Regulator
May 28, 2011
SEBI has been strangely and inexplicably absent from its role of supervising the primary market in India despite a stream of pump and dump IPO by small disreputable promoters and investment bankers.Most of these IPOs have no fundamentals to justify lofty valuations and without the role of market operators and investment bankers have no hope in hell of getting subscribed.Its a scary gambling scheme in which retail investors put money only with the hope of getting out on the first day with probably listing gains.There is no way that an investor can make money in these issues in the long term.However the shenanigans of the promoters and bankers have gone unpunished leading to more and more of these junk IPOs getting into the stock market everyday.This only brings a bad name to Indian stock markets where manipulation can happen so brazenly and openly and pushes away genuine investors away from equities.SEBI has been recently been trying to get more retail investors into the stock market however it seems mere words as it does not take action on open corruption.
May 12, 2011
Power Finance Corporation Green Energy has been floated as a subsidiary of one of India's biggest power sector financier Power Finance Corporation.As the name implies the company's mission is to provide loans to India's Green Energy Industry.Note India requires around $10 billion dollars according to the government plans of building 17 GW of Alternative Energy Capacity in India between 2012-2017 which is low in my view.However even this low target will require a massive amount of debt financing to the tune of around $6-7 billion annually.Power Finance Corporation is one India's largest infrastructure financing companies owned by the government.The company which has billions of dollars of loan assets to the Power sector in India has naturally entered the fast growing Green Energy area as well.
May 12, 2011
BJP,the chief opposition party in India is finding it hard to fight the ruling party's widespread corruption as its leader are too compromised in land scams of their own.The Karnataka ministers of the BJP are known to be amongst the most corrupt in the country with the CM himself indulging in land scams along with his sons.The Bellary trio of Reddy brothers have amassed billions of dollars through plundering iron ore illegally and having literally bought the government in Karnataka for the BJP with their ill-gotten wealth.Karnataka’s Chief Minister has justified corruption as tradition and despite huge pressure to resign managed to survive due to unique caste politics of India .The Supreme Court has called the corruption in India “mind boggling” while the Chief Vigilance Officer had earlier called 30% of India’s population utterly corrupt.Now the BJP's ministers in the Punjab government have been accused of land scams in the state.Two of the BJP ministers Manoranjan Kalia and Swarna Ram have been implicated in a Land deal on the outskirts of Chandigarh.Kalia holds the industries and local bodies portfolio, Ram is social welfare and justice minister.
May 8, 2011
Note the stock fell before it announced the results after the close of the markets which means that insider trading had take n place.The volumes at 10 times certainly seems to hint so as the JP Morgan downgrade of the stock could not have led to such a big fall in which there are a large number of foreign and domestic funds as investors.Besides its problems in Andhra Pradesh are hardly new and Indian brokers hardly that good that their reports cause such big stock price movements.Like other SEBI probes expect this one to fail or result in a small penatly which will not deter more such white collar fraunds in the Indian Stock Market.Insider Trading in India is quite widespread with some of the biggest business groups having been fined by SEBI like ADAG etc.
May 8, 2011
India has a massive potential in Solar Energy with at least 20 GW of Solar Power to be installed by 2022 according to the JNNSM Plan.This […]
May 7, 2011
HAREDA which is the state renewable energy development agency akin to MNRE at the centre will put these solar farms under a fast track approval process.Note Red Tape in India is quite notorious especially for small project developers who lack the connections and resources to get things done.Note Haryana gives seperate incentives on its own for solar energy,solar water heaters and solar lighting as well.Haryana is desperately deficient in renewable energy despite being one of the most industrialized and fastest growing states in the country.Haryana cities like Gurgaon and Faridabad have benefited hugely from being part of India’s National Capital Region (NCR).However Haryana only generates 0.5% of its 4000 MW of Electricity from Renewable Energy Sources.The state has negligible Wind or Biomass Energy.Despite a Department of Renewable Energy being setup to specifically promote the use of Alternative Energy Sources,the state has not had much success.Haryana is richly endowed with Solar Energy Resources with 320 days sunny days.The State has managed to win some allocation from the centre’s JNNSM scheme.It is also promoting the use of solar energy through disseminating solar kits amongst 2000 schools and providing solar lighting in around 500 villages.
