher Airlines rallied by over 12% to end at Rs53 and Spice Jet surged over 7% to end at Rs33.6.

The BSE Sensex advanced 34 points or 0.2% at 16,711 after touching a high of 16,820 and a low of 16,636. The index opened at 16,686 against the previous close of 16,677. The NSE Nifty was up 7 points to shut shop at 4,965.

In Asia, the Nikkei in Japan gained by 1.7% at 10,443 while Australia's S&P/ASX ended higher by 1.4% at 4,714. The Hang Seng index in Hong Kong gained 1.7% at 21,768. Shanghai SE Composite in China gained by 2% at 3,060.

In Europe, stocks were in the green. The FTSE in the UK was up 0.9%, The DAX in Germany was up 0.6% and the CAC 40 index in France gained 0.6%.

Coming back to India, among the BSE sectoral indices, the Teck index was the top gainer, gaining 2%, followed by the IT index that was up 2%. The BSE Auto index up 1.5% and the BSE Bankex index was up 0.8%.

The BSE Mid-Cap index gained 0.3% and the BSE Small-Cap index gained 0.2%.

Among the 30-components of Sensex, 22 stocks ended in the green and 8 ended in the negative terrain. Among the major gainers were Hindalco, ACC, JP Associates, Bharti, Maruti and Grasim.

On the other hand, Reliance Industries, Tata steel, ITC, NTPC and Hero Honda were among the major laggards.

Outside the frontline indices, the big gainers in the broader market were Jet Airways, Proctor & Gamble, Essar Oil, HCL Tech and Indian Hotels. On the other hand, losers included EIH Ltd, EKC, Godrej Ind, IFCI and LIC Housing Fin.

India’s Inflation broke in to the positive terrain for the first time in over 12 months. The annual rate of inflation stood at 0.12% for the week ended August 5, 2009 over as compared to -0.12% for the previous week July 29, 2009 and 12.42% during the corresponding week August 06, 2008 of the previous year. The government announced that it revised inflation for week ended July 11 to -0.63% from -1.17%.

Reliance Industries announced that Petroleum Trust sold 10.5mn equity shares of the Company. Reliance Industrial Investments and Holdings Ltd, a wholly owned subsidiary of Reliance, is the sole beneficiary of the Trust.

The Trust will realize approximately Rs31.88bn, at an average price of about Rs2,125 per share. The shares are carried in the books at a cost of Rs158 per share by the Trust.

Petroleum Trust is a special purpose vehicle created for Reliance Industries holding in the earlier Reliance Petroleum when the company merged the latter with itself some seven years ago. The stake of the Trust rose again when IPCL merged with RIL.

DSP Merrill Lynch Limited and Citigroup Global Markets India Private Limited acted as joint arrangers for the seller.

Shares of Reliance Industries lost over 4.5% to Rs2086. The stock opened at Rs2169 and made an intra-day high of Rs2204 and a low of Rs2070. Total traded volumes stood at 10.2mn shares.

BHEL plans to spend Rs15.9bn to expand capacity to produce equipment capable of generating 20,000MW by March 2012.

Shares of BHEL ended flat at Rs2275. The stock opened at Rs2294 and made an intra-day high of Rs2314 and a low of Rs2265. Total traded volumes stood at 0.13mn shares.

Shares of Bharati Shipyard surged by over 2.6% to Rs214 after the company picked up an additional 3.01% stake, raising its holding to 22.48% for an amount of ~Rs3.05bn on acquiring its 22.48% stake in Great Offshore.

Bharati acquired 1.11mn shares at an average Rs558.81 per share through Dhanshree Properties Pvt. Ltd, a Bharati Shipyard unit, for a total of Rs624mn.

ABG Shipyard had proposed an open offer of Rs520 per share on August 5, 2009 for Great Offshore to lift its 7.87% stake.

Shares of Petronet LNG gained by 2.5% to Rs76.2 after the company announced its plans to raise Rs50bn in debt to build power plants. The company plans to borrow money from overseas and local banks by the end of 2010, Managing Director P. Dasgupta said. The company may raise an additional Rs20bn in 2011, selling shares to existing investors.

Petronet’s planned power plants will be built adjacent to its import terminals at Dahej in Gujarat state in western India and Kochi in the southern state of Kerala.

The plants will have the capacity to generate 1,200MW of electricity and may be completed in 2012.

Shares of Thermax advanced by 3.5% to end at Rs525 after the company announced its entry into the independent power producer segment by bagging an order worth Rs10.01bn for the turnkey supply of a 270 MW power plant being set up by a Hyderabad based Infrastructure Company.

The boilers for this project will be manufactured by Thermax using the circulating fluidized bed combustion (CFBC) technology Licensed from Babcock & Wilcox, USA.

Shares of Raymond were locked at 10% upper circuit to end at Rs204.85 after the company announced that the board of directors approved the proposal for commencement of Realty Development as new business.

Shares of Alstom Projects surged over 4% to Rs544 after the company and its *consortium partners have signed a signaling equipment and services contract worth Rs1.87bn with the Bangalore Metro Rail Corporation Ltd (Â"BMRCL") for the first two lines of the new Bangalore metro system in India.

(*The consortium is led by ALSTOM Projects India Ltd and composed of ALSTOM Transport SA (ATSA), Thales Security Solutions and Services and Sumitomo Corporation).
The contract also has a provision for BMRCL to exercise a firm option of value Rs1.41bn (out of which Alstom’s share is Rs500mn) within 15 days of the base contract coming into effect.