China’s massive state owned banks have given multi billion dollar credit lines to its China’s solar panel module companies. These credit lines can be used by these companies to give cheap debt to solar projects which are capital intensive. Note one of the biggest hurdles in setting up a solar power plant is to tie up the debt which can form upto 85% of the total capital requirements. Given the high interest rates in India , this makes a huge difference as the returns are lowered if the debt is costly .

China’s solar panel companies can used their government banks backing as a major competitive advantage. Just like  their telecom equipment companies ZTE and Huawei they can use the debt to win contracts over suppliers from India and elsewhere. Chin’a Wind Equipment Companies like Dongfang are also using the lure of cheap loans to win orders.

Like China’s Huawei and ZTE which have captured the Telecom Equipment market using low cost and Chinese Bank Lending,Dongfang is looking to capture the power equipment market as well.Note the proposal to put a 10% import duty on power equipment imports has been put in cold storage.There are a number of  small wind players in India which are trying to find a foothold alongwith India’s largest company Suzlon.The entry of Chinese Wind Companies should ring loud alarm the domestic industry as the Chinese could overwhelm the local industry here.The scale,size and government support of Chinese companies are on a simply different level compared to Indian companies.

Note there is a already a major controversy in the USA over the subsidies and support given to Chinese solar companies and has led to a so called solar trade war between the two . Even USA has used its EXIM Bank to provides millions of dollars in financing of solar farms which are supplied by US Solar Panel producers First Solar. Chinese companies Goldpoly are using the strong billion dollar lines to build solar projects in the Europe as well

GoldPoly,SunOasis,China Technology Development Group Corp have formed a JV to invest $10 billion in European Solar Projects using Financing from China Development Bank and Merchants Bank.Note these 3 companies have integrated facilities from processing of polysilicon into wafers to making solar panels.Its the first time that 3 Chinese companies have combined to promote such a massive project.The 3 companies are not listed in the US stock or HK stock exchange unlike other major Chinese solar companies like Trina,GCL,Suntech,LDK and others.Note China Development Bank (CDB) which is owned by the Chinese government has already extended billions of dollars in credit to Chinese solar panel companies like JA Solar,LDK and others.

US Exim Bank Loans in India

The US Exim Bank too seems to be pulling up its socks in helping American companies win large equipment orders through vendor financing.Note the US Exim Bank had got involved in a huge controversy when it agreed to finance a ultra mega power plant based on coal energy by Reliance Power in India.Despite protests by environmentalists,Exim Bank had gone ahead in financing as it would lead to jobs in America.Note USA is one of the biggest laggards in climate change and the government does not really care much out there.

Now the US Exim Bank has picked on 2 solar projects in India which are going to be built by Amercian companies.One is by the Thin Film Solar PV Leader First Solar and another by a small time Solar Thermal equipment supplier Infinia Corporation. Note the interest rates in India are extremely high compared to the US and vendor financing by a US bank leads to a massive increase in profits for the project owner.

Chinese solar major offers financing for Indian projects

China Sunergy, one of China’s larger solar module manufacturers, is willing to bring investments into solar projects in India, the company’s Chief Executive Officer, Mr Stephen Cai, told Business Line.

Nasdaq-listed China Sunergy, which last year supplied 45 MW worth of modules to two projects in Gujarat, is also interested in entering into strategic partnerships with Indian companies, he said.

 

China India Trade has been rising at very high growth rates over the last few years driven by the booming GDP growth in the fastest growing economies of the world. However India like other countries faces the mounting problem of a huge trade deficit with China which is growing all the time. Like Brazil ,USA this has become a major problem . Beside the official reported figures , there is a large clandestine trade takes place outside the normal channels. Massive imports from China go unreported to avoid excise duties and custom taxes. Both countries have corrupt officials and businessmen which facilitate trade without paying of taxes and duties. Unofficial Trade Deficit with China may be double the $27 billion reported in 2011.

