Companies & Sectors
IOC investment plan not to affect its credit profile: Fitch
International rating agency Fitch Ratings on Monday said Indian Oil Corporation's (IOC) financial profile would "remain stable" even though the state-run oil marketing company (OMC) planned to invest Rs 1,700-Rs 1,800 billion over the next six years.
 
The OMC on Thursday announced that it would invest Rs 1,700-1,800 billion over the next six years, including around Rs 150 billion in the current fiscal and around Rs 250 billion each in FY18 and FY19.
 
"Fitch has already factored in most of the capex over the next three years, and we see no significant change to our current expectations as a result of this announcement. We continue to expect IOC's free cash flow to remain negative over the medium term, due to the high capex," the rating agency said, adding that it expected "IOC's financial profile to remain stable due to strong volume growth and relatively robust refining margins".
 
According to the rating agency, the oil marketing company's credit metrics is likely to weaken marginally but to remain within levels commensurate with its standalone profile over the medium term.
 
Fitch equalises IOC's ratings with that of its largest shareholder, the Indian state (BBB-/Stable) due to their strong operational and strategic linkages.
 
The agency has not factored in its investment along with the other state-owned oil-marketing companies -- Bharat Petroleum Corporation Limited and Hindustan Petroleum Corporation Limited -- in the proposed refinery project in coastal Maharashtra.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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Where does RCom-Aircel stand post the merger?
The merger of the wireless business of Reliance Communications (RCom) with Aircel Limited (Aircel), is a key milestone in the ongoing consolidation in the telecom sector, says India Ratings and Research (Ind-Ra). The combined entity RCom-Aircel will now be the third largest telecom entity in India by subscriber base, thus moving ahead of Idea Cellular Ltd (Idea). 
 
"The merged entity will offer strong competition to both Vodafone India Ltd (Vodafone) and Idea, which are weaker placed, as far as 4G operations are concerned. The sector will now have five meaningful players namely, Bharti Airtel Ltd (Bharti), Vodafone, RJio, Idea and the merged RCom-Aircel-Sistema (with a new brand) as the industry moves towards data driven revenues," the ratings agency said in a report.
 
 
Ind-Ra says it believes that the merger will enable the new entity RCom-Aircel to give strong competition to its peers in the backdrop of the disruption that the launch of operations by Reliance Jio Infocomm (RJio) has caused. This development coupled with RJio's penetration strategy will spur competition and in turn push tariffs lower.
 
The top five circles of Aircel are Assam, Jammu & Kashmir, Uttar Pradesh (East), Bihar and Gujarat, while those of RCom are Bihar, Tamil Nadu and Chennai, Delhi, and Mumbai. 
 
The merged entity will be positioned as the second largest in the Bihar circle, after Bharti, and overtaking Vodafone and Idea, which were number two and number three respectively. In the Tamil Nadu and Chennai circle, the merged entity will vie for the second spot with Vodafone, which is ranked the second largest after Bharti. 
 
RCom has a wireless active subscriber base of 9.2 crore as on March 2016 (market share 9.8%), whereas Aircel has 6.3 crore subscribers (market share 6.8%), leading to a combined subscriber market share of 16.1% with 15.6 crore subscribers; which will rank forth after Idea with 19.6% subscriber share and Vodafone with 20.4%  subscriber market share as of March 2016. "The merged entity could potentially have a revenue market share of 14%, given RCom's existing revenue market share at around 11% in FY16 and Aircel's 3% revenue market share," Ind-Ra says.
 
According to the ratings agency, the spectrum acquisition strategy, particularly around 4G, is an important driver for the consolidation in the telecom sector. "This deal provides RCom access to the superior 800MHz band in eight circles with extended validity till 2033, as its own spectrum is scheduled to expire in 2021-2022. The merged entity will have 448MHz spectrum, which is about 17% of the total spectrum held, is the third largest spectrum holding, following 770MHz of Bharti and 596MHz of RJio," it added.
 