May 7, 2011
India's Shipping Industry has constantly declined despite the Indian economy growing by almost 8-10% in the past 5 years .Indian Flag Vessel marketshare has reduced to under 10% in 2010 from 37%.It is because the Shipping Industry suffers from a lack of good companies . The largest company is the state owned SCI which has been tardy in expanding capacity to take advantage.Recently SCI has given orders to increase fleet capacity by more than 50%.Government policies have also been not too favorable despite shipping being a very strategic industry from the point of view of defense.Note in times of war the country's merchant fleet forms one of the most important weapons in the arsenal needed for logistics and transporation of war materials and personnel.
Note Shipping is a cyclical industry and currently the industry is facing rough weather as the global shipping industry is facing a supply glut.However that's no reason for Indian shipping industry to face a trough as its marketshare remains quite low.Unlike other sectors like autos,steel,oil and gas,the shipping industry has failed to compete and as a result has become a minnow in its own backyard.
May 7, 2011
Renewable Energy in India has seen decent growth in the past mainly driven by Wind Energy which accounts for almsot 65% of the estimated 20 GW of Green Energy capacity installed in the country.However to meet India's 2020 Green Energy Target of 15% of power to be generated from renewable sources set by CERC,at least 40 GW more would need to be installed (that is a conservative estimate as load factors for green energy are lower).This is assuming that India meets its target of raising the power capacity to 400 GW by 2020 from around 175 GW at present.Solar Energy in India has not got off to a good start despite immense potential as the federal subsidy program JNNSM has seen irrational bidding by bit players and debt financing is difficult.Wind Power in India has seen the most growth amongst the green sources of power but it too faces hurdles as good quality wind sites have all been taken.
May 7, 2011
India's environment minister Jairam Ramesh has pleaded helplessness as he is too being forced to go along with these environmental destructive projects.This is a characteristic which is peculiar to India and has allowed the culture of corruption to flourish.If you build a large enough project with enough billions in investment you can get away with the murder of the environment as the government could destroy such a large investment.These ad hoc measures which lead to construction of illegal projects has been leading to the destruction of ecology in a large scale manner.Only a blanket demolition of all structures built illegally irrespective of the cost will lead to the lessening of the corruption in the business sector.
May 7, 2011
Investing in the Indian Stock Markets is like navigating your way through a minefield with innumerable instances of fraud,unethical actions and disregarding the interest of the retail investor.The SEBI which is India's stock market regulator remains mostly toothless and a blind spectator to the whole stock market fraud schemes like pump and dump.Most of the IPO's that come in the Indian markets are blatantly manipulated by the market operators,promoters and shady investment bankers.However SEBI has not taken any action so far which would make one speculate that the regulator is itself compromised.The pump and dump schemes continue unabated in the market which remains quite shallow despite the more than one trillion dollar capitalization.Mid cap and small cap corruptions scams happen with alarming regularity and even top MNCs defraud the retail investors using legal loopholes.
May 6, 2011
China has been rewriting its renewable energy plan in the wake of the Fukushima Nuclear Energy Disaster in Japan.Note there has been a strong global backlash against nuclear energy around the world and 7 nuclear plants in Germany have been closed all but in name.Other countries like South Korea,Italy,Switzerland are rethinking of what do about their nuclear reactors giving the massive tail risks with nuclear generation.China had a target of only 20 GW of solar by 2020 has decided to raise the target by 150% to 50 GW according to the country's leading energy planning authority NRDC.Note China installed more than 15 GW of Wind Energy in 2010 alone becoming the world’s largest Wind Energy Market by far.Solar Energy strongly lags Wind in China despite China having the biggest solar panel manufacturing industry in the world.Its Golden Sun and other Solar Subsidy programs have been small in absolute terms compared to its huge electricity capacity.
