Infrastructure Finance Companies of India – Sources of Financing of Indian Infra Projects (IDFC,IL&FS,IFCI,PFC,REC)

4 Jul, 2011
Energy,Finance,PSU,Real Estate and Construction

At the time of independence in 1947, India’s capital market was relatively under-developed. Although there was significant demand for new capital, there was a dearth of providers. Merchant bankers and underwriting firms were almost non-existent. And commercial banks were not equipped to provide long-term industrial finance in any significant manner. By the early 1990s, it was recognized that there was need for greater flexibility to respond to the changing financial system. There was a need for these financial institutions to directly access the capital markets for their funds needs.So a number of infrastructure finance companies were set up.Some of them have become fully private like ICICI while others have been partly privatized. like REC and PFC.Besides a number of private companies have recently become big players in the infrastructure financing space like SREI,L&T Finance etc.Note with almost $1 trillion expected to be spent on infrastructure in India over the next 5 years,the scope for these companies is immense if they manage their assets-liabilities in a decent manner

  1. Rural Electrification Corporation (REC) - REC a listed Public Sector Enterprise Government of India with a net worth of Rs. 11,080 Crore as on March 2010.  Its main objective is to finance and promote rural electrification projects all over the country.  It provides financial assistance to State Electricity Boards, State Government Departments and Rural Electric Cooperatives for rural electrification projects as are sponsored by them. REC provides loan assistance to SEBs/State Power Utilities for investments in rural electrification schemes through its Corporate Office. The Project Offices in the States coordinate the programmes of REC’s financing with the concerned SEBs/State Power Utilities and facilitate in formulation of schemes, loan sanction and disbursement and implementation of schemes by the concerned SEBs/State Power Utilities.
  2. Infrastructure Development Financial Corporation (IDFC) – is India’s leading integrated infrastructure finance player providing end to end infrastructure financing and project implementation services. Their business can be broadly classified into Corporate investment banking (project finance, investment banking), alternative asset management (private & project equity), public market asset management (IDFC Mutual fund). The company provides financial intermediation for infrastructure projects and services, adding value through innovative products to the infrastructure value chain & asset maintenance of existing infrastructure projects. It focuses on supporting companies to get the best return on investments.
  3. The Industrial Finance Corporation of India (IFCI) - was founded in July 1948, as the first Development Financial Institution in the country to cater to the long-term finance needs of the industrial sector. The newly-established DFI was provided access to low-cost funds through the central bank’s Statutory Liquidity Ratio which in turn enabled it to provide loans and advances to corporate borrowers at concessional rates. Until the establishment of ICICI in 1956 and IDBI in 1964, IFCI remained solely responsible for implementation of the government’s industrial policy initiatives. It made a significant contribution to the modernization of Indian industry, export promotion, import substitution, pollution control, energy conservation and generation through commercially viable and market- friendly initiatives. Cumulatively, IFCI sanctioned financial assistance of Rs 462 billion to 5707 concerns and disbursed Rs 444 billion since its inception. In the process, IFCI catalysed investments worth Rs 2,526 billion in the industrial and infrastructure sectors.
  4. Power Finance Corporation (PFC) – is an Institution in financing for sustainable development of the Indian Power Sector and its linkages, with an eye on global operations. The total sanctions & disbursements for the year ended 2009-10 amounted to Rs.65,466 crores & Rs.25,808 crores respectively. The resources mobilized for the year ended Dec 2010 amounted to Rs.764,465 million (source: http://www.pfcindia.com/Content/LendingOperations.aspx). The clientele consists of State Electricity Boards, State Power Utilities, State Electricity/Power Departments, Other State Departments engaged in the development of power projects, Central Power Utilities, Joint Sector Power Utilities, Equipment Manufacturers & Private Sector Power Utilities.
  5. Infrastructure Leasing & Financial Services Limited (IL&FS) is one of India’s leading infrastructure development and finance companies .IL&FS was promoted by the Central Bank of India (CBI), Housing Development Finance Corporation Limited (HDFC) and Unit Trust of India (UTI). Over the years, IL&FS has broad-based its shareholding and inducted Institutional shareholders including State Bank of India, Life Insurance Corporation of India, ORIX Corporation – Japan and Abu Dhabi Investment Authority.IL&FS has branched to become a leading player in venture capital,private equity,asset managment,road building.It has a number of listed subsidiaries in the Indian stock market
  6. India Infrastructure Finance Company Ltd (IIFCL) was established in January 2006 as a wholly owned Government of India company and commenced its operations from April 2006.It was established under the Scheme for Financing Viable  Infrastructure Projects through a Special Purpose Vehicle called the  India Infrastructure Finance Company Ltd, broadly referred to as SIFTI. India Infrastructure Finance Company Ltd (IIFCL) is providing long term financial assistance to various viable infrastructure projects in the country in terms of the SIFTI. The authorized capital of the company is Rs20 billion and has sanctioned financial assistance of Rs 187.60 billion to 107 projects involving a total project cost of Rs1492.03 billion.
  7. L&T Infrastructure Finance Company is a part of L&T Finance Holdings Limited which is a wholly owned subsidiary of L&T.Note L&T is India’s biggest private infrastructure company with interests in a diverse number of fields.LT Infra commenced operations in January 2007.
  8. Srei Infrastructure Finance Limited is another major private sector player which is present in the following segments Project Finance, Advisory and Development, Infrastructure Equipment Finance, Sahaj e-Village, Venture Capital, Capital Market, Quippo – Equipment Bank, Viom – Telecom Towers and Insurance Broking.Srei has a JV with the  Tata Group through Viom Networks Limited for their shared passive telecom infrastructure business and BNP Paribas for Equipment Financing business.

