Blog
November 30, 2010
Nuclear Energy in India is going to quadruple in the next decade as India's power hungry economy requires increasing amounts of energy to sustain its growth.India's Electricity Capacity is targeted to reach 450 GW from around 160 GW at present which would require increasing the supply from all renewable energy sources as well as non-renewable sources.While Thermal Power will continue to remain the top dog with 60-70% of the capacity,Nuclear Power which forms just 3% of the current capacity is also poised to grow exponentially.India's Nuclear Power deal with USA have paved the way for India to again part of the civilian nuclear club which would allow import of uranium fuel and nuclear technology.It would also allow Nuclear Equipment Producers like Toshiba,Areva and GE to set up Nuclear Power Plants in India.Note India has a long history of a home grown indigenous nuclear power program with nuclear power capacity of around 4.5 GW.Despite facing low utilization in recent times due to inadequate supply of uranium fuel,the nuclear energy industry has continued its growth path.India is the only country spending large amounts in Thorium Fuel R&D as the country has huge deposits of the element.
November 30, 2010
The increasing amounts of Wind Energy and Solar Energy will require elements of a Smart Grid.China's electricty capacity is going to double in the next 5 years to around 1500 GW from 850-900 GW at present.This will require a huge increase in transmission capacity creating a huge market for electricity equipment giants like Siemens,ABB,Areva and Alstom.China also has the opputunity of creating a a Smart Grid as it builds Transmission Capacity form Scratch.Almost $100 Billion is going to be spent over the next 5 years attracting even IT firms like IBM and Cisco.IBM has already tied up with Chinese cities to roll out a pilot program.Note Smart Grid Technologies are still in their infancy.Chinese investment in Smart Grid will allow development of these technologies giving a huge boost to companies winning Smart Grid Projects in China.The Chinese Market despite its size is a highly competitive market with local companies competing mainly on price.Local companies that are benefiting from the Grid Investment are
November 29, 2010
Organized Real Estate Industry in India is only a couple of decades old .Real Estate Industry in India took off with the global boom in the Realty Sector which percolated down to India as well.Lack of clear land titles and litigation has made this industry one of the most opaque and corrupt ones.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.That said modern India presents a booming picture of tall buildings and huge office areas & shopping malls. A list of the chief players in Indian market is given below:
November 29, 2010
The Delhi Mumbai Industrial Corridor (DMIC) which is being jointly developed by India and Japan will also see the development of 24 Green Cities.The ambitious infrastructure project being built with $50-90 Billion will see a freight/railway/road transport corridor between India's 2 most important cities of Delhi and Mumbai.The resulting development along this transport corridor which will be passing through 6 states will make use of Green Technologies.Japanese Conglomerates like Hitachi,Toshiba,Mitsubishi will be involved in the building of this massive projects and will use their advanced energy efficient technologies to develop these Green Cities.
November 29, 2010
China has the world's largest hydro power capacity at 200 GW and it plans to double the capacity by 2020.China is mostly dependent on Coal Power and Hydro Power to meet the electricity demand from its fast growing economy.China has the world's second largest electricity capacity at 850-900 GW second only to USA at ~1000 GW.This will be soon be overtaken as China continues to grow at 8-10% and its electricity per capita is still much below developed world standards.China is already the world's biggest consumer of Energy and emitter of Greenhouse Gases.Despite rapidly investing in Nuclear and Renewable Energy,China's voracious demand has made the growth of Fossil Fuel Energy unsustainable.It already consumes 3 Billion Tons of Coal per year and is already importing around 180 million tons per year.