May 5, 2011
The Tata Group which is known in India for high standards of corporate governance and doing business ethically in a country steeped in corruption too seems to have fallen.Ratan Tata appeared blemished as tapes of his conversations with the now disreputed corporate lobbyist Nira Radia were published in the media.He was caught at least listening and agreeing the the open manipulation of the Indian ministries in government formation if not the architect.Tata Teleservices which was a major beneficiary of the second round of 2G Telecom Auction during Raja's tenure has now again appeared in the news for the wrong reasons.Despite denials by the Tata Group honchos,the Tata companies seem to be complicit in the billion dollar scam that has shaken the political and business roots of India.
May 3, 2011
Grantham has made a famous call that the rise in commodities is not a cyclical phenomenon but a secular long term one.He says that the rise in commodity prices is different from the past.Note Grantham has done an extensive study of bubbles and is one of the leading minds in the investment community.While every time in the past,the statement "this time is different" has led to a crash,Grantham's call cannot be taken lightly.He says that the rise in population,shortage of resources,the growing consumption power of massive chunks of prosperous citizens in India and China will lead to a continued surge.Note commodity prices have declined secularly in the last century and since 2000 have managed to erase all their losses to form new peaks.Grantham also says there is a possibility of a massive short term decline which will give a historic opportunity to load on commodities.Jim Rogers is the most famous commodity bull and now Grantham has joined him.Note famous hedge fund managers have already made huge bets on gold and are winning currently.Note CIA and German Military are already on the record for calling Peak Oil which would lead to a drastic fall in living conditions worldwide as the global growth fueled by cheap fossil fuels sees an end
May 3, 2011
Coal M&A is picking up at a feverish pace as the demand and price of coal shoot through the roof.Note Coal is the cheapest fossil fuel and powers most of the world's power plants despite its disadvantages.The abundance and cheapness of coal has managed to hide its deleterious effects.Indian and Chinese companies are gobbling up coal mines and companies globally as they rush to secure raw material for the growing thermal power plant capacity.The Adani Group is one of the leading Indian private power companies setting up gigawatts of new thermal power plant capacity.Mundhra Port the Adani Flagship has been buying up coal plants,ports and building power plants to vertically integrate itself in the whole coal supply chain.It recently bought the Australian Linnc Energy's Gaililee coal project for USD 2.7 billion.It has followed it up by buying Abbot Point Coal Terminal from the Queensland state of Australia for 1.8 billion Australian dollars.
May 3, 2011
India's Central Bank has been steadily raising interest rates in 25 bps increments as inflation has raged at more the double digits for more than a year.However it has not stopped the inflation from coming down as high commodity prices keep the inflation at 9% which is much more than the target of 3-5% inflation rates.With Bernake money printing fueling oil and food prices globally,it looked unlikely that RBI's timid measure would bring the inflation down anytime soon.So this time the Central Bank has thrown the kitchen sink at the problem raising the interest rates by 50 bps to 7.25% which is much more than what the market was expecting.The Central Bank also raised the interest rate on savings rate from 3.25% to 4% which was not expected by anyone.Note the low interest rate on savings bank had been a huge money spinner to top Indian banks which have large deposits of this low interest rate savings deposits.
May 2, 2011
Indian government seems not to have learned much from the Fukushima Nuclear Meltdown which has thrown millions of Japanese lives out of gear and caused massive disruption to the economy.The Jaitapur Nuclear Power Plant to be built by NPCIL using Areva's experimental nuclear reactors has got the federal government's environmental clearance.Note the protests against the plant had got a political color with local opposition parties getting involved.A number of villagers have already been killed by police firing and further protests are expected.Note India's activist environment minister Jairam Ramesh has proven to be selectively biased towards large industrial projects in Congress ruled states.After appearing to be hero stopping the Niyamgiri project from Vedanta,Ramesh has given the go ahead to politically favored projects.Not a surprise given the endemic corruption present in the ruling coalition which has given birth to a number of corruption scams and scandals.Like everything,even a project of this criticality has acquired a political cover with everyone sounding their party positions without worrying about the possibility of a nuclear meltdown in India.
