Govtopens FDI floodgates for global airlines and retailers
BS REPORTERS
New Delhi/Mumbai, 14 September
Jolted out of policy inaction, the Manmohan Singh-led United
Progressive Alliance (UPA) government today opened the FDI floodgates
— across sectors ranging from aviation to retail, and media to power —
in a single stroke. In another step signalling a reform push, could
fetch the exchequer around ~15,000 crore, disinvestment in four PSUs —
Nalco, MMTC, Hindustan Copper (HCL) and Oil India — was also okayed by
the Union Cabinet.
Domestic airlines, in screaming need of funds, have been allowed up to
49 per cent foreign direct investment (FDI) from global airlines. FDI
in India's multi-brand retail, where global chains like Walmart,
Carrefour and Tesco have been waiting for several years to enter, will
be capped at 51 per cent; but, it will be up to states to take a final
call.
The policy on single-brand retail, too, has been diluted to clear the
way for the likes of the ^25-billion Swedish furniture company IKEA to
set up shop and invest freely in India. The norm mandating 30 per cent
sourcing from the country's micro, small and medium enterprises
(MSMEs), cleared by the Cabinet last year, has been tweaked. Now, it
would be 30 per cent mandatory sourcing from India, preferably from
MSMEs. IKEA had told the government in its India proposal that it
would be impossible to follow the 30 per cent MSME sourcing norm.
The government's FDI spree didn't end there —broadcasting services
such as direct to home (DTH) and cable could attract up to 74 per cent
foreign investment, up from 49 per cent. Power exchanges have been
allowed to receive up to 26 per cent FDI and 23 per cent foreign
institutional investment.
India Inc, critical till now of the UPA government's 'policy
paralysis', showered praises on it for its bold step after Commerce
Minister Anand Sharma made the announcement in a televised press
conference.
Political resistance, from both allies and Opposition parties, had
kept the aviation and retail FDI policies in a limbo for long. The
government, as well as the PM, had been drawing flak at home and, more
recently, from the global media, for the state of slumber. Today, as
if on a steroid, the government cleared all that had been seemingly
"undoable" till now, in spite of the frowning allies and the
Opposition. The move comes a day after the government showed its guts
by raising the diesel price by ~5 a litre and capping subsidised LPG
for a consumer at six in a year.
"If these measures result in economic growth of the country and better
image for the ruling government, UPA can face the 2014 elections much
bolder," said a bureaucrat who did not want to be named. More than
anything, the FDI announcements would translate into better
middle-class opinion and foreign investors' perception of the
government, he said.
Trinamool Congress chief Mamata Banerjee, a key UPA constituent, has
opposed the FDI move, while BJP, the main Opposition party, argues the
government has allowed FDI under foreign pressure.
ECONOMY 4 >>Game changerin retail FDI
>Airpolicy opening gets qualified welcome
>FDI in broadcastto spurdigitisation
>Powerbourses eye funds, tech
>Govtgets going on disinvestment
>PM, Congress leaders choose bold option
>Policy inaction weighs on FDI inflows
Newon the block:
Cabinet has approved stake sale in four PSUs: |Hindustan Copper: 9.59%
|Nalco: 12.15% |Oil India: 10% |MMTC: 9.33%
In the works
|RINL, NMDC, SAIL, BHEL, NLC already in pipeline |Govt preparing for
offer-for-sale route for Nalco, NMDC and NLC |ETF and buyback of
shares by CPSEs being looked at
Also approved
|FDI of up to 74% allowed in the broadcasting sector |49% foreign
investment (26% FDI, 23% FII ) allowed in power trading exchanges
Today's move: 51% FDI allowed in multi-brand retail, but subject to
state governments' permission
Background: The govt had cleared 51% FDI in multi-brand retail last
year, but the decision was put on hold due to political opposition
BOLD DECISIONS, FRENETIC ACTIVITY
Today's take-off:
Cabinet approves foreign airlines to invest up to 49% in the country's
airlines |Earlierstance: Foreign entities other than airlines were
allowed to own an equity stake of up to 49% in Indian carriers |Stocks
soar*: Earlier in the day, aviation stocks rose on buzz that Cabinet
might approve FDI
Kingfisher: ~10.81 (+ 7.88%)
SpiceJet: ~34.50 (+ 4.39%)
JetAirways: ~368.35 (+1.97%)
*Friday's closing stock price on BSE DISINVESTMENT PUSH
"We have to bite the bullet. Ifwe have to go down, letus go down fighting"
MANMOHAN SINGH
PM (Quoted as saying at the meeting)
"Itis a bold move and will open doors forboth FDI and FIIs. Manyglobal
retailers are looking atIndia forthe long term"
KISHOREBIYANI
Chairman, Future Group
QUOTE, UNQUOTE
"From a famine ofpolicyaction,weve moved to a feast. The governments
gotbackits gumption! We cheer& urge that theystaythe course.