Infrastructure Finance Company Status by RBI Advantages

a) It is entitled to lend up to 25% of its owned funds to a single borrower in the infrastructure sector, compared to 20% of owned funds by other NBFCs that have not been granted IFC status.

b) It is also eligible to raise ECBs up to 50% of owned funds without prior RBI approval.

c) It can raise capital through issuance of infrastructure bonds at comparatively lower yields, as holders of such bonds are entitled to tax benefits

Ernst and Young (E&Y) in Indian Corruption Investigation as awards itself Technology Tender for Indian Government Corporation Bank – Accounting Big 4 losing pristine image (PWC Satyam Scandal)

2 Jul, 2011
Finance,PSU

Ernst and Young famous for being part of the Big 4 accounting firms has been caught in a corruption tangle as it awarded itself a tender for Technology Services for an Indian Government Bank.India’s top corruption agency CVC has banned Corporation Bank of India from hiring any technical or management consultant or doing any sort of new business in wealth management or insurance till its probe is complete.There was a massive breakage in government rules as Ernst and Young the management consultant to Corporation Bank of India set out a tender favoring itself.In a totally blatant conflict of interest,the tender was won by E&Y which was the lowest bidder in just 2 companies.According to ET,The source said Corporation Bank consulted Ernst and Young (E&Y) for preparing a proposal for the tenders. Later, the bank not only allowed E&Y to bid for the project but also revised the tender norms.

Note corruption is nothing new for the Big 4 firms with another one PriceWaterhouseCoopers caught red handed in the massive billion dollar Satyam corruption scam.Two of the partners of PWC were sent to jail in the fraud which involved cooking the books for almost 8 years.Having a Big 4 auditor is a must for any well known big public company.However the reputation of these Big 4 continues to get besmirched with newer scandals.It does not take a rocket scientist to guess that bribes were involved as rules were circumvented and Corporation Bank top brass was also involved.Government Tenders are a massive hotspot of corruption as they are opaque and powers rest with a few.Lack of transparency results in massive embezzlement of taxpayer money.Corporation Bank.Note Relaince India’s biggest company is facing an investigation along with the oil and gas regulator DGH.Recently LIC Housing Finance one of India’s largest housing finance companies was involved in a scam as well alongwith top official form other PSU Banks for taking bribes.This resulted in a massive stock price fall for a number of these companies.Expect Corporation Bank stock to take a similar dive hurting the shareholders.Investing in the Indian stock market has become more dangerous than ever where a corruption scam hides under every stone.Government companies which are considered safer by investors too are being proved problematic with PSU CEOs now being jailed for scams.India’s largest aluminium company NALCO CEO has been jailed for accepting gold bricks in bribes

CVC bans Corporation Bank from awarding tenders

CHENNAI: The Central Vigilance Commission (CVC) that probed irregularities in the public sector Corporation Bank has asked it not to issue or award tenders for appointment of technical, management consultants on retainer basis or for expanding the bank’s insurance, wealth and asset management business, due to violations of norms.