May 2, 2011
Arch Coal is the 3rd largest Coal Company in the USA. During the year ended December 31, 2009, the Company sold approximately 126.1 million tons of coal and operated 19 active mines at 11 mining complexes located in the United States. On October 1, 2009, the Company acquired Rio Tinto’s Jacobs Ranch mine with 345 million tons of coal reserves and integrated it into the Black Thunder mine.International Coal on the other hand is a small producer with a market cap of $2.2 billion previously which has managed a nearly 50% premium.Market Cap of $2.2 Billion is a producer of coal in Northern and Central Appalachia .As of December 31, 2009, the Company operated a total of 11 surface and 11 underground coal mines located in Kentucky, Maryland, Virginia, West Virginia and Illinois.The Company’s mines in Central Appalachia produced 10.1 million tons of coal in 2009, and the mines in Northern Appalachia produced 3.9 million tons of coal in 2009.
May 2, 2011
Lavasa is a story of corruption,looting of the poor and raping of the surrounding environment by the Indian politician-bureaucrat-businessmen nexus in a beautiful cover of a township built for the rich and well heeled.There is little concern for the law as these powerful developers know that they can get away with murder quite literally.The long term sustainability of the township is in doubt which defeats the entire purpose anyway.Any buyer of property in Lavasa should be aware of these problems and should not buy it as their investment will be eroded in the future anyway besides having the taint of being looted from the poor.However the media too has lost interest as a new scandal emerges everyday.
Lavasa Township being constructed near Pune,Maharashtra has been in the media off and on for creating a environmental disaster in the shape of a beautiful township constructed on the hills.The town which has been constructed for 300,000 residents has violated all building and environmental norms of the state and centre.With powerful politicians and businessmen backing the project,its not as surprise that the state government of Maharashtra actively helped the township in bypassing all the laws and regulations.There is no provision for permanent water supply and it would lead to a clash between the water wants of Lavasa and Pune.Note builders in India are notorious for leaving out water and waste sustainability in their plans.The residents of the buildings,apartments and other shelters have to bear the brunt later on when there is no water and problems like waterlogging.Gurgaon the millenium township suffers from both of these problems quite acutely.Note these problems are common to both million dollar homes as well as slums in India.
May 2, 2011
SBI and HDFC Bank which are the 2 of the largest banks in the country have protested against the RBI proposal to free up the interest rate given on savings account in India.Note RBI fixes the rate at which money deposited in saings account earns interest currently for all banks in India.The current rate is 3.5% which is way below the near double digit inflation rate being experienced in India.Most Indians deposit their savings in bank saving and fixed deposit accounts as there is no widespread equity or debt investment culture in the country.This allows banks with a large retail depositer base to earn supernormal profits by paying pathetic interest rates on savings account and lending that money at 12-13%.While the public sector banks have to serve a lot of priority sectors private banks have no such concerns.This leads to high NIM for private banks leading to huge profit growth each year.This has made investing in top banks in India such an attractive proposition.
May 1, 2011
Private Banking in India has become one of the fastest growing businesses in the country with a rising wave of millionaires forming an attractive target segment for MNC banks looking for growth.Top Indian Banks have given spectacular returns driven by India's 8% GDP growth and increasing financial penetration.Note Private Banking or Wealth Management business involves providing taxation,wealth managment,investment,insurance and other financial products under one umbrella to wealthy customers.The private banking customers recieve privileged services from the banks who provide a one stop contact person in the shape of a "relationship manager".Compare this to normal banking customers who face namelss contact centre operators with little knowledge.Most of the foreign banks in India like Barclays,Standard Chartered,Citibank which have a big presence in India have been hiring aggressively and targeting wealthy customers through a big marketing spend.However the services being given leave a lot to be desired."Trust" is the biggest quality in a banking relationship as a customer trusts his life savings and in this quality these banks have failed miserably.
