Government
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 29, 2010
Organized Real Estate Industry in India is only a couple of decades old .Real Estate Industry in India took off with the global boom in the Realty Sector which percolated down to India as well.Lack of clear land titles and litigation has made this industry one of the most opaque and corrupt ones.Due to the massive price appreciation and huge valuations,Land Scams have become quite common with Chief Ministers,Generals,Top Bureaucrats all involved in the murky environment of Real Estate in India.The most recent scam related to bribing of top public banks officials in the LIC Housing Finance Scandal has again put question mark on the fundamentals of the industry.Valuing the industry and making a real estate investment remains one of the most difficult investing tasks in the Indian Stock Market.Even Fund Managers are staying away from the Sector due to lack of trust in the Financial Statement given by the industry.That said modern India presents a booming picture of tall buildings and huge office areas & shopping malls. A list of the chief players in Indian market is given below:
November 29, 2010
The Delhi Mumbai Industrial Corridor (DMIC) which is being jointly developed by India and Japan will also see the development of 24 Green Cities.The ambitious infrastructure project being built with $50-90 Billion will see a freight/railway/road transport corridor between India's 2 most important cities of Delhi and Mumbai.The resulting development along this transport corridor which will be passing through 6 states will make use of Green Technologies.Japanese Conglomerates like Hitachi,Toshiba,Mitsubishi will be involved in the building of this massive projects and will use their advanced energy efficient technologies to develop these Green Cities.
November 29, 2010
China has the world's largest hydro power capacity at 200 GW and it plans to double the capacity by 2020.China is mostly dependent on Coal Power and Hydro Power to meet the electricity demand from its fast growing economy.China has the world's second largest electricity capacity at 850-900 GW second only to USA at ~1000 GW.This will be soon be overtaken as China continues to grow at 8-10% and its electricity per capita is still much below developed world standards.China is already the world's biggest consumer of Energy and emitter of Greenhouse Gases.Despite rapidly investing in Nuclear and Renewable Energy,China's voracious demand has made the growth of Fossil Fuel Energy unsustainable.It already consumes 3 Billion Tons of Coal per year and is already importing around 180 million tons per year.
November 29, 2010
India's JNNSM Phase 1 which is targeting 1000 MW of Solar Power Capacity by 2013 is in jeopardy due to irrational bidding,financing and small size.The 150 MW Solar PV and ~500 MW of Solar Thermal Capacity which has been put to bidding is going to see massive discounts.This will eventually lead to project winners abandoning these projects or delaying it inordinately,leading to a failure of the first phase.India Solar Thermal Bidding has already seen Massive Discounts from the base prices of Rs 15.31 set by CERC and the Solar PV project bidding for 150 MW is going to see equally ferocious discounts.Tata Power,which is India's largest private utility is staying away from these auctions due to the above problems.Renewable Energy in India has a huge growth potential with Solar Energy the brightest Green Energy Sector.This has attracted companies in droves leading to hyper competition for the first phase of India's Jawaharlal Nehru National Solar Mission.However huge competition in this subsidy driven sector is not necessarily good for the growth of Renewable Energy as irrational bidding by small players would lead to project failures.
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 25, 2010
Asian Development Bank (ADB) has planned $2 Billion in Annual Green Investments in power hungry countries of Asia.For this the multilateral institution has sold multi-currency bonds in Japan to populate its Renewable Energy Fund.Note Green Energy is a capital intensive business and requires large amounts of low cost capital which is difficult to get in developing emerging markets of Asia.ADB is meeting this intermediary gap of funneling low interest capital from developed markets like Japan to capital deficient countries like India.Note ADB is already financing Asia's largest solar photovoltaic plant in Thailand.
November 24, 2010
LIC Housing Finance is one of India's Largest Home Lenders with a huge distribution network around the country.LIC Housing Finance Stock has been on a roll propelled by fast growth of the company and the housing loan growth sector.The Company was a relatively safe investment being promoted by Life Insurance Corporation (LIC) which is India's largest insurance company owned fully by the government.The Foreign Ownership of the LIC Housing Finance Shareholding is quite high at 40%+ due to its relative safety and high growth.However the Central Bureau of Investigations (CBI) raids on the company has resulted in a sharp 20% price fall.The company's top officials have been implicated in misappropriation of money and home loan scams along with a company called Money Matters.