November 29, 2010
Toshiba,the Japanese Conglomerate with diversified interests in Electronics,Nuclear Energy Equipment,NAND Memory is leading the Japanese Search for Rare Earth Minerals.Fears of Chinese monopoly over production of REE came true,when Exports to Japan were blocked over a shipping incident.EU and USA have long been concerned with the Chinese control of 95% of the global REE production with USA even thinking of taking China to the WTO.Japan has recently drastically increased its investment into finding new sources of Rare Earth with recent deals with Vietnam,India,Kazakhstan and others.Sojitz, a Trading Zaibatsu recently signed a long term supply deal with Lynas.Toshiba is the other Japanese firm actively scouting for Rare Earth Minerals looking for newer processes and geographies.
November 29, 2010
India's JNNSM Phase 1 which is targeting 1000 MW of Solar Power Capacity by 2013 is in jeopardy due to irrational bidding,financing and small size.The 150 MW Solar PV and ~500 MW of Solar Thermal Capacity which has been put to bidding is going to see massive discounts.This will eventually lead to project winners abandoning these projects or delaying it inordinately,leading to a failure of the first phase.India Solar Thermal Bidding has already seen Massive Discounts from the base prices of Rs 15.31 set by CERC and the Solar PV project bidding for 150 MW is going to see equally ferocious discounts.Tata Power,which is India's largest private utility is staying away from these auctions due to the above problems.Renewable Energy in India has a huge growth potential with Solar Energy the brightest Green Energy Sector.This has attracted companies in droves leading to hyper competition for the first phase of India's Jawaharlal Nehru National Solar Mission.However huge competition in this subsidy driven sector is not necessarily good for the growth of Renewable Energy as irrational bidding by small players would lead to project failures.
November 28, 2010
Nira Radia one of the top lobbyists in India has been exposed through wire taps done by Indian investigative agencies which has been leaked to the media.The conversations in the tape have revealed how this lobbyist has India's top politicians,bureaucrats,journalists at her beck and call.While it is known that corporate interest wield huge influence amongst Indian government officials,the tapes reveal that Big Business has the government almost completely in its pocket.The 2G Telecom Scam had earlier shown that how top ministers had connived with capricious business houses in swindling the Indian taxpayers of billions of dollars.LIC Housing Finance Scam which has been recently exposed has led to top government company officials being arrested for taking bribes in sanctioning loans to top realty and infrastructure companies.This had been done by a financial intermediary listed on the stock exchange and which had top investors like Goldman,GMO,Fidelity and Morgan Stanley.With the scam exposed these top investment banks have lost their shirt in this investment.
November 26, 2010
India has set up ambitious targets of meeting 15% of its Energy Needs from Renewable Sources up from around 5.5-6% in 2010.WIth India's Electricity Capacity expected to rise to 450 GW from around 165 GW,this would imply that around 67.5 GW of Electricity Capacity would be needed up from around 16 GW.This would mean around 5 GW of Capacity addition every year in the next decade which is a very tall order.20 GW could be met by Solar Energy according to the Jawaharlal Nehru Solar Mission (JNNSM).Most of the rest would have to met by Wind Energy.Biomass Energy has high costs and reliability problems which mini hydro potential is only 1 GW.Note this is just the capacity I am talking about,for meeting the electricity generation,capacity additions would have to be greater as Solar Energy and Wind Energy have only 20-30% Load Factor compared to 60-80% for Fossil Fuel Energy Sources.Nuclear Energy can contribute another 20 GW.
Renewable Energy in India is growing at a rapid pace increasing its share of the total capacity from 2% in 2003 to around 10% in 2010.However the share of electricity generation is still quite low at 3% due to the lower capacity load factors of Green Energy Sources compared to Fossil Fuel Sources.The Total Installed Capacity of Renewable Energy in India is around 16 GW with Wind Energy taking the Lion's share at almost 70% followed by Small Hydro at 15% and Biomass Energy at 12%.Solar Energy in India till now has a capacity of just 6 MW which is estimated to grow to 22 GW by 2022 making Solar Energy one of the Biggest Growth Opportunities in the Field of Indian Energy.
