Ranbaxy slumps to near 4-year low; rupee to add to injury

Moneycontrol Bureau

Shares of pharma major Ranbaxy slumped more than 6 percent to hit a near 4-year low of Rs 342.75 on NSE on Tuesday.

The company, now owned by Japan's Daiichi Sankyo, last month pleaded guilty to felony charges in the US related to two of its manufacturing plants in India -- Dewas in Madhya Pradesh and Paonta Sahib in HImachal Pradesh.

Now the Supreme Court in India on June 24 will hear a petition seeking a probe against the company for allegedly manufacturing adulterated medicines, which has further got the street worried.

The Supreme Court had earlier sought more details/proof over the petitioner's allegations. Now the court has agreed to hear the PIL (public interest litigation), which could throw open more can of worms, analysts say.

Apart from this case, there were also reports earlier this month that the Drug Controller General of India will inspect the Dewas and Paonta Sahib to check if it follows proper manufacturing practises under Indian laws.

Further, the recent sharp rupee depreciation is also likely to bring more pain for Ranbaxy, rather than any benefits.

The company had already provisioned in FY13 to a pay USD 500 million fine in the United States, but the provision was at around Rs 50 per US Dollar. It has depreciated to Rs 57-58 now, so it will lose more, points out an analyst at a local brokerage.

That payout according to a CNBC-TV18 report is expected in the current quarter and net debt post the payout will be around USD 670 million.

Also Read: Vodafone India reduces 2G data charges by 80%

Also the Rupee depreciation will be offset by loss on overseas options derivatives worth USD 962 million, which expire over two years, the CNBC-TV18 report added.

Some analysts say the company could take a hit of USD 1 billion in the US market, as apart from the USD 500 million fine, the two plants remained closed and new launches were also impacted.

Ranbaxy shares closed down 3.5 percent at Rs 352.80 on NSE. The stock is already down 25 percent over the last one month.

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69 power plants yet to sign FSA with CIL: CoalMin

Jun 18, 2013, 03.47 PM IST

Around 69 power plants are yet to sign a fuel supply pact with state-run Coal India, Coal Ministry today informed Prime Minister's Office.

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69 power plants yet to sign FSA with CIL: CoalMin

Around 69 power plants are yet to sign a fuel supply pact with state-run Coal India, Coal Ministry today informed Prime Minister's Office.

Like this story, share it with millions of investors on M3

69 power plants yet to sign FSA with CIL: CoalMin

Around 69 power plants are yet to sign a fuel supply pact with state-run Coal India, Coal Ministry today informed Prime Minister's Office.

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The Coal Ministry has informed the Prime Minister's Office (PMO) that out of the 69 power plants which are yet to enter into fuel supply pacts with state-run CIL, 29 cases belong to NTPC and its joint ventures. "There are 131 cases of power plants/units which are...for signing of FSAs (Fuel Supply Agreements) by CIL ( Coal India) and its subsidiaries. Out of these 131 cases...FSAs for 62 cases have already been executed...Out of 69 cases, 29 cases belong to NTPC and its JVs," the Coal Ministry has informed the PMO.

The power plants of NTPC and its joint ventures (JV) which have not signed FSAs include Dadri, Korba, Farakka, Simhadri, Bhilai JV and Sipat. Though these power plants of the power PSU have not signed pacts with CIL, most of them are drawing coal under MoU (Memorandum of Understanding), the ministry said.

The power firms, including NTPC, had earlier this year failed to meet the second deadline set by the PMO for signing FSAs. The Principal Secretary to Prime Minister Pulok Chatterjee had in December last year directed that the remaining FSAs should be signed within a month's time.

The PMO's directive in December, 2012 came after its November, 2012 deadline for signing of FSAs was missed. NTPC has not entered into FSA with CIL as it had raised concerns about quality of coal being supplied to its power plants. Earlier, the government issued a Presidential Directive to CIL to sign FSAs with the power producers assuring them of at least 80 per cent of the committed coal delivery.

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Era Infra expects pick up in stagnant order book this year

After bagging a construction order from the Delhi Metro Rail Corporation (DMRC), TD Arora of Era Infra Engineering told CNBC-TV18 that the company's stagnant order book will pick up in this year. He expected additional orders to cross Rs 500-Rs 1,000 crore at the end of 2013.

Speaking on the margin from the project, he saw it to be in-line with its traditional 6.5 percent margin.