November 24, 2010
Now it has come to light that one of India's Leading Bureaucrats sold sensitive details related to Telecom Security to private firms in return for sex and money.Through an elaborate web of codes and multiple mobile phones,this IAS officer used to sell security information related to India's recent telecom security to leading telecom firms.Note India had recently taken stringent action against RIMM( Blackberry maker) and some others for failing to provide security codes.It was an opaque regulatory action ripe for bribes and corruption which was taken advantage by Ravi Inder Singh, the Director in the Union Ministry of Home Affairs (MHA).Note it is openly known that nothing moves through the central ministry without bribing the corrupt officials manning those offices.Powerful Business Houses have most of these bureaucrats on their illegal payrolls as most policies are known much before by bigger corporates before they become policy.The expose done in the magazine "outlook" clearly demonstrates how India's powerful minsisterships and policy decisions are sold in closed rooms in the capital.Investors should be careful about investing in Indian companies as regulatory/corruption risk remains high as the SKS Microfinance and Unitech/Videocon stock falls show
November 23, 2010
The main difference between MOIL and Coal India is the number of shares being issued.Note MOIL is going to raise only $300 million compared to the $3.5 billion raised Coal India.CIL had gotten 15 times over subscription which implies that MOIL can 150 times over subscription based on CIL subscription numbers.While the MOIL IPO Price is very attractive,the massive potential over-subscription would hardly lead to much allotment.However the government had done a good job in pricing the PSU share sales at a decently low price leaving something on the table for investors.Coal India IPO was done at a substantial discount to international peers making it a big success.Shipping Corporation of India is also coming out with a FPO where the pricing will be the key.
November 23, 2010
India has followed the example of Korea,China,Japan,USA and others in providing a capital subsidy to promote the use of Green Transport in India.Note China and Korea have been very aggressive in providing support and subsidy to the Green Industry.USA has also been providing soft loans and capital grants for manufacturing to Electric Vehicles and Lithium Batteries besides spending millions of dollar in R&D.Obama wants the US to become a leader in Battery Manufacturing with a 40% Global Marketshare while China recently unveiled a plan to create national champions in the Green Car Industry.Japan has also been supportive of Hybrid and Electric Car Technology with Honda and Toyota looking to dominate this emerging Auto Category.
November 23, 2010
The growth in Pharmaceutical companies has been tremendous in India. It is the second largest growing sector in country dominating the $8 billion domestic pharma market which is growing at around 15-16% pa. The Indian pharmaceutical industry is the third largest in the world.Mergers and acquisitions have become an increasingly important feature of this industry with foreing pharma giants like Merck,Pfizer,Daiichi looking to buy these fast growing small Indian companies.The recent buyouts of Piramal by Abbott and Ranbaxy by Daiichi reflects the desire of Pharma MNCs to inorganically grow their generics strength.This has raised some concerns amongst the Indian government about the independence of the Pharma Industry.However pharma companies are proliferating taking advantage of India's low cost technical workforce to grow at breakneck speed.. A broad overview of the pharma companies based on the revenue generated in 2007 & market cap is given below:
November 23, 2010
Chines Rare Exports in October have dropped dramatically to 3 figures from around 3660 tons in September reflecting the Chinese-Japan Tensions and Export Quotas imposed by […]
November 23, 2010
Shipping Corporation of India (SCI),the government owned carrier is coming out with a Follow on Public Offering (FPO) of 84,690,730 Equity Shares to divest 18% of its equity which will be equally shared by the company and the government.At the current price the company will raise around Rs 600 crores for the company with another Rs 600 crore going to the government. SCI is India's largest shipping line by tonnage deriving most of its revenues from oil/gas transport.SCI like other shipping companies has faced a very bad 2009 due to the sharp contraction in world trade and dropping in shipping rates.However results have started to improve with the improvement in the world economy and it is returning to its normalized sales and profits.The valuation of the company is not expensive according to normalized profits however note that shipping sector in general does not enjoy high p/e due to the cyclical and capex intensive nature of the business.The pricing of SCI has not been decided as of now,in the secondary market it trades at Rs 156 which is near its 52 week low in anticipation of the share dilution due to the FPO.Here is a list of the pros and cons.
