Credit profiles of companies in South Asia improving on robust domestic growth: S&P

Higher demand for products and services stemming from good domestic macroeconomic conditions, along with the gradual improvement in the global economy, has strengthened the credit profiles of companies in the region and this is particularly true in India.

Ratings agency Standard & Poor's (S&P) said the credit profiles of companies in South Asia are improving on robust domestic growth. Higher demand for products and services stemming from good domestic macroeconomic conditions, along with the gradual improvement in the global economy, has strengthened the credit profiles of companies in the region and this is particularly true in India, S&P said.

"The general improvement in credit profiles is further bolstered because many companies in South Asia were less adversely affected by the global recession than their counterparts in other regions. Companies that did not defer capital expenditure are also benefiting from increased capacities coming on line in 2010 and 2011," said S&P's credit analyst, Suzanne Smith, managing director, corporate and government ratings, South and Southeast Asia.

According to an industry report card titled "Credit Profiles of South Asian Companies are Headed North Supported by Robust Domestic Growth," and published by S&P, Indian companies with large operations in Europe and the US have already started to benefit from the global economic recovery. Exporters and producers of commodities that are linked to global prices have also gained and the global economic recovery, however, remains tentative, the report said.

Nevertheless, S&P said it believes that companies may not be immediately affected by a reversal if local demand remains healthy and the Indian banking system continues to have good liquidity.

"We expect the improvement in credit quality to continue, as reflected by the positive outlook on six companies. Just one company in the region has a negative outlook," said Ms Smith. "This scenario is different from that in December 2009, when six companies were on a negative outlook, including two where the negative outlook reflected that on the sovereign rating on India. Subsequently, we revised the outlook on India to stable in March 2010," she added.

According to the report, metals and mining companies in South Asia have shown rapid improvement in their profitability and cash flows over the past one year. India is an attractive place for global mining companies to build new capacities given the availability of untapped resources, low-cost production, and growing domestic demand. Land acquisition and mine allocation and environmental clearances by the government, however, are bottlenecks for new green-field expansion projects, the report pointed out.

S&P said a favorable regulatory environment, aggressive capital expenditure plans, and the relationship with the government of India are key drivers of the credit profiles of rated electric utilities in India. "Operating performances have been stable, as the electricity companies are largely insulated from the global economic conditions. High capital expenditure will result in weaker financial metrics for companies until new projects start operations. We have, however, already factored the capital expenditure for existing projects in our ratings on the companies," the ratings agency said.

Speaking about IT sector, the report said a resilient Indian IT sector is now benefiting from improved global economic conditions. The industry's revenue is likely to grow at about 10%-15% annually for the next four to five years. Strategic measures such as increasing offshoring, greater use of fixed-price contracts, and more operating efficiencies have improved the operating margins of IT companies, it added.

The Indian telecommunications market continues to be highly competitive, with a large number of players. While wireless companies continue to grow rapidly in terms of subscribers, due to lower penetration, average revenue per user (ARPU) is declining because of the intense competition and subscriber addition in rural areas, S&P said in the report.

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Personal finance Wednesday

Religare MF files offer document with SEBI to launch Religare FMP-Series IV-Plan A to F

Religare Mutual Fund has filed an offer document with the Securities and Exchange Board of India (SEBI) to launch Religare Fixed Maturity Plan (FMP)-Series IV-Plan A to F, a close ended debt scheme. During the new fund offer (NFO) period, the scheme will offer units at Rs10 each. Religare FMP-Series IV-Plan A to F offers plans of tenure from three months to 13 months from the date of allotment of the respective plans. The scheme offers six plans viz. Plan A, B, C, D, E & F. Each of these plans offers growth and dividend payout option. The entry load and exit load charge will be nil for the scheme. The minimum subscription amount will be Rs5,000 and in multiples of Rs10 thereafter. The investment objective of the scheme is to generate income by investing in debt and money market instruments maturing in line with the duration of the scheme.

ICICIdirect.com launches online advisory facility for active traders

ICICIdirect.com has launched a new facility called 'F&[email protected]' which provides real-time advanced information on derivative contracts to its customers. F&[email protected] offers an integrated platform consisting of all tools, information and inputs needed by a retail trader to identify the opportunities in the derivative market with an option to trade it immediately. The new facility has seven sections. Among these include: Top Active Futures provides a real-time list of 10 most active future contracts of the day; Top Nifty Strikes provides a real-time list of five most active call and put Nifty contracts; Low Value Nifty Strikes provides a real-time list of five call and put Nifty contracts which are cheaper; Active Stock Options is a list of five most active call and put contracts for stock options; High Rollover Stock provides a list of stock futures; Movers & Shakers lists stock futures which are witnessing significant price or volume activity as compared to the previous day.

