Wednesday, December 30, 2009

India Strategy


was having a look at India Strategy reports from the past:
one common indicator is that everybody has been UNDERWEIGHT on Cement.

Oct-Nov 09
Morgan Stanley
- Equity funds experienced 3rd month consecutive net redemptions of Rs 2,200 crores
- Fixed income saw 2nd largest monthly inflows ever Rs 1.4 trillion
- Oct end MF Equity AUM $40billion = Rs 2lac crores (25% of total MF AUM)
- per second billing & high competition eating profits of Telecom players
- Indian cos likely to continue with RoE superiority ~18%
- RoE bottom behind us

HSBC
- upgrade EPS estimates, underweight Healthcare
- RBI could tighten monetary policy-our economists
- Indian markets may lag Asia

Citigroup
- Foreign stake up by 1% to 17% Q-o-Q, but below 20% peak
- FII holdings at $200 billion is 50% of free-float m-cap

BoA Merrill Lynch
- markets will rally in December after a slow October
- expect markets to SELL on earnings good news
- cash with DMFs at 18month low
- nxt 6 months supply of new paper will suck out liquidity
- Inflation could be a worry
- Overweight Banks, Pharma, Capital goods
- Underweight Hindalco, Ambuja, Infosys

BNP Paribas
- Overweight infra, banks, utilities.
- Underweight Cement & Telecom
- Buy M&M, Axis Bank, IRB Infra. SELL ABB, Wipro, RCom
- expect RBI to continue with easy money policy

UBS
- correction = buying opportunity
- Overweight Auto, Telecom & Pharma

Edelweiss
- Current rally has been too far too soon
- Large supply of paper to temper markets/ liquidity
- Mid cap values. Bottom-up stock selection
- Overweight BFSI, Metals, RE, Healthcare
- Underweight IT, Cement

Monday, December 28, 2009

Coal India


2 biggest indian superheros - Amitabh Bacchan and Shahrukh Khan have played lead roles in movies named after 'Coal' - Kala Patthar & Koyla ! so much importance.. not for nothing..
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Coal India is the largest company in the World in terms of coal production - it produces 85% of total domestic coal production in india with 4 lac employees and Rs 40,000 crores in revenues.

Coal India Limited was formed as holding Company in 1975. Foll subsidiaries"
- Eastern Coalfields
- Western Coalfields
- Northern Coalfields
- Central Coalfields
- South Eastern coalfields
- Mahanadi coalfields
- Bharat Coking Coal Limited


WORLD COAL PRODUCERS

1. China - 2.5 billion tonnes
2. USA - 1.1 billion tonnes
3. India - 0.5 billion tonnes
4. Aus - 0.4 billion tonnes

Total - 7 billion tonnes. 90% electricity in USA is generated by burning coal.

WORLD COAL RESERVES
USA - 26%
Russia - 17%
China - 13%
India - 10%
Australia - 8%
South Africa - 6%
Kazakastan - 3%
Ukraine - 2%
Brazil - 1%
Poland - 1%
Germany - 1%
Indonesia - 1%
Canada - 0.5%

Australia & Indonesia are the world's largest coal exporters.



• Power sector accounts for about 77% of the domestic coal consumption.
• Steel sector accounts for about 13% of the domestic coal consumption.
• Cement industry accounts for about 4% of the domestic coal consumption.

various varieties of coal available include –
• Anthracite
• Bituminous
• Sub-bituminous
• Lignite

Low Ash Metallurgical Coke (LAM Coke or Metallurgical Coke or Met Coke) is manufactured by heating bituminous coal
in absence of air. LAM Coke forms an integral part in manufacture of Steel. It is one of the basic raw materials required to
produce Pig Iron, which in turn is used to manufacture Steel.

The different varieties of Metallurgical Coke include –
• Blast Furnace grade
• Foundry grade
• Form Coke

Coal has a heterogeneous composition and hence coal from a same mine may also vary significantly. The variation is
primarily on the following parameters: -
• Heat content
• Ash content
• Sulphur

• Bituminous coal is used for manufacturing Metallurgical Coke.
• The Metallurgical Coke production in North America and Europe is not adequate to meet the local demand.
• Many Metallurgical Coke capacities in North America and Europe are being closed as they are finding it
increasingly difficult to compete with Asian players.
• China is the world’s largest producer of LAM Coke.
• India is a net importer of Metallurgical Coke.

Petroleum Coke is carbonaceous solid obtained from Oil Cracker units or other Cracking process.

