Global Economic and Political News and It's Impact:-
1. US India Nuclear Deal
Ending the log jam after six long years, President Barack Obama and PM Narendra Modi announced a breakthrough in the nuclear deal on Sunday. The inability to move ahead on this had been the major irritant in the ties.
The two countries had in 2008 signed a landmark deal giving India access to civilian nuclear technology, but it has been held up by US concerns over India's strict laws on liability in the event of a nuclear accident.
While there were no immediate details on how the impasse had been broken, India will set up an insurance pool -- led by General Insurance Co and four other insurance companies of a total amount of Rs 750 crore -- to indemnify companies that build reactors in the country against liabilities in case of a nuclear accident, ET reported.
The remaining Rs 750 crore of the total Rs 1,500 crore to offset liabilities will be provided by the government of India. This will address the US concerns over clause 17 of the Indian liability Act, added the report.
"The culmination of the contentious Nuclear Deal with US would once again send a signal to offshore investors that the new regime, led by Prime Minister Narendra Modi, means business and is on the right path to unleash reforms," says Aviral Gupta, Independent Investment Strategist.
"More so, the new government is very keen to iron out contentious issues which have been hampering the progress of our country," he adds.
Antique Stock Broking Ltd identifies nine stocks which are likely to benefit more from the Indo-US ties:
NTPC: The company had formed a joint venture with Nuclear Power Corporation of India. It was looking at setting up a 2000 MW nuclear plant and was in talks with GE Energy for technology and fuel in 2012. However, the project is put on the back-burner. Post the deal, one can expect revival of the project.
BHEL: BHEL has manufactured and supplied certain Nuclear Reactor components like steam generators, reactor headers, and end shields to NPCIL for their 220 MWe and 540 MWe reactors based on Pressurized Heavy Water Reactor (PHWR) Technology.
It is looking for a tie-up for manufacturing equipment of up to 700 MW & 1500 MW. It has an existing tie-up with Siemens for nuclear technology.
L&T: L&T has signed four agreements with foreign nuclear power reactor vendors. The first, with Westinghouse, sets up L&T to produce component modules for Westinghouse's AP1000 reactor. The second agreement was with Atomic Energy of Canada Ltd (AECL) "to develop a competitive cost/scope model for the ACR-1000."
It had also signed an agreement with Atomstroyexport primarily focused on components for the next four VVER reactors at Kudankulam, but extending beyond that to other Russian VVER plants in India and internationally. Then signed an agreement with GE Hitachi to produce major components for ABWRs. The two companies hope to utilize indigenous Indian capabilities for the complete construction of nuclear power plants, including the supply of reactor equipment and systems, valves, electrical and instrumentation products for ABWR plants to be built in India.
Alstom India: Alstom India, which is now majorly owned by General Electric, can benefit from possible demand of turbine-generators (TG) used in nuclear power plants, given that GE is likely to be an active player in the field.
HCC: HCC has constructed four nuclear power projects in India. It is an EPC contractor for nuclear projects.
ABB: ABB makes components for power projects. Its parent company's exposure includes new nuclear power plants, systems and components. The parent company's exposure includes fuel services, waste management and decommissioning.
Siemens: Siemens has been involved in setting up high voltage switchyards at nuclear power plants.
Walchandnagar Industries: It makes critical equipment for India's nuclear power facilities.
KSB Pumps: Has supplied pumps to Nuclear Power Corporation and continues to be a preferred supplier.
2. Greece elections
As Syriza is likely to win the election it will any day strengthening the possibility of Greece exit and therefore the burden on Euro which anybody can predict that this zone will be affected specially country like Germany,Portugal,Italy etc.
Indian Economic and Political News and It's Impact:-
In the past four financial years, India has imported from China bulk drugs and active pharmaceutical ingredients (APIs) worth about Rs 38,186 crore. Most of these have gone into making essential drugs.
TOI had reported in November 2014 that national security adviser Ajit Doval had warned the government about over-dependence on China.
If submissions to the government by the department of pharmaceuticals are any indication, there is significant dependence on imports in the case of 12 essential drugs. "Approximately 80-90% of these (essential drugs) imports are from China," the department has said. "The decision is based on economic considerations."
The 12 drugs are: paracetamol, metformin, ranitidine, amoxicillin, ciprofloxacin, cefixime, acetyl salicylic acid, ascorbic acid, ofloxacin, ibuprofen, metronidazole and ampicillin. Eight of these are on WHO's Model List of Essential Medicines.
Documents of the department of pharmaceuticals show there has been a consistent growth in the import of drugs and APIs from China. In 2011-12, Rs 8,798 crore worth of bulk drugs and APIs were imported from China. This was Rs 11,000 crore in 2012-13, Rs 11,865 crore in 2013-14, and Rs 6,521 crore during April-September in 2014-15.
Sudhansh Pant, joint secretary, department of pharmaceuticals, told TOI from Delhi: "China out-prices India when it comes to APIs and bulk drugs. There is a need to see how to change this situation. A committee of secretaries under Dr VM Katoch (secretary, department of health research) is looking into the matter."
India is mulling a separate policy for APIs so as to create an environment for production of the same within the country. A lot of this policy will be derived from the Katoch committee's recommendations.
But India may to have find another way to reduce dependence before the policy bears fruit.
At the outset, I agree that heavy dependence on one vendor or a single country for active pharmaceutical ingredients (APIs) and bulk drugs can affect the public health system. There could be issues related to quality, among other things.
Take Paracetamol for instance. Thousands of people, especially children, take it every day; it's used for fever and other ailments. One must be wary of the quality of products that come in, and depending on a single vendor for essential drugs may not be good.