ANAND MAHINDRA
Chairman, Mahindra &Mahindra group, on Twitter
"The series ofpolicydecisions send out aclearmessage to the global
investor communitythatthe governmentis committed to taking forward
next-generation economic reforms.
"We are pleased thatthe govthas decided to allowforeign airlines to
investup to 49% in the equityof Indian scheduled airlines. Kingfisher
will nowbe able to re-engage with airline investors in a more
meaningful mannerand move towards recapitalisation and ramp-up of
operations"
VIJAYMALLYA
Chairman, Kingfisher Airlines & UB Group FDI IN RETAIL FDI IN AIRLINES
Stake sale in 4 public sector firms, FDI in broadcasting sector, power
exchanges also cleared
REFORMS OVERDRIVE
Bold reforms lift market sentiment
BS REPORTERS
Mumbai, 14 September
Foreign institutional investors (FIIs), buoyed by quantitative easing
(QE3) by the US Federal Reserve and the diesel price increase, today
pumped in over half-a-billion dollars in the Indian stock market.
The BSE Sensex rose 443 points – the highest rise in a day this
calender year – to close at a 14-month high of 18,464.27. The rupee
rose two per cent – the highest amid Asian currencies – to a fourmonth
high of 54.31.
The party isn't over yet. For many, it's just starting. The
government's bold steps, such as allowing foreign direct investment in
aviation, retail and other sectors has sent sentiments soaring.
"This is the beginning of a significant rally. The sharp rise in the
rupee would act as a trigger for FIIs to pump in more money. We expect
market to touch 21,000 before March," said G Chokkalingam, executive
director & CIO, Centrum Wealth Management.
Three key decisions – ECB President Mario Draghi's unlimited
bond-buying programme, increase in diesel prices by ~5 and a cap on
subsidised LPG to a consumer at six cylinders a year by the Indian
government and Fed Chairman Ben Bernanke's $40-billion-a-month
bondbuying programme – have seen the Sensex surge six per cent, or
1,118 points, in last seven trading sessions.
Precious metals also surged. Gold and silver were trading at six-month
highs of $1,777.95 an oz and $34.67 an oz, respectively, in early
London trade today.
India, which has received the highest foreign inflows among the 10
Asian markets outside China that Bloomberg tracks, is likely to
attract further flows after QE3.
According to BSE's provisional figures, FIIs' net purchase stood at
~2,833 crore today, whereas DIIs sold ~688crore shares. FIIs have
pumped in as much as ~68,874 crore this year. Friday's rally added
nearly ~37,000 crore to investors' wealth in terms of market
capitalisation of all the BSE-listed companies.
The rupee's jump was the highest single session gain in 11 weeks. "The
rupee is poised to benefit from a combination of domestic and global
developments," said Hitendra Dave, head of global markets (India) at
Hongkong and Shanghai Banking Corporation.
Sensex surges to 14-month high; rupee, precious metals also gain
Top 5 gains in 2012 SENTIMENTS SOAR
Date Sensex change*
Sep 14 18,464.27 443.11
Jun 29 17,429.98 439.22
Jun 06 16,454.30 433.66
Jan 03 15,939.36 421.44
Mar09 17,503.24 357.72
Company Sep 14, '12 % chg*
Jindal Steel 372.25 8.83
Hindalco 118.10 8.00
SBI 1,970.55 5.52
Company Sep 14, '12 % chg*
Reliance Ind 840.95 5.35
ICICI Bank 1,006.35 4.97
Commodities
Sep 14, '12 %chg*
Silver(~/kg) 63,665.00 2.13
Standard 32,200.00 0.63
Gold (~/gm) Indian Brent 114.43 0.01
Crude ($/bbl)
Top Sensexperformers today
*Change over previous close Data compiled by BS Research Bureau
Rupee, day's best Asian performer
PARNIKASOKHI
Mumbai, 14 September
Fuelled by capital inflows amid a favourable outcome from key domestic
and global events, the rupee gained the most as compared to other
Asian currencies today. While the latter took advantage of global
dollar weakening, the Indian currency had many other reasons to
celebrate.
