Capital Goods
June 22, 2012
However India's biggest capital good equipment company BHEL owned by the government is plannning a $500 million investment to build a solar cell factory in at Sakoli which is part Union heavy industries minister Praful Patel's constituency Bhandara.Talk about how dumb you can get. BHEL hardly has too much expertise in the solar panel industry and with solar cells in massive oversupply,it is almost sure to lose money. However that is how things work with Indian government companies where investment is made at the whims of ministers rather than rationality and business sense.BHEL is currently trading at one of the lowest valuations in its 10 year history and its not a big wonder why. The company has benefited in the past as did other machinery and engineering companies from an infrastructure invesment boom. However those glory days are over for the company as it faces competition from the Chinese companies and decreasing orders flow. Praful Patel the minister has already spent a few years in the airline ministry presiding over the conversion of the state owned carrier Air India ino a basket case. Now its the turn of BHEL to be turned into a basket case as well.
February 3, 2012
China India Trade has been rising at very high growth rates over the last few years driven by the booming GDP growth in the fastest growing economies of the world. However India like other countries faces the mounting problem of a huge trade deficit with China which is growing all the time. Like Brazil ,USA this has become a major problem . Beside the official reported figures , there is a large clandestine trade takes place outside the normal channels. Massive imports from China go unreported to avoid excise duties and custom taxes. Both countries have corrupt officials and businessmen which facilitate trade without paying of taxes and duties. Unofficial Trade Deficit with China may be double the $27 billion reported in 2011.
July 4, 2011
At the time of independence in 1947, India's capital market was relatively under-developed. Although there was significant demand for new capital, there was a dearth of providers. Merchant bankers and underwriting firms were almost non-existent. And commercial banks were not equipped to provide long-term industrial finance in any significant manner. By the early 1990s, it was recognized that there was need for greater flexibility to respond to the changing financial system. There was a need for these financial institutions to directly access the capital markets for their funds needs.So a number of infrastructure finance companies were set up.Some of them have become fully private like ICICI while others have been partly privatized. like REC and PFC.Besides a number of private companies have recently become big players in the infrastructure financing space like SREI,L&T Finance etc.Note with almost $1 trillion expected to be spent on infrastructure in India over the next 5 years,the scope for these companies is immense if they manage their assets-liabilities in a decent manner
April 11, 2011
Wind Energy Companies in India were already facing trouble when China's largest power equipment producer and the 3rd largest Wind Turbine Manufacture Dongfang Electric won major Wind Contracts from Power Producers.Note Chinese companies have become the low cost leaders in the Wind Equipment Industry and sell much below Western competitors.Leading WTG companies from the West like Vestas and Gamesa are reeling from Chinese competition and slowdown in Western markets.Suzlon too has been affected as Korean shipbuilders and Chinese wind producers have become major players.India is the world's fifth biggest wind energy market and is expected to continue to build 1.5-2 GW wind power plants per year for the next decade.
April 11, 2011
Solar Power in India is increasing at a rapid pace and will become one of the biggest energy industries in the next decade as falling costs of solar energy and India's rising demand makes it a perfect match.Solar Companies in India are constanly growing by the day as firms rush in to take advantage of the vast investment and profit potential in India's Solar Energy Market.BHEL which is India’s largest Capitals Good Company has big solar ambitions.BHEL has strong capabilities in the field of making electricity generating equipment.Extending these capabilities in the field of solar power generation is a natural extension.It is following the JV route with various other Public Sector Undertakings (PSUs) like HPCL,BEL and IOC to build power plants and solar equipment factories in the country.Most of these JVs have been dormant till now but the JV with BEL is now looking to move on.The JV is scouting for sites to build a 250 MW integrated c-Si Solar Factory which will also have India's first polysilicon and wafer manufacturing operations.Note India has a large capacity of solar cells and modules but does not have a commercial solar wafer or poly plant which are essential raw materials for making Solar Panels.Till now Solar Panels in India are made from imported Solar Wafers from companies like LDK,GCL,REC,Solarworld and others.There are a few private companies who are looking to set up upstream manufacturing in solar as well.Note there are other Indian government owned PSUs which too are looking to enter Solar Energy Industry as well
March 19, 2011
India's Economy is being hampered in its growth trajectory by lack of infrastructure which is leading to supply side problems.India suffers woefully from a lack of roads,electricity,ports etc. and almost a trillion dollars is going to be spent in the next few years as demand outstrips supply.India's Machinery and Capital Goods Industry is set to capitalize on this strong growth and is already seeing massive orders which are 2-3 years worth of their annual revenue.While the stock valuations of the capital goods equipment manufacturers has come down a bit from the heavy days of 2008,they are still quite high reflecting the strong growth potential.India's Engineering Industry is also composed of a number of smaller manufacturers that export light engineering equipment worth several billion dollars mostly to developing countries.India's Machinery Sector is composed of a mix of government owned and private companies as well as the giant capital goods MCN conglomerates like Areva and others.Here is a list of the major Indian equipment manufacturers.