Rising China and India Tensions

India and China are the Two Rising Global Behemoths with Relations between these most populated countries always being tense.Both countries share a similar history of colonization by Western Powers in the 17-20th Centuries and Independence being attained in the middle of the 20th Century.China and India also shared the same economic trajectory until 1979 when Market Reforms put China on track to become the 2nd largest economy in 2010.India also embarked on Reforms in 1991 and has started showing fast economic growth in recent times.The relations between these 2 countries are tense since the Border War fought between them in 1962.They have one of the longest borders in the world which is disputed.China recently upped the ante on claiming territorial rights over India’s North Eastern State of Arunachal Pradesh.

China’s Recent Provocations

Chinese provocations against India have been rising in recent times as the Chinese leadership wants to keep India off tilt.Here is a list of recent provocations against India

1) Stapling of  separate visas for India’s citizens from the state of  Jammu and Kashmir which is disputed with Pakistan

2) Trying to stall an ADB Loan to India’s state of Arunachal Pradesh

3) Support in Building Nuclear Reactors in Pakistan which regards India as an existential threat.It has also supplying Pakistan with missiles and  fighter aircraft.

4) Denial of visa to India’s top ranking military official on flimsy grounds leading to suspension of military contacts between the 2 countries

 5) Stationing of  11,000 troops in Gilghit Pakistan Occupied Kashmir (POK) which India regards as a part of its own territory and over which India and Pakistan have fought 3 wars

Many of India’s top companies like BHEL,L&T are being hollowed out by Chinese competition of low cost goods and super cheap financing. Power, Telecom equipment form a major chunk of imports while India is primarily exports resource like iron ore. So what is happening is that India is become a resource vassal economy of China (though it may sound simplistic) . China puts up big trade barriers for India’s value added exports like pharma and Information Technology while putting no hurdles for import of resources.With the rapid growth rate of imports , India is in danger of becoming dependent on China for a number of goods as its industries shut down in the face of competion.

China captures almost Half of the Power Equipment Market in India raising Concerns

India’s private players like Tata Power,Reliance Power and others are in the process  of setting up massive mega coal plants using supercritical boiler technology.While L&T and BHEL,the two Largest Capital Equipment Companies have won a lot of orders,the sheer scale of Demand requires Huge Imports as well.Low cost Chinese equipment providers like Shanghai Electric and Dongfang Electric have won almost half of the power equipment orders raising concerns amongst the Indian administrators.

Solar Panels are a good example of one such good where Indian industries can’t compete in the face of Chinese subsidies to its own companies.

The Indian government is not going to impose any new duties on imports of Chinese solar cells. This is despite the petition by the Indian solar panel manufacturers to give a level playing field. Note Chinese solar panels have virtually destroyed the solar manufacturing industry in the West with big companies falling under the relentless price pressure where solar panel prices have gone down by 60% in one year. Only the Koreans seem to be standing up to the Chinese government backed top tier solar companies from China. The rest have mostly folded up and are facing survival questions including those from Taiwan. Indian solar companies were never that big and cost competitive anyway given the headstart and support of the Chinese backed companies. The price crash in 2011 has seen most of them close their factories as they can’t even cover their costs at the Gross Margin Level.

India China relations have never been that great on a geopolitical level with the 1962 War and unresolved border dispute in the north. Recently the imports of Chinese telecom equipment from Huawei and ZTE raised a massive ruckus with Indian telecom companies supporting the Chinese because of low cost equipment while security concerns were raised.

China has recently been in the news over Internet Espionage on defense and sensitive installations in India and USA. This has led to the high profile exit of Google from China.Recently a Canadian research organization revealed/alleged  how Chinese govt backed hackers had broken into Indian embassy and government computers.This has made the Indian government wary of allowing Chinese equipment suppliers into India’s communication sector.Though both ZTE and Huawei’s equipment is much cheaper compared to Nokia  Siemens,Alcatel and Ericsson , these companies face an uphill battler in India right now.

Rising Trade Deficit Concerns

India’s trade deficit with China is estimated to reach $60 billion by 2014-15, up nearly three-fold from $23 billion in 2010-11. Bilateral trade with China was $63 billion in 2010-11, with China accounting for $43 billion worth of imports.

