Patel Engineering wins $1-billion road order in Djibouti

While the Consulate General of the Republic of Djibouti confirmed the news report, Patel Engineering, on the other hand, said that it is in an advanced stage of negotiation for this infrastructure project

According to reports, Indian construction company Patel Engineering Works Ltd has won an order for building a 350-km highway connecting Djibouti’s border to Ethiopia, worth nearly $1 billion (about Rs4,600 crore).

"Patel Engineering Works has bagged the order worth nearly $1 billion. The work which commenced six months ago is being carried out on a Build-Operate-Transfer basis," consulate general of the Republic of Djibouti in India, Mohamed Idris Saban, told reporters in Bengaluru.

When contacted, company officials said Patel Engineering Works was in “advanced talks” and a formal agreement is “yet to be reached”. According to a filing to the Bombay Stock Exchange, Patel Engineering said that it is in an advanced stage of negotiation with the ministry of transport, Djibouti, for infrastructure works.

HRD and Co, another Mumbai-based company, has been given an order for a geo-thermal energy project in Djibouti. The deal was a power purchase agreement, said Mr Saban.

"We are also looking at tie-ups with Indian computer education firms like NIIT and Aptech to start such institutes in Djibouti and are looking at student-exchange programmes. We have almost 750 students in India from Djibouti," he added.


Sensex sheds 19 points, ends at 16,894

Dollar hits a new three-month high; Indian markets continue on their volatile trend

Indian markets continued to remain in the red on weak global cues. The Sensex declined 19 points from the previous day’s close, ending the day at 16,894, while the Nifty remained flat at 5,042.

During the day, Tata Steel rose 1%. As per media reports, the company’s European unit Corus has secured a €350-million contract to supply rail tracks to French railway operator SNCF.

Ennore Coke rose 3% on reports that the company plans to buy a 90% stake in an Australian mining firm.

Titagarh Steel shot up 10% after the Calcutta High Court approved the amalgamation plan of the company and unlisted Titagarh Biotec with group firm Titagarh Wagons.

Diamant Investment & Finance was locked at 5% after the company said its board will meet on 24 December 2009 to consider issue of bonus shares and raising funds.

The Gemini-PointRed combo outbid various multinational companies to win another major mobile WiMAX deal from BSNL worth Rs435 crore. Gemini Communication was up 5%.

Patel Engineering shot up 2% on reports that the company had bagged an order worth $1 billion in Djibouti.

Pratibha Industries secured a contract worth Rs129.89 crore from the Haryana Urban Development Authority. The project is in joint venture with SMS Paryavaran Pvt Ltd. The stock was up 2%.

Usha Martin Infotech has signed a non-binding, non-exclusive Memorandum of Understanding with Pearson Education India for foraying into school management. The stock was up 5%.

Tanla Solutions gained 6% on reports that Tanla Mobile Pvt Ltd (TMPL), a subsidiary of Tanla Solutions (TSL), had commenced operations from DLF Cyber City in the Special Economic Zone at Hyderabad.

KEC International has won major orders in Algeria and Abu Dhabi worth Rs474 crore and Rs76 crore respectively. The stock was up 3%.

As per data released by the government, the food price index rose 19.95% in the year to 5 December 2009. The fuel price index rose 3.95% and primary articles index rose 14.98%.

Moody’s Investors Service upgraded the long-term foreign currency (FC) deposit ratings of 14 Indian banks to ‘Ba1’ from ‘Ba2’, following the rating agency's recent upgrade of India’s FC deposit ceiling.

Meanwhile, the two main bourses, Bombay Stock Exchange and National Stock Exchange have reportedly postponed by more than two weeks their move to bring forward the start of trading by 55 minutes, after strong protests from brokers. Extended trading on the two stock exchanges will now begin on 4 January 2010, instead of the earlier planned date of 18 December 2009. The two exchanges had announced late on Wednesday the extension of trade timings in equity and derivatives segments by almost one hour to 9:00am IST effective from Friday, 18 December 2009. The move was to align their timings with major Asian markets.

Today, the dollar rose to a three-month-high against the euro in Asia due to concerns over European bond markets and the US Federal Open Market Committee’s slightly hawkish statement overnight. The US currency is expected to post further gains if December’s Philadelphia Fed Manufacturing Index due later in the day beats market forecasts, highlighting the recovery in the American economy. Economists expect the index to drop to 16.40, a slight deterioration from the index’s previous result of 16.70.

