Companies & Sectors
Outlook brightens for Cairn India

Cairn India is positive that its gas find would be commercially viable and that they would be able to supply piped gas to the Gujarat market by laying an additional pipeline

In the eighth round  of NELP (New Exploration Licensing Policy) Cairn India won 1988 sqkm block in 2010 (KG-OSN-2009/3 block) but work could not start due to certain objections raised by the Ministry of Defence.  This block is next to the prolific Ravva fields and hence Cairn India had shown great interest to explore the same. Thankfully, now that the Ministry of Defence has withdrawn their objections, in the next couple of months, Cairn plans to explore by seismic shots (or imaging the earth below by sending shock waves and capturing reflections).

This has been made possible after the Cabinet Committee for Investments cleared Cairn to go ahead with its plan in one part of the block, of about 60% of the area, since the Ministry of Defence cleared the same.  Cairn India is optimistic to find hydrocarbon resources there, and expects to have gas results in the first quarter of 2015.

The upward revision of gas prices from 1st April was withheld due to the instructions received from the Election Commission, but it is generally felt, at least by the petroleum industry that this increased price would make it viable for contractors to explore for such hydrocarbon resources.  

Because of the prospect of increased price, which would make exploration worthwhile, Cairn has turned its attention to Rajasthan south block and in Rageshwari fields.  The Vedanta group is already producing 200,000 barrels (boepd) and they are stepping up efforts to find gas in this area. Drilling is in progress, and, as mentioned above,Cairn expect to have positive gas results in the early part of 2015.  Initial estimates show that the gas reserves could be higher than Cambay Basin.

Cairn India is positive that its gas find would be commercially viable and that they would be able to supply piped gas to the Gujarat market by laying an additional pipeline, to the existing Barmer-Boghat (Gujarat) pipeline. Once the final assessment is made, all that they would need to do is to lay this additional line!

At the moment, this Barmer-Boghat pipeline is designed to carry 1.75 lakh barrels a day, but it is  actually touching close to 2 lakh barrels and  we feel that this could even be increased to 3 lakh barrels by setting up more booster pumps, till possibly the second pipeline is laid.

At the moment, Cairn India has a production sharing contract valid till May 2020, which can get a five-year extension on general merit.  Also, a 10-year extension may be allowed if gas availability is beyond the original 2020 expiry date. It appears that the Barmer block has the commercial potential to go beyond 2040. Cairn India have already sought a ten-year extension.

In the meantime, Anil Agarwal, Vedanta group chairman is reported to have stated that "the government should  consider the Barmer oilfield contract in line with those signed under the hydrocarbon auction rounds under which the contracts are valid till the life of the field."  Such a move will enable the contractor to work most earnestly to get the best out of the fields and
invest enormous sums to achieve the end results.

It is in this context the new proposals from the Petroleum Ministry, when approved by the Cabinet, would enable the contractors to carry on the exploration work without any hassles and bureaucratic hinderances.

As matter of interest for our readers, it may be recalled that Cairn had announced a buy back plan to secure 17.09 crore shares (or 8.9% of its equity) at a price of Rs335, because of the enormous cash reserves of more than $3 billion it has and set aside Rs5,725 crores for this purpose.This proposal had to be called off because of the dispute with the Income Tax Department, which, as we write, is still in process.

Meantime, Cairn India prices in the stock market has reached Rs360 and the chances for a good dividend are bright, once again.

(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)

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Sensex, Nifty regain strength: Thursday closing report

A close above the day’s high may keep the index going higher

Yesterday, we had suggested that Nifty may put in a quick rally from around 6,625. The market did not go below yesterday’s low and started to rally. The  Sensex, Nifty opened well in the positive and after moving in a range for some time, started edging higher and closed near the day’s high. Sensex opened at 22,328 and immediately hit its days low at 22,312 while the Nifty opened at 6,695 and hit a low at 6,684. Sensex hit a high at 22,649 and closed at 22,629 (up 352 points or 1.58%) while Nifty hit a high at 6,783 and closed at 6,779 (up 104 points or 1.56%). The NSE recorded a volume of 83.11 crore shares.

Except for Media (0.28%), all the other indices on the NSE closed in the positive. The top five gainers were PSU Bank (2.90%), Realty (2.64%), Auto (2.26%), Nifty Midcap 50 (2.22%) and Metal (1.82%).

Of the 50 stocks on the Nifty, 47 ended in the green. The top five gainers were Tata Motors (4.63%), Hindalco (4.47%), Jindal Steel (4.08%), Ambuja Cements (3.97%) and ICICI Bank (3.39%). The top three losers were HDFC Bank (1.10%), Power Grid (0.84%) and United Spirits (0.69%).