Power Finance Corporation (PFC) Analysis – Follow-on Public Offering Buy/Sell Recommendation Not Bad but Not Great Either

10 May, 2011
Energy,Finance,PSU

Power Finance Corporation (PFC) will raise ~$1 billion through a follow-on-public offer (FPO) which is the first divestment by the Government for FY12.Note the government of India has set a target to raise $9 billion through divestment of public sector (PSU) companies stocks.PTC India Financial Services another company operating in the same segment offering finance to power generation companies came out with an IPO.Despite advantages of growth,a good business model in India’s booming Energy Sector,the valuation of the company had been kept too high leading to 20-30% losses from the IPO price.However PFC does not have a high valuation trading for around 9-10x P/E which is comparable to the competitors like REC.However the valuation is not very low also keeping in mind the rising interest rate environment which is making life tough for the Indian Banks and financial intermediaries.

Price Band,Dates and Offer Size of Power Finance Corporation

PFC price band has been set at  Rs 193-203 per share with a discount of 5 per cent in the issue price to retail investors and eligible employees. The FPO will opens on May 10 and close on May 13 with institutional bidders able to bid till 12 May only. It comprises a fresh issue of 17.2 crore shares and an offer for sale of 5.7, crore shares by the government.The government is divesting 5 per cent of its stake in the public sector company. The government first sold off  a 10 % stake through IPO in March 2007 which relieved a huge response.

Pros and Cons of Power Finance Corporation (PFC)

Advantages

1) Leading Position as a Strategic Organization in the Power Sector– Company has played a strategic role in, the GoI’s initiatives for the promotion and development of the power sector in India for more than two decades.Acted as the nodal agency for the UMPP and the R-APDRP and as a bid process coordinator for the ITP scheme.The company has  management significant experience in the power sector and the financial services industry.

2) Financial and Business Model - The Financial of the company are quite good though lower than REC and other.The Net Margin at more than 25% for the last 5 years is also quite good.The company has seen a profit of Rs 8000 crores with Rs 2250 crore of profit in FY 2010.

3) Growth - The company has been growing at a rapid pace since inception.Total loans  increased from  35581 crores in  2006 to  921,18 crores in  2010 with  a CAGR of 22.6% .The revenues and profits have also grown at a comparable aboe 20% CAGR.

4) Power Industry Attractiveness - The current revised capacity target for the 11th Plan is 78,700 MW. A tentative capacity addition of  approximately 100,000 MW has been envisaged for the 12th Plan. The total fund requirement to achieve the 11th Plan target was estimated as `10,316.00 billion. Similarly, the total fund requirement to achieve the targeted capacity addition under the 12th Plan is estimated at `11,000.00 billion.

5) Navratna and non-deposit taking systemically important NBFC (“NBFC”) IFC by RBI – The company is registered with the RBI as a non-deposit taking systemically important NBFC (“NBFC”) and were classified as an IFC in July 2010. We believe that our NBFC and IFC classification enables us to effectively capitalize on available financing opportunities in the power sector in India. In addition, as a government-owned NBFC, loans made by us to Central and State entities in the power sector are currently exempt from the RBI’s prudential lending (exposure) norms that are applicable to other non-government owned NBFCs

a) It is entitled to lend up to 25% of its owned funds to a single borrower in the infrastructure sector, compared to 20%
of owned funds by other NBFCs that have not been granted IFC status.

b) It is also eligible to raise ECBs up to 50% of owned funds without prior RBI approval.

c) It can raise capital through issuance of infrastructure bonds at comparatively lower yields, as holders of such bonds are entitled to tax benefits

6) Focus on Renewable Energy – Solar Power in India is expected to grow rapidly even as Wind Power in India has already become the 5th largest sector in the world.PFC is establishing a separate division to concentrate on this fast growing renewable energy sector.

