"Mumbai (Bombay) Sickness": The Housing Societies in Mumbai (Bombay) generally do not allow their apartments / flats to be rented to Bachelors and Sprinters....!! Strange isn't it??!!

Friday, November 27, 2015

IVRCL Ltd: Buy
IVRCL Ltd got its debt of Rs 7,350 crore restructured in June last year, but its journey since then has been full of thorns. In the quarter ended September, its net loss shot up to Rs.305 crore, while revenue remained stagnant at Rs.641 crore. To add to its woes, its accumulated losses for the first time exceeded its net worth at Rs.941 crore.

The company is currently facing a tough situation as lenders are reluctant to give new loans, even though it was sanctioned a fresh non-fund credit of Rs.1,800 crore in bank guarantees and letter of credit, in addition to a cash credit limit of Rs.200 crore as part of the CDR deal.

As part of the corporate debt restructuring, the company has a moratorium on interest payments on term loans till September 2015. The repayments are expected to start only from March next year. This means it has less than four months to fix things to enable IVRCL to improve its cash flows.

However, there seems to be some silver lining on the cards. The company is contemplating to sell some assets and divest equity in existing projects to regain control of its finances. 

Meanwhile, IVRCL Ltd has restarted negotiations with Tata Realty and Infrastructure for three of its projects, including the Chengapalli Tollways, a special purpose vehicle set up for widening the road from Chengapalli to Walayar via Coimbatore, which began toll collection from October 14.

There were recent media reports that this Hyderabad-based infrastructure player will get Rs.400 crore from the sale of three road projects in Tamil Nadu as the delayed monetisation ended up in losses.

Apart from monetising the assets, there are six more in line, it has decided to focus on realising the claims amounting to over Rs.6000 crore from various government projects. The company wants to utilise the new arbitration law that brings down the time limit for the settlement of a commercial dispute, for this purpose.

It is also looking at taking on more engineering procurement and construction projects where the role of an infrastructure company is limited to construction of projects within a prescribed budget. IVRCL Ltd has an order book of Rs.18,000 crore.  The success of the company now solely rests on its ability to generate enough cash flows.

Recently, IDBI Bank  said it has acquired an additional stake in IVRCL  Ltd, raising its total stake in the latter to over 5%. It said the acquisition was done through conversion of Funded Interest Term Loan (FITL) into equity.

Hence, high-risk-taking investors can buy the scrip of IVRCL Ltd at the CMP of Rs.8.95 for a short term target of Rs.11. Please keep a SL (must) of Rs.7.70, for any short term play.  The stock was already recommended to the Paid Groups a couple of days back at Rs.8.70.

Wednesday, November 25, 2015

First Source Solutions Ltd
This scrip of First Source Solutions Ltd, was recommended repeatedly around Rs.27-28 during the last few months, the scrip made a 52-week high yesterday at Rs.43.80 and closed at Rs.42.55.

Congratulations to all those who are still holding the scrip. 
Vedanta not to shut down refinery
[Editor: Vedanta Ltd (Rs.90.30) is the largest copper producer, while Hindalco Industries Ltd (Rs.73.75) is the biggest aluminum maker in India. Last month, Mehraboon Irani of Nirmal Bang Securities told a business channel that he had turned positive on metals; as he believed that global economy might recover over the next two years. I also somewhat feel that non-ferrous pack might have  bottomed out. Hence, I would suggest the investors, to have at least one of the scrips in your portfolio]
Bhubaneshwar, Nov 25, 2015: Vedanta Ltd on Tuesday said it would not close down its one million tonne per annum (mtpa) refinery at Lanjigarh since the state government has assured to sort out its raw material crisis.

"We will not shut down the plant as we are hopeful that the state government will help us meet our requirement of raw materials to run the plant," said chief executive officer (CEO) of Vedanta (Aluminium) Abhijit Pati, following a high-level meeting with chief secretary G C Pati.

The CEO said the plant requires at least 3 lakh metric tonne of bauxite ore per annum to run its refinery. "At present, the production capacity of the refinery has fallen by about 50% due to non-availability of adequate raw material," he added.

On August 25, Vedanta, which has been struggling for around 10 years to arrange raw material, had announced to shut down its refinery in a phased manner. At present, the plant is operating on a daily loss of Rs 3 crores. The plant generates employment opportunities for around 10,000 people in Kalahandi district. Earlier, in December 2012, the company had temporarily shut down its plant due to lack of raw material. After a closure of around seven months, the plant was reopened in July 2013. After that, the company was running its refinery at Lanjigarh by sourcing bauxite from Gujarat and Chhattisgarh, official sources said.

