The great coal hunt continues as firms tap global markets

Another company has now tied up a foreign coal source. A subsidiary firm of Nava Bharat Ventures is acquiring a coal mine in Zambia

In another example of how getting coal thousands of miles away from another continent is much easier than getting it from a few hundred kilometres within the country, Nava Bharat (Singapore) Private Limited (NBS) a subsidiary of Nava Bharat Ventures Limited (NBVL), has signed a share sale and purchase agreement (SPA) for acquiring 65% equity stake in Maamba Collieries Limited (MCL), with the Government of the Republic of Zambia holding the Golden Share.

This news pushed the stock to a high of Rs405, and it ended the day at Rs399, up 6% from the previous day’s close of Rs378.

As per reports, MCL, which is estimated to have a capacity of two million tonnes of washed coal per annum, is expected to start operating on
1 March 2010 after the new investor, Nava Bharat, completes the financial closure.

As per the filing to the Bombay Stock Exchange (BSE), the company said that a group of individuals (Zambian Consortium) had joined NBS to form Nava Bharat Consortium (Nava Bharat). According to the company announcement, the acquisition was made pursuant to the selection of Nava Bharat against a global tender issued by ZCCM in late 2008 for inducting a private majority partner.

Nava Bharat’s move underlines once again how there is now a beeline to acquire coal sources abroad. In early December, Moneylife Digital had reported that JSW Energy’s fuel requirement would be met by a mix of domestic coal sources and imported coal, since uninterrupted coal supply from domestic sources was not easy.

“Domestic coal has its own challenge. If we want to ramp up capacity, there are issues. We have tried to enter this space very differently with a mix of domestic coal and imported coal. We have around three to five years to explore various sources for coal allocation. A lot of capacity is coming in, but we have to keep an eye on the challenges which we will face in procuring domestic coal. The reason for this is that we are not seeing a huge amount of coal capacity actually coming on stream,” said Pramod Menon, chief financial officer, JSW Energy Ltd.

“We believe it is ideal to have a (supply) mix of domestic and imported coal. We have most of our projects dependent on imported coal located near ports, so we have the infrastructure in place,” Mr Menon had told us.

JSW Energy imports coal from Indonesia and Mozambique. It owns two coal blocks in Mozambique. Coal sourced from this country will fuel JSW’s power plants dependent on this source in about three to four years. Mr Menon added that, “We need to de-risk the dependence on a single source by working out arrangements with multiple parties. Over time, you will find us addressing these risks.”

Meanwhile, P Trivikrama Prasad, managing director of Nava Bharat, said that the company has successfully demonstrated its strengths in executing small-scale, coal-based power projects in the past. He said that this new venture will benefit from the same experience, and the company expects to be able to complete this project through a prudent financial structure that will optimise the opportunity for all stakeholders involved.

Nava Bharat and ZCCM are committed to optimise the mine operations to obtain positive cash flows soon and to establish a 2x150MW power plant by utilising low-grade coal from the coal mine which has reserves of about 65 million tonnes of washed high-grade coal and an equivalent quantum of
low-grade coal for use as feedstock for the proposed 300-MW power plant.

The overall integrated project entails capital outlay of about $550 million which will be funded by non-recourse project debt and equity. The filing also said that Nava Bharat’s share of equity for this integrated project is about $108 million and that of ZCCM is about $57 million and the actual commitment would vary upon finalisation of the project cost and financing structure. Currently, the company is in talks with some leading banks for the proposed financing of the MCL project.


Sensex sheds 119 points, ends at 16,601

Higher advance tax figures from India Inc—suggesting greater profit growth and improving economic prospects—fail to uplift Indian markets

The Sensex declined 119 points from Friday’s (18 December 2009) close, ending the day at 16,601, while the Nifty declined 35 points to 4,953, despite reports of higher advance tax figures from India Inc for the third quarter.

Among index heavyweights, Reliance Industries Ltd (RIL) rose 1%. As per reports, stock market regulator Securities and Exchange Board of India (SEBI) has asked the government to consider appropriate action against RIL for allegedly routing funds to dummy companies for buying large quantity of its shares in 2000.

Ranbaxy Laboratories remained flat even after the company said it will launch hypertension drug Olmesartan Medoxomil developed by the company’s parent, Daiichi Sankyo, in six African countries.

Nava Bharat (Singapore), a subsidiary of Nava Bharat Ventures, has acquired 65% equity stake in Zambia-based Maamba Collieries Ltd (MCL). The stock shot up 6%.

Prime Focus rose 3% as it earned $18 million for providing visual effects in a recently released film, ‘Avatar’.

Zee Entertainment Enterprises (ZEEL) will consider a proposal for restructuring of the businesses of ETC Networks Ltd, a subsidiary of the company. At the end of the day, ETC Networks was up 5% while ZEEL rose 4%.

MRF declined 7%. The company reported 68% growth in operating profits for the financial year 2008-2009 over the corresponding period last year. However, sales rose only 12% during the same period.

As per reports, Indian firms paid 24% more in advance tax for the October-December 2009 period year-on-year, suggesting higher profit growth as economic recovery picked up pace. The advance tax paid by the top 100 firms was up more than 30% in the December 2009 quarter. The country’s corporate advance tax had fallen by 3.7% in the June 2009 quarter, but grew by 14.7% in the September 2009 quarter due to a strong recovery in banking, auto, and consumer durables sectors.

According to the latest data release from fund-tracker EPFR Global, emerging-market equity funds took in $571.40 million in the week ended 16 December 2009, a slower pace of inflows than that seen earlier in the year.