Of the 1,561 companies on the NSE, 1,027 companies closed in the green, 448 closed in the red while 86 closed flat.

The market remains shut tomorrow, 18 April 2014, on account of Good Friday.

Tata Consultancy was among the gainers in Sensex 30 stocks, after giving out better than anticipated results for the March quarter. It foresees a further rise in revenue growth in the FY15.

Hindalco has been in the news as its senior executives are being questioned for the past few days in connection with the case registered against the company for the allocation of the Talabira-II coal block. But the stock was the top gainer in Sensex 30 pack.

The lone loser among the Sensex stocks was HDFC Bank, which fell on the reports that MSCI has further reduced the weightage of the bank in MSCI India Index.

Apollo Tyres was the top gainer in ‘A’ group on the BSE after the news that the company foresees 50% increase in export revenue from Asia Pacific, West Asia and North African markets in this fiscal.

According to sources, Financial Technologies’ MCX stake is likely to go to multiple investors. Therefore, no single investor is likely to get the entire 24% stake in MCX. FMC sources say Kotak Mahindra Group and CME are currently front-runners for the MCX stake. According to FMC's draft guidelines, which it has submitted to the Finance Ministry, no single foreign investor can own more than 5% stake in MCX. MCX was the top loser in ‘A’ group on the BSE.

Global credit rating agency Standard & Poor's (S&P) today said it may upgrade India's rating outlook, if the government that is elected next month addresses some of the country's fiscal and economic challenges through steps such as passing a goods and services tax. "If in the future they implement policies that effectively addresses some of the credit weaknesses that I have highlighted, we could revise the outlook to stable again," said S&P senior director Kim Eng Tan in a web cast. "In the absence of effective policy action, we could lower the ratings on the sovereign," he added. S&P rates India at "BBB-minus".

US indices closed in the green on Wednesday. In her first major speech on her policy framework as Fed chair, Janet Yellen said US central bankers must be mindful of how short the Fed is of its goals of full employment and price stability.

Except for Shanghai Composite (0.30%), Nikkei 225 (0.15 points) and Seoul Composite (0.01%) all the other Asian indices closed in the positive. Jakarta Composite (0.49%) was the top gainer.

Japan’s consumer confidence fell to the lowest level since August 2011, and the government cut its economic assessment for the first time in 17 months, as a sales-tax increase on April 1 sapped the public’s spending power. The March confidence reading of 37.5 fell by 1 from the previous month, the Cabinet Office said in Tokyo today. About 90% of respondents to the survey saw prices rising over the next 12 months -- the most in comparable data back to 2004.

European indices were trading flat as were the US Futures.

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Piramal Enterprises to acquire 20% stake in Shriram Capital for Rs2,014 crore

Piramal Enterprises to acquire 20% stake in Shriram Capital for Rs2,014 crore

Piramal Enterprises Ltd. (Piramal) today announced that it will acquire 20% equity stake in Shriram Capital Ltd (Shriram Capital), a financial service company for Rs2,014 crore to enhance its presence in the financial service sector. Ajay Piramal's Mumbai-based Piramal Enterprises, operates in the pharmaceutical, financial services and information management sectors.

“This investment builds our presence in the financial services sector and we see long term shareholder value creation from our partnership with Shriram Capital. The Company is well known for its culture and values, which resonates well with Piramal Group’s philosophy,” said Ajay Piramal, chairman of Piramal Enterprises.

Last year in May, Piramal had invested Rs1,636 crore in Shriram Transport Finance Company Ltd and acquired 9.9% equity shares.

In 2010,Piramal Healthcare Ltd sold its domestic formulations business to Abbott Laboratories for about USD 3.8 billion. Earlier this month, Piramal Enterprises sold its 11% stake in Vodafone India to Britain's Vodafone Group Plc for Rs8,900 crore.

Commenting on the aquisition, R Thyagarajan, founder of Shriram Group, said “Shriram Group has pioneered providing financial services to the under-served section of the Economy. Our success over the last four decades has been possible only through strategic partnerships. Piramals’ entry into Shriram Capital is a significant milestone for the Financial Services businesses to take a quantum leap in the Group’s contribution to the community at large.”

Shriram Capital is the holding company for the financial services and insurance entities of the Chennai-based group, including Shriram Transport Finance Co and Shriram City Union Finance. It was created to optimise synergies across the group's companies. Shriram Capital's operating entities have over 9 million customers, more than 53,000 employees across 2,600 offices, net profit of Rs800 crore and assets under management in excess of Rs78,000 crore.

Piramal Enterprises shares closed 1.10% up on Thursday at Rs602 on the BSE. While 30-share benchmark Sensex closed 1.54% up at 22,620.

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