Vedanta faced a jolt after rejection of its bid to mine the bauxite reserve at the ecologically sensitive Niyamgiri Hill, home to the particularly vulnerable Dongaria Kondhs as the gram sabhas held to decide the mining project had rejected the mining plan.

State steel and mines minister Prafulla Mallik said the state government has applied for a mining lease of Kodingamali bauxite reserve in Rayagada district in favour of the Odisha Mining Corporation (OMC). "We hope to get the mining lease very soon. Through the OMC, we will facilitate long term ore linkage to Vedanta," he added.

The minister also said that the OMC has applied for prospecting license of Sasubohumali and Karlapat bauxite mines, which would further resolve the bauxite requirement of aluminium plants in the state.
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Tuesday, November 24, 2015

Lanco Infratech Ltd was recommended at around Rs.3.25 some months back to the Paid Members. The scrip closed at Rs.6.40 in the BSE, at a kissing distance from the 2nd target of Rs.7.

The power producer has reported a consolidated net profit of Rs.98.98 crore for September quarter against loss of Rs.527.5 crore in year-ago period, driven by strong operational performance and favourable power tariff order.

Today, another scrip in the construction space was recommended to the Paid Group members. What is its name? And what to do with Lanco Infrastructure Ltd now?

Meanwhile. Gammon India Ltd hit 19.98% buyer freeze in the BSE and 19.92% buyer freeze in the NSE to close at Rs.15.49 and 15.65 today, in the respective exchanges. This looks a little queer when the lenders to the company led by ICICI Bank proposes to invoke the rules for strategic debt restructuring as a step to recover Rs.100 bln (1 billion= 100 Cr) of dues, from the company. 

Monday, November 23, 2015

Government spending key for revival of Indian steel sector: Fitch 
Photo: Live Mint
New Delhi, 23 Nov, 2015: Spending on infra projects such as housing for all and smart cities is the key for the revival of the Indian steel industry, which faces headwinds like cheap imports, global agency Fitch said. 

"Spending by the Indian government on infrastructure will be the catalyst for any meaningful improvement in domestic steel demand. The agency expects India's steel consumption to improve modestly by 7-8 per cent in 2016," the agency said in a report titled '2016 Outlook: Indian Steel Sector'. 

The agency projected that high imports and soft steel prices globally in 2016 are likely to result in continuing profitability pressures for the Indian steel producers. 

"Their margins are likely to be lower in 2015 and improve marginally in 2016, supported by improving domestic demand and the imposition of safeguard duty on imports on certain steel products for 200 days," it added. 

Fitch has a Negative Outlook on the sector, it said. 

It expects the leverage of major Indian steel producers to remain high in 2016 and start to decrease meaningfully only by 2017. 

"The debt levels of major Indian steel producers increased over the last three years due to capacity expansions. The high debt, along with profitability pressure, is likely to result in deterioration of leverage in 2015," it added. 

It also expects global steel prices to remain weak in 2016, driven by weak demand and overcapacity in the industry. Indian steel prices had fallen almost a quarter year-on-year as of end-September 2015 in line with global trends. 

A relatively stronger rupee in 2015 to date, significant import increases and weak steel demand affected steel prices and consequently, profitability of steelmakers.

Still, the imposition of a 20 per cent duty on certain steel product imports, effective September 14, has given them some relief, Fitch said. 

Rohit Ferro Tech Ltd: Buy
CMP: Rs.5.50
Rohit Ferro-Tech, which is into ferro alloy manufacturing (and Mining & Minerals sector) has been facing several problems like non-availability of  adequate quantities of raw materials, lower capacity utilisation and low absorption of overheads. 

Earlier this year it sold its Jajput unit to Balasore Alloys Ltd (formerly Ispat Alloys Limited), which is part of the Ispat Group, due to severe financial stress owing to its high debt exposure.  In other words, the company decided to dispose off the Jajpur unit so as to ease its financial burden and improve its cash flow requirement.

It also has units located at Bishnupur and Haldia in West Bengal. 

The current market capitalization stands at Rs.62.58 crore. The current book value of the shares of the company is Rs.19.74.

Buy the shares of the company with a six-month perspective for a target of Rs.7.30--9.50.

Thursday, November 19, 2015

Vedanta Ltd: Buy
CMP: Rs.91.70
The much talked about merger of Vedanta Ltd with Cairn India Ltd may happen in the next couple of months. 

Vedanta already has a 59.88 per cent stake in Cairn India. State-owned insurer Life Insurance Corp (LIC), Cairn India's second-largest minority shareholder, and which together with Cairn Energy controls about 19 per cent of the Indian company, too had earlier expressed reservations about the deal.