Still, inflows into developing world stock funds have now surpassed $75 billion for calendar year 2009, well beyond the previous record of $54 billion set in 2007. Meanwhile, diversified global emerging market funds soaked up $404 million and Asia funds, excluding Japan, posted net inflows of $301 million. India equity funds took in $64 million over the week, putting their intake for the year ahead of the previous record of $3.40 billion in 2005.

During the day, finance secretary Ashok Chawla said that there are no plans for any additional borrowing this year and added that not much can be done about food price inflation with steps including monetary policy.

Kaushik Basu, chief economic adviser to the finance ministry said that inflationary expectations in India will die out soon. He also added that inflation in India was sector-specific, present in food prices, and would therefore need sectoral intervention.

Meanwhile, companies planning to list may reportedly have to ensure that at least a quarter of their total equity lies with the public, as the government sets about its stated mission to ensure that investors get a wider selection of stocks to choose from. Under the proposed plan, already listed companies will be required to divest at least 5% stake every year from 2010 to reach the prescribed threshold. Under the current rules, companies have the option to go public with 10% or 25% equity dilution. The government is scrapping the rules allowing companies to go for an initial public offering with 10% dilution.

During the day, Asia’s key benchmark indices in South Korea, Hong Kong, Indonesia and Singapore were down by between 0.17%-3.12%, while indices in China, Japan, and Taiwan rose by between 0.29%-0.43%.

Japan’s exports fell at the slowest pace in 14 months in November 2009 as demand from Asia supported the nation’s recovery from its worst post-war recession. Shipments abroad slid 6.2% from a year earlier, the smallest drop since September 2008, the finance ministry said.

Meanwhile, China’s industry minister said that the government will aim for economic growth of about 8% in 2010, even as it faces a tougher time boosting domestic consumption as a driver of growth.

The economy minister of the United Arab Emirates (UAE) said that Dubai, which faces more debt maturities in 2010, may receive more aid from either the UAE federal government or wealthy fellow emirate, Abu Dhabi.

On Friday, 18 December 2009, the Dow Jones Industrial Average rose 21 points while the S&P 500 and Nasdaq Composite rose 6 points and 32 points respectively.


Trail commission: AMFI ignores internal verdict

The fund lobby continues with its anti-investor stance and its latest move only serves to highlight its ineptitude

There is continuing confusion about who gets the trail commission in a mutual fund transaction, where a client has moved away from one distributor to another. A large part of the blame for this confusion must lie with the fund industry, especially the Association of Mutual Funds in India (AMFI). It is a shocking story of ineptitude and anti-investor stance of the fund lobby.

About five months ago, AMFI formed a committee with representatives from ICICI Prudential and Birla Sun Life to decide on who should be getting the trail commission. The committee argued that that the original trail should be there for life even if the client has shifted. There were huge objections to this obviously flawed idea. The simple principle was that the trail commission was being paid for maintenance of an account, not acquisition of clients. For acquisition of clients, fund companies were paying upfront commissions anyway. If a distributor was not maintaining the account, why would the fund company pay him for ever? “It is a matter of principle and it is the client’s money. We have no right to direct it wrongly,” argues the chief executive officer (CEO) of a mid-sized fund company.

The decision was put to a hand of vote. According to one of the CEOs, 11 funds voted in favour of the committee’s flawed decision while 17 were against. “Amazingly, till date, it has not been implemented. For any other decision, we get the AMFI circular the very next day. But on this, five months later, we have no clarity.” Indeed, quite shockingly, a few of the CEOs who voted against trail commission continuing, got calls from top AMFI officials asking them whether they had really thought through the implication of changing the trail decision. “If you want to take your vote back, please write to me,” was an open hint.

Since the voting of trail commission turned out to be such a farce, one of the CEOs commented “when voting has no meaning why vote”, when the issue of fund trading platform came up for discussion and voting.

While the regulator, the Securities and Exchange Board of India has scrapped the need to get a ‘No Objection Certificate’ to change distributors, it has to now step in and give a clear directive to AMFI since AMFI will suppress what its own members have decided.

This is of course one more example of the way AMFI functions. There are no elections for the posts of office-bearers, and the head of AMFI, AP Kurian, apparently gets paid a hefty salary. Over the past decade, SEBI has had four chairmen and the Insurance Regulatory and Development Authority has had three. But the AMFI chief continues to rule unelected and unhindered. Even the board of directors of AMFI does not change. Naval Bir Kumar resigned from the board a year ago but there has not been a replacement. About six years back, the CEO of Birla Sun Life took the signatures from some 20 funds to ask for a change.  



Vivek Rege

7 years ago

I marked a mail to SEBI directly on 9th December explaining them the need to get rid of the NOC required from a distributor and let the distributor compete on Quality Advice and the fact that the spirit of the Regulations are not to sheild a distributor for poor show . Moreover Trail Commission be paid to the New Distributor since that is the spirit of the investors decision , also receving Trail will help subsidise the Investor on fees which are now charged for the value added services rendered . If Trail is not paid to the new distributor in which case the wrong person is being compensated , the investor needs to pay higher fees since the same cannot be subsidised hence once again the investor bears the brunt , which in my opinion any investor would want his fees subsidised when he knows that the advisor is being paid through trail hence he can afford to charge lower there is no magic here . The need to mail to SEBI directly has arisen from the fact that there are no proper reliable channels before going to the regulator directly which if it was there i would have opted for the same. I hope SEBI gives guidance on this front as well in the broader interest of the investor and to promote advisory services which was the intent of the new regulations , hence condusive regulations are required .

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