Aircel reported revenues of Rs5,500 crore, with EBIDTA of Rs806 crore, and an EBIDTA margin of 14.5%, and net loss of Rs1,450 crore and cash loss of Rs600 crore in FY15. Aircel had a total debt of Rs20,900 crore in FY15. RCOM reported consolidated revenue of Rs22,100 crore, EBITDA of Rs7,400 crore and EBITDA margin of 33.6% in FY16 and debt of Rs4,100 crore. The combined entity's revenues are estimated at around Rs25,000 crore (for full year of operations), with EBITDA of around Rs6,500-Rs7,000 crore.
 
However, Ind-Ra says both RCom and Aircel have significant debt and their average revenue per user (ARPU)'s are below industry average, as evident from their low standalone revenue market share and Aircel's presence in low ARPU generating circles. "Aircel on a standalone basis is a highly leveraged entity (FY15 debt to EBIDTA 26 times), whereas RCom had net leverage of 5.6 times in FY16. Therefore, we believe the merged entity will continue to depend upon the parents' support for fund infusion for growth capex. Post the deal the merged entity will hold Rs28,000 crore of debt from its parents to start with," it added.

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COMMENTS

Kamal Garg

8 months ago

Most probably the combined entity will be sold sooner than later. There are many indicators of this in the proposed entity including the fact that there are no promoters on the merged entity's board.

Renault and Honda still consider safety as an option in India: Global NCAP crash test
The latest Indian crash test results from Global NCAP released on Monday continue to disappoint with limited progress from Renault Kwid and an encouraging showing from Honda Mobilio. 
 
David Ward, Secretary General of Global NCAP said, “Renault has made limited progress, they should be offering their one star car as the standard version not an option. Honda too have shown that with two airbags they can achieve three stars. These safety systems should not be options.”
 
“Renault and Honda make safe cars in other markets, they have the know how to make all their Indian cars much safer. We expect them to start doing so now,” he added.
 
After poor results earlier this year, and following Renault’s latest set of improvements, the Kwid was assessed again by Global NCAP in the frontal impact test and the model still offers just one star for adult occupant protection. The Honda Mobilio was tested in the basic version showing a stable structure and zero stars for adult occupant protection.
 
 
Global NCAP says the basic version of Renault Kwid scored zero stars for adult occupant protection and two stars for child occupant protection. The latest version and the most highly equipped safety levels, includes an airbag only for the driver and a seatbelt pretensioner for the driver’s seat. During the test this version still showed high chest deflection, explaining the one star rating in the driver seat. 
 
 
Honda requested Global NCAP to test a unit with double airbags in order to show the benefits of these safety systems, the car achieved three stars for adult occupant protection, the release says.
 
 
According to Rohit Baluja, President of the Institute of Road Traffic Education, the automobile industry in India is fast progressing, however safety systems approach is not yet a priority. "Customers are not yet aware how safe are the cars they are purchasing in case they meet up with frontal crashes when at higher speeds. In these tests both Honda and Renault have demonstrated that they can offer safer cars to the Indian market. Automobile manufacturers should not enhance safety features as an option rather, safety should be an uncompromising standard,” he added.

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COMMENTS

Jack Black

8 months ago

Thank you MoneyLife for sharing this important information. I personally feel that the Govt should ensure that safety ratings if each variant should be published so that customers can make informed decisions. Can you please publish a link to the NCAP website where your users can view a comprehensive list for all indian vehicles.

Nitin Bhatia

8 months ago

This is nothing but mudslinging. The author obviously has no idea about the ridiculously low level of safety for some of the cheaper cars in India like Omni and Alto.

REPLY

MDT

In Reply to Nitin Bhatia 8 months ago

The report is based on tests conducted by Global NCAP. If they have not included the cars mentioned by you in this latest tests, it is up to them. Moneylife has just reported about the car crash test.
Wish you would have read our previous reports as well before labeling a news report as 'mudslinging'. Anyway, here are the links of previous articles carried out by Moneylife...
http://www.moneylife.in/article/kwid-cel...

http://www.moneylife.in/article/crash-te...

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