The rupee today jumped to a fourmonth high of 54.31 from 55.42 against
the dollar in its previous close. It registered the highest single
session gain of two per cent in 11 weeks. Data from the Bombay Stock
Exchange showed foreign institutional investors had netinvested ~2,833
crore in Indian equity markets, the latter rallying 2.5 per cent.
"The rupee is well placed to benefit from the combination of both
domestic and global developments," said Hitendra Dave, head of global
markets-India at Hongkong and Shanghai Banking Corporation. The
closest contenders were the Malaysian ringgit that appreciated by 1.3
per cent and the South Korean won that gained one per cent against the
dollar. The rupee today opened at 54.89 and touched a low of 54.92
before closing near the day's high of 54.31 against the dollar. It
gained almost 50p in the last three hours of the trading session.
Tagged as the worst performing Asian currency for long, the rupee was
facing various issues such as uncertainty and policy inaction on the
domestic front. Headwinds from the Euro zone also did not spare the
currency, which lost a little over 20 per cent against the greenback
in less than a year. Market participants said the rupee had the
potential to gain some of its lost ground now, as these issues get
resolved.
Dave expects it to gain 2-2.5 per cent more in the short term.
However, sustainability of these levels is still in question. "Over
the medium term, the level will be decided by the size of the current
account deficit and the quality of portfolio inflows," he said.
Jumps 2%, further upside seen in near term
Countrycurrency Sep 13, 12 Sep 14, 12 % Change
Indian rupee 55.42 54.31 2.00
Malaysian ringgit 3.08 3.04 1.28
South Korean won 1,128.43 1117.30 0.99
Philippines peso 41.74 41.39 0.84
Indonesian rupiah 9,599.00 9520.00 0.82
Taiwan dollar 29.66 29.42 0.80
Singapore dollar 1.23 1.22 0.40
Thai baht 30.89 30.78 0.36
China renminbi 6.33 6.32 0.24
Hong Kong dollar 7.75 7.75 0.02
Japanese yen 77.49 78.10 -0.79
Compiled by BS Research Bureau Source: Bloomberg
Currencyagainst dollar Smiling again
(Inverted scale) ~ RUPEE RECOVERS
Bharti Infratel files forIPO; likely to raise $1 billion
BS REPORTER & REUTERS
Mumbai, 14 September
Bharti Infratel, the mobile phone tower arm of India's leading telecom
player Bharti Airtel, today filed its draft prospectus for an initial
public offering (IPO) with market regulator Securities and Exchange
Board of India (Sebi).
The offering, which comprises both fresh issue and offer for sale from
existing investor, is looking at raising close to $1 billion (~5,500
crore) from the market, said people with direct knowledge of the
matter.
Bharti Airtel, which owns 86 per cent stake in the company, will not
tender its shares in the IPO.
"The issue constitutes a fresh issue of equity shares by Bharti
Infratel and an offer for sale portion by Compassvale Investments, GS
Strategic Investments, Anadale and Nomura Asia Investment (IB)," said
Airtel in a filing to the Bombay Stock Exchange (BSE).
"Bharti Airtel has now informed BSE that the committee of directors of
Bharti Airtel has decided not to participate in the offer for sale of
equity shares in the proposed issue," said another filing.
According to sources, 75 per cent of the offering will be of fresh
shares and the proceeds will be used for future capital expenditure.
The IPO, which is likely to be the biggest since Coal India's in 2008,
is likely to be launched in January 2013. Coal India had raised more
than ~15,000 crore through India's largest ever IPO in October 2010.
Some other shareholders in Bharti Infratel include including Goldman
Sachs, Macquarie Group, Citigroup, Kohlberg Kravis Roberts & Co and
Investment Corporation of Dubai.
