RINL IPO likely to be postponed till FY12-13

The postponement of RINL’s issue could be another setback for the government, which has set up a target of Rs40,000 crore through disinvestments in PSU during this fiscal. It has managed to garner only Rs1,000 crore so far due to continuous volatility in the domestic market

New Delhi: Disinvestment in Rashtriya Ispat Nigam (RINL) is likely to be postponed to 2012-13 after it completes the Rs12,500-crore first phase expansion by the end of this fiscal which will improve valuation of the company, reports PTI.

The IPO of the Navratna firm, in which the government is considering to divest 10% its stake, was earlier being planned for January-March quarter of this fiscal.

“Valuations of the company will improve post expansion of our steel unit at Vizag, which is scheduled for commissioning in January-February next year. So, we are targeting to come out with the IPO of RINL only in the first quarter of next fiscal,” said a senior company official.

Meanwhile, the company has initiated the IPO process and appointed four merchant bankers—UBS Securities, Deutsche Bank, Edelweiss Capital and IDBI Capital—as the book running lead managers (BRLMs) to manage its issue, he said.

The second largest steel PSU has embarked upon a major capacity expansion drive to have a capacity of 11.5 million tonnes per annum (MTPA) by 2015-16 at an investment of Rs45,000 crore. The expansion is to be completed in three phases.

Of this, phase-I is slated to be commissioned in January-February of next year, taking the production capacity of RINL to 6.3 MTPA from existing 2.9 MTPA, at a cost of Rs12,500 crore.

The company is looking to increase its valuation before hitting the markets, the official said.

“The company has time till November 2012 to fulfil the guidelines of being a Navratna company. So listing of our company on the stock exchange can be done anytime before that and we are not in a hurry,” he added.

Pointing out the current market conditions, the official further said that time was not ripe for coming out with the IPO and there was no pressure either from Disinvestment Department or from the steel ministry on this front.

“Every company looks for favourable conditions before coming out with its issue; we are also looking for the same,” he said, adding that preparation for the IPO and securing government and other regulatory clearances will take 4-5 months time.

In 2010-11, RINL had posted a sales turnover of Rs11,517 crore, while during this fiscal it is targeting a turnover of Rs13,600 crore. The Navratna firm is a zero debt company and is sitting on cash reserves of Rs5,500 crore.

As of 31 March 2011, the company has a paid-up capital of Rs7,827.32 crore. This comprises Rs4,889.85 crore paid-up equity capital (4,88,98,462 shares of face value of Rs1,000 each) and Rs2,937.47 crore preference capital.

According to the request for proposal (RFP) to appoint merchant bankers for RINL issue, the government is considering disinvestment of 10% of its stake in the Navratna firm, comprising 48,89,846 shares of face value of Rs1,000 each through a domestic IPO.

The shares are proposed to be split into Rs10 each before the disinvestment, so as to make the RINL issue more affordable to the investors.

Moreover, the postponement of RINL’s issue could be another setback for the government, which has set up a target of Rs40,000 crore through disinvestments in PSU during this fiscal. It has managed to garner only Rs1,000 crore so far due to continuous volatility in the domestic market.

The big ticket issues of SAIL and ONGC are yet to hit the market due to adverse conditions, while other issues like BHEL and NBCC are now being planned for January-March quarter this fiscal.


Share prices await US stimulus announcement: Wednesday Closing Report

Nifty may struggle between 5,125 and 5,230 before a decisive move

The market closed flat with a negative bias as investors all over the world wait for positive signals from the US Federal Reserve. The NSE traded on a volume of 61.12 crore shares, the second highest in the past six days. Today the Nifty managed a higher high of 5,168 and a low of 5,110, which was the highest in the past 26 days (including today). Although the indicators show signs of a rally, global events may cause impediments in the upmove. The Nifty may move between 5,125 and 5,230 tomorrow.

Continuing from yesterday's positive close, the Indian market opened higher, tracking the Asian markets that were in the green in early trade as investors awaited the outcome of the two-day US Federal Open Market Committee (FOMC) meeting. The Nifty started the day at 5,154, up by a modest 14 points and the Sensex added 30 points to resume trade at 17,129.