April 25, 2011
China has recently put increased scrutiny and control over the mining,smelting and export of important minerals like tungsten and rare earth oxides.Note mining in China often takes place illegaly without any regard to environment in quest for a quick buck.Japan which is the largest importer of rare earth oxides from China gets most of its demand met through illegal mining.However China has cracked down on this practise as it regards these minerals like tungsten,iron,rare earth,antimony and molybdenum as important for national goals.China has severely curtailed the exports of rare earth exports leading to a sharp rise in rare earth prices and stocks of rare earth companies.This has sparked concern in developed countries and blocks like EU,Japan and USA which has taken the case to the WTO.
April 25, 2011
India has lately become a nation known for endemic corruption rather than the world's poster growth boy with the ruling party members implicated in a number of corruption scams.With the government reluctant to take action against its own,the Supreme Court was forced to take over the supervision of the investigating agency CBI.In the first chargesheet top corporate honchos and CEOs were put under arrest alongwith the former telecom minister Raja and his cronies.With the ruling party under pressure from a civil society movement against corruption,the ability to manipulate the investigation process is limited.Not that the government is not trying put impediments in the court cases and top ministers and leaders indulging in character assassination of the eminent social activists like Santosh Hedge and others.This comes even as other chief ministers of the Congress like Gehlot get caught in nepotism.
April 25, 2011
Wind Power in India is the 5th biggest wind energy market in the world with more than 2 Gw of wind capacity being installed in the country.However Wind Energy Companies in India are seeing increasing competition from the entry of low cost Chinese Wind Turbine manufacturers Shanghai Electric and Dongfang.Chinese Wind Companies have seen astronomical growth in the last 5 years to occupy 7 of the top 15 global positions in the top wind companies in the world from zero.On the other hand India has only Suzlon in that list. Wind Turbines in India which are not as sophisticated and advanced in the western market with most turbines being of lower than 1 MW capacity.However with increasing focus on improving the LCOE and development of low wind locations,India Turbine producers are concentrating on introducing higher capacity 2.5 MW turbines and advanced technology like "direct drive" wind turbines.
April 25, 2011
Maharashtra which is the largest power generating state in India but deficient in renewable energy sources of generation will not use the discredited reverse auction bidding mechanism being used in the First Phase of the JNNSM Federal Solar Subsidy Policy.The reverse auction bidding was done due to the massive deluge of applications for setting up solar PV and solar thermal power plants.Based on the Rs 17.91/Kwh Feed in Tariff,developers had bid discounts with the solar project owner offering the biggest discount winning the right to build the solar power plant.This had led to irrationally low bidding for projects and it is all but certain that these solar projects will either be not be built at all or run into heavy losses.
April 25, 2011
The Government of India issued an Ordinance on 19th January, 1956 nationalizing the Life Insurance sector and Life Insurance Corporation came into existence in the same year. The Life Insurance Corporation (LIC) absorbed 154 Indian, 16 non-Indian insurers as also 75 provident societies—245 Indian and foreign insurers in all. In 1972 with the General Insurance Business (Nationalization) Act was passed by the Indian Parliament, and consequently, General Insurance business was nationalized with effect from 1st January, 1973. 107 insurers were amalgamated and grouped into four companies, namely National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd and the United India Insurance Company Ltd. The LIC had monopoly till the late 90s when the Insurance sector was reopened to the private sector.Now more than 20 life insurance companies in India have started operations with the industry size expected to reach a mammoth $350-400 billion by 2020. Before that, the industry consisted of only two state insurers: Life Insurance Corporation of India, LIC and General Insurers (General Insurance Corporation of India, GIC). GIC has four subsidiaries
April 22, 2011
Mining Industry in India is an important economic sector which contributes significantly to the economy of India. India's minerals range from both metallic and non-metallic types.The total working mines were 2,854 in 2007-08 with 569 mines belonged to coal and lignite, 676 mines to metallic minerals and 1,609 mines to non-metallic minerals.There were 755 mines in public sector and the remaining 2,099 mines in private sector.India is an important exporter of iron ore, titanium, manganese, bauxite, granite, and imports cobalt, mercury, graphite etc. India mineral resources of the country are surveyed by the Indian Ministry of Mines, which also regulates the manner in which these resources are used. The ministry oversees the various aspects of industrial mining in the country.Note Mining in India comes under both the ferderal and state supervision.