Disadvantages

1) High Exposure to small number of Customers and Electricity Sector- PFC has almost 35% of its loans made to 5 customers which makes it vulnerable to a collapse of a major customer.Electricity Sector in India is looking like a Bubble as well (for the short term at least) as every Tom,Dick and Harry enters the power sector in India.Building a thermal power plant has become the latest hobby amongst every business group.This has already led to problems of merchant price crashing and coal prices skyrocketing.

2) Higher Interest Rate Spread and Margins will come down – PFC has had it  higher interest spreads under pressure due to rising interest rates as RBI throws in the kitchen sink to fight double digit inflation

3) Competition Rising in the Power Finance Sector - The company is facing increasing competition with a number of public sector infrastructure finance companies, public sector banks, private banks (including foreign banks), financial
institutions and other NBFCs entering the sector

Power Finance Corp Valuation

Despite its strong growth,the valuation of PFC is reasonable at  9-10x P/E and around 1.3x P/B post the FPO.The company has much same valuation compared to its listed peer REC and PTC and lower than compared to IDFC.

Summary

Power Finance Corporation has substantial advantages of growth,a good business model in India’s booming Electricity Sector where the List of Power Companies are growing exponentially.The valuation of the company also has been kept at a reasonable level at a discount of around 5% from the prevailing stock market price.The growth of the company has been impressive but a rising interest rate environment,competition from other power finance government providers like IFCI,IDFC,REC makes the issue neutral.It is always possible to buy the stock later or buy competitors in the same space like REC.The stock is a good buy for the long term given the fundamentals,good business sector,however current short term macro problems does not make it a great buy .

List of Oil & Gas Companies in India – Growing Rapidly despite Bankrupt Energy Policy

22 Apr, 2011
Energy,Gas,Oil,PSU
Oil and Gas

BPCL Refinery

India’s Oil and Gas Industry has an interesting mix of Oil & Gas companies from the government and private sector.Except for some companies providing ancillary and drilling services,most of the companies are huge with billion dollar balance sheet and huge operations as is the case with the Oil and Gas Industry worldwide.Except for Reliance Industries,the upstream sector of oil and gas production and distribution is dominated by government owned companies which are heavily regulated.Despite attempts at liberalizing the APMC and the operations of the PSU Oil Companies,HPCL,BPCL and IOC run billions of  dollars in losses as they are forced to sell oil and gas products at below their cost.The government’s policies are mostly ad-hoc compensating these companies through bonds and money transfers.It is quite strange as the minority investors are forced to pay for government subsidies for energy.India’s Oil Subsidies has led to the flourishing of a massive Oil Mafia which does not think twice before killing government officials and has led to poor outcomes for the country.Despite this government stupidity,some government companies like GAIL,OIL India and ONGC which operates in the production and have to bear less of the subsidy burden have grown and performed admirably.In the private sector companies like Reliance,Aban,Great Offshore,Essar have managed to grow rapidly as well with varying degrees of success.Here is the list of the major Oil and Gas Companies in India.