Take the circumstances which has led to this dependency. There have been considerable discussions on this matter, but one must understand that in India, there is a cap on pricing for pharmaceutical products. If the manufacturer cannot sell a pharmaceutical product above a certain prescribed rate and has to also (it goes without the need for emphasis) meet quality requirements, it is natural for one to look at procuring APIs at cheaper costs.
At a seminar in Delhi last month, there was a detailed discussion on the matter and some interesting presentations were made. It is important to study how China is able to deliver these products at costs cheaper than those in India and other places.
New Deals and It's Impact:-
Market Outlook:-
Idea Cellular Ltd: Idea Cellular Ltd posted a 64 percent rise in quarterly profit as it added more subscribers than rivals did, boosting data and talk time usage
Gati Ltd: Gati Limited, a city-based express distribution and supply chain solutions provider, said its Board of Directors has decided to raise up to Rs 120 crore for expansion of e-commerce business.
Tata Motors Ltd: Tata Motors, India's biggest auto maker by revenue, will launch its biggest ever rights issue and the country's third biggest to pay for expansion and retire debt.
SBI: State Bank of India on Tuesday said its committee of directors on capital has permitted it to raise up to Rs 15,000 crore in a share sale, setting the stage for other staterun peers to raise capital in a market that is at a new high on hopes of economic recovery and speedy reforms.
L&T Ltd: Larsen & Toubro hopes to build nuclear reactors in partnership with Westinghouse Electric Company and is exploring other partnerships after India and the US cleared the way for implementing a bilateral agreement signed in 2008.
GMR Infrastructure Ltd: GMR Infra-controlled Delhi International Airport (DIAL) on Tuesday raised $289 million through a considerably oversubscribed bond issue, also the first high-yield paper in Asia this year, in a sign that global investors are now taking a fresh positive look at Indian infrastructure.
Yes Bank Ltd: Yes Bank singed a pact with OPIC, an arm of the US government's development finance institution, for $220 million (about Rs 1,350 crore) loan for on-lending to micro, small and medium enterprises.
Persistent Systems Ltd: A digital technology-focused IT company, has created an M&A team as it looks for acquisitions to push it past the $1-billion revenue mark. Pune-based Persistent is currently at the $320 million in revenue-a-year level, and the company is looking to more than treble its topline in the next three to five years.
Bajaj Hindusthan Ltd: The company has announced that the members of the Company will consider to approve the resolutions by way of Postal Ballot. The company is seeking Seeks shareholders nod for debt restructuring package.
Karnataka Bank: The bank has reported a flat growth in its net profit at Rs 106.94 crore for third quarter ended December 2014-15. Bank's net profit in the corresponding (October-December) quarter of 2013-14 stood at Rs 106.70 crore.
Titan Company Ltd: Tata group firm Titan Company Ltd today reported 15.19 per cent increase in standalone net profit at Rs 190.73 crore for the third quarter ended December 31, 2014.
Amara Raja Batteries: The company posted 7.71 per cent increase in its net profit at Rs 102.34 crore for the third quarter ended December 31, 2014. It ad posted a net profit of Rs 95.01 crore for the third quarter ended December 31, 2013.
Godrej Properties Ltd: The real estate arm of Godrej Group, today reported a 26.44 per cent increase in consolidated net profit at Rs 47.24 crore for the quarter ended December 31, 2014 mainly on the back of higher sales.
Big Bulls Entry & Exit:-
Ashish Kacholia & Rakesh Jhunjhunwala has bought Zen Technologies.
Zen Technologies is a micro-cap with a market capitalisation of only Rs. 427 crore. It is engaged exclusively in manufacturing weapon and defense simulators. These simulators are used by the armed forces, para military, police forces etc.
Zen Technologies’ USP is that because it has been dealing with the Defense & Police forces for nearly 21 years, it is familiar with the complicated procurement process followed by the Forces. Foreign companies seeking to bid for Indian defense contracts can take advantage of Zen’s expertise with the procurement process so as to reduce the cost of production, customize the product for Indian requirements, ensure compliance with technical requirements and increase the chance of winning the bid
The other opportunity for Zen comes from the requirement of the Government that foreign contractors must sub-contract a part of their contract (above Rs. 300 crore) to Indian companies. Zen has the expertise and technology to fulfill a part of that requirement of indigenous production.
However, there are also several drawbacks to dealing in such a specialized line of activity.
The first is there is huge expenditure on R&D which may or may not be productive. What compounds this is the fact that the Defense Forces insist on a fully functional trial without a purchase commitment. This means that large sums have to be invested in giving the trial without any orders being awarded.
The second drawback is that one is competing with deep-pocketed foreign suppliers who can sell the same or even a superior product at lower costs. Given the Government’s penchant for awarding contracts to the lowest bidder, this can wipe out small players without the financial muscle to hold on.
Yet another drawback is that the award and execution of Defense projects, and receiving fees for it, can be spread over several years. This means that the revenues are lumpy.
One can see an example of this from FY 2011-12 where the total income and PAT was Rs. 102 crore and Rs. 31.62 crore respectively. However, in FY 2012-13, the corresponding figures plunged to Rs. 37.11 crore and Rs. 4.70 crore respectively. In FY 2013-14, the PAT plunged further to a paltry Rs. 9 lakh.
The other big risk is that of warranty claims and performance guarantee. One really cannot argue with the Government or the Defense Forces because there is a risk of being black-listed as a contractor and being debarred from future contracts.
In fact, the volatility and unpredictably of earnings may have caused Rakesh Jhunjhunwala to sell off his holding in Zen Technologies. Whether Ashish Kacholia fares better requires to be seen.
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