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MARCH 11, 2007
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The centre is looking at removing the distinction between FDI and FII investments. This will impact sectors like asset reconstruction, real estate and aviation, where separate ceilings apply to FDI and FII investment. However, allowing FDI through the FII route in the realty sector could result in prices shooting through the roof. The Asian financial crisis of the '90s is still fresh in mind, and a method should be devised to moderate possible volatility in key sectors.

S&P And After
For the first time in 14 years, international credit rating agency, Standard and Poor's (S&P), has raised India's credit rating to investment grade. S&P is the last of the three major international rating agencies to do so. Moody's Investors Service did it in January 2004 and Fitch Ratings in August 2006. The upgrade is likely to spur the flow of foreign investment into power, steel and other industries, which receive less than a tenth of the funds going China's way.
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Business Today,  February 25, 2007

Mercator Eyes Oil Sector
The shipping company is diversifying into other sectors.

These are exciting times for Mercator Lines. Revenues have grown from Rs 30 crore in 2001-02 to Rs 826 crore now; profits have grown from an insignificant Rs 3.28 crore to Rs 198 crore during this period; and the company, which is among India's largest shipping lines, has total tonnage of over 13.69 lakh DWT (dead weight tonnes). Now, its Chairman and Managing Director, H.K. Mittal, is looking to keep the momentum going with a combination of expansion and diversification. "We should continue to grow fast over the next five years," he says, adding that he's looking to invest $1 billion (Rs 4,400 crore) over the next three years. "Of this, $650 million (Rs 2,860 crore) will be spent on acquiring assets in offshore oil exploration and shipping," he adds.

The company is setting up an overseas subsidiary, Mercator Lines (Singapore) Pte; this company has been set up to capitalise on Singapore's position as Asia's regional shipping hub. Mittal plans to raise $150 million (Rs 660 crore) through this company and list it on the Singapore, London and Oslo stock exchanges. "We will continue to hold a majority (51 per cent) in this company," says Mittal, who is also scanning the acquisition radar for potential targets. "If something looks good, we will look at it," he says guardedly, even as he declines to reveal further details, except to say: "Return on investment (ROI) will be the key determinant of any buyout."

Mercator is also looking to expand into the oil rigs and oil exploration businesses. It has set up a new company, Mercator Oil and Gas, which is negotiating with some foreign players to form a consortium that could then bid for oil blocks in the next round of NELP (New Exploration Licensing Policy) bids. The consortium will also look at the possibility of acquiring oil blocks in South East Asia and West Asia. Another company, Mercator Offshore will buy and operate oil rigs. Mittal is tight-lipped about his plans in the sector, pointing out that shipping remains his primary focus area. "Our plans in oil and gas will depend on the partners we finally tie up with," he says.

The big picture seems to be to shield the group's top and bottom lines from the cyclical nature of the shipping industry. Says Arun Kejriwal, Director at the Mumbai-based Kris Securities: "The long-term strategy looks interesting."

Tripped Again
Power capacity addition once again falls short of target.

For years, investors in India have cited power (as in electricity) as their key constraint. Their lament is unlikely to change. During the 10th Plan period (2002-07) that ends in April this year, the estimated power capacity addition of 23,000 mw will be close to 56 per cent of the original target of 41,000 mw. That, by the way, is not the bad news. Of the projected capacity of 23,000 mw, only 18,500 mw has been commissioned so far. "Yes, there has been a shortfall. We are monitoring the capacity programme closely," says the newly-appointed Power Secretary, Anil Razdan.

The silver lining to this otherwise bleak news is that the sector's performance in the 10th Plan has been marginally better than that in the previous one. Against a target of 40,000 mw, the capacity addition in the 9th Plan was 19,000 mw. What is to blame for the shortfalls? The fact that, due to theft and technical reasons, only 65 paise of every Re 1 of power sold is recovered, is well known. But there's another culprit: state-owned utilities, which have added only 13,725 mw against their 10th Plan target of 22,832 mw. A major reason for that: equipment supplier BHEL is capacity-strapped, prompting Union power minister Shushil Kumar Shinde to talk of setting up another power equipment company. Meanwhile, big power consumers are becoming more and more self-reliant. At 40,000 mw, captive power generation is already at a third of the installed non-captive capacity in the country.

Breaking Up Bajaj
Will Sanjiv keep the books, and Rajiv the bikes?

Sanjiv and Rajiv Bajaj: Will they be able to take Bajaj Auto to the next level?
To demerge or not to demerge", that is the question that Rahul Bajaj, Chairman of Bajaj Auto, must be contemplating often. At a recent investor meet, Bajaj reportedly pointed out that the company's scrip could be undervalued by 15-20 per cent. "This is price-sensitive information; anything that I say can impact the markets. However, there has been no decision taken on the subject as yet, and nothing will be decided until the board meeting in May. Once that happens, I will have something further to say," is what Bajaj had to say to BT about the speculated demerger of Bajaj Auto's investment portfolio, estimated to be valued at Rs 8,500 crore, into a separate financial services company, which could also become the holding company for Bajaj's life and general insurance subsidiaries. A senior broker feels that Bajaj Auto's insurance and investment business handled by Sanjiv Bajaj (Rahul Bajaj's younger son, currently Executive Director, Finance at Bajaj Auto), should be valued at Rs 900-1,000 per share.

On the other hand, Rajiv Bajaj (Rahul's elder son), Managing Director, Bajaj Auto, has in the past five years completely transformed the manufacturing side of the business, taking Bajaj Auto from a has-been scooter manufacturer to possibly the 'coolest' motorcycle manufacturer in India with the highly lucrative Pulsar line. For the first 10 months of the current fiscal, Bajaj closed with a 32.5 per cent share of the motorcycle market compared to Hero Honda's 47.4 per cent (and with better operating margins). At a recent press briefing to launch the latest member of the Pulsar family, Rajiv Bajaj firmly avoided any questions on a possible demerger, "This is not a demerger meeting," he said when asked about recent reports on the topic, although he was quoted in some sections of the press saying: "Sanjiv keeps the books, I make the bikes."

There have been reports about Rajiv and Sanjiv not being on the best of terms, but that may not be important at least from the shareholder point of view. Brokers point out that a demerger would unlock tremendous value for investors, just as the settlement between Mukesh and Anil Ambani-which enabled both brothers to go their separate ways-did.