November 23, 2010
The US Government has recently approved a number of Large Scale Solar Thermal and Photovoltaic Projects as Renewable Energy Projects rush to meet the December 2010 Deadline for getting the 30% Subsidy Cash Grants from the US Treasury.California has been leading the way with gigawatts of solar thermal plants being approved.However these projects are facing resistance from local groups due to different reasons.Green Activists are questioning the Environment Friendliness of these projects due to the harmful effects on endangered desert wildlife.While some projects have dedicated millions of dollars for the Rehabilitation and Resettlement of Tortoises and other wildlife,Green NGOs are not convinced.The 660 MW,$2 Billion Tessera Solar Thermal Plant has been put under a review of its approval due to protests that the approval was done with haste and without following proper procedures.Note Large Solar Thermal Projects need hundreds of acres of land and are being frequently built on public land.
November 22, 2010
China is using its industrial strengths to become an emerging low cost low quality Weapons Exporters.Note the Global Arms Market is dominated by USA and Russia with UK,France,Germany the other major exporters.China,India are the biggest importers of arms with most of their purchases from Russia.However the equation is set to change with China moving up the Technology Ladder to become an Arms Exporter.China has started to export fighter aircraft and missiles and is looking to export drones as well.Its major customers are countries which have difficulty in finding weapons elsewhere.Pakistan is the biggest customer with joint development of weapons with China.Note Russia has become alarmed over the developments as many of Chinese arms said to be copied from Russian Technology.
November 22, 2010
Climate Change in the last year has faced one hit after another which should culminate in the failure of the Cancun,Mexico talks which is to start on November 29.Note there are not many expectations from the Cancun Climate Change negotiations in sharp contrast to the Copenhagen Talks in 2009.Despite the global attention and expectations from the Danish hosted Climate Meet,Copenhagen was a total disaster putting Global Warming in the Backburner despite more and more evidence of the massive global harmful effects.In the recent year,the Fossil Fuel Lobbies have been trying to discredit the very agency in charge of spearheading the war against Global Warming.They have been largely successful with global polls revealing a distinct cooling towards Global Warming Efforts.China despite huge investments into Clean Technology is emitting more Carbon Dioxide while USA has completely given up its Global Leadership on the most pressing World Problem.Here are the Reasons why the Cancun Climate Change Talks would fail.
November 22, 2010
Coal Demand continues to grow at steep pace in India and China defeating the efforts of Climate Change Activists in the Developed World.Building a Thermal Power Project in Europe and USA has become exceedingly difficult due to concerns of the detrimental health,air quality and pollution effects of Coal Derived Electricity and Heat.Coal is considered as the Dirtiest Form of Fossil Fuel Energy making it a prime target in Climate Change Fighting Efforts.However China with around 3 Billion Tons of Coal Consumption and India with another 500 million Tons depend on King Coal for majority of their Energy Needs.While China generates 80% of its Electricity from Coal,India generates around 65%.While both countries have Huge Reserves and Production of Coal,their voracious demand is leading to surging imports.These Imports are being sourced from countries like Australia,Canada and USA which are going through Coal Mining Booms.Ports are getting congested as Infrastructure failed to meet the growing coal needs of India and China.
November 22, 2010
India's ambitious JNNSM Plan to build 20 GW of Solar Capacity by 2022 has seen projects being awarded for 479 MW of Solar Thermal Projects under Phase-1.The Solar Project Bidding was expected to be extremely competitive and it turned out to be exactly that with dis conts of more than 30% being offered to the base price of RS 15.31 for Solar Thermal generated Electricty.Note Rs 15.31 was determined to be a decent price on which a Solar Thermal Plant Developer could get decent returns just a year ago.This means that a 30% Discount would lead to zero or very low returns for the Solar Thermal Winners.According to news reports there are 7 winners for these Solar Thermal Plants 6 of which will come up in Rajasthan which seems to be the biggest winner of these Solar Subsidy Scheme.Andhra Pradesh is the only other state to win a Solar Thermal Project.There were about 60 applicants for the Solar Thermal Part of the Phase 1 JNNSM Bidding from which these 7 have been selected.