“Participants at the inter-ministerial workshop were especially worried about forecasts that China could account for 75% of India’s manufacturing in the next five years, up from the present 26%,” the official said. The workshop was attended by officials of key ministries and departments, including finance, home and the department of industrial policy and promotion.

“Excessive dependence can be disruptive in case of strained relations,” said Narendra Sisodia, a defence analyst and former additional secretary of NSC Secretariat. In general terms, if a country that is supplying basic components to another stops supplies, it would hurt the importing country because its manufacturing will be adversely affected, he said. “Much also depends on whether a country has alternative sources of supply and how quickly those could be mobilised.”

 

 

India is a country with one of the biggest population of poor people living hand to mouth. But becoming super rich in this country is quite easy if you know how. All you have to do is become a political crony and start counting your millions if not billions. Corruption in India has become rampant with a scam being uncovered almost every day. Politicians and Businessmen have been jailed but they have managed to get out on bail using their millionaire lawyers to fake illness and other shenanigans. Some politicians are now involved in both professions with some rumored to be billionaires owning companies through surreptitious means and parking their money in Swiss banks. Business Groups in India see their shares rising and going down depending on which political party wins proving the nexus between politicians and businessmen. There has been no reforms to separate these two and now powerful politico-business dynasties have started ruling large parts of India.

Leaders of Political parties have their favorite businessmen which they shower with goodies. There are example galore which is described below. Today a businessman in Uttar Pradesh was found to have stashed around $20 million in cash in the basement of a mall that he owns. Ponty Chadha is  real estate and liquor tycoon with close ties with the leader to that state. Both industries are rampantly corrupt and sources of massive black money generation. Like other scamsters expect this one to get away too.

Nira Radia reveals Sordid Corruption Nexus – DB Realty owned by Pawar,Tata Companies TCS,Tata Motors Bending Backwards in giving Favors to DMK Raja for Telecom License

Nira Radia the millionaire lobbyist who became a public figure overnight as tapes leaked to her phone conversations were printed by the mass media has revealed sordid details about the politician businessmen nexus.In the chargesheet presented by the CBI to the Supreme Court she has revealed the multi billion dollar realty company DB Realty is a front for Sharad Pawar and controlled by him.This hardly comes as a surprise as powerful Agri Minister Pawar has been linked to a number of corruption scandals like the Lavasa Scandal,2G Telecom Scam,IPL Scam etc.Note DB Realty CEO has been directly implicated in the transfer of bribe giving to Raja the former Telecom Minister in exchange for a Telecom License at dirt cheap prices.It is a tribute to the power of Pawar that despite such massive circumstantial evidence against him and his family,there has been no court case or police charges against him.Note a number of big companies in India are known to be secretly owned and controlled by powerful politicians.Not that politicians don’t own  billion dollar businesses openly and use their political muscle to further their own interests in a blatant manner.

India Corruption Unlimited – Sharad Pawar gets Linked in yet another Scam (DB Realty,Pune,Sule)

Sharad Pawar,India’s powerful agricultural minister and the president of the international cricket body ICC has managed to get involved in most corruption scams coming out in the last year or so.However he has managed to come out unscathed even as his fingers are in multiple corruption pies.The name of Pawar and his daughter Supriya Sule ( who is a MP what a surprise) has come up in multiple corruption scandals like the 2G Telecom Scandal,IPL Cricket Scandal and Lavasa Scam etc.However it points to his influence and reach,that nothing has happened.He is the leader of a regional party which is part of the ruling coalition in the centre.

The ICC and the BCCI are one of the most corrupt and opaque sporting bodies in the country.Cricket is a religion in India and generates billions of dollars in revenue which is monopolized by the BCCI which is a private cabal of corrupt politicians and businessmen.TheBCCI runs with no accountability and the corruption of the BCCI is openly condoned.The IPL Scam involving Modi revealed the extent of rot in the game administration and led to his ouster.However his mentor Pawar escaped without a blot.The arrogance and power of the BCCI is reflected in the fact it has refused to let enter any members of the electronics media into the final match of the World Cup despite a request from the information ministry.Now there is news that Pawar has close links with the real estate firm DB Realty which is another billion dollar corruption based company.DB Realty is one of the ringleaders in the 2G Telecom Scam being investigated by the Supreme Court.It has led to the jailing of India’s former Telecom Minister and revealed the systematic corruption in all major institutions in the country.

