Companies & Sectors
BEL-Thales JV to make radars for civilian, defence use in India

France-based Thales will hold 26% stake while BEL would hold the rest in the JV that would manufacture radars for Indian and global markets

New Delhi: India's state-run Bharat Electronics Ltd (BEL) and France-based Thales have agreed to form a joint venture company in India to design, develop, market and supply civilian and defence radars in local and global markets, reports PTI.
"BEL and Thales are delighted to announce that boards of both companies have approved the formation of a joint venture company subject...The company will be dedicated to design, development, marketing, supply and support of civilian and select defence radars for Indian and global markets," the companies said in a joint statement on Wednesday.
Thales will hold 26% stake in the company - the maximum shareholding permitted for a foreign company in a defence joint venture in India. Bharat Electronics will own the majority 74%, it said.
The formation of the new company is subject to approvals from the governments of India and France, the statement said.
BEL, a defence PSU, has been making radars for the Indian armed forces, including the Indra-II and the Rajendra radars.
It also provides support to the armed forces in maintaining their radars procured from foreign sources.
Thales has also been a major player in the Indian defence sector and recently won a $2.3 billion contract with Dassault Aviation from India for upgrading IAF's Mirage-2000 aircraft fleet.


Will investors sue Tulip Telecom?

Tulip Telecom has missed its deadline for redeeming FCCBs. The shares are down 10% in the last couple of days and there could be further downside on the back of this uncertainty, says Nomura

Tulip Telecom has been unable to meet its 26th August maturity deadline for redeeming its FCCB (Foreign Currency Convertible Bonds) and has stated that it now hopes to complete this exercise by 10 September 2012. Based on Nomura’s (Nomura Equity Research) initial discussion with the company, it is understood that there is no official approval on this new timeline; rather, this is the extension Tulip seeks from investors to complete the refinancing. Nomura’s point of view is that investors, however, could choose not to wait and take legal recourse. 
FCCB redemptions have been an investor concern for the past several quarters and the conversion option was well out of money. Tulip shares are down 10% in the last couple of days and there could be a further downside potential on the back of this uncertainty. Hence Nomura says that it would remain on the sidelines until there is better clarity. Wondering why is Nomura even covering this stock? Stock analysts and fund managers usually have no sense of corporate governance.
Of the total $140 million required to redeem its existing FCCBs, there is a funding shortfall of $20 million. The company management notes “while the company has partial resources towards the redemption, it is awaiting sanction and disbursements from some of the lenders to raise the balance amount, besides the funds from the issuance of new FCCBs of approximately $50 million.” 
It may be recalled that Tulip had recently announced that it had tied up for $80 million in debt and $50 million through the issue of fresh FCCBs. Tulip also received about $40 million in proceeds from the sale of its stake in a JV (joint venture) with Qualcomm in the recent quarter. Nomura however, says that this appears to have been deployed, likely for working capital.
At this stage, Tulip is not in discussion with existing FCCB holders for a restructuring or rollover, according to Nomura analysts.


Tariff revisions for PPA projects possible, finds Nomura

CERC has the jurisdiction to regulate/revise or consider the appeal for tariff revision in case the power generating company sells power to more than one state and has signed legally binding PPAs, said the Attorney General of India. This may benefit Adani Power and Reliance Power, finds Nomura

Power generating companies have a glimmer of hope now in increasing power tariffs, says Nomura given that the Attorney General of India (AG), G Vahanvati, has told the Forum of Regulators (FoR), that the Central Electricity Regulatory Commission (CERC) has the jurisdiction and can regulate/revise electricity tariffs if legally binding contracts (PPAs—Power Purchase Agreements) have been signed by the generating company (IPP) with discoms across multiple states. The AG opined:


(a) CERC is the appropriate commission which has the ‘jurisdiction’ in cases where the generating company is supplying to more than one state. Whether the generating company originally had just one state as a buyer and thereafter added more units/capacity and started supplies to buyers/beneficiaries in other states, is immaterial.


(b) CERC has the jurisdiction to and can regulate/revise signed PPA tariffs (between the generating company and state discoms). Whether the relief is to be granted or not, is ultimately for the appropriate commission (CERC) to consider.


(c ) In case of the anomalous situation where an SERC has already passed a tariff order while the other state refuses to acknowledge the same, CERC is the appropriate commission and it is immaterial whether an SERC has passed a tariff order or not (relating to the power plant/generating company in subject).


In essence, CERC has the jurisdiction to regulate/revise or consider the appeal for tariff revision in case the generating company sells power to more than one state and/or have signed legally binding PPAs, says Nomura.


The implications for IPPs (independent power producers) are as follows, according to Nomura:


(a) Adani Power and Reliance Power are the most likely beneficiaries given their fixed tariff PPAs in Mundra and Krishnapatnam UMPP. Adani’s appeal, seeking revision in tariff related to PPA with GUVNL (Mundra II, 1000MW at Rs2.35/kWh) has been admitted in the Supreme Court while it has also filed petitions with the CERC for PPAs with GUVNL and Haryana SEBs (1424MW with UHBVNL & DHBVNL). Adani’s Tiroda-I PPA with MSEDCL is also under negotiation and a positive outcome may impact the results positively.


(b) Reliance Power’s Krishnapatnam UMPP case is also sub judice (as Reliance seeks stay on encashment of bank guarantee by the procurers) subsequent to which a tariff revision petition would be filed.


(c) JSW Energy and Lanco Infratech can also benefit in respect of their PPAs with MSEDCL (300MW from its Ratnagiri facility) and HSEB (165MW from its Amarkantak facility) plants respectively.


(d) Tata Power could potentially benefit from this development.


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