April 22, 2011
The Congress Party and its leaders can't stop being caught in corruption scams and instead of trying to correct them,they slander and character assassinate civil rights activists who try to bring about an anti-corruption bill in the country.The Adarsh Housing Scandal in which the Congress Chief Minister in Maharashtra was involved had to resign though no jail time for him or for his associates.The Scam which also involved top bureaucrats,Corrupt Indian Military Generals and other sleazy officials has died a natural media death as fresh scams take their place.Not that the Opposition party BJP is any better with its Karnataka Chief Minister failing to resign despite being accused of a number of scams.Note the Karnataka Ministry of the BJP has robber mining barons as top ministers who have made billions of dollar through illegal mining of iron ore.
April 22, 2011
India's Oil and Gas Industry has an interesting mix of Oil & Gas companies from the government and private sector.Except for some companies providing ancillary and drilling services,most of the companies are huge with billion dollar balance sheet and huge operations as is the case with the Oil and Gas Industry worldwide.Except for Reliance Industries,the upstream sector of oil and gas production and distribution is dominated by government owned companies which are heavily regulated.Despite attempts at liberalizing the APMC and the operations of the PSU Oil Companies,HPCL,BPCL and IOC run billions of dollars in losses as they are forced to sell oil and gas products at below their cost.The government's policies are mostly ad-hoc compensating these companies through bonds and money transfers.It is quite strange as the minority investors are forced to pay for government subsidies for energy.India's Oil Subsidies has led to the flourishing of a massive Oil Mafia which does not think twice before killing government officials and has led to poor outcomes for the country.Despite this government stupidity,some government companies like GAIL,OIL India and ONGC which operates in the production and have to bear less of the subsidy burden have grown and performed admirably.In the private sector companies like Reliance,Aban,Great Offshore,Essar have managed to grow rapidly as well with varying degrees of success.Here is the list of the major Oil and Gas Companies in India.
April 22, 2011
General Insurance covers all the non-life insurance types such as Motor Insurance,Health Insurance,Calamity Insurance,House Insurance etc.The biggest money earner for General Insurance Companies is Health Insurance and its associated policies like Disability Insurance etc.Having health insurance is important for several reasons. Uninsured people receive less medical care and less timely care, they have worse health outcomes, and lack of insurance is a fiscal burden for them and their families.
Government General Insurance Companies are the best ones to take health insurance policies because of a simple fact that do not cheat and harass you like the private insurance companies whose only aim is to earn a quick profit.Given the pathetic system of contract enforcement in India this become especially important as legal cases can go remain stuck in the justice system for years.Just like LIC is the best life insurance company in India because of the TRUST factor so are the Four government health insurance companies because of their government ownership and lack of overarching profit motive.
April 22, 2011
In India, Insurance is a national matter, in which life and general insurance is yet a booming sector with huge possibilities for different global companies, as life insurance premiums account to 2.5% of India's GDP. The Indian Insurance sector has gone through several phases and changes, especially after 1999, when the Govt. of India opened up the insurance sector for private companies to solicit insurance, allowing FDI up to 26%. Since then, the Insurance sector in India is considered as a flourishing market amongst global insurance companies. However, the largest life insurance company in India is still owned by the government.The Insurance Industry has grown (premium as percentage of GDP) from 2.3 per cent in 2001 to 5.2 per cent in 2011.The report estimates the total insurance premium at approximately Rs $350-400 billion in 2020 with Life Insurance making 90% of the premiums.The profitability of the industry is negative as they have spent their energies in expanding their base in a rapidly growing market without concentrating on the margins leading to a cumulative loss by private insurers of around $3.5 billion.However the huge size of the insurance market which has been estimate at an astounding $350 billion in premium by 2020 is attracting companies in droves.Almost all major global insurance companies have a presence in India through JV (as government regulations only allow 26% holding).Major Indian Banks and Finance Companies too have a presence in the sector through JV with foreign partners who bring the expertise.