Petroleum Coke finds wide application in the following areas –
• Fuel in Catalytic Cracker
• Manufacture of Dry Cells
• Electrodes in Aluminium and Copper manufacturing

Saturday, December 26, 2009

Corporate Laws in India

i spent the past 5 years trying to learn the Indian Companies Act '1956 and Income-Tax Act '1961, and now that I am on the verge of being a qualified professional, the year 2009 saw introduction of new Companies Bill' 2008 to replace the existing company law and a new DIRECT TAX CODE to replace the existing Income-tax Act.
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the existing Indian Companies Act' 1956 will be replaced once the Companies Bill of 2008 gets passed. saw an interesting conversation on CNBC TV18 organised by The Firm ( Menaka Doshi).
Y.H.Malegam, Bharat Vasani (Tata Group), Cyril Shroff (Amarchand Mangaldas)
highlights:
change law to: remove loopholes, rigidity, make it more contemporary, simplify, bundle together all relevant provisions eg managerial remuneration

Critical Analysis:
- seems like old wine in new bottle. rearrangement of sections
- no need for a separate definition of independent director when Clause 49 already has one
- insider trading is a SEBI mandade. no need to include it in DCA
- prospectus related provisions should also be left to SEBI
- removal of DVRs is regressive. we need multiple instruments in capital raising
- much abused provisions not capped. eg premium on redemtion of Debentures can be set-off against Securities Premium
drafting lacunas

Suggestions:
- scheme of reconstruction court order should not contravene mandatory Accounting Standards
- we need a 2 tier board like Germany - executive & supervisory

(note: full video of the discussion is available on http://www.thefirm.moneycontrol.com/)

Friday, December 25, 2009

Investment Banking in India



Hemendra Kothari






Nimesh Kampani of JM Financial










Vallabh Bhansali




Uday Kotak











Ashok Wadhwa

Thursday, December 24, 2009

Mighty morphin Fund managers


Top FIIs in INDIA - $22 billion

1.Deutsche - $7b = Rs 35,000 crores
2.HSBC Gl - $5b = Rs 25,000 crores
3.Citigroup - $3b= Rs 15,000 crores
4.Fidelity - $1.2b= Rs _6,000 crores
5.T.Row Pr $1b = Rs _5,000 crores

6.Morgan Stanley - $1b = Rs 5,000 crores
7.JP Morgan Chs- $0.8b=Rs 4,000 crores
8.Merrill Lynch - $0.6b = Rs 3,000 crores
9.Templeton Ast-$0.5b = Rs 2,500 crores

Top Domestic Players

1. LIC Of India - $50b = Rs 250,000 crores
2.Reliance Cap - $7b = Rs 35,000 crores
3.HDFC Asst - $5b = Rs 25,000 crores
4.UTI AMC - $5b = Rs 25,000 crores
5. SBI AMC - $4b = Rs 20,000 crores
6.Franklin Tem-$3b = Rs 15,000 crores

Sunil Singhania, Reliance MF

Monday, December 21, 2009

Mining in India



Ministry of Mines is responsible for survey and exploration of all minerals, other than natural gases, petroleum and atomic minerals, for mining and metallurgy of non-ferrous metals like aluminium, copper, zinc, lead, gold, nickel, etc. and for administration of the Mines and Minerals (Regulation and Development) Act, 1957 in respect of all mines and minerals other than coal, natural gas and petroleum.
Indian Bureau of Mines, Nagpur is a subordinate body, which undertakes research & assistance work.

The number of mines which reported mineral production (excluding minor minerals, petroleum (crude), natural gas and atomic minerals) in India was 2954 in 2008-09 as against 2854 in the previous year. Out of 2954 reporting mines, 433 were located in Gujarat followed by Andhra Pradesh (406), Madhya Pradesh (298), Jharkhand (298), Rajasthan (252), Orissa (236), Karnataka (230), Tamil Nadu (159), Maharashtra (154), Chhattisgarh (150), West Bengal (113).

The value of metallic minerals in 2007-08 at Rs.24,038 crores.
Iron ore contributed Rs.18,495 crores or 76.9%, [206 million tonnes]
Chromite Rs.2020 crores or 8.4%,
Lead & zinc (concentrate) Rs. 1080crores or 4.5%,
Manganese ore Rs. 1098 crores or 4.6%,
Copper (concentrate) Rs. 383crores or 1.6%,
Bauxite Rs. 526 crores or 2.2%,
Gold Rs. 283 crores or 1.17%

Iron Ore
The production of iron ore at about 206.45 million tonnes in 2007-08 registered an increase of 10% over the previous year. About 32% of the total production was shared by Public Sector Companies like SAIL (including IISCO), NMDC, etc. The share of Private Sector was 68% which includes Tata Steel (formerly TISCO) (7%). Almost the entire production of iron ore (94%) accrued from Orissa, Karnataka, Chhattisgarh, Goa and Jharkhand during the year. The remaining 6% production was reported from Andhra Pradesh, Madhya Pradesh, Maharashtra and Rajasthan.

Copper
The production of copper concentrate at 159 thousand tonnes in 2007-08 increased by about 6% as compared to the previous year. Average metal content in copper concentrate was 21.75% Cu.

Bauxite
The production of bauxite at 23.08 million tonnes in 2007-08 increased by 47% compared to the previous year.
The five major companies; namely, NALCO, HINDALCO, Prabhu Das Vithal Das, BALCO and Bombay Minerals Limited engaged in bauxite mining in the country, jointly contributed 49% of the total production of bauxite in 2007-08.
Gujarat - 54%
Orissa - 20%
Chhattisgarh - 8%
Maharashtra - 8%
Jharkhand - 5%

Lead Zinc
Global zinc consumption - 10 million tonnes

Zinc, used in galvanising (coating steel) to avoid corrosion. galvanised steel (used maintly in automobiles) accounts 50% of zinc consumption. zinc is also used in brass semis.