Also read: Govt announces another mega industrial corridor

Below is the edited transcript of his interview to CNBC-TV18.

Q: We understand that you have secured an order from the Delhi Metro Rail Corporation (DMRC) for construction of some elevated viaducts.

A: This is a Kochi Metro Rail package but the consultants are the DMRC. We have received the KC-5 metro line package. This is in a joint venture (JV) with Ranken , a Chinese (railway construction) company.

The construction is of elevated viaduct which includes five elevated stations. Some of the stations are there in that Alwaye-Petta Line.

Q: The whole order is Rs 383 crore. But, what do you make in terms of net?

A: While bidding you definitely keep certain margins (aside). While doing the job, certain things are there (kept in mind).

Q: Your traditional margin has been about 6.5 percent. Is that what we should expect in this one?

A: Yes. Such margins are definitely targeted and we will move in that direction. In our past contracts, we have kept our bottom-line intact.

Q: For your company size, this is still relatively smaller order. The concern has been on your stagnant order book. In FY14, will it go past Rs 10,000 crore mark significantly?

A: As far as our order book is concerned we are already having almost around Rs 10,000 crore of work in hand.

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European biz witnessing recovery: VA Tech Wabag

VA Tech Wabag has an order book of around Rs 450 crore in the first quarter of current financial year, says executive director Amit Sengupta. "The large order, which we have booked, is about Rs 116 crore worth of Chennai Metro pumping station and  Rs 262 crore worth of orders from Nepal ," he told CNBC-TV18. He expects some more major orders to close before June.

He also says that the company's European business is witnessing recovery and its footing in the domestic market remains strong.

Below is the edited transcript of his interview with CNBC-TV18

Q: Let us start with your order book position of  Rs 450 crore. This will give you visibility of work up until how long and what do these orders give you by way of margins?

A: This order book of Rs 450 crore is in the first quarter of April to June. Of course I see this year to be a very good one for us.

In the first quarter itself, we expect some more orders and it can be anywhere between Rs 420 crore to Rs 450 crore with some small orders here and there. But the large order, which we have booked, is about Rs 116 crore worth of Chennai Metro pumping station and about Rs 262 crore worth of orders from Nepal. I am also expecting some more major orders to close before June.

Q: This is the order of the joint venture (JV) isn't it, the order book. What about the standalone VA Tech Wabag?

A: Standalone VA Tech Wabag will also be good because only the Nepal order is on a JV, but we are the leaders. So, the entire order can be attributed to us and we will share it with the partner. The other orders which I am expecting to close will be solely ours.

Q: The concern for your company really has been international operations especially in Europe, because the standalone entity continues to do well even on the margin front. By when will the transition be complete in terms of Europe from moving to slightly lower cost economies and by when will we see an impact on the financials because FY13 was relatively muted for your company?

A: Let us understand that Europe basically caters to the markets which are emerging market for them in North Africa and other places. So with the Arab spring and all these things the African market was hit, but now I find good recovery and we expect one order from Egypt very soon.

It will be a good order, and definitely this one was obtained by good backing from India because it has been understood that lot of support will be provided to our European office from India and our Turkey office so that they become very competitive and they again come back to good order growth path.

About international market another thing I must say that Wabag India is expected to do very well in the Middle East and we expect some good orders from Philippines as well.

Q: What about domestic desalination projects, what kind of revenue should we see in FY14 on these projects?

A: I must tell you that the domestic desalination projects are always very few because leaving some part of coastal Tamil Nadu and some part of Kutch Gujarat, there will not be many desalination projects in the domestic market.

But definitely with the million others, we are on a very strong footing in the domestic market and there could be some more movement in Tamil Nadu domestic market where series of projects are going to be announced soon. So we expect it to do very well.

Other domestic markets as you know that the domestic market is going a bit slow. So we have concentrated more on the countries in the vicinity of India and that is why we are very positive about order booking for Wabag.

Q: Can you give us some numbers on what kind of revenue growth you will see in FY14 and FY15 if you have visibility since you are talking of order books and how will your margins perform, will you do better than the 13.5 that you have been doing?

A: The numbers and guidance which have already been provided are much better than the first years and you must have seen that in our profit and loss account on standalone basis we have grown hardly 4 percent last year that is because we had lower order book in the previous years.

With adequate order book now we expect very good order book in this year. I am sure it is going to reflect everywhere in the results at least in the next coming two years.