India’s Business and Political Elite continue to Mock Indian Laws;Raju gets Bail

India’s Business and Political Elite continue to mock the Indian Legal System through loopholes and expensive lawyers.I had written earlier in a post of how Satyam Scandal Kingpin Ramalinga Raju enjoyed luxurious facilities at hospitals despite his jail term.He had managed to avoid questioning by the authorities through excuses of bad health and now he has managed to get bail for the Biggest Corporate Scandal to hit India.This reduces the trust of the Indian citizens on  the State and tarnishes the reputation of the country as a vibrant democracy.A number of scandals have hit the Indian legal system with a powerful criminal convicted of murder recently partying in the capital.He had got time away from jail on the recommendation of the state government.Politically connected powerful criminals manage to enjoy jail time through lenient jail authorities who let them out frequently on flimsy conditions.Even in Jail,they enjoy a privileged existence denied to common criminals.Their army of expensive lawyers keeps finding loopholes to get off their rich clients as India’s Justice System remains mired under millions of long due cases.

It is a matter of concern that everyone of the accused in this scandal has managed to get bail as India’s premier agency CBI has not been able to build a watertight case till now.This is despite Raju accepting his role as the master rogue in the siphoning of millions of dollars from India’s 4th largest IT company at that time.Despite the media spotlight on this case,blatant corruption has won again.

“Corruption as Tradition” Justification in Bangalore Land Scam by Chief Minister of Indian State

Corruption in India has taken a widely virulent and blatant form with scams popping up almost everyday.Greed is Good has become  the motto for India’s Role Models in Sport and Military as well.India’s Politicians are Leading the  protagonists with Realty being the Main Theme.Note Real Estate companies in India are notorious for corruption with the sector being avoided by Fund Managers.India’s Southern State of Karnataka is known for its IT Industry with capital Bangalore famous as a Knowledge Hub.However the Politicians of that State have made it the Corruption Capital with Bangalore equally famous for Land Grabbing and Real Estate Scams by Bureaucrats and Politicians.Note the rest of Karnataka has also been made famous by Illegal Mining.Robber Mining Barons have become powerful enough to topple governments with some heading the administration as Ministers.

 The Chief Minister of the State has justified Corruption in Land Dealings as Tradition.Being Accused of favorably allocating Prime Land to Companies owned by his sons,he has sought to defend himself by accusing previous administrations of indulging in land scams as well.India’s Image of Corruption has become bleaker by the Day with the Commonwealth Games Scam,Adarsh Housing Scam and the Multi Billion 2G Telecom Spectrum Auction Scam.Now comes this Scam perpetrated by the leaders of the Chief Opposition Party.India’sPolitical and Business Elite have scant regard for India’s Justice System as hardly anyone is prosecuted for Corruption.Only some small fish are made scapegoats while the Ringleaders  blatantly and openly indulge in manipulation and corruption.

India’s Real Estate Companies have seen a very tough 3-4 years with interest rates climbing, investors running away from shoddy accounting and the global macro scene being quite bad. One needs only to look at the stock price chart to see times have been very bad. Besides some of these companies have come under court scanner for their practices with Unitech CEO spending some months in jail for a telecom scam. However property prices have not come down as India’s real estate bubble seems immune from crises in the West and in India . Prices have more or less remained stable while other assets have seen a major carnage at one point or the other.

One of the major reasons is that Foreign Fund and Investors have continued to pour big money into the Indian Property Developers . They are getting a big pound of flesh getting returns of 20% per year or more as the Indian Realtor is squeezed for cash .Indian Banks have grown wary of lending while the IPO market remains closed because of the corruption and scamming. Foreign Funds have huge assets and bolstered by the zero interest rate regime in the West are spending money here where the returns are quite high.They don’t mind waiting for some years for returns given that Real Estate Demand in India is high and growing.