Capital goods, consumer durables and PSU stocks supported early gains, which enabled the indices to hit their intraday high in the initial half hour. At the highs, the Nifty rose to 5,168 and the Sensex touched 17,191. However, a high degree of choppiness saw the indices fluctuating on both sides of the neutral line till noon trade.

The lower opening of the key European markets on news that international policymakers would meet in Athens next week to review the measures taken by the Greece government and nervousness ahead of the FOMC announcement, pushed the domestic indices into the negative with the benchmarks falling to the day's low in the noon session. At the lows, the Nifty fell to 5,110 and the Sensex went back to 17,001.

The market was sideways in subsequent trade. It made a feeble recovery attempt in the last half hour, but selling pressure kept the indices in the red till close of trade. The market ended flat with a negative bias. At the end of the session, the Nifty lost seven points at 5,133 and the Sensex settled 34 points down at 17,065.

The advance-decline ratio on the National Stock Exchange (NSE) was 973:689.

Even as the Sensex settled almost flat, the broader indices outperformed the benchmark. The BSE Mid-cap index gained 0.73% and the BSE Small-cap index advanced 0.71%.

The leaders in the sectoral space were BSE Consumer Durables (up 2.04%), BSE Bankex (up 0.96%), BSE Realty (up 0.83%), BSE PSU (up 0.50%) and BSE Power (up 0.43%). The top losers were BSE Oil & Gas (down 1.16%), BSE Auto (down 0.91%), BSE Metal and BSE IT (down 0.26% each) and BSE Fast Moving Consumer Goods (down 0.14%).

The major gainers on the Sensex were ICICI Bank (up 2.15%), Jaiprakash Associates (up 2.14%), Coal India (up 1.57%), Wipro (up 1.30%) and State Bank of India (up 0.89%). The top losers on the index were Hero MotoCorp (down 3.06%), Hindalco Industries (down 2.80%), Maruti Suzuki (down 2.65%), Reliance Industries (down1.57%) and Bajaj Auto (down 1.49%).

The key Nifty gainers were Siemens (up 2.03%), ICICI Bank (up 1.99%), Grasim (up 1.80%), Ambuja Cement (up 1.74%), and JP Associates (up 1.66%). The main losers were Hero MotoCorp (down 3.43%), Hindalco Ind (down 3.27%), Maruti Suzuki (down 3.19%), Cairn India (down 2.55%) and RIL (down 1.97%).

Markets in Asia edged higher on speculation that the US Fed, later today, will announce new measures to boost the economy. A rise in China's economic indicator index in July also supported the gains. However, less-than-expected growth in Japanese exports in August by 2.8% on a year-on-year basis capped the gains on the Nikkei.

The Shanghai Composite jumped 2.66%, the KLSE Composite gained 0.60%, the Nikkei 225 rose 0.23%, the Straits Times advanced 0.39%, the Seoul Composite climbed 0.89% and the Taiwan Weighted was up 0.57%. On the other hand, the Hang Seng lost 1% and the Jakarta Composite declined 1.46%.

Back home, domestic institutional investors were net buyers of stocks worth Rs318.84 crore on Tuesday. On the other hand, domestic institutional investors were net sellers of equities worth Rs317.69 crore.

Power Finance Corporation (PFC) has received the Reserve Bank of India's (RBI) approval to raise $1 billion (Rs4,600 crore) via offshore medium-term note borrowing. The funds would be utilised for funding the power projects, including ultra mega power projects, financed by the company. The stock gained 3.14% to close at Rs164.25 on the NSE.

Belgium-based WABCO Holdings has embarked upon a Rs60 crore investment plan for its Indian operations during the current financial year. WABCO-TVS, which has been renamed WABCO India, will invest around Rs40 crore for expanding its facility at Mahindra World City SEZ in Chennai and another Rs10 crore for setting up a facility at Lucknow. The remaining would be utilised for other purposes. WABCO India added 0.52% to close at Rs1,308 on the NSE.

Sterlite Technologies, engaged in providing transmission solutions for the power and telecom industries, has received a Rs114 crore contract from state-run BSNL for establishment of a broadband network in the state-run company's telecom circles. The company will install and commission the system by the end of FY12-13 and will manage this network for seven years thereafter. The stock jumped 3.88% to settle at Rs41.50 on the NSE.