February 17, 2011
Geothermal Energy in India is non existent with not a single functioning plant as of 2011.However potential for this renewable energy exists in a number of sites in India with a potential of around 10 GW.With the Indian government planning to come out with a draft policy to develop geothermal energy by March 2011,major companies are gearing up to exploit this alternative energy resource.Note India has massive energy needs and with a 15% energy requirement from clean sources by 2020,it will need to develop all renewable sources.Note India already has a well developed Wind Energy Industry and has one of the fasted growing Solar Power Industry in the world with a massive future growth potential.Geothermal Energy is regarded as a poor cousin to its more glamorous cousins Wind and Solar.However Geothermal Energy possesses one attribute that the others do not.Its 24 hour generation capability is a massive plus compared to the intermittent nature of Wind and Solar Energy.However long project development time and massive capital investments have deterred fast growth in geothermal energy in the world.However some countries like Iceland,Indonesia,Philippines and USA have a strong geothermal energy industry.
February 10, 2011
India's Infrastructure Sector which was considered the ideal play on India's fast growing GDP and its huge infrastructure requirements long commanded nosebleed valuations.While realty stocks which are closely related to the infra ones had long collapsed after the GFC in 2008 ,the infrastructure stocks had retained their preeminence in the stock market rally.However end 2010 and 2011 has seen a vicious change in their fortunes.Stocks like IVRCL,IRB,Punj Lloyd,L&T,Gammon etc have seen their stock prices nosedive.The stocks have corrected far more than the broader market which has itself fallen more than 15% in 2011. The problems related to the infrastructure stocks are varied and they have converged for investors to totally lose confidence in this sector something akin to the realty sector.The list of the problems are
November 30, 2010
Nuclear Energy in India is going to quadruple in the next decade as India's power hungry economy requires increasing amounts of energy to sustain its growth.India's Electricity Capacity is targeted to reach 450 GW from around 160 GW at present which would require increasing the supply from all renewable energy sources as well as non-renewable sources.While Thermal Power will continue to remain the top dog with 60-70% of the capacity,Nuclear Power which forms just 3% of the current capacity is also poised to grow exponentially.India's Nuclear Power deal with USA have paved the way for India to again part of the civilian nuclear club which would allow import of uranium fuel and nuclear technology.It would also allow Nuclear Equipment Producers like Toshiba,Areva and GE to set up Nuclear Power Plants in India.Note India has a long history of a home grown indigenous nuclear power program with nuclear power capacity of around 4.5 GW.Despite facing low utilization in recent times due to inadequate supply of uranium fuel,the nuclear energy industry has continued its growth path.India is the only country spending large amounts in Thorium Fuel R&D as the country has huge deposits of the element.
November 26, 2010
India has set up ambitious targets of meeting 15% of its Energy Needs from Renewable Sources up from around 5.5-6% in 2010.WIth India's Electricity Capacity expected to rise to 450 GW from around 165 GW,this would imply that around 67.5 GW of Electricity Capacity would be needed up from around 16 GW.This would mean around 5 GW of Capacity addition every year in the next decade which is a very tall order.20 GW could be met by Solar Energy according to the Jawaharlal Nehru Solar Mission (JNNSM).Most of the rest would have to met by Wind Energy.Biomass Energy has high costs and reliability problems which mini hydro potential is only 1 GW.Note this is just the capacity I am talking about,for meeting the electricity generation,capacity additions would have to be greater as Solar Energy and Wind Energy have only 20-30% Load Factor compared to 60-80% for Fossil Fuel Energy Sources.Nuclear Energy can contribute another 20 GW.
Renewable Energy in India is growing at a rapid pace increasing its share of the total capacity from 2% in 2003 to around 10% in 2010.However the share of electricity generation is still quite low at 3% due to the lower capacity load factors of Green Energy Sources compared to Fossil Fuel Sources.The Total Installed Capacity of Renewable Energy in India is around 16 GW with Wind Energy taking the Lion's share at almost 70% followed by Small Hydro at 15% and Biomass Energy at 12%.Solar Energy in India till now has a capacity of just 6 MW which is estimated to grow to 22 GW by 2022 making Solar Energy one of the Biggest Growth Opportunities in the Field of Indian Energy.