  1. Reliance  Industries - The Flagship Company of the Ambanis and India’s largest Private Company Reliance Industries is also an Oil and Gas Giant .The Company has seen very sharp growth in the last decade and is diversifying into Retail.With a market cap exceeding $30 billion it is India’s most valued company.The company is also one of the biggest exporters in India with one of the largest petrochemical and oil refining complexes in the world at Jamnager.It recently sold a stake in its valuable Godavari Basin to BP for a whopping $7.5 billion.Extremely cash rich with a horde of more than $15 billion,it has started on empire building through ventures in Finance ( DE Shaw) ,Communications (buying of wirelss broadband spectrum),Shale Gas Buys in the USA,Hospitality (Buying up stakes in Hotel Companies).
  2. ONGC Corp – With a market cap of Rs. 235,000 crores ONGC ranks 3rd in Oil & Gas Exploration & Production (E&P) Industry globally .It cumulatively produced 803 Million Metric Tonnes of crude and 485 Billion Cubic Meters of Natural Gas from 111 fields. ONGC’s wholly-owned subsidiary ONGC Videsh Ltd. (OVL) is the biggest Indian multinational, with 40 Oil & Gas projects in 15 countries. The company earned a revenue of approx Rs. 20,000 crores with net profit margin of 34% in Dec’10.It holds largest share of hydrocarbon acreages in India & contributes over 79 per cent of Indian’s oil and gas production. Created a record of sorts by turning Mangalore Refinery and Petrochemicals Limited (MRPL) around from being a stretcher case at BIFR to the BSE Top 30, within a year.
  3. GAIL India – GAIL (India) Limited, is India’s flagship Natural Gas company, integrating all aspects of the Natural Gas value chain right from exploration to marketing.It emphasizes on clean fuel industrialization, creating a quadrilateral of green energy corridors that connect major consumption centers in India with major gas fields, LNG terminals and other cross border gas sourcing points. With a market cap Rs. 58,000 crores GAIL is expanding its business to become a player in the  International Market. . The revenue earned was 24,000 crores (2009-10) with a net profit margin of 11%.The business has achieved laying of Natural Gas high pressure trunk pipeline, LPG Gas Processing Units & Transmission pipeline network, oil and gas Exploration blocks, OFC network offering highly dependable bandwith for telecom service providers etc. GAIL has been entrusted with the responsibility of reviving the LNG terminal at Dabhol as well as sourcing LNG.GAIL is one of the best performing stocks in the Energy Industry in India in the last couple of years.It is a well managed fast growing company in one of the best sectors in India with high competitive barriers.
  4. Cairn India - With a market cap Rs. 66,000 crores, Cairn India is now one of the biggest private exploration and production companies currently operating in the region. A subsidiary of the British company Cairn,its growth has been nothing short of phenomenal after winning a bid to explore oil blocs in Rajasthan in the NELP. Cairn India’s strategy is to establish commercial reserves from strategic positions in order to create and deliver shareholder value. The company operates the largest producing oil field in the Indian private sector and has pioneered the use of cutting-edge technology to extend production life. The company has set up a Processing terminal in Barmer (Rajasthan) to process the crude from fields. A pipeline has also been constructed to transport the crude from Barmer to Bhogat in the Gujarat coast. The pipeline section from Barmer to Salaya is operational and sales have commenced to Essar, RIL and IOC.Cairn India has recently agreed to be taken over by London listed India’s largest Mining Group Vedanta though the approval is still awaited from the government of India.It is the second largest Oil and Gas private company listed on the Indian stock exchange.
  5. BPCL – BPCL is alongiwth HPCL and IOCL, a major distributor of petroleum,cooking gas and diesel in the Indian market The company has a  market capitalisation of Rs. 21,000 crores. on revenues of Rs. 36,000 crores with a net profit margin of 0.5%.The company’s low margins and abysmal stock price performance is due to the government control which forces it to sell at below cost leading to huge losses and curtails capex for growth.Despite noises of liberalization,nothing has come about with increased global crude prices increasing the losses greatly.Bharat Petroleum produces a diverse range of products, from petrochemicals and solvents to aircraft fuel and speciality lubricants and markets them to hundreds of industries and several international and domestic airlines.
  6. Indian Oil Corporation Ltd (IOCL) – The company covers the entire hydrocarbon value chain – from refining, pipeline transportation and marketing of petroleum products to exploration & production of crude oil & gas, marketing of natural gas, and petrochemicals. With a market capitalisation of Rs. 75,000 crores, it is in the Fortune ‘Global 500′ listing, ranked at the 125th position in the year 2010. IndianOil closed the year 2009-10 with a sales turnover of Rs. 271,074 crore and profits of Rs. 10,221 crore. IndianOil and its subsidiary (CPCL) accounted for over 48% petroleum products market share, 34.8% national refining capacity and 71% downstream sector pipelines capacity in India. IndianOil is currently investing Rs. 47,000 crore in a host of projects. The IndianOil Group of companies owns and operates 10 of India’s 20 refineries with a combined refining capacity of 65.7 million metric tonnes per annum. IndianOil’s cross-country network of crude oil and product pipelines, spanning 10,899 km and the largest in the country, meets the vital energy needs of the consumers in an efficient, economical and environment-friendly manner.Like IOCL it is also suffers from government mal-interference and not a good investment.
  7. Hindustan Petroleum Corp. Ltd (HPCL – One of the smalled of the major Oil and Gas PSUs with  a market capitalisation of Rs. 11,000 crores. The company owns and operates the largest Lube Refinery in the country producing Lube Base Oils of international standards, with a capacity of 335 TMT. This Lube Refinery accounts for over 40% of the India’s total Lube Base Oil production. It has two major refineries producing a wide variety of petroleum fuels & specialties, one in Mumbai (West Coast) and the other in Vishakapatnam, (East Coast). HPCL’s vast marketing network consists of its zonal & regional offices facilitated by a supply & distribution infrastructure comprising terminals, pipeline networks, aviation service stations, LPG bottling plants, inland relay depots & retail outlets, lube and LPG distributorships. HPCL accounts for about 20% of the market share and about 10% of the nation’s refining capacity. The revenue earned was around Rs. 34,000 crores with a net profit margin of 0.6% in Dec’10.
  8. Oil India Ltd.- With a market capitalisation of Rs. 31,000 crores, OIL is engaged in the business of exploration, development and production of crude oil and natural gas, transportation of crude oil and production of LPG. It became a wholly-owned Government of India enterprise in 1981. The revenue earned by the company was 2,400 crores & with a net profit margin of 36% in Dec ’10. Very similar in profile to ONGC it  presently produces over 3.2 million tons pa of crude oil, Natural Gas and over 50,000 Tones of LPG annually. Most of this emanates from its traditionally rich oil and gas fields concentrated in the Northeastern part of India and contribute to over 65% of total oil & gas produced in the region. It has emerged as a consistently profitable international company with exploration blocks as far as Libya and sub-Saharan Africa.
  9. Petronet LNG Ltd. -  It was formed as a Joint Venture by the Government of India to import LNG and set up LNG terminals in the country, it involves India’s leading oil and natural gas industry players. The promoters are GAIL, ONGC, IOCL & BPCL. The company has a Market cap Rs. 9,000 crores. The revenues earned in Dec’10 was approximately Rs.3,600 crores with a net profit margin of 5%.