Q: In last quarter you improved your working capital cycle quite a bit, that was one positive that came out. Is that process continuing or is the upside from that part over?

A: That is the focus our entire company has and we are very much on to it and I am sure that working capital is going to come down substantially and our receivables position will substantially improve this year because there were some of the two three large elements in the receivables which is affecting our working capital and we are going to come out of it very soon.

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Nokia has followed Indian tax laws to a tee: Shivakumar

The outgoing Nokia senior vice-president (India, Middle East, Asia) D Shivakumar defended the company against the tax departments claims of tax evasion. He also said to operate in India, corporates need patience.

After an eight-year stint, Shivakumar will quit Nokia on June 30. Sivakumar led Nokia India between 2006 and 2011 and has seen the company rise to the top and lose market share over the last few years.

In an exclusive exit interview, Shivakumar says "I would really be surprised if any global CEO said India is not an important market for us."

Also read: Bharti slips after Vodafone cuts data charges, RComm up 11%

Below is the verbatim transcript of his interview to CNBC-TV18

Q: What do you have to say about tax that IT slapped on Nokia India?

A: We have followed all the laws, to the letter, every single thing. The issue is interpretation. Someone who is looking at the same thing will interpret it differently and so no you need to pay a profit on this transaction also. We have got enough legal, consultant and international opinion to say what we have done is right.

In this case a constructive dialogue is the answer. It is not for the media to repeatedly say here is Vodafone and here is Nokia, here is somebody else and they are tax evaders.

Q: But where does the constructive dialogue actually led you because you moved to Delhi High Court, there has been no positive movement for you on that front, where is the constructive dialogue?

A: That is the democracy. If you operate in markets and democratic institutions like India, it takes time. So, one of the things on dealing with India is you have to have enormous patience. One needs to have patience for the process to go through, for the institution to take its view and do the right thing.

Q: Is the global headquater (HQ) losing patience with having to do business in this sort of an environment?

A: I don't think people will lose patience. People invariably look at India and say: "Here is a great country and a great market. We really wish they could iron out these little things which hamper smooth progress". That is the way most people will look at India today.

I would really be surprised if any global CEO said India is not an important market for us. They will not be able to say that because India is too important today and will be even more important in the future.

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PM may replace law minister Ashwani Kumar soon: Sources

Law minister Ashwani Kumar, who has been under pressure to resign after the Central Bureau of Investigation (CBI) told the Supreme Court that he not only saw the coal scam report but also suggested some changes in it, is likely to be replaced. Sources say that Prime Minister Manmohan Singh is seriously considering the possibility of replacing Ashwani Kumar.

Also Read: Not Ashwani, not Bansal, it is the PM who needs to go

Sources say that the Manmohan Singh may either ask a senior minister to take the additional charge of the law ministry or go for a minor Cabinet reshuffle to replace Ashwani. Even Railways minister Pawan Kumar Bansal's chair is not secure after his nephew was arrested in the Railway Board bribery and cash-for-jobs scam.

Sources say the decision to remove Ashwani was taken after Karnataka Assembly elections in which the Congress registered a big victory. Sources add after the Karnataka win, the view that action should be taken against ministers facing allegations of impropriety and corruption has gained momentum.

Even though the clamour to sack Ashwani had been growing ever since the CBI admission before the Supreme Court that the law minister was privy to the coal scam report and even got a few changes made in it, the government had been of the view that no decision should be taken on him under pressure from the opposition parties.

As Parliament was adjourned sine die on Wednesday after Karnataka Assembly results went in favour of the Congress, a decision on the two ministers was imminent.

Even though both Ashwani and Bansal are considered close to Manmohan Singh, Congress president Sonia Gandhi had been very firm that the image of the Congress, already on the back foot on corruption, must not be allowed to take any more beating and any individual whose actions were detrimental to the fight against corruption should be asked to go.

Earlier on Thursday, Ashwani and Attorney General GE Vahanvati had gone to meet Manmohan Singh, just a day after the Supreme Court came down heavily on the government and the CBI for sharing the coal scam probe report. While Vahanvati was able to meet Manmohan Singh, Ashwani had no such luck as the Prime Minister had left for Rastrapati Bhawan to meet President Pranab Mukherjee.

Vahanvati, Ashwani Kumar and the two officials of the PMO and the coal ministry have been accused by the CBI in its affidavit of suggesting changes to its report on Coalgate.