November 26, 2010
India's new Corruption Scandal involving a Housing Loan Scam involving Bribes paid to India's top public bank officials has ensnared top notch financial institutions in the West as well.The whos-who of Wall Street got dazed by spectacular growth and profits of a 3 year old financial outfit in India which had been built on a foundation of lies and bribers.This Corruption Scam was started by a Financial Outfit called Money Matter Financial Services which started as a 2 person outfit.However through arranging of debt to big corporate houses by paying bribes to top officials of India's large government owned institutions such as Bank of Indian,PNB and others,the outfit saw its share price increase by 7 times.
November 25, 2010
Asian Development Bank (ADB) has planned $2 Billion in Annual Green Investments in power hungry countries of Asia.For this the multilateral institution has sold multi-currency bonds in Japan to populate its Renewable Energy Fund.Note Green Energy is a capital intensive business and requires large amounts of low cost capital which is difficult to get in developing emerging markets of Asia.ADB is meeting this intermediary gap of funneling low interest capital from developed markets like Japan to capital deficient countries like India.Note ADB is already financing Asia's largest solar photovoltaic plant in Thailand.
November 25, 2010
Boeing,the US Aircraft and Military Equipment Supplier had decided to sell its high efficiency solar cells in 2011.Note Boeing Subsidiary had created a record a couple of years ago with a 39.2% multi junction solar cell.These cells are primarily used in spacecraft where low space requirements require the use of high efficiency cells without major cost considerations.Spectrolab has continued to improve on the efficiency of the cells reaching 41.6% in a NREL Lab Test.Boeing has claimed a 60% marketshare of the space solar cell market and hopes to replicate that success on Earth as well.Boeing had earlier said that it would set up a 300 MW capacity by 2010 and market solar cells to CPV companies such as SolFocus.Will Boeing be Successful at Selling High Efficiency Spectrolab Germanium Solar Cells
November 25, 2010
One97 a Private Equity Backed Mobile Value Added Service (VAS) Company is raising Rs 120 crore ( $25 million) from the Stock Market in an IPO.The Company operates in India's Telecom Sector which is the fastest growing in terms of subscribers and represents a good growth opportunity as 3G services starts to roll out.
The Company has not indicated the pricing of shares as of now ,only that it wants to raise Rs 120 crore.Note the VAS Category is seeing increasing competition with a number of new entrants.One97 has diversified into a combined VAS player cum Technology Investor makings its valuation difficult.Note the VAS sector is no longer a unique or fancied one as OnMobile has already listed sometime ago and its valuation has decreased dramatically since then despite improved profits.I would sit out on this one due to the complicated nature of the business,slowing growth and valuation difficulties.A higher risk investor probably might want to buy this one.
November 25, 2010
I have been repeatedly pointing out the dangers of investing in Real Estate Companies as more and more skeletons tumble from the closet.Its an open secret that Real Estate Companies in India fudge their Financial Statements through Creative Accounting and other means such that even Fund Managers don't invest in the Realty Sector.Major Real Estate Companies like IREO and Emaar MGF have played prominent role in some of the major corruption scams rocking the country.Now more big Real Estate Firms have been implicated for their role in other corruption scandals.DB Realty a Mumbai based Realty Company has been found to be a prime suspect in the LIC Housing Finance Scam where the CBI has arrested.Some construction companies like Man Infrastructure,HCC have also become a target of investigation.
November 25, 2010
Wind Energy Companies are increasingly facing competition from a host of new entrants into the industry.The dominants firms Vestas,Gamesa and Suzlon have seen their stock prices fall steeply due to declining revenues and margins.A number of Giant Industrial Firms have entered the Wind Energy Industry to diversify from the slow growth in their own sectors.Korean Shipbuilders have invested heavily in the Wind Turbine Manufacturing en masse to take advantage of the secular growth of Wind Energy.Chinese companies have risen from virtually nothing 5 years ago to become Top 5 Global Wind Energy Players.Companies like Sinovel,Goldwind,Mingyang Power are now trying to spread their wings outside of China.India's Wind Energy Industry is comparatively small but it has also seen a number of wind power companies setting up facilities with technology licensed from the West.The slowdown in the Western Markets has led to huge problems for dominant Western firms like Gamesa and Vestas.It has led to painful restructuring for Vestas which has fired thousands of workers from its domestic manufacturing base in Denmark.Gamesa has also seen management and ownership turmoil as WTG Orders have evaporated and its competitive position has eroded.GE,Suzlon,Gamesa and Vestas are all investing in the Chinese market which has grown exponentially in recent times and which is expected to form 50% of the Wind Energy Demand till the next few years.