Birla Sun Life MF revises exit load under certain schemes of Birla Sun Life MIP II-Saving 5 Plan 

Birla Sun Life Mutual Fund has revised the exit load applicable to switch outs from Birla Sun Life Monthly Income Plan (MIP) II-Saving 5 Plan to certain fixed income schemes. The change will be effective from 12 August 2010. As per the revision, switch outs made from Birla Sun Life MIP II-Saving 5 Plan to any other schemes of Birla Sun Life Mutual Fund, exit load as applicable to the scheme shall be charged. No exit load shall be charged for switch-outs made from various plans/options under Birla Sun Life MIP II-Saving 5 Plan to Birla Sun Life Dynamic Bond, Birla Sun Life Income Fund, Birla Sun Life GSF-Long Term Plan, Birla Sun Life Monthly Income and Birla Sun Life MIP II-Wealth 25 Plan.

Allahabad Bank hikes benchmark prime lending rate by 50 bps

Allahabad Bank has decided to increase its benchmark prime lending rate (BPLR) by 50 basis points (bps) to 12.5% with effect from 16 August 2010. With regard to the base rate, which is the interest rate below which banks cannot lend, Allahabad Bank has fixed it at 8%. A host of banks, including public sector undertaking (PSU) lenders Punjab National Bank, Bank of Baroda, Union Bank of India, Corporation Bank and IDBI Bank, have raised their BPLRs in the last 10 days.

DWS Investment floats DWS Fixed Term Fund Series 73-A 370 days

DWS Investments has launched DWS Fixed Term Fund Series 73-A 370 days, a close ended debt fund. The fund is a fixed maturity plan and provides investors the benefit of indexation to get tax efficient returns, low interest rate sensitivity and low credit risk. The new fund offer (NFO) for this fund opens for subscription on the 11 August 2010 and closes on 16 August 2010. The objective of the fund is to generate regular income by investing in debt securities and money market instruments maturing on or before the date of maturity of the scheme. The unit offer price for fund is Rs10 per unit during NFO period. No entry and exit load will be charged for the fund. The minimum amount of subscription is Rs5,000 and in multiples of Re1 thereafter. Under the scheme, two investment options are available-growth and dividend payout.

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NHAI to call for project bids worth Rs4,000 crore by month-end

The National Highways Authority of India has been aggressive in calling for bids across the country, but few projects have been awarded

The National Highways Authority of India (NHAI), which has an ambitious plan of adding 20km per day, is expected to come out with bids for road projects worth Rs4,000 crore by August-end. However, the target has been revised for the current financial year.

"More NHAI bids are expected by the end of August 2010. Bids are likely for about Rs3,600 crore to Rs4,000 crore worth of projects by the end of August 2010," said an industry source familiar with the development.

The first project likely to be bid out in this process is the Panvel- Indapur Highway project in Maharashtra. The project work will include four-laning the 100km highway. The total project cost is being pegged at around Rs1,100 crore. Bids for this project were to be called for yesterday.

The ministry of road transport and highways has been targeting an ambitious record of 20km per day (or 7,000km per year) of road development. As of May 2010, road development of around 684km has been completed.

Under NHAI's 'Work Plan I', projects of a total length of 5,600km have already been awarded. Bids for another seven projects of a total length of 4,056km are in the pipeline. Bids for 11 projects of 1,036 km have already been called for.

Under 'Work Plan II', one road project of 170km has already been awarded. Bids for projects of total length of 307km are in the process of being invited; bids for three projects of total length of 489km have already been called for. The ministry also plans to announce bids for projects of total length of  23,000km in this financial year. These are projects which have been approved and are ready for bidding.

While the NHAI has been on a bidding spree, it has suffered a setback in actually awarding them. Not much activity has been noticed on the actual awarding front over the past few months. However, it has continued to bid rigorously. The last bidding that took place was in the previous month.

In line with various announcements made by the ministry, there are plans for around six mega-expressway projects. While a few road-developing companies have already tied up with foreign counterparts to bid for these projects, nothing concrete has been announced by the ministry. According to sources from the ministry, there is no new significant development on the Expressway Authority which was being planned to smoothen the process of awarding these expressway projects.

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