November 22, 2010
Claris Lifesciences is one of the few decent size pharmaceutical companies coming out with an IPO of around Rs 300 crores ($65mm) in the price band of Rs 278-293 which would give it a market cap of around Rs 1400 crore.Most of the money would be used in manufacturing expansion as the company is still in the capex phase spending around $20-30mm annually.There is a lot to like in the stock except for the management.The Pharma Sector is one where India has done extremely well boosted by its low cost qualified labor something like the IT sector.The Indian Pharma Sector excel in the Generics Category which has been receiving increasing global attention for reducing ballooning health-care costs.India posseses a definite competitive advantage in the Generics Category.Here is the list of pros and cons for Claris LifeSciences
November 20, 2010
Deflating Developed Countries are fueling Inflation in Developing Ones with ultra low interest rates.QE2 has been heavily criticized around the world due to the dangers of it creating asset bubbles in emerging markets as yield hungry investors look for growth at any price.With hundred of billions flooding emerging debt and equity markets,the situation has become volatile for a lot of countries.Brazil has already seen its currency skyrocket in the last 2-3 years due to the huge spread between its bond yields and the US interest rates.With carry investors able to make around 10%,Brazil remains a favorite market for the inflow of dollars.Other countries like Thailand,Malaysia,Indonesia have seen their stock markets rallying to all time highs as well.Many of these countries have already imposed capital controls earlier.Now they are increasing further,as monetary authorities rush to close the gates.
November 18, 2010
Renewable Energy Certificate (REC) Policy is starting in India tomorrow which will allow Green Energy Generators to earn additional tariff.Note the REC Mechanism is also present in different forms in Italy,USA and Australia and has proven a good incentive to promoter Renewable Energy in those countries.India's Electricity Regulator (CERC) has been actively implementing different orders to boost Green Energy Generation.CERC had earlier mandated a 6% Renewable Energy Percentage from Alternative Energy which would go upto 15% by 2020.The REC Policy will help in achieving those targets by providing a pseud market linked mechanism to inentivize Green Power Producers.
Who will Benefit
Renewable Energy Companies and Green Utilities are set to benefit the most from this Policy.Suzlon has already welcomed the policy saying that Financing will ease for Renewable Energy Projects.Orient Green Power,the largest Green Focused Utility will also be a big beneficiary.Local Indian Wind Turbine Companies should also benefit from the Scheme.It also provides companies outside the JNNSM to get decent returns from solar generation as the REC band for Solar REC has been set between Rs 12-17/Kwh.India need to increase Renewable Energy Capacity by at least 50 GW in the next 10 year to meet the 15% CERC Target
November 18, 2010
Note the Chinese government has completely denied any wrongdoing and it is almost impossible to prove the allegations.However the Chinese Origin IP Addresses point to the Chinese origin of the attacks.One of the main reasons for Google leaving China was the cyberattack on Google computers.China has become the 2nd largest economy in the world and a major world power.With growing power comes more responsibility though can't think of any global power taking much of that ( USA till recently believed in preemptive attacks on weaker countries).Growing cyberattacks will lead to increased security and restriction of the Internet which is to the detriment of all countries.Note the development of Networking and Communication Technologies has been a key element of the growing prosperity the world over.