November 24, 2010
LIC Housing Finance is one of India's Largest Home Lenders with a huge distribution network around the country.LIC Housing Finance Stock has been on a roll propelled by fast growth of the company and the housing loan growth sector.The Company was a relatively safe investment being promoted by Life Insurance Corporation (LIC) which is India's largest insurance company owned fully by the government.The Foreign Ownership of the LIC Housing Finance Shareholding is quite high at 40%+ due to its relative safety and high growth.However the Central Bureau of Investigations (CBI) raids on the company has resulted in a sharp 20% price fall.The company's top officials have been implicated in misappropriation of money and home loan scams along with a company called Money Matters.
November 24, 2010
Now it has come to light that one of India's Leading Bureaucrats sold sensitive details related to Telecom Security to private firms in return for sex and money.Through an elaborate web of codes and multiple mobile phones,this IAS officer used to sell security information related to India's recent telecom security to leading telecom firms.Note India had recently taken stringent action against RIMM( Blackberry maker) and some others for failing to provide security codes.It was an opaque regulatory action ripe for bribes and corruption which was taken advantage by Ravi Inder Singh, the Director in the Union Ministry of Home Affairs (MHA).Note it is openly known that nothing moves through the central ministry without bribing the corrupt officials manning those offices.Powerful Business Houses have most of these bureaucrats on their illegal payrolls as most policies are known much before by bigger corporates before they become policy.The expose done in the magazine "outlook" clearly demonstrates how India's powerful minsisterships and policy decisions are sold in closed rooms in the capital.Investors should be careful about investing in Indian companies as regulatory/corruption risk remains high as the SKS Microfinance and Unitech/Videocon stock falls show
November 24, 2010
Australian Company Lynas Corporation is going to accelerate the production from its Mt. Weld Mining Project in Australia in order to meet increased demand from Japanese companies.Lynas is building a 20,000 tons rare earth mine in Australia with processing to be done in Malaysia.The company had raised around $500 million with strong institutional backing to boost the supply of non-Chinese Rare Earth Production.The Rare Earth Mineral Frenzy has cooled a bit but the supply picture is still in a constrained mode with Chinese exports of REE falling by 77% in the month of October.Japan is the most exposed to the Chinese slowdown of REE minerals with a large processing industry and consumption sector.Japan has been frantically looking towards the surrounding seas,Vietnam and Kazakhstan as China has used its monopoly position for political ends.
November 24, 2010
Note most of these companies fundamentals don''t justify even half of the price at which these stocks were issued at.However these companies keep coming with increasing frequency even as the Regulator SEBI chides investment bankers without doing anything real to prevent the retail investors being defrauded again and again.Note Gravita India is another stock which is undergoing a "pump" currently .I expect it to be dumped shortly as the fundamentals of the company are pretty sorry compared to the valuation it is commanding.The illegal grey market of IPO's , the small market cap of the company and the lax attitude of the Stock Market Regulator has made the Indian Stock Market a heavily biased casino.Here is an interesting article which has analyzed that the only way to beat the shenanigans of the "operators" and the promoters is to sell out on the very day of listing.