Other companies which deserve a mention are Essar Oil,Essar Energ,Aban Offshore,Chennai Petroleum,Gujarat State Petroleum,Indraprastha Gas,Gujarat State Petronent LNG

India’s Fossil Fuel Policy – Story of Corruption,Waste,Mafia Growth

India’s Fossil Fuel Subsidies have led to a massive growth of the petrol and diesel mafia in the country.India gives subsidies on diesel,kerosene and cooking gas through its state owned petro/gas companies like BPCL,IOCL,HPCL etc.These subsidies have been given for a long time and have led to the growth of a parallel black economy in these products.They not only lead to capital misallocation but also to the massive illegal profits for a few.It is a well known fact that all petroleum pump owners adulterate petroleum ( which power most of the cars) with subsidized diesel and kerosene.This massive racket earns millions of dollars (if not billions) for a network of company officials,pump owners,government bureaucrats and politicians.The mafia is so strong and powerful that it thinks  nothing of burning alive a senior police official.The racketeers are so rich and well connected that despite common knowledge nothing gets done about it.

In 1961, it became a joint venture company between the Indian Government and Burmah Oil Company Limited, UK.

Integrated c-Si Solar Polysilicon to Module Plant by BHEL,BEL India’s Two Largest Capital Goods Government Companies JV to be set up