ONGC may okay Cairn-Vedanta deal on 27th September

ONGC's consent for transfer of control in Cairn India to Vedanta Resources is subject to Cairn Energy subsidiary and the Anil Agarwal-led firm signing a legally binding agreement to share royalty and pay cess on production from their Rajasthan field

New Delhi: State-owned Oil & Natural Gas Corporation (ONGC) may next week give consent for transfer of control in Cairn India to Vedanta Resources, provided the Cairn Energy subsidiary and the Anil Agarwal-led firm sign a legally binding agreement to share royalty and pay cess on production from their Rajasthan field, reports PTI.

The need for a legal document has arisen because Cairn India insisted on ONGC giving no-objection to the Cairn-Vedanta deal before it agrees to accept conditions that the government has set for clearing the $9 billion transaction.

Sources privy to the development said the ONGC board can waive its pre-emption rights only when Cairn India agrees to pay its share of the Rs2,500 per tonne cess on production from the all-important Rajasthan oilfields, as per its stake of 70%, and also makes royalty payments cost-recoverable.

ONGC holds 30% interest in the Rajasthan fields and Cairn previously felt the state-owned firm was liable to pay royalty and cess on its share of production, as well as Cairn's 70% participating interest.

"There is mutual distrust between the two partners," a source said. "Cairn doesn't want to agree to paying royalty and cess without getting a no-objection certificate (NOC) from ONGC, while ONGC doesn't want to give its consent without Cairn agreeing to the conditions set by the government."

A way out of this would be for ONGC, Cairn India, Vedanta and UK's Cairn Energy-which is selling its 40% stake in its Indian unit-to sign a legally binding document agreeing on the government conditions as well as a separate paper granting clearance to the transaction simultaneously.

Sources said ONGC board may on 27th September agree to waive its right of first refusal (ROFR) on the proposal, subject to Cairn India and others signing the legal document.

Upon the board approval, the legal agreement can be signed that very day if Cairn/Vedanta so desire, they said, adding that the NOC will be handed over upon signing of the papers.

SBI Caps, which had been appointed by ONGC to advice on exercising its pre-emption rights, has opined that the Rs355 a share price that Vedanta is paying Cairn Energy for buying a majority stake in Cairn India is too high a price.

Stating that SBI Caps was in the process of finalising its report, sources said the valuation-along with a recommendation for waiver of ONGC's ROFR over the deal-would be put before the state-run oil and gas explorer's board on 27th September.

In a postal ballot earlier this month, 97% of Cairn India's shareholders-including Cairn Energy (52.1%) and Vedanta (28.5%)-had voted for acceptance of the government conditions so that the transaction can conclude.

The company board, which met on 14th September, accepted the shareholder's mandate, but added a caveat that the conditions would be accepted only upon receiving a NOC from ONGC.

Sources said Cairn India had conveyed the same to ONGC in a formal letter it wrote shortly after the board meeting, seeking formal approval for the Vedanta deal.

Cairn India currently does not pay any royalty on its 70% stake in the Rajasthan fields. Royalty, as per the contract, is paid by state-owned ONGC, which got a 30% stake in the 6.5 billion barrel field for free.

However, even before the $9.6 billion Cairn-Vedanta deal was announced in August last year, ONGC had demanded that like all other taxes, royalty should be added to the project cost, considering it as revenues earned from oil sales before profits were split between partners.

Cairn had opposed this as it would lower its profitability and had also initiated arbitration against the government, contesting its liability to pay oil cess on its share. It believed that cess, like royalty, was also the liability of ONGC.

"The acceptance of royalty as being cost-recoverable and the withdrawal of the arbitration pertaining to cess will be concomitant with transfer of control of Cairn India," the company said in a letter seeking approval for the deal from ONGC, which holds a stake in eight out of the company's 10 properties in India.

Cairn currently produces 125,000 barrels of oil per day (bpd) from the Rajasthan block and believes the output could rise to 300,000 bpd (15 million tonnes a year).

Cairn Energy, which is selling a 40% stake in its Indian unit to Vedanta, had previously said it would rather call off the deal than force Cairn India to accept the government's conditions.

Cairn India had on 26th July stated that its April-June quarter net profit would halve to Rs1,435 crore if royalty on the Rajasthan crude oil was made cost-recoverable.


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