Coal India likely to topple RIL as most valuable firm
13 August 2011;business-standard.com:Mumbai: Reliance Industries Ltd (RIL) may lose its tag as India’s most valued company to state-owned Coal India Ltd (CIL) for the first time in nearly a decade, due to a sharp fall in its share price in recent months. At the end of on Friday’s trading on the Bombay Stock Exchange (BSE), heavyweight RIL’s shares closed at Rs 760.8, down 1.6 per cent, with a market cap of Rs 2.49 lakh crore. CIL’s shares closed almost flat at Rs 385.3, for a market valuation of Rs 2.43 lakh crore. Thus, the gap in the market cap of both companies is just 2.3 per cent. In fact, the gap has narrowed by a staggering Rs 1.45 lakh crore since the listing of CIL on November 4, 2010. CIL has gained 57 per cent since its listing from an issue price of Rs 245, while RIL has lost 31 per cent during the same time. CIL, which became a part of the 30-share BSE Sensex this month, will gain an entry into the 50-scrip S&P CNX Nifty of the National Stock Exchange during its next constitution, say market analysts. So, what do the changing equations suggest? “RIL has lost its charm with retail investors,” said Ambareesh Baliga, chief operating officer of Way2Wealth. “Till a couple of years ago, it was a bellwether stock, but no longer the counter has the ability to move markets or change moods. Its large retail shareholding base was eroded on the back of falling share price.” Between April and June quarters, retail investors offloaded a million shares, while mutual funds sold two million shares. Foreign institutional investors sold 10.05 million shares worth Rs 800-1,000 crore and financial institutions and banks offloaded 0.3 million shares. Life Insurance Corporation (LIC) showed much support and faith in RIL in these months by acquiring 1.86 million shares. Also, other corporate bodies, whose names were not disclosed as they fall in the non-institutional and non-promoter category, bought 70 per cent, or 10.1 million shares, when the stock was on a crash course. The promoters hold 44.72 per cent in RIL. RIL’s weight in the Sensex has come down below 10 per cent for the first time in many years due to a fall in its shareholder base. But it is still the highest-weighted company in the Sensex, with a 9.90 per cent share in the index constitution, ahead of Infosys (8.37 per cent) and ICICI Bank (7.83 per cent). The shareholder base is one of the criteria to account for a company’s weight in the index. The shareholder base of CIL, too, is not very large, as 90 per cent of its shareholding is concentrated with the government and majority of floating stock with large institutions. “Though RIL may take a long time to regain its glory as the market mover, CIL cannot move markets, as its investor base is very low, and unless the government decides to dilute more stake. A counter with high floating stock and investor base is required to change the market direction, along with positive news. While it has a huge floating stock, RIL lacks any positive trigger currently,” said Baliga. Even the $20-billion deal with BP, recently approved by the government, failed to push RIL’s share price. For CIL, the world’s largest coal producer, its undervalued IPO did the most to get in investors, which in turn saw the share price rising. For RIL, it has been the constant flow of bad news, ranging from family feud, SEBI probing the company on insider trading charges to the Comptroller and Auditor General of India pointing out its role in inflating project costs at Krishna-Godavari oil and gas fields.
13 August 2011;business-standard.com:Mumbai: Tata Motors Chairman Ratan Tata has warned of a challenging year ahead for car makers in India even as the automotive industry continues to grapple with diminishing demand. “Looking ahead, I think the coming year will probably pose a considerable challenge. We all know western Europe is going through a relative crisis in terms of currency. All this is expected to dampen the demand for passenger cars,” Tata said while addressing shareholders at the company’s 66th annual general meeting here on Friday. Sales of passenger cars of the company in the domestic market declined 10.7 per cent to 69,529 units during the first quarter of this financial year, as against 77,858 units a year ago. While commercial vehicles posted 13 per cent growth in sales in the first quarter, Tata cautioned any decrease in the government’s spending on infrastructure would impact their sales. Tata also said the company should use the economic downturn as an opportunity to leverage low-cost manufacturing capabilities through design and manufacturing. With increased presence of several international automotive companies in India, Tata said efforts were being made to protect its share in the domestic market. “We need to also fill up the various product gaps that we may have. We are working on joint products with Jaguar and Land Rover and with Tata Daewoo”. Tata Motors is looking to tap the extensive dealer base of JLR globally while exploring synergies with it. JLR currently serves 160 markets globally. Tata also assured the shareholders over the company’s loss-making joint venture (JV) with Italy’s Fiat, saying efforts were underway to turn around the operations. “The JV was created with a certain set of assumptions. The assumption was basically that the JV would be to introduce Fiat products that we would market and we would produce products for ourselves,” Tata said. “Those assumptions in terms of volumes did not work out, more so for Fiat than for us because there was a downturn and they made an assumption on planned demand which did not materialise. Both Fiat and we are relooking at the contractual undertaking. I hope we resolve this,” he added. He said Tata Motors was looking to set up an vehicle assembly facility, especially for the Nano in Indonesia. The company is looking to tap the potential demand base for the ultra compact car in the Southeast Asian market. In addition, it will set up an assembly base in Brazil to cater to the Latin American market.