11 Apr, 2011
BHEL,Energy,PSU,Solar Cells,Solar Energy,Solar EPC,Solar Panels

Solar Power in India is increasing at a rapid pace and will become one of the biggest energy industries in the next decade as falling costs of solar energy and India’s rising demand makes it a perfect match.Solar Companies in India are constanly growing by the day as firms rush in to take advantage of the vast investment and profit potential in India’s Solar Energy Market.BHEL which is India’s largest Capitals Good Company has big solar ambitions.BHEL has strong capabilities in the field of making electricity generating equipment.Extending these capabilities in the field of solar power generation is a natural extension.It is following the JV route with various other Public Sector Undertakings (PSUs) like HPCL,BEL and IOC to build power plants and solar equipment factories in the country.Most of these JVs have been dormant till now but the JV with BEL is now looking to move on.The JV is scouting for sites to build a 250 MW integrated c-Si Solar Factory which will also have India’s first polysilicon and wafer manufacturing operations.Note India has a large capacity of solar cells and modules but does not have a commercial solar wafer or poly plant which are essential raw materials for making Solar Panels.Till now Solar Panels in India are made from imported Solar Wafers from companies like LDK,GCL,REC,Solarworld and others.There are a few private companies who are looking to set up upstream manufacturing in solar as well.Note there are other Indian government owned PSUs which too are looking to enter Solar Energy Industry as well

BHEL recently signed a JV with Spanish giant Abengoa  to manufacture components for Solar Thermal Plants.Note Solar Thermal in India has got solid government backing on par with Solar PV.A number of Solar Thermal Plants are being built in India and this JV might target supplying equipment to these companies.

BEL established by the Indian Government to meet the specialised electronic needs of the Indian defence services is a  $3 billion company with presence in making Solar Powered LED-Based Traffic Signal Lights.They have also shortlisted two locations in Karnataka and one in Andhra Pradesh for setting up the plant at an investment of Rs 2,000 crore, a top BHEL official said.Presently, BEL exports solar cells to Germany, France and Italy among others. BHEL also exports solar modules to countries such as Germany, Australia and Italy.

India 68% increase in Oil Subsidies to $40 Billion but Stock Market rises 10% in 10 Days as Hot Foreign Money Flows in

4 Apr, 2011
Energy,Gas,Oil,PSU

India’s State Owned Oil Firms will see their Losses from selling Oil/Gas at subsidized prices rise by a whopping 68% to $37 billion in the current fiscal year.This is due to the fact that India’s Oil Sector is badly mismanaged with Diesel Guzzling SUVs getting subsides meant for the poor.The majority of the Oil Subsidies is pilfered by the Mafia which thinks nothing of burning honest officials.However India has been reluctant to reform one of the most important Energy Sectors of the Economy.With state elections in 5 provinces about to begin,the ruling party would not touch this hot potato anyway.Even in non-election times,nobody gathers up the courage to deregulate this sector.Note Petroleum is heavily taxed in the country and majority of the subsidies is earned back by the government in the form of taxes.The only people to gain are the adulterers and the mafia who have a massive billion dollar racket going on.

Oil firms to lose Rs 174,126 cr on fuel sales in 2011-12

State-owned oil firms will lose a whopping Rs 174,000 crore on selling fuel at government- controlled rates this fiscal, 68 per cent more than what they lost when crude oil touched an all-time high in 2008-09. Indian Oil, Bharat Petroleum and Hindustan Petroleum will “at current international crude oil prices lose Rs 174,126 crore in revenues on selling diesel, domestic LPG and kerosene below their imported cost in 2011-12 fiscal,” a government official said today. The revenue loss, termed as under-recovery by oil firms, will be the highest-ever, even more than what they lost in 2008-09 when crude oil touched an all-time high of USD 147 per barrel.

Increasing Oil Prices is the biggest Achilles Heel of the Indian Economy heavily dependent on imported oil products.The government will have to either raise the prices leading to adding fire to the already high inflation or compensate the badly bleeding half privatized Oil  Companies like IOC,BPCL and HPCL.These companies generally make massive losses despite having private investors apart from the government.Compensating these losses would lead to a higher fiscal deficit which would add to the inflation pressures anyway.Note a recent survey revealed that the Indian Middle Class has cut its expenditure on shopping,eating out and entertainment by a whopping 65% due to the high inflation.However the Indian Stock Market has seemingly discounted all these factors going up by 10% in 10 days on the back of a global rally.Bernanke Fueled Cheap Money is Circulating Hungrily across the Globe and currently India seems to be the fashion trend of the month.Note these hot money flows can reverse equally quickly leading to a sharp market crash just like the Jan-Feb one as fundamentals hardly support this kind of rally.With government intervention and distortions becoming the overriding factor in the stock markets,Free Markets and Fundamentals have taken a backseat.

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