Standard & Poor’s Ratings Services announced that it has revised its ratings criteria for covered bond programs, placed €1.46 trillion worth of such programs on CreditWatch, and signalled these programs may be downgraded in the next few months. This announcement made the markets more bearish over the euro. European banks often raise funds using covered bonds because of their low cost. A ratings cut possibility in bonds means European financial institutions may face difficulty raising funds in the near future, which may spur risk aversion.

Further, Standard & Poor’s announcement on Wednesday that it had cut Greece’s credit rating, as it has the widest budget deficit among the European Union nations, added further pressure on the euro.

During the day, Asia’s key benchmark indices in China, Japan, Indonesia, Singapore, Hong Kong and South Korea fell by between 0.14%-2.34% despite the US Federal Reserve saying that the US economy was improving.

On Wednesday, 16 December 2009, the Dow Jones Industrial Average was down 11 points while the S&P 500 and the Nasdaq Composite were up 1 point and 6 points respectively after the Fed offered no surprises in its latest statement.

The Federal Reserve kept its target range for its bank lending rate at zero to 0.25%, the same level since last December 2008, and it repeated its pledge to keep rates at exceptionally low levels for an extended period.

The Fed also said that the economy had continued to pick up and that deterioration in the labour market was abating. However, the Fed still predicts unemployment to remain high. The Fed statement said that household spending appears to be expanding at a moderate pace. The central bank said that the economic conditions, including low rates of resource utilisation, subdued inflation trends and stable inflation expectations are likely to warrant exceptionally low levels of the Federal funds rate for an extended period. Taking note of the improving conditions for banks, the Fed said that it would shutter most of its emergency lending facilities on 1 February 2010.

In premarket trading, the Dow was trading 45 points higher.


Cement capacity utilisation on a downward trend

The capacity utilisation in the Indian cement industry has fallen to 80% in November 2009 from a high of nearly 100% in March 2009. Analysts believe addition of new capacities and oversupply to be the main reasons for this downward trend

Addition of new capacities—coupled with oversupply—has resulted in a downturn in capacity utilisation in the cement industry. While temporary price hikes have eased the situation, the broader capacity utilisation scenario looks bleak for the industry.

Capacity utilisation in the cement industry has been declining since March 2009. As per data available on the monthly trend of capacity utilisation in the industry, the capacity utilisation in the industry has fallen to 80% in November from a high of nearly 100% in March 2009.

Overall capacity utilisation across the country declined to 77.2% in October 2009 from 84.6% a year ago. In the region-wise data available, capacity utilisation rates have fallen significantly in the southern and western regions for the month of October 2009.

In the southern region, capacity utilisation was 69.3% in October 2009, 17% less than 86.7% in October 2008. India Cements and Madras Cements are the among the cement companies who reported low capacity utilisation rates in October 2009. Similarly, capacity utilisation in the western region has fallen to 72.7% in October 2009 compared to 86.7% in October 2008.

A positive growth in capacity utilisation was witnessed only in the northern and central regions. It increased from 82.2% in October 2008 to 85.6% in October 2009 in the northern region. Similarly, capacity utilisation in the central region increased from 87.95% in October 2008 to 93.5% in October 2009.

Analysts attribute this downward trend in capacity utilisation to addition of new capacities and a pressure on the supply side. “The new capacity added is the first factor resulting in the decrease in capacity utilisation for various cement companies. Generally, new capacities in the first four to five months contribute only up to 50% of their total capacity. This is also because of the
oversupply situation, where the capacity is higher, but the demand is lower,” said Priyakant Dave, research analyst, Sharekhan Ltd.

However, Mr Dave pointed out that the oversupply situation has temporarily eased in certain regions due to a wagon shortage leading to a hike in prices.

“Cement manufacturers have reduced their operating capacity utilisation to maintain the demand-supply situation. It has helped reduce their inventories,” added Amit Srivastava, research analyst, Karvy Stock Broking Services Ltd.

“Companies like India Cements and Madras Cements are among the companies who witnessed reduced capacity utilisation. They have added a lot of new capacities in the past few months,” Mr Dave said. However, he pointed out that the volume of dispatches for these companies have also improved.

As per a research note by Emkay Research, capacity utilisation in the Indian cement industry is expected to fall to 80.5% in 2010 from 91.5% in 2009, showing a marginal improvement of 80.6% in 2011 and recovering to 87% in 2012.


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