Vahanvati, however, has sought to deflect charges against him, saying he never sought a copy of the report and that he acted as per the instructions of the law minister. "My meeting with CBI officials took place only on suggestions of the law minister," he had told the Supreme Court.

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Reliance Industries will invest $5 bn in KG block

With gas output from its flagship KG-D6 fields dipping to an all-time low, Reliance Industries Chairman Mukesh Ambani has said the company will invest over USD 5 billion in "a series of projects" to reverse the trend.

RIL and its British partner BP plc have submitted to the government plans to bring to production satellite fields in the eastern offshore KG basin block to raise output that has plummeted to less than 16 million standard cubic meters per day from about 64 mmscmd achieved three years ago.

We are planning to invest in a series of projects to develop around 4 trillion cubic feet of discovered natural gas resources from the block," Ambani said in the company's annual report for 2012-13.

While RIL-BP have planned various activities including work-overs, side tracks and compressor addition to maximise recovery from the existing wells, new production would be added in 4-5 years using existing infrastructure, he said.

"The field development plan for the R-Series project (in the KG-D6 block) has been submitted to the Government of India for approval. This along with other projects is expected to add incremental production in the next four to five years," he said.

RIL has discovered 18 gas fields in KG-D6 block. Of these, only two (Dhirubhai-1 and 3) have been put to production. Satellite fields are now being planned to be developed.

"We believe gas from these projects will deliver energy to millions of Indians and would significantly help India in reducing import dependence," Ambani added.

RIL said average production from KG-D6 block during 2012-13 was 26 mmscmd of gas and 9,225 barrels of oil per day. "The fall in production is mainly attributed to geological complexity, natural decline in the fields and higher than envisaged water ingress," the annual report said.

To augment production from the current fields (D1-D3 and MA), various Base Management actions including work overs, side tracks, compressor, enhancement of water handling capacity and a new well in the MA field will be undertaken in FY 2013-14.

"The next wave of projects in KG-D6 block are envisaged to be undertaken over the next three to five years and entail a potential total investment in excess of USD 5 billion to develop around 4 trillion cubic feet (TCF) of discovered natural gas resources," RIL said.

At current international LNG prices, it would cost more than USD 50 billion to import this volume of gas into India. The field development plan for R-Cluster, submitted in January 2013, proposed to maximize infrastructure utilisation of existing D1 and D3 hub.

"The company is creating a projects pipeline for the next wave of oil and gas development, which includes satellite discoveries in KG-D6 block.

"Under the block's enhancement plan, the company aims to invest in a series of projects to develop around 4 trillion cubic feet (TCF) of discovered natural gas resources over the next 3-5 years," RIL said.

At current international Liquefied Natural Gas (LNG) prices, it would cost over USD 50 billion to import this gas volume into India.

"It aims to install minimum essential, safe and suitable incremental facilities for R-Cluster's integration. Similarly, development of all satellite discoveries is being planned as part of an integrated concept," RIL said.

Additionally, potential upside through resource accretion is being targeted by undertaking exploration drilling in the existing production area with the approval of Government, the company said. By the end of 2012, fields in the KG-D6 block had produced 2 tcf of gas and 22 million barrels of oil, saving nearly USD 35 billion in energy imports.

"To complement the existing asset base, RIL continues to look at new opportunities globally that are a strategic fit with capabilities and integrated petroleum value chain," the company said, adding that it aspires to become a global top 10 independent hydrocarbon producer.

In its second year of the partnership, RIL and BP combined their expertise in deepwater exploration and development and operations in India. "Both the teams worked closely to understand the complex geology of the east-coast of India including KG-D6 block. The efforts are on to map out an exploration and development campaign that will efficiently target high quality prospects in deeper zones and optimise existing as well as future development plans," the annual report said.

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Jet to charge Rs 250per kg for additional baggage over 15kg

Jet Airways group today said it has revised, with effective from May 15, the free baggage allowance to 15 kg in the economy class on all domestic routes, but has retained the cabin baggage limit at the previous level of 7 kg. The airline, in a statement, said it will charge a passenger flat Rs 250 for every additional baggage.

However, the JetPrivilege members will continue to enjoy the additional free baggage allowance as per their JP membership status, while Premiere guests will continue to avail 30 kg of free baggage allowance on Jet Airways and JetKonnect flights, it said.