November 18, 2010
India's Fast Growing Economy based on Consumption rather than Exports has made it a Darling for International Fund Managers.When the whole world is suffering from some structural crisis or the other,India seems an like an oasis in the desert.However like a Mirage,the Governance and Regulatory Shortcomings make India look much better than what it is.$90 Billion of Record Foreign Inflows have been invested into India mostly into the booming Stock Market even as Indian Retail investors have fled.The dichotomy is perhaps explained by the problems faced by people on the ground who have a better sense than Fund Managers sitting in their Glass Towers in Singapore,New York and London.Insitutional Investors in India are mostly Compromised or Incompetent in my view herding into the Indian Markets dazed by the positive aspects of the Indian Economy while glossing over the Risks.Crushing Income Disparity where a $2 Billion Home is constructed while 80% of Indians live on less than $2 day,Pervasive Corruption with Billions being Swindled in Telecom and Land Scams,Massive Red Tape and Policy Bankruptcy has been ignored.However these Risks remain as can be seen by the SKS Microfinance Debacle.
November 18, 2010
Chicago Climate Exchange the only USA Exchange to allow trading of Carbon Emission Credits has been shut down by its owner ICE.While I am no fan of Carbon Emissions Cap and Trade Policy as it gives rise to Frauds and Misplaced Incentives,the mechanism is one of the popular subsidy tools in combating Global Climate Change.Note Carbon Cap and Trading was on the Policy Agenda of the Obama Administration,however a deadlock in the Senate prevented any move in 2010.The US has been a huge laggard in the global warming fight and with the Republican Ascendancy following the MidTerm Polls,things are set to stay the same.Despite the BP Oil Spill and Record Global Temperatures,US remains blind to its climate obligations.With US reluctance,the Climate Change has been in Cold Storage with little progress expected in Cancun Meet.
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
November 16, 2010
Corruption in India has taken a widely virulent and blatant form with scams popping up almost everyday.Greed is Good has become the motto for India's Role Models in Sport and Military as well.India's Politicians are Leading the protagonists with Realty being the Main Theme.Note Real Estate companies in India are notorious for corruption with the sector being avoided by Fund Managers.India's Southern State of Karnataka is known for its IT Industry with capital Bangalore famous as a Knowledge Hub.However the Politicians of that State have made it the Corruption Capital with Bangalore equally famous for Land Grabbing and Real Estate Scams by Bureaucrats and Politicians.While Districts in the State have been made famous by Robber Mining Barons,the capital is famous for Realty Shenanigans.
November 16, 2010
India's Relations with its Neighbours in South Asia has mostly been strained despite sharing a common history and culture.While China and Pakistan remains India's topmost concerns with 4 wars being fought with these 2 countries in the last 65 years,the other smaller neighbours have not always been too friendly.However things seem to be improving with Bangladesh which is completely encircled by India on 3 sides.Bangladesh has viewed Big Brother India with suspicion despite India playing a crucial role in Bangladesh's Liberation from Pakistan during 1971.However the Bonhomie since 1971 was lost as subsequent military rulers and the BNP ruled coalition viewed India as an adversary.However the coming back to power of Shiekh Hasina led AWP has put India and Bangladesh on a new level.The reasons behind India-Bangladesh closeness are due to
November 16, 2010
Valuation
MOIL has a Net Worth of Rs 1860 crores and a NAV of around Rs 110/share.The Company will probably earn around Rs 700 crore this fiscal year after doing Rs 465 crores last year (which was a bad year for the industry).Operating Cash Flow has been generally higher than the Net Profit leading to improved cash position over the last 4 years.The Capital Requirements of the Business is quite low leading to high Return Metrics.If the Government sells the 20% stake at Rs 1500 crore that would give the company a market cap of Rs 7500 crore.Taking out the Rs 1700 crore in cash would make the company be valued at 3.2x BV and 8-9x P/E.This is a substantial discount to Global Mining Companies.
Summary
Like Coal India Limited,MOIL looks like a very safe commodity investment at a cheap valuation.With growing Indian Demand,MOIL can hardly miss continuing on a steady 10-15% earnings growth over the next 4-5 years.If the commodity prices flare up again like 2008 due to QE2,then MOIL provides a big upside as well.Its a good investment for investors looking to invest in safe mining plays.With government ownership,the typical Indian management risk is also greatly mitigated.
November 16, 2010
India has a huge potential in Solar Energy Generation which is being strongly supported by the Federal Government under the JNNSM Scheme and by individual States […]