Companies & Sectors
Hero MotoCorp to drop ‘Honda’ tag from all models this month

Currently the company sells 18 models in the market, out of which three were launched under the Hero brand. Hero said the process to drop Honda tag from other models is almost complete with only CD Dawn and CD Deluxe carrying the Hero Honda tag at present

New Delhi: Hero MotoCorp, India's largest two-wheeler maker said it will complete dropping the badge of its erstwhile joint venture partner Honda from all its existing products within this month, two years ahead of schedule, reports PTI.


Buoyed by good response to its new model Maestro, which was launched under the Hero brand, the company is also doubling its scooter production capacity to 60,000 units a month. Moreover, it is also hiking the production capacity of its 125 cc bikes to 75,000 units a month.


"The acceptance of our new identity and the market response that we have received on our three new Hero branded models--Impulse, Maestro and Ignitor--make us confident to go ahead. Our entire range of products would have moved to the Hero brand within this month," Hero MotoCorp Senior Vice-President (Marketing & Sales) Anil Dua told PTI.


The company had begun the exercise of dropping the Honda badge from its products starting with its best selling model range Splendor in April this year.


"Now almost all of the models have moved to the Hero brand and only CD Dawn and CD Deluxe are left," he said.


Currently the company sells 18 models in the market, out of which three were launched under the Hero brand after the firm announced its new brand identity in London last August.


The 15 other models have been sold under the erstwhile Hero Honda brand.


As part of their parting agreement, Hero MotoCorp has time till 2014 to use the Honda brand in its products. In December 2010, the Indian promoter of the firm, the BM Munjal family, had agreed to buy out the entire 26% stake of Honda in Hero Honda for Rs3,841.83 crore. It brought an end to a 26-year-old successful joint venture.


On increasing scooter production capacity, Dua said: "The Maestro, which is targeted to young men, has done well.


It has complemented our other scooter Pleasure which is targeted to women. Therefore, we are increasing scooter capacity to 60,000 units a month".


Earlier the company had a scooter production capacity of about 30,000 units a month. Its scooter sales in August stood at 42,836 units, a jump of 51.6% from the same month last year.


For the April-August period this fiscal, Hero MotoCorp's scooter sales were at 1,87,846 units as against 1,58,825 units in the year-ago period, up 18.3%.


Commenting on the 125cc bike segment, he said: "With Ignitor coming in, we have expanded the portfolio in this segment to four models. Also, we are increasing the production capacity of this segment to 75,000 units a month and we may even increase it further"


The company's existing capacity is about 60,000 units per month, he said, adding, "we are doing extremely well and moving faster in the 125 cc segment in this otherwise suppressed market".


Dua said the investments on the capacity hike will be a part of the Rs2,575 crore plan announced in June for expansion. This includes setting up two new plants in Gujarat and Rajasthan and an R&D centre by 2013-14.


Asked about the festive season, he said: "The overall market has slowed down but we expect the situation to change in the festive season. With our new models doing well, we are looking forward to it optimistically".


In order to boost sales during the festivities, he said the company will be "investing a lot on advertising and on-ground activities like test rides" to promote the Hero brand and its products.


"During the cricket T20 World Cup, we will be airing new advertisements for the Maestro, Ignitor and another in the premium segment," Dua said.


“Not harsh, but a poor tariff order” on Gujarat State Petronet, says Nomura

“PNGRB has tried to explain in detail the rationale behind the tariff order for Gujarat State Petronet. But we think it is not a progressive order. It would create more confusion in the near term, and as it is applied with retroactive effect,” says Nomura Equity Research  