Mahindra auto component arm pushes for integration
12 August 2011;business-standard.com:Swaraj Baggonkar:Mumbai: Mahindra Systech, the component-making division of the Rs 56,000-crore Mahindra & Mahindra group, is pushing forward with a plan to bring all its domestic and international companies under one roof. The complicated process, which involves reverse mergers, getting statutory approvals from all stake holders and boards of directors of all companies involved, has got “strong approval from the senior management of M&M”. At present, all its 16 companies involved in making gears, composites, castings, forgings, stamping, steel and ferrites and engineering services operating in India and Germany work under an umbrella organisation called Mahindra Systech. It is the third biggest auto component making group in India, after Bharat Forge and Tata Auto Comp Systems. Turnover last year was $1 billion (Rs 4,500 crore). About 15-18 per cent of its revenue comes from M&M's automotive sector. Hemant Luthra, president, Mahindra Systech, said, "The plan was always to bring everything under one roof. It now has the strong approval of the senior management of the company, including Anand (Mahindra, vice-chairman and managing director) and the chairman. We haven't taken it to the other investors, who are invested in the unlisted companies." By bringing all its companies under a common entity, it is aiming to contain expenses which otherwise are incurred over separate purchase, marketing and sales initiatives done the various companies. It will also enable clients to have easier and faster access to the different companies, is the thinking. In addition to its recent foray into aerospace engineering and manufacturing, it has been supplying forged components to some of Europe's top automotive companies such as Daimler, Scania, Volkswagen and General Motors. The idea now, says Luthra, is to service a client on more than one aspect (for example, forgings) of the business. The number of investors in these companies, which involve private equity investors, other financial investors and other minority shareholders, are large. So, the entire operation would be a time-consuming process. It has already started to integrate its front-end operations such as marketing, purchase and sales. While some resistance is expected from companies not in agreement over its plans, M&M is readying itself for a buyout of stake of such companies in its subsidiaries. “When we did the QIP (qualified institutional placement) roadshow last year, everybody asked us why we don’t put them together. We did put them together, but on a piece of paper, and we showed it to Anand (Mahindra) a few days ago and by that time, relative valuation of all the companies had also been done by Ernst & Young. As a result of that, we continued to push forward on that plan. The only catch is that if I have someone expressing dissatisfaction over a merger, the only way out would be buying out that investor. Mahindra is very respectful of minority shareholders. Once I have in-principle approval of all stakeholders, only then can I go to the M&M board and to the markets regulator,” said Luthra. Adding: “We can reverse-merge everything into a listed company. We have got our guys and investment bankers to do a study. If we put everything together, it will reduce costs, we will be able to have a common marketing and sales organisation.” Presently about half of the company's turnover, or about $500 million, is generated outside India. The company caters to Bajaj Auto, Tata Motors, Toyota, Maruti Suzuki, Ashok Leyland and Hyundai, among others in India. Luthra also stated he had received feelers of interest from strategic or financial partners from several companies outside India.