Vedanta has already pushed back the deadline for the merger to June quarter of 2016 as against the first quarter stated previously. 

Buy the shares of the company, for short term targets of Rs.97-104 and medium term target of Rs.125. 

Monday, November 16, 2015

32% of Chinese zinc smelters surveyed by SMM are optimistic toward zinc prices and expect prices to rise to 14,000-15,000 yuan per tonne in the near future. 

Meanwhile, Vedanta Resources Plc said it would maintain its low-cost production of the metal, as well as continue with its plans for a $630 million zinc development in South Africa. 

Earlier Glencore Plc, the world’s largest commodities trading company— announced, in October that it plans to cut zinc output by a third rather than sell it cheaply;  suggesting that more producers may curb supply. 

JPMorgan Chase & Co. said October 16, 2015: "More capacity shut-downs are probably needed to tighten the market".

However, according to ICBC Standard Bank Plc: "Refined zinc production will exceed demand this year and in 2016". 
Commodity Demand: Past, present, future
Photo: Wikipedia
November 8, 2015: Over the past 15 years, China’s impact on global raw material demand has been nothing short of phenomenal.

The spectacular growth in COMMODITY demand between 2005 and 2010 led to the term “commodity supercycle”.

But this was no ordinary commodity cycle, as the nation with a population of more than 1 billion people rapidly urbanised.

Today, despite the slowdown in COMMODITY demand since 2011, there are still many analysts who have the firm conviction that the world remains in a commodity supercycle and that the globe is currently experiencing a pause before the acceleration in the demand for commodities resumes.

Bearing these views in mind, as well as the current impact on global MARKETS being caused by China’s growth slowdown, it is worth taking a moment to review the impact of China’s industrialisation and the rapid increase in commodity demand in the past.

Equally important is taking STOCK of current commodity demand fundamentals and looking to the future and China’s likely impact on commodity demand.

The death of Chinese communist leader Mao Zedong in 1976 saw the end of the Cultural Revolution and the introduction of economic liberalisation in the Chinese economy. This change in economic policy led initially to a period of gradual industrialisation followed by a phase of rapid acceleration of the economy, with an emphasis on fixed-asset INVESTMENT.

 Economic acceleration

In the 1980s economic growth accelerated off a low base, gathered further momentum in the 1990s and, in the 2000s, the Chinese economy grew rapidly during a time of loose global monetary policy and excessive credit extension.

Evidence of this industrialisation is illustrated by the growth in China’s commodity demand.

In the 1980s and 1990s the demand growth for commodities such as steel, aluminium, copper, zinc and nickel expanded at less than 10 percent a year. However, in the period between 2000 to 2010 demand for these commodities increased between 12 percent and 20 percent a year.

This rapid increase in demand caught the companies that produce commodities flat-footed and scurrying to increase production by investing heavily in mine expansions and new mine development.

The fruits of these INVESTMENTS are only now coming into full production and this is one of several reasons why there is currently an oversupply of many commodities.

This, in turn, has placed downward pressure on commodity prices.

The evolution of the Chinese economy and its impact on commodity demand can be seen in terms of China’s share of global commodity consumption.

If the 20-year period from 1994 to 2014 is examined, the following statistics stand out:

In 1994 China’s share of global commodity demand was less than 10 percent.

By 2004 China’s share of commodity demand had increased to about 20 percent, with the exception of steel, which stood at 28 percent.

Ten years later, in 2014, China’s share of commodity consumption had accelerated even further to 45 percent for copper and zinc, and about 50 percent for aluminium, nickel and crude steel.

Accordingly, commodity demand and prices are largely dictated by the ebb and flow of the Chinese economy.

If one examines China’s share of commodity demand growth for this year, the percentages are increased.

For COMMODITIES such as copper, aluminium, thermal and metallurgical coal, zinc and lead, China’s share of demand growth is forecast at between 60 percent and 80 percent.

For steel this number is a staggering 95 percent.

Despite China’s dominant position in terms of global commodity demand, over the last five years there has been a concerted effort to swing the Chinese economy away from INVESTMENT in infrastructure development and real estate, to a consumption driven economy.

Regardless of these efforts, China’s ratio of fixed capital formation to gross domestic product (GDP) remains stubbornly high, at 50 percent.

A reduction in gross capital formation INVESTMENT will inevitably result in slower GDP growth in the future.

This transition to a consumption-led economy has negative consequences for commodity demand.

Notwithstanding this negative commodity demand outlook, continued Chinese urbanisation should provide support for commodity consumption – although not at past growth rates.