A large European bank, which continues to be an aggressive player in the Indian property market, is organising Rs 1,800 crore funding for a Delhi-based developer who will use the money to pay off its foreign bond holders. The foreign banking group will use its FII arm to subscribe to the securities that the property firms will issue. The same bank will also invest and rope in other investors for a Rs 800-crore non-convertible debenture issue of another large builder in Mumbai which is dabbling in multiple projects. Besides some offshore institutions, wealthy local investors (better known as HNIs) have emerged as the biggest buyers for real estate papers. They are either buying the papers directly or through the portfolio management schemes run by brokerages managing their money. In a few cases, investment banks and their finance companies are playing the role of anchor investors – a strategy that has helped in attracting HNIs

I have tried to explain the reason for India’s Real Estate Bubble here.

1) Corruption,Opaque Regulations,Use of Black Money – Real Estate in India is a Cesspool of Corruption and even India’s Prime Minister has also accepted it saying that high Stamp Duty on Real Estate Buys result in the preponderance of Black Money in Real Estate Deals.Due to the massive price appreciation and huge valuations,Land Scams have become quite common with Chief Ministers,Generals,Top Bureaucrats all involved in the murky environment of Real Estate in India.The most recent scam related to bribing of top public banks officials in the LIC Housing Finance Scandal has again put question mark on the fundamentals of the industry.Valuing the industry and making a real estate investment remains one of the most difficult investing tasks in the Indian Stock Market.Even Fund Managers are staying away from the Sector due to lack of trust in the Financial Statement given by the industry.

2) Global Real Estate Bubbles – One of the reasons for the sharp price rise in Real Estate in India is that Real Estate in many parts of the world are a bubble.Allowing Foreign Money into Real Estate in India has made these PE investors pay the same valuation for properties in India as outside.Note many of these “Real Estate” Private Equity Investors have yet to recover from the fall in property prices in the 2008 crash though many have been saved by the Bernake reinflation.

3) Tax Laws and Policy Stupidity – India’s Tax Laws impose high capital gains on land that is sold and not reinvested back into real estate again.That keeps the huge sums from gains in the real estate to be funneled back again.Otherwise a lot of the money would have gone elsewhere bringing the Real Estate back to earth again.India also allows an exemption of Rs 1.5 laks ceiling on interest payments on Real Estate Payment giving an impetus to investing in RE.Note such misguided laws were a leading cause of trouble for the Real Estate in USA.

4) Local,State Laws on Real Estate prevent Market Forces of Demand/Supply to Operate – India’s Local and State Laws dealing with Real Estate are as bad if not worse than Laws at the central Level.These Laws in most cases prevent the normal working of the Market Forces of Supply and Demand.The biggest proof of this in the fact that the Rental Yields on properties on India are way lower than if you took out money from selling the real estate investment and putting in a safe goverment bond.People in Mumbai the biggest real estate bubble market in India have stopped buying houses and going for rental leases.

Creative Accounting

India’s Real Estate Sector is one of the most unloved sectors in the Stock Market.Even Fund Managers shun this Sector because of the complete lack of trust in the financial statements published by the Real Estate Companies.With the whole industry most unogranized and companies playing with their books,its not a wonder that the sector continues to languish nearly 70-80% of its 2008 peak despite the broader market being only 10% below its all time peak.Real Estate Companies trying to raise funds in the Primary Market have been stymied by the lack of interest and distrust by the investor community.Recent IPO’s like Nitesh Estates and Jaypee Infratech have rewarded investors with huge losses in a rising Stock Market.The Industry is Synonymous with Frauds and Scams besides everyday violation of norms and contracts.Even the most famous Real Estate Groups are frequently in the news for scams and frauds.Here is a real life example of the ways that these companies inflate their revenues and profits through use of creative accounting.