Shares of Bharti Airtel today ended ~1.45, or 0.57 per cent higher at
~255.1, underperforming the benchmark indices which rallied over two
per cent.
Bharti Infratel owns and operates over 33,000 mobile phone towers. It
also holds 42 per cent stake Indus Towers, which is the world's
biggest telecoms tower company, with about 110,000 towers.
Tower companies derive revenues by leasing infrastructure to mobile carriers.
Standard Chartered, Barclays, JPMorgan, Bank of America-Merrill Lynch,
HSBC, UBS, Kotak Mahindra and Enam Securities will be the lead book
running managers for the IPO.
Due to unfavourable market conditions many companies have had to put
off their share sale plans this year. This year 16 companies have
raised only ~3,067 crore through IPOs, about 45 per cent lower than
the ~5,568 crore raised by 29 companies during the same period last
year.
IPO date Issue size (~ cr)
Coal India Oct 2010 15,199
Reliance Power Jan 2008 11,700
DLF Jun 2007 9,188
Reliance Petro Apr 2006 8,100
NHPC Aug 2009 6,039
NTPC Oct 2004 5,368
Cairn India Dec 2006 5,261
Source: BS Research Bureau THE ~5,000-CRORE CLUB
Onlyseven IPOs have raised more than ~5,000 crore so far Do you
thinkyou are better offstaying outofthe stocks during the last four
years ofturmoil? ThinkAgain. While the Sensexitselfgained just 36 per
centsince the Lehman collapse, 10 ofits components would have doubled
your moneyifyou had boughtthem on September 15, 2008. Ifyou had
boughtBajaj Auto stockworth ~ 1 lakh then, todayit would be worth
~5.69 lakh. Here are the stars ofthe crisis:
Share price in ~ on BSE Your 1 lakh Name Sep 15, '08 Sep 14, '12 would
be (~) Bajaj Auto 306.00 1,743.70 5,69,837
TCS 373.62 1,411.95 3,77,911
Tata Motors 78.12 270.30 3,46,006
Dr Reddys Labs 561.00 1,745.95 3,11,221
ITC 92.28 268.10 2,90,529
Mahindra & Mahindra 267.78 777.05 2,90,182
HDFCBank 240.81 612.10 2,54,184
Hero MotoCorp 793.65 1,858.65 2,34,190
Sun Pharma 294.36 677.85 2,30,279
Hindustan Unilever 242.80 547.40 2,25,453
Source: BS Research Bureau Compiled by N Sundaresha Subramanian
Sebi rejigs primary market advisory panel
PRESS TRUST OF INDIA
Mumbai, 14 September
Capital market regulator, the Securities and Exchange Board of India
(Sebi) has reconstituted its primary market advisory committee (PMAC)
which advises it on issues related to regulation and development of
initial public offerings (IPOs) and other primary market segments.
The panel would be chaired by T V Mohandas Pai, formerly asenior
executive at information technology giant, Infosys, and currently
chairman of Manipal Global Education Services, Sebi has said.
The other members of the 18-member panel include BSE interim chief
executive officer Ashish Chauhan, Tata Steel Group CFO Koushik
Chatterjee, Morgan Stanley India CEO P J Nayak, Crisil Managing
Director and CEO Roopa Kudva and Kotak Mahindra Bank chief Uday Kotak.
The panel would also have three representatives from Sebi, Executive
Directors S Ravindran and J Ranganayakulu, Ministry of Finance
Director (Primary Markets) Ramesh Krishnamurthi and Reserve Bank of
India Chief General Manager KK Vohra.
Other members include Prime Database chief Prithvi Haldea, SIDBI
Chairman Sushil Muhnot, Association of Investment Bankers of India
Chairman Sanjay Sharma, Crawford Bayley and Co Partner Sanjay Asher,
IIMLucknow Faculty Member Manoj Anand and Bhopal Stock Investors'
Association President Arun Kothari.
--
.
-
CS A RENGARAJAN,, B.Com ,FCS, LLB, PGDBM
Company Secretary, Chennai
email csarengarajan@gmail.com
http://www.csarengarajan.blogspot.com
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mobile 093810 11200
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times of distress Let us lend support and join for noble cause.
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