The Petroleum & Natural Gas Regulatory Board (PNGRB) has finally issued the “provisional initial unit” tariff order for Gujarat State Petronet (GSPL). On first look, compared to PNGRB’s earlier tariff orders for other entities, the order appears soft, according to a Nomura Equity Research Quick Note. The determined tariff of Rs23.99/mmbtu (Rs904/scm) seems good for GSPL, in Nomura’s view, and better than street expectations of Rs750-Rs850/scm. Even as the headline tariff indicates a tariff reduction, and payout for retroactive implementation, we think the actual payments may not be much, and GSPL’s average reported tariff numbers may not decline much. But in the short term, there will be added confusion till clarity emerges on retroactive payments, and actual impact on GSPL’s realised tariffs going forward.
The new tariff is 12% lower than the current tariff; but only 2% lower than past five-year average tariff. The tariff order is a retroactive order applicable from 20 November 2008. The current tariff order is a provisional tariff order with final tariff to be decided in a year’s time. By the time PNGRB finalises the final tariff, the term of the current order (November 2013) may well lapse.
According to the Nomura Equity Research Quick Note, even as the tariff order is much longer and PNGRB has tried to explain in detail the rationale on several issues, we think it is not a progressive order. It would create more confusion in the near term, and as it is applied with retroactive effect, the order itself could become stale very soon.
Nomura points out that the order is only for GSPL’s high-pressure network. It is silent on its low-pressure network. The network is operated as a single network and GSPL does not disclose its numbers separately for these two networks. Given that order is coming after such a delay, Nomura feels an order for both networks together would have made much more sense.
PNGRB has considered an inflation rate of only 4.5% as per “extant practice”. This rate is too low, in Nomura’s view, when current headline inflation rates range 8%-10%.
Nomura observes that the tariff order continues to disallow unaccounted for gas. Even as GSPL submitted that such losses are industry wide, and cited international reports/ practices, PNGRB did not agree similar to earlier orders.
PNGRB insists on accounting depreciation rate of 8.33% for periods prior to April-2010, even as the ministry of corporate affairs has now allowed the rate of 3.17%. For its book of accounts GSPL had charged the rate of 8.33% as conservative accounting, but for tariff calculations it was asking for the permitted rate. PNGRB has disallowed this on the grounds that it would result in higher net fixed assets and thus a higher tariff. Nomura feels that GSPL should have been given the benefit of a lower rate of depreciation.
PNGRB has also disallowed ongoing capex of Rs10 million per km of spur pipelines beyond FY15, as GSPL could not give enough data. Nomura’s point of view is that 50km of spur pipelines each year looks reasonable.
Finally, Nomura points out that the working out of past tariff and system usage charges will be cumbersome and create confusion. 


RBI relaxes ECB norms for infrastructure companies

The central bank allowed companies engaged in infrastructure sector to raise bridge finance from overseas market under the automatic route

Mumbai: Giving a boost to infrastructure sector funding, the Reserve Bank of India (RBI) has relaxed the external commercial borrowings (ECB) norms to help companies raise more funds from overseas markets, reports PTI.
The RBI has allowed companies engaged in infrastructure sector to raise bridge finance from overseas market under the automatic route.
"On a review, it has been decided to allow refinancing of such bridge finance (if in the nature of buyers'/suppliers' credit) availed of, with an ECB under the automatic route," the central bank said in a notification.
Under the earlier provision, the companies were required to take permission of the RBI for raising bridge finance, which is a kind of interim arrangement for short-term credit.
The Reserve bank through a separate notification, has also allowed companies in infrastructure sector to raise ECB up to a maximum period of five years for importing capital goods.
Under the new norms, the trade credit should not be for a period of less than 15 months and also not in the nature of short-term rollover finance.
Earlier, the companies could raise ECBs for a period ranging from one year to three years.
The RBI notification further said that the all-inclusive costs, which include arranger fee, upfront fee, management fee among others, of such borrowing should not be over 3.5% of six months Libor.
The credit facility would be available up to $20 million per transaction for import of capital goods as classified by the Directorate General of Foreign Trade (DGFT).
The Reserve Bank has also relaxed the ECB norms for repayment of Rupee loans within the overall ceiling of $20 billion.
As per the RBI notification, the permissible limit of ECB has been increased from 50% to 75% of the average foreign exchange earnings realised during the past three financial years or 50% of the highest forex earning in a year.
The limit of maximum ECB which can be availed by an individual or group company under the scheme has been pegged at $3 billion.
Earlier the maximum permissible ECB under the scheme was limited to 50% of the average annual export earnings realised during the past three financial years.


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