Mining Zinc - lead-zinc ore is sold to smelters, they get payment for 85% of zinc contained in the concentrate, less a treatment charge (Tc)
smelters purchase concentrate and sell finished metal after smelting & refining it.

50 countries undertake zinc mining of which 5 largest are:
1.China _ 2. Australia _ 3. Peru _ 4. USA _ 5. Canada
USA has already mined so much zinc that reserves are almost exhausted.

5 largest zinc mining companies:
1. Xstrata, 2. Glencore, 3. ZiniFer 4. HindZinc

Peru is world's largest supplier of zinc concentrate.
Zinc smelting is less geographically concentrated than zinc mining.

Indian Zinc industry has
During 2007-08, the production of lead concentrate at 126 thousand tonnes increased by 17% and that of zinc concentrate at 1036 thousand tonnes showed an increase of 9% over the previous year. Average metal content in lead concentrate was 61.74% Pb and that in zinc concentrate was 53.21% Zn.
Rajasthan accounted for the entire production of lead concentrate and zinc concentrate during 2007-08.

Ferro Chrome
Orissa reported almost entire output of chromite (99.7%) in the country.Mining of chromite was mostly dominated by private sector producers; viz, Tata Steel (formerly TISCO), IMFAL, Balasore Alloys Ltd., Jindal Strips Private Ltd. and FACOR having their own plants, jointly accounted for 63% of total production during 2007-08.Three Public Sector Companies; viz, Orissa Mining Corporation (OMC), Mysore Mineral Ltd. (MML) and Industrial Development Corp. of Orissa Ltd. (IDCOL) together reported 30% of the total production in 2007-08.

The production of manganese ore at 2.6 million tonnes in 2007-08.
(MOIL) the largest producer of manganese ore with a share of 50% in 2007-08.
Tata Steel (12%),
SMIOR (9%) and Mangilal Rungta (4%).
Orissa 27%,
Maharashtra 33%,
Madhya Pradesh 22%,
Karnataka 12%
ndhra Pradesh 5%
remaining 7.1% was jointly shared by Goa and Jharkhand.

Limestone
The value of production of non-metallic minerals at Rs. 3446 crores during 2007-08.
Limestone contributed 70% of the total value of non-metallic minerals in 2007-08. The production of limestone at 188 million tonnes.
About 53% of the total production was reported by 15 private sector companies.
Some of them are
Grasim, ACC and Ultra Tech Cement (9% each),
India Cement Ltd. and Gujarat Ambuja (5% each),
Birla Corporation Ltd. and Madras Cement Ltd. (3% each)

84% of the total output in 2007-08 was contributed by seven principal States; viz,
Andhra Pradesh - 20%,
Rajasthan -16%,
Madhya Pradesh - 14%
Gujarat - 12%
Tamil Nadu - 9%
Chhattisgarh and Karnataka - 8% each


In 2007-08, the Public Sector accounted for sizeable 92% production of Coal

Minor minerals

The value of minor minerals at Rs 10,467.4 crores

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National Mineral Development Corporation ('NMDC')

NMDC with 8,500 crores of topline and 4,350 crores PAT is the largest producer of iron-ore in the country, producing 28 million tonnes of iron ore in FY09 mainly for the 3 mines:
1. Kirandul, Chhatisgarh
2. Bacheli, Chhatishgarh
3. Donimalai, Karnataka

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Monday, December 7, 2009

the INDIA growth story



'INDIA' is now a must on the menu of every fund manager if he wants to outperform the global indices. And the 'India growth story' lies not just in the biggest metros, but more so in the Tier-II cities and in Rural India.

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WEST

GOA

MUMBAI (280 lacs)

PUNE (45 lacs)

NASHIK (16 lacs)

NAGPUR (24 lacs)

AHMEDABAD (40 lacs)

VADODARA

SURAT (32 lacs)

JAIPUR (32 lacs)

Mundra Port

Jamnagar
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NORTH

DELHI (130 lacs)

GHAZIABAD

FARIDABAD

AGRA (16 lacs)

CHANDIGARH

LUDHIANA (17 lacs)

SRINAGAR (12 lacs)

KANPUR (30 lacs)

LUCKNOW (27 lacs)

ALLAHABAD

BHOPAL (18 lacs)

INDORE (18 lacs)
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EAST

KOLKATA (52 lacs)

GUWAHATI

PATNA (20 lacs)

VARANASI (12 lacs)

RANCHI

RAIPUR

JAMSHEDPUR

BHUBANESHWAR

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SOUTH

CHENNAI (46 lacs)

HYDERABAD (42 lacs)

BENGALURU (50 lacs)

VIZAG (12 lacs)

COIMBATORE (10 lacs)

MYSORE ( 10 lacs)

TRIVENDRUM

KOCHIN

MADURAI

TIRCHY

Stats