12 August 2011;business-standard.com:Kalpana Pathak:Mumbai: Gujarat-based Adani Gas, an arm of Adani Enterprise, will pick up 20 per cent equity in Green Gas Limited, a joint venture between Gail and the Indian Oil Corporation (IOC). Green Gas supplies city gas and compressed natural gas in Agra and Lucknow in Uttar Pradesh. Gailand IOC hold 22.5 per cent each in the company, while Uttar Pradesh State Industrial Development Corporation holds five per cent. Aditya Vikram Birla Group and financial institutions IDFC and UTI together hold 50 per cent stake in Green Gas. “We have signed a memorandum of understanding with Green Gas to pick up 20 per cent equity in the company. We will merge our assets with Green Gas. Since both of us were in the same city, we decided to work together so that there is no hassle. Also, now, wherever we go we will go together,” said Rajeev Sharma, chief executive officer, Adani Gas. SBI Capital Markets has been given the mandate to evaluate assets of Green Gas and Adani Gas. The company has begun work on drawing a financial model and a business plan for Green Gas. The board has also asked it to try and arrange private equity infusion upto a specified limit. IOC and Gail decided that Adani Gas may be inducted as a strategic partner in Green Gas on account of their gas pipeline infrastructure in Lucknow. The combined infrastructure of both companies is expected to provide ready infrastructure to service most parts of the city. “Adani Gas has infrastructure in Lucknow so we decided to utilise their network. If the business case of Adani Gas is found beneficial to the interest of Green Gas and its shareholders, Adani Gas could be offered up to 20 per cent equity in Green Gas,” said a Green Gas executive. Adani had spent around Rs 65 crore to lay steel and plastic pipelines for around 60 kilometre in Lucknow. The company, however, had to suspend work midway as it failed to source gas and was subsequently forced to stop work after an intervention by the Petroleum and Natural Gas Regulatory Board in 2009. Green Gas has syndicated a term loan of Rs 153.6 crore to finance the ongoing city gas distribution expansions and capital expenditures.
11 August 2011;deccanherald.com:Bangalore: Tata Motors, on Thursday, launched its new variant of Aria crossover family — Aria 4x2 in City. The company claimed that the new variant promises the finesse of a sedan and muscle of an SUV, much like the 4x4. The new Aria 4x2 boasts of a series of high-end features, emphasising on passenger comfort. Dual-tone premium leather upholstery, air-conditioning louvers on pillars, automatic climate control sytem, sweeping row of roof utility spaces, 2-DIN music system with Bluetooth, height adjustable driver’s seat and tilt adjustable steering. The car also boasts of electrically adjustable outside rear view mirrors (ORVMs) offers commanding visibility. The Reverse Guide System helps in parking the car with ease, while the Driver Information System continuously indicates essential drive data. It comes with a 2.2 litre Direct Injection Common Rail (DICOR) engine, with variable turbine technology and 32-bit ECU that delivers 140 PS power and 320 Nm torque. The new Mark II gearbox is perfectly mated to the engine ensuring smooth power delivery and precise shifting. The car is available as Aria Prestige at the top-end, Aria Pleasure and Aria Pure. The Aria will be available from Rs 11.71 lakh onwards (ex-showroom Bangalore), Tata said.
Ultra low-cost cars to wait as Tata, Hyundai, Maruti, Ford, GM focus on small car segment
11 August 2011;economictimes.indiatimes.com:Lijee Philip & Chanchal Pal Chauhan:MUMBAI/DELHI: The Tatas swear by it, the Detroit giants have for now given up on it, and the top 2 in the Indian car bazaar see a future beyond it. Don't look now, but blueprints for an ultra low-cost car (ULCC) under Rs 2 lakh - championed by the Tatas with the much-touted Nano - are under various stages of modification at the research centres of various manufacturers. Even as it attempts to push up sales of the Nano, Tata Motors is working on Plan B: it is close to showcasing a car positioned a step above the Nano and below compact bestseller, the Indica. No 2 in India Hyundai is working on a model that will be priced below its cheapest car in the country, the Santro, but above the Nano. And leader Maruti Suzuki has two irons in the fire -a revamped Maruti 800 that will be pitted directly against the Tatas' ULCC; and another - the first indigenous car Maruti will develop fully in India -that will occupy the space between the Nano and the Alto. Meantime, Ford and General Motors have taken the ULCC off their drawing boards; and Renault India, which had plans to build an affordable car with Bajaj Auto and Nissan, is in no hurry to launch anything soon. The foreign majors feel they're better off concentrating on what they know better - premium compacts. For, this is a segment first-time customers are aspiring for and, in the process, bypassing the no-frills space. There's clearly plenty of activity and jostling for space at the lower half of the auto pyramid. Manufacturers are spending sleepless nights figuring out price points, features and positioning tactics in the low-cost segment. Their biggest dilemma: Should one attempt to make ultra low-cost cars, or should the focus be on affordable but snazzy cars that will be driven out by consumers with higher disposable incomes and burgeoning purchasing power? "The aspirations of car buyers are moving the Indian car market upwards to bigger hatchbacks, but there will always be demand for ultra low-cost cars," says Hormazd Sorabjee, editor, Autocar India. Sorabjee adds that cost targets in building an ULCC are extremely challenging which makes this segment the most difficult to enter.
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