The move follows the recent move of the government to unbundle on-board and on-ground services like preferred seating and baggage allowances. Globally airlines have already unbundled their services which helps shore up revenue. Last week, Air India had allowed revised downward its free baggage limit to 15 kg.

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IndiGo, Jet announce charges for seats extra baggage

Days after the ministry of civil aviation allowed the unbundling of fares, Jet Airways on Thursday announced that it was bringing down the free check-in baggage from 20 to 15kg and would charge a flat rate of Rs 250 for baggage over and above the free baggage allowance.

However the weight limit on check-in baggage remains unchanged at 7kg. Meanwhile, low-cost carrier Indigo, will charge a premium for seats in the first 2 rows and close to the emergency exits, charging Rs 500 on preferential routes on domestic routes and Rs 800 on international routes.

Pre-booking a seat in the first two rows or near emergency exits in 12 and 13th row in an IndiGo flight will cost passengers more with the airline deciding to charge a premium for these seats. The low cost airline will charge the passenger a premium of Rs 500 for sitting in rows one, two, 12 and 13 on a domestic flight and Rs 800 for an international flight under its Indigo Seat Plus plan.

Though the airline has not indicated from when it would start charging the new rates, but in a circular to travel agents it said for all other window and aisle seats, which are pre-booked, a passenger would be charged Rs 200 for a domestic and Rs 300 for an international flight.

While pre-booking all other middle seats would cost Rs 100 on a domestic and Rs 200 on an international flights. Last week, the DGCA had allowed airlines to charge fees for 'unbundled services' like check-in baggage, preferential seats, meals, snacks or drink (barring drinking water) and sports and musical instruments on their domestic flights .

IndiGo has followed the footsteps of Air India, which last week had announced lowering of the free baggage allowance from 20 to 15 kgs on the domestic sector . The national carrier had decided to charge a flat rate of about Rs 200-250 per kg on excess weight. The excess baggage charges currently vary between Rs 150-400 per kg depending upon the sector. The airline is also contemplating levying charges for preferred seats.

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Gas-price policy: Why are power, fertiliser cos against it?

Moneycontrol Bureau

Power and fertilisers, the two key natural gas consuming sectors have vehemently opposed Rangarajan committee's formula and recommendations on increase in gas prices.

While fertlisers sector is supportive of gas price hike up to USD 2- USD 3 per mmbtu (million metric British Thermal units), power sector is willing to pay up to USD 5. The Rangarajan committee's formula has suggested putting natural gas prices in India at around USD 8 per mmbtu.

Natural gas prices in India currently range between USD 4.2 to USD 5.6 per mmbtu, while imported natural gas costs around USD 14- USD 15 per mmbtu.

So far fertisers sector have enjoyed the priority status for supply of gas the government is now also considering to give power sector also priority sector status for supply of gas. An empowered group of ministers are likely to soon meet for taking decisions on gas allocation and gas pricing.

Latha Venkatesh of CNBC-TV18 discusses the key issues of gas price increase with Satish Chander, DG of Fertiliser Association of India (FAI), Ashok Kumar Khurana, Director General of Association of Power Producers (APP) and RS Sharma, Former Chairman, Oil and Natural Gas Corporation ( ONGC ).

Increase in gas prices will impact subsidy of government who has been struggling to rein in fiscal deficit. "If the gas price increases by (recommendation of) Rangarajan Committee, the prices will almost double. So that will impact the subsidy bill of the government of India," Chander said.

Fertilisers Association had also suggested the government an alternative formula for fixing gas prices, where 50 percent of the gas price can be based upon the cost of production in the country and 50 percent can be through some other index of the imported LNG.

According to power sectors increase in gas prices beyond USD 5 would result in high per unit power cost which may not find any takers in the current lean period. Khurana, Director General of APP said that every dollar increase in the gas prices would increase the variable of energy cost of power by another 50 paisa. He believes that pricing formula designed by Rangarajan Committee has taken a very narrow basket and a slightly wider approach would help to arrive at USD 6 per mmbtu gas price.

But more importantly he said, "Problem is government wants to increase the prices of the input industry. But on that basis of prices you have the output price increase. There it is completely regulated on that side, so equation never matches." 

The Kelkar Committee is studying the suggestions Rangarajan committee's recommendation and is likely to come back with a new formula.

Must read: Rangarajan's formula too complex for gas consumers: Sharma

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