Reliance Industries which is India’s biggest oil and gas company is set to become one of India’s largest media players as well. Reliance with its massive war chest of cash has been buying stakes in both content generation and delivery across the spectrum in India. The company recently bought controlling stakes in one of the largest TV broadcasters Network 18 coupled with its earlier stake in Eanadu . Reliance  earlier bought the broadband spectrum rights for broadband transmission in a deal with over $1 billion.

Reliance Industries the biggest private company in India with billions of dollars in free cash flow being generated by its oil and gas business,is set to make a  massive investment into the broadband business through 4G. Reliance which is primarily an oil and gas company is investing heavily into Retail, Financial Services and Media. The company is set to become a media behemoth after buying substantial chunks into the content business of NW18 and Eenadu network.

Reliance has a massive balance sheet which is has used strategically to acquire 4G spectrum (Infotel) and content.The company had revolutionized the telecom space through the Monsoon Hungama campaign when it had provided super cheap telecom  mobile plan with handsets. It could do the same in the Internet space through providing super cheap Tablets like Aakash with super cheap broadband plans on 4G. It already has content to provide its subscribers.Note broadband companies in India provide poor service at high rates, so Reliance can takeover the broadband space in India easily if it executes right.

With voice becoming a commodity with super low or free pricing,data is the only way to earn money for telecom companies in India. If Reliance executes its strategy right,then these telecom companies like Idea,Vodafone,Airtel would see their revenues and valuations crushed.

The company is planning to introduce a big bang plan for broadband  coupling a cheap tablet with a cheap monthly plan. This is on the lines of a mobile phone with a monthly connection. Reliance has a  good chance of winning the broadband market which remains under penetrated and high cost. It poses a direct existential threat to India’s telecom companies which have failed to compete on data effectively.

Reliance in continuation of its strategy in the media industry has bought a small stake in Den Networks one of India’s largest cable networks though one its subsidiaries. The company is slowly and methodically capturing the entire media development and delivery network  in the country. The stake in the cable companies will give it leverage to deliver its broadband and content.

Reliance Strategic Investments, a subsidiary of Reliance Industries, has bought a 1.14% stake in DEN Networks, one of the two listed cable distribution companies in India. As RIL has acquired interests in media firms dealing with content, it makes sense for the Mukesh Ambani-controlled group to invest in a distribution network now, several analysts told ET.

Solar Renewable Energy Certificate (SREC) Prices in New Jersey have been falling at a sharp rate from a high of $600 to $225 as high returns from falling solar panel prices and other tax breaks.This has led to a massive growth in solar installations in the state making it the 2nd largest state by solar capacity.New Jersey installations have crossed 500 MW and made it a huge green job driver in the state.However this boom has made the market driven SREC prices fall quite sharply.Though not falling as sharply as Pennsylvania where SREC prices have become a joke ,they are still low and falling.

New Jersey lawmakers are trying to rectify the situation with Assembly Telecommunications and Utilities Committee  approving two bills that seek to reverse a recent sharp fall in the value of the tradable Solar Renewable Energy Certificates.This will have the follwing measures like

1) Increase the PPA term to 15 years

2) Make non-utilities buy SRECs

to boost the falling SREC prices.

These measures should boost the solar EPC Companies  in USA as well as the domestic solar panel manufacturers.

Solar EPC/Installation Companies

11) Akeena/Westinghouse Solar (WEST) – The first US Solar Installer to list on the US Stock Exchange,the company’s operations are based mainly in California.The company also sells solar sytems through retail outlets which was a first.The company also has a unique solar system which reduces solar installation costs called Mandalay.

12) Real Goods Solar (RSOL)- The second US Solar Installer to list on the Stock exchange,Real Goods Solar is present in California and Colorado and it targets the residential and commercial segments of the market

13) Verengo Solar – The company also provides solar financing solutions and is present in the California market.

14) Borrego Solar – The company is similar to Verengo Solar but mainly concentrates on the commercial market.The company signed a deal with Chinese solar panel producer Yingli for procuring solar panels.The company is headquartered in California like most others.