At present China’s population is 55 percent urbanised compared with the US at 80 percent and Japan at 90 percent.

For the next few years the commodity complex faces headwinds from China.

Not only is the rate of economic growth contracting but the intensity of fixed-capital formation in the economy is slowing.

 Passing the baton

Consequently, there is a structural decline in commodity demand growth.

The requirement for bulk commodities – including coal, iron ore and steel – will be the most adversely impacted by the slowdown in the rate of growth in fixed-asset INVESTMENT.

Copper and aluminium prices should fare better than the bulk commodities as they are not as negatively affected by a reduction in spending into large capital projects.

So who will take up the COMMODITY mantle from a slowing Chinese economy?

Based on population demographics and rates of urbanisation, the commodity baton should be taken up by emerging MARKET economies such as the Association of Southeast Asian Nations, India, the Middle East, Africa and Latin America.

The increasing demand from these economies will not necessarily offset the slowdown in demand from China, however it will soften the blow.

These emerging MARKET economies together represent about half of the world’s population.

These population demographics are indicative of the fact that there should be significant support for commodity demand over the next 10 to 20 years.

The metals commodity basket is entering a very different era to that of the 2000s. The Chinese economy is deliberately moving away from an infrastructure-led to a consumption-driven economy.

This will impact commodity exporting nations negatively as they will be pressured to find alternative forms of economic growth.

The rapidly urbanising emerging MARKET economies will incrementally shift commodity demand away from China and will take market share away from the “global factory”.

As a result of this shift in urbanisation, the intensity of commodity cycles should diminish as global demand is spread across a great number of industrialising economies.

 Note: Tony Cadle is the head of portfolio construction at Ashburton INVESTMENTS.

Courtesy: www.iol.co.za

Monday, November 09, 2015

Though Vedanta Ltd (Rs.93.65) posted a 40% drop in consolidated net profit, due to lower COMMODITY prices during the September, 2015 quarter (Y-o-Y basis); the earnings were higher than analysts’ expectations..

The company, straddling mining, OIL and gas sectors, reported a net profit of Rs.973.97 crore for the quarter ended September, 2015 as against Rs.1,639.93 crore in the same period a year ago. Revenue for the quarter fell 15% to Rs.16,561 crore, compared to Rs.19,549 crore in the same quarter last year.

It showed record production from our Tier I zinc mines, resulting in strong free cash flow during the quarter. The company is continuing to drive efficiency improvements and is optimizing opex (operational expenditure) and capex (capital expenditure) across the business, taking measured steps to reduce net debt and maximize free cash flow.

One significant thing, which needs to be mentioned here is that: during the September, 2015 quarter, the company managed to reduce net debt and finance costs. As of September, net debt was at Rs.27,105 crore compared with Rs.32,440 crore at the end of September 2014.

For the September quarter, the company managed to post profits in its zinc business (which also includes production of lead and silver), copper business and power generation business. However, its two main businesses OIL and gas under subsidiary Cairn India Ltd and aluminium, run under Vedanta Aluminium and Balco Ltd—posted losses during the quarter.

“Finance cost at Rs.1,418 crore was lower by Rs.46 crore year-on-year, primarily due to debt refinanced at lower cost… The company was also able to renegotiate spreads on its existing term loan portfolio by an average of ~22 basis points. This, along with the declining interest rate scenario in India, led to a 30 bps reduction in the borrowing cost,” said a note issued by the company, post September, 2015 quarter results. 

Though the near-term MARKET outlook remains challenging, but it's right mix of low-cost assets fuelled with new technologies, is likely to benefit the company, from future demand in India and globally.

Those who are already holding the shares of the company, should add on all declines, for short term targets of Rs.106-111 and medium term target of Rs.125. 

Saturday, November 07, 2015

Veddanta Ltd: Buy
CMP: Rs.92.20
A bunch of reforms in the power sector accompanied by smart city projects of the government of India, is likely to increase the demand for the building materials including steel, cement and aluminium. It is to be remembered that Vedanta Ltd is India’s biggest zinc miner.

Meanwhile, there are media reports that local governments and power suppliers, smelter executives in China are saying a bleak outlook for aluminium prices will leave them with no choice but to cut or halt production of the metal if power prices there are not reduced.

Power tariffs account for about 40% of production costs of aluminium smelters in China, the world's top producer and consumer of the metal. Any output reduction in China will help support weak prices of the metal.

Buy the scrip at the CMP of Rs.92.20 (NSE)5, for short term targets of Rs.106-109-112 and medium term targets of Rs.120-125.