November 23, 2010
The main difference between MOIL and Coal India is the number of shares being issued.Note MOIL is going to raise only $300 million compared to the $3.5 billion raised Coal India.CIL had gotten 15 times over subscription which implies that MOIL can 150 times over subscription based on CIL subscription numbers.While the MOIL IPO Price is very attractive,the massive potential over-subscription would hardly lead to much allotment.However the government had done a good job in pricing the PSU share sales at a decently low price leaving something on the table for investors.Coal India IPO was done at a substantial discount to international peers making it a big success.Shipping Corporation of India is also coming out with a FPO where the pricing will be the key.
November 23, 2010
India has followed the example of Korea,China,Japan,USA and others in providing a capital subsidy to promote the use of Green Transport in India.Note China and Korea have been very aggressive in providing support and subsidy to the Green Industry.USA has also been providing soft loans and capital grants for manufacturing to Electric Vehicles and Lithium Batteries besides spending millions of dollar in R&D.Obama wants the US to become a leader in Battery Manufacturing with a 40% Global Marketshare while China recently unveiled a plan to create national champions in the Green Car Industry.Japan has also been supportive of Hybrid and Electric Car Technology with Honda and Toyota looking to dominate this emerging Auto Category.
November 23, 2010
The growth in Pharmaceutical companies has been tremendous in India. It is the second largest growing sector in country dominating the $8 billion domestic pharma market which is growing at around 15-16% pa. The Indian pharmaceutical industry is the third largest in the world.Mergers and acquisitions have become an increasingly important feature of this industry with foreing pharma giants like Merck,Pfizer,Daiichi looking to buy these fast growing small Indian companies.The recent buyouts of Piramal by Abbott and Ranbaxy by Daiichi reflects the desire of Pharma MNCs to inorganically grow their generics strength.This has raised some concerns amongst the Indian government about the independence of the Pharma Industry.However pharma companies are proliferating taking advantage of India's low cost technical workforce to grow at breakneck speed.. A broad overview of the pharma companies based on the revenue generated in 2007 & market cap is given below:
November 23, 2010
Chines Rare Exports in October have dropped dramatically to 3 figures from around 3660 tons in September reflecting the Chinese-Japan Tensions and Export Quotas imposed by […]
November 23, 2010
Shipping Corporation of India (SCI),the government owned carrier is coming out with a Follow on Public Offering (FPO) of 84,690,730 Equity Shares to divest 18% of its equity which will be equally shared by the company and the government.At the current price the company will raise around Rs 600 crores for the company with another Rs 600 crore going to the government. SCI is India's largest shipping line by tonnage deriving most of its revenues from oil/gas transport.SCI like other shipping companies has faced a very bad 2009 due to the sharp contraction in world trade and dropping in shipping rates.However results have started to improve with the improvement in the world economy and it is returning to its normalized sales and profits.The valuation of the company is not expensive according to normalized profits however note that shipping sector in general does not enjoy high p/e due to the cyclical and capex intensive nature of the business.The pricing of SCI has not been decided as of now,in the secondary market it trades at Rs 156 which is near its 52 week low in anticipation of the share dilution due to the FPO.Here is a list of the pros and cons.
November 23, 2010
The US Government has recently approved a number of Large Scale Solar Thermal and Photovoltaic Projects as Renewable Energy Projects rush to meet the December 2010 Deadline for getting the 30% Subsidy Cash Grants from the US Treasury.California has been leading the way with gigawatts of solar thermal plants being approved.However these projects are facing resistance from local groups due to different reasons.Green Activists are questioning the Environment Friendliness of these projects due to the harmful effects on endangered desert wildlife.While some projects have dedicated millions of dollars for the Rehabilitation and Resettlement of Tortoises and other wildlife,Green NGOs are not convinced.The 660 MW,$2 Billion Tessera Solar Thermal Plant has been put under a review of its approval due to protests that the approval was done with haste and without following proper procedures.Note Large Solar Thermal Projects need hundreds of acres of land and are being frequently built on public land.
