The under-recoveries could decline to Rs0.8 trillion if diesel prices are increased at Re1 per litre every month as being proposed, Kotak Institutional Equities said
Mumbai: Brokerage firm Kotak Institutional Equities revised its estimates of under-recoveries on diesel, kerosene and LPG to Rs1.3 trillion for FY14 against Re1 trillion amid firmness in international oil prices, weaker exchange rate and the government failing to increase diesel prices, reports PTI.
However, the under-recoveries could decline to Rs0.8 trillion if diesel prices are increased at Re1 per litre every month as being proposed, it said.
“We have increased our estimate of gross under-recoveries on diesel, kerosene and LPG to Rs1.3 trillion for FY14 versus our previous estimate of Rs1 trillion, assuming higher crude oil prices, weaker exchange rates and no further increase in retail prices of regulated fuels,” senior executive director of the firm Sanjeev Prasad said in a note.
The firm has assumed an increase of $5 per barrel to $105 and exchange rate at Rs54 against the US dollar to arrive at the estimated increase in under-recoveries for FY14, it said.
“However, if we were to assume a monthly increase of Re1 per litre in retail price of diesel for FY14 along with roll-back of cap on LPG cylinders to nine, the under-recoveries will decline meaningfully to Rs0.8 trillion,” he said.
The petroleum ministry is considering a gradual increase in diesel prices of less than Re1 per litre on a monthly basis over the next 15 months in a bid to eventually deregulate retail prices, based on the recommendations of Kelkar committee.
Progressive increase in diesel prices, if implemented, may lead to meaningful savings on fuel subsidies. “We compute annualised savings of Rs90 billion on diesel subsidies for every Re1 per litre net increase in diesel price for oil marketing companies,” he said.
However, the report said it was doubtful if the government would be able to continue monthly price increases in the second half of the fiscal given that there are many state elections during January-March and the general elections in 2014.
The report further said higher market-linked prices of diesel for the direct bulk consumers will be relatively easier to implement and may reduce the subsidies meaningfully.
“Nearly 18% of diesel is consumed by bulk customers including the Railways, state transport undertakings and private industrial companies, who do not deserve any subsidy, in our view,” Prasad said.
The government's plans to increase cap on subsidised LPG cylinders to nine per household per annum from current limit of six can be managed through a price hike.
“We expect the annual savings on LPG subsidies to reduce to 9% assuming the proposed cap of nine cylinders per household per annum versus 28% assuming current cap of six,” he added.
Diageo has submitted its replies to clarifications sought by SEBI on the open offer for United Spirits and the market regulator would take a decision in due course
Mumbai: Global liquor major Diageo Plc has submitted details sought by market regulator Securities and Exchange Board of India (SEBI) regarding its Rs5,441 crore open offer for buying stake in Vijay Mallya-led United Spirits, reports PTI.
The open offer to buy 26% stake in United Spirits, which was to start yesterday, was postponed pending final approval from SEBI.
“Diageo has submitted its replies to clarifications sought by SEBI on the open offer for United Spirits. SEBI will take a decision in due course,” a source said.
Last month, SEBI had asked for some clarifications on the from Diageo’s open offer, part of a deal to buy up to 53.4% stake in United Spirits.
On Monday, United Spirits had informed the stock exchanges that the open offer has been postponed.
JM Financial, the manager for the open offer, has said that since the “final observations from SEBI” are awaited, the schedule has been revised.
“...the revised schedule of activities will be intimated in due course,” according to a filing made by United Spirits to the BSE.
As per the detailed public statement (DPS) issued in November last year, Diageo’s open offer was to begin yesterday.
Diageo is to acquire a 27.4% stake in United Spirits, through a combination of purchase of shares from existing promoters and a preferential allotment of share, for Rs5,725.4 crore.
Any acquisition of 25% or more stakes in a listed company triggers a mandatory open offer for purchase of additional 26% stake from the public shareholders and the same needs to be cleared by the market regulator.
The proposed open offer for an additional 26% stake in USL entails purchase of about 3.8 crore shares at a price of Rs1,440 per share, totalling to Rs5,441 crore, by Relay BV, a wholly owned subsidiary of Diageo.
United Spirits, the country's largest spirits company, is part of Vijay Mallya-led UB Group, whose aviation venture Kingfisher Airlines is grappling with turbulent times.
Patience amongst Marico shareholders for the Kaya business to break even was running out and the vertical slicing of Marico should provide some respite
After more than a deacde of losses, Marico has decided to cut loose Kaya, the “skin care solutions company”. Marico Kaya Enterprises (MaKE, to be formed). will run the Kaya beauty and wellness chain and will be a separately listed. The appointed date of the demerger is 1 April 2013. It may take about six months to obtain the necessary approvals and complete all formalities, the company said in a statement. Following the demerger, the shareholders of Marico will get one share of Marico Kaya Enterprises with a face value of Rs10 each to be issued at a premium of Rs200 per share for every 50 shares of Marico with a face value of Re1 each.
“This corporate restructuring will lead to enhanced shareholder value through sharper focus and greater energy across both organizations and businesses,” Marico said in the release. Unfortunately, the current proposal does not give an option to minority shareholders in Marico not to participate in the MaKE business, according to the analysts in Espirito Santo Securities. Kaya has tried several measures to break even and the analysts were not enthused by the Kaya business. It is believed that a further cash infusion (or strategic investor) might be required in the MaKE business before it can turn into a sustainable business model.
The shareholding structure of the to-be listed MaKE business will mirror the shareholding structure of Marico on the date of the demerger, with no holding from the current listed FMCG (fast moving consumer goods) business.
The Marico share, after the demerger, is not considered to be an attractive buy by Espirito Santo, and it maintains a ‘sell’ rating.
The accumulated losses of Kaya since inception in FY 2003 are estimated to be Rs145 crore in comparison to the existing direct capital employed by the Marico group in the Kaya business of Rs179 crore.