November 17, 2010
India's Fast Growing Economy is seeing substantial churn in the Top 10 Rankings for Companies.Coal India which recently did a successful IPO straightaway went from being a Government Owned Private Company to the Top 5 in Market Capitalization Rankings.The Top 10 Rankings are dominated by State Owned Companies known as PSUs in India.Despite Privatization in the 1990s,Government Companies Lead the Rankings.Note the Top 10 Rankings don't have any Private Companies because of the lack of good information about their Financials.Note Most of the Largest Companies in India are related to Banding and Oil/Gas as is the case worldwide.India's Technology Companies like Infosys,TCS and others are still way behind in Revenues compared to the dominant Materials,Fossil Fuel,Industrial and Financial Sectors.However note that the diversity is much greater when you rank the companies by their market capitalization.TCS and Infosys are both amongst the top 5 recovering strongly in 2010 from their 2008 underperformance.You also see a Capital Goods and Telecom Representation in this Top 10 Rankings
October 22, 2010
The JV with the Adani Group is a win-win for both companies.Adani Group is setting up 16000 MW of Thermal Based Plants in India over the next few years and has also planned a 100 MW Solar Plant in Gujarat.It has started a company Adani Renewable Energy to take forward its Green Energy initiatives.The tie-up with Siemens will allow it to access cutting edge Green Technology while Siemens will get a huge customer for its Energy Equipment.Renewable Energy in India is a huge growth opportunity considering that India will have to increase its Renewable Energy by almost 45 GW over the next 10 years if it has to meet 15% of its Electricity Requirements from Green Sources as mandated by the CERC.
October 18, 2010
Wind Energy in India is the biggest Green Industry currently with around 1 GW of Wind Power Capacity being installed in a year on average.The Growth in Wind Industry has been driven by states like Tamil Nadu who have heavily subsidized and promted Wind Energy.India at around 10 GW of Wind Capacity is the world's 5th largest Wind Energy Producer.However India remains far behind China in terms of Wind Energy Growth .Last Year China installed nearly 13 GW of Wind Energy which is more than India's total installed capacity of Wind Energy.With a target of around 230 GW by 2020,China is on track to install 20 GW of WInd Capacity a Year in the next 10 years which would make India a Pygmy.Also two of the largest Wind Turbine Producers Sinovel and Goldwind are from China.India despite producing a world class company Suzlon in the early states of Wind Industry Development is struggling.Suzlon has fallen on very hard times running big losses while other Wind Companies are of hardly any decent size.
October 5, 2010
India suffers from a lack of variety as well as depth in ETFs compared to developed markets such as USA.Only Benchmark Asset Management Company (AMC) has seriously invested in the ETF space and its NiftyBeES ETF which follows India's Nifty Index is the most successful one so far.India's Infrastructure Sector has attracted a lot of investor interest given the stupendous $500 Billion Investment planned over the next 5 years.This will be 2.5x the investment in the past 5 years and will help India's crumbling ports,roads,railways,power and communications sectors to gear up to India's 8-9% GDP growth.Recently EGShares launched INXX which also markets itself as a play on India's Infrastructure Growth in the US Markets.However that ETF was found wanting in a lot of areas.The new InfraBeES ETF launched by Benchmark seems much better than INXX and has been launched in the Indian markets.This ETF is based on CNX Infrastructure Index and its 1 unit will be 1/10th of that Index.Here are some of the key features of this new ETF
August 12, 2010
While L&T and BHEL,the two Largest Capital Equipment Companies have won a lot of orders,the sheer scale of Demand requires Huge Imports as well.Low cost Chinese equipment providers like Shanghai Electric and Dongfang Electric have won almost half of the power equipment orders raising concerns amongst the Indian administrators.The relations between the 2 countries has always been testy with a major war being fought in 1962.Recently India banned Chinese telecom equipment providers Huawei and ZTE over Security Concerns.
July 17, 2010
ABB recently came up with an open offer to increase its stake in the Indian subsidiary from 52% to 75% offering Rs 900/share which was a […]
June 20, 2010
The Indian Defense Industry is great way to invest in an area which is Recession Proof and benefits from the one of the World’s Fastest Growing […]
May 23, 2010
Indian companies Fear Foreign Competition Indian companies raised a massive hue and cry against the Indian government’s draft to allow foreign made modules to be used […]
May 20, 2010
SJVN was one decent quality company to offer shares amongst the sea of junk initial public offerings.The government which had faced tepid response to the IPO […]
May 18, 2010
The Indian market has seen a wave of low quality offerings in the recent days propelled by the bullish conditions prevailing in the market.Tarapur Transfromers is […]
May 16, 2010
The Indian Government under the Jawaharlal Nehru Solar Mission has proposed ambitious plans for the development of solar energy with a 20 GW target by 2022. […]