November 22, 2010
China is using its industrial strengths to become an emerging low cost low quality Weapons Exporters.Note the Global Arms Market is dominated by USA and Russia with UK,France,Germany the other major exporters.China,India are the biggest importers of arms with most of their purchases from Russia.However the equation is set to change with China moving up the Technology Ladder to become an Arms Exporter.China has started to export fighter aircraft and missiles and is looking to export drones as well.Its major customers are countries which have difficulty in finding weapons elsewhere.Pakistan is the biggest customer with joint development of weapons with China.Note Russia has become alarmed over the developments as many of Chinese arms said to be copied from Russian Technology.
November 22, 2010
Climate Change in the last year has faced one hit after another which should culminate in the failure of the Cancun,Mexico talks which is to start on November 29.Note there are not many expectations from the Cancun Climate Change negotiations in sharp contrast to the Copenhagen Talks in 2009.Despite the global attention and expectations from the Danish hosted Climate Meet,Copenhagen was a total disaster putting Global Warming in the Backburner despite more and more evidence of the massive global harmful effects.In the recent year,the Fossil Fuel Lobbies have been trying to discredit the very agency in charge of spearheading the war against Global Warming.They have been largely successful with global polls revealing a distinct cooling towards Global Warming Efforts.China despite huge investments into Clean Technology is emitting more Carbon Dioxide while USA has completely given up its Global Leadership on the most pressing World Problem.Here are the Reasons why the Cancun Climate Change Talks would fail.
November 22, 2010
Coal Demand continues to grow at steep pace in India and China defeating the efforts of Climate Change Activists in the Developed World.Building a Thermal Power Project in Europe and USA has become exceedingly difficult due to concerns of the detrimental health,air quality and pollution effects of Coal Derived Electricity and Heat.Coal is considered as the Dirtiest Form of Fossil Fuel Energy making it a prime target in Climate Change Fighting Efforts.However China with around 3 Billion Tons of Coal Consumption and India with another 500 million Tons depend on King Coal for majority of their Energy Needs.While China generates 80% of its Electricity from Coal,India generates around 65%.While both countries have Huge Reserves and Production of Coal,their voracious demand is leading to surging imports.These Imports are being sourced from countries like Australia,Canada and USA which are going through Coal Mining Booms.Ports are getting congested as Infrastructure failed to meet the growing coal needs of India and China.
November 22, 2010
India's ambitious JNNSM Plan to build 20 GW of Solar Capacity by 2022 has seen projects being awarded for 479 MW of Solar Thermal Projects under Phase-1.The Solar Project Bidding was expected to be extremely competitive and it turned out to be exactly that with dis conts of more than 30% being offered to the base price of RS 15.31 for Solar Thermal generated Electricty.Note Rs 15.31 was determined to be a decent price on which a Solar Thermal Plant Developer could get decent returns just a year ago.This means that a 30% Discount would lead to zero or very low returns for the Solar Thermal Winners.According to news reports there are 7 winners for these Solar Thermal Plants 6 of which will come up in Rajasthan which seems to be the biggest winner of these Solar Subsidy Scheme.Andhra Pradesh is the only other state to win a Solar Thermal Project.There were about 60 applicants for the Solar Thermal Part of the Phase 1 JNNSM Bidding from which these 7 have been selected.
November 22, 2010
Claris Lifesciences is one of the few decent size pharmaceutical companies coming out with an IPO of around Rs 300 crores ($65mm) in the price band of Rs 278-293 which would give it a market cap of around Rs 1400 crore.Most of the money would be used in manufacturing expansion as the company is still in the capex phase spending around $20-30mm annually.There is a lot to like in the stock except for the management.The Pharma Sector is one where India has done extremely well boosted by its low cost qualified labor something like the IT sector.The Indian Pharma Sector excel in the Generics Category which has been receiving increasing global attention for reducing ballooning health-care costs.India posseses a definite competitive advantage in the Generics Category.Here is the list of pros and cons for Claris LifeSciences
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