All posts by Sunidhi Arora

AirAsia Gets FIPB Approval to Start New Airline in India

AirAsia has received approval of Foreign Investment Promotion Board for setup of new airline in India. The Malaysia based budget airline has jumped in Indian aviation sector by setting up a joint venture with Tata Sons and Telestra Tradeplace. Tata Group was planning to enter aviation sector for quite some time.

After the modifications in FDI policy in September 2012, AirAsia is the first airline to enter domestic aviation sector in India. Domestic travelers in India can expect lower airfares as the new airline company will try to cut the market share of other players.

In Indian domestic aviation sector, Indigo Airlines and GoAir have been doing very good. Jet Airways and Air India are also prominent players in domestic aviation space.

Jet Airways is also looking to expand its base in India with investment from Abu Dhabi based Etihad Airways.

The Tata Sons-AirAsia joint venture company will operate from Chennai. The company will focus on Tier-II and Tier III cities connectivity by air routes. AirAsia will be involved in operations of the airline while Tata Sons will be holding 30 per cent stake in the company with negligible operating role.

Congress Plays Cheap Political Trick with 9 LPG Cylinders in Congress Ruled States

Facing the pressure from opposition and UPA allies over the increase in diesel price, and FDI, Congress has played another card by increasing the number of subsidized LPG cylinders in a year from 6 to 9 in congress ruled states.

The decision comes after most political parties announced that 6 LPG cylinders per year are too low as common household consumption is more. Congress has directed the states where it has ruling to offer 3 additional cylinders at subsidy to consumers.

Mamata Banerjee has decided to withdraw support from UPA and their ministers will offer resignation on Friday. The Congress party leaders held meeting in New Delhi to discuss next course of action. The decision of Mamata Banerjee to quit the UPA government comes as her demands for rollback were not heard by Congress leadership.

Congress wants to push ahead with the reforms but its allies are not allowing it to move forward. Congress is also portraying itself as a victim to win public support, but with rising expenses, common man can not support the decisions of the government. Congress should have thought of other reforms, which could have allowed the government to reduce deficit rather than increasing diesel prices by Rs 5, which will surely impact budget of most of the people in the country.

Deal Between BP and Bridas Gets Cancelled

The much awaited deal between the BP and CNOOC Ltd and Bridas has got cancelled due to the failure in transaction.

BP wanted to sell its stake in Pan American Energy, as they needed urgent funds to pay for the cleanup of its Gulf of Mexico oil spill. But that was way back in 2010 and now the BP’s Chief Executive, Bob Dudley, said that they would not repent if this deal gets cancel as torment phase has got over.

CNOOC Ltd, China’s biggest offshore oil producer and Bridas, 40% stake holder of PAE have blamed BP for collapse of the deal. They affirmed that there were some legal hassles in the deal and moreover, BP did not handle transaction in an appropriate manner which resulted cancellation of the deal.

It seems malign act has started as Dudley was of the view that to get Argentine anti-trust and Chinese regulatory approvals was the sole responsibility of Bridas and they were unable to get those permission, so their deal did not turn out to be successful.

Bridas is in no mood to take burden of failure on its head and affirmed that approval is not the reason as the Chinese and Argentine governments were in complete support for the deal.

BP is in not ready to strike peaceful chord with Bridas and affirmed that they would make some strategies in regard to PAE, but on the other hand, Bridas is still ready to negotiate with BP.

Experts were of the view that cancellation of the deal would surely affect profits of BP, which would publicize its annual turnover by the start of next year. But it is something, which is of little concern for BP.

Dudley said that tough time is over and they no more need to get into agreement, which would be more of divestment.

Manufacturing Division Profit Seen Descending By 5.7% During Q2, Says CMIE

Centre for Monitoring Indian Economy (CMIE) has reviewed its estimation for net profit of the manufacturing segment during the September quarter downwards, mainly because of the poor show of petroleum products biz.

In its monthly appraisal, it stated, “We now expect net profit to fall by 5.7 per cent, against our earlier expectations of a 34.2 per cent rise. This is on account of a downward revision in the profit forecast of the petroleum products industry.”

But, CMIE anticipates the manufacturing division to continue its growth impetus by recording a 20.7% increase in net sales during the September quarter.

A steep reduction in profit of the petroleum products business and big losses to be incurred by the aviation business are likely to confine the development in business profit during the second quarterly period.

The report signalizes that exclusion of 5% import duty on crude during the month of June was likely to have a optimistic impact on the earnings of petroleum products business during the existing quarter.

“But, a sharp rise in crude prices in July prompted us to revise our forecast for crude prices upwards for the September quarter and for the full fiscal,” it said.

“We expect the rise in crude prices to offset the impact of duty removal. The industry is now expected to report a steep 56.7 per cent fall in net profit in the second quarter as against 33.1 per cent fall expected earlier,” CMIE added.

CMIE estimates net profit development of manufacturing division (apart from petroleum products) during the quarter almost unaltered at 32.5%.

Steel Rates To Climb Further From Oct This Year, Says CMIE

As per CMIE report, domestic steel giants are likely to increase rates further during the month of October on account of a expected upswing in manufacturing as well as infrastructure construction actions.

In its monthly assessment, the Centre for Monitoring Indian Economy (CMIE) stated, “We expect steel companies to hike prices in October-November once industrial and infrastructure construction activity gathers pace.”

During the existing financial year, CMIE anticipates finished steel rates to average 7% higher than during the last fiscal.

It should be mentioned that steel rates have already mounted around 15% during the first quarter of 2011-12.

But, it has sharply reduced its growth estimation for finished steel fabrication for 2011-12 to 9.5% as against 12%.

“The downward revision is due to the lower-than-expected growth in demand for steel in the first quarter and a shortfall of iron ore likely to be faced by the steel units in Karnataka,” it said.

Previously, Tata Steel Managing Director HM Nerurkar stated that domestic steel demand was expected to nurture at around 9% in the existing financial.

The steel giant anticipates steel rates to stay stable, with rates climbing or dropping by Rs 1,000 a tonne for some time.

The majority of firms have inked coking coal agreements for the existing quarterly period at $315 per tonne, which is 40% higher than the year-ago level.

“If the ban continues for long, the plants located in Karnataka will have to cut down production,” the CMIE said.

SA’s PPC Mill Expects ‘To Lift Capacity By 30%’

It seems that after lingering for long after 2009 recession, the Pretoria Portland Cement (PPC) is all set on its mission to recovery. Backed by its newly upgraded technology, the Company is expecting to extend its cement production capacity by a staggering 30%. Of lately, the Company had faced tough time when the local demand could not be met while the international demand was growing.

The SA’s biggest cement maker will churn out and sell premium products in its new R699m largest manufacturing facility in Pretoria. The mill was commissioned last year.

Confirming the news, Kevin Odendaal, the company’s investor relations and Strategy Manager, said, “It (the new technology) is extremely efficient on electricity, up to 30% more efficient, which is especially relevant, considering that the plant will run at high volumes”.

The Company had been quite disappointed with the loss it incurred as 5% of the market went in imports and further, it is concerned about subsidized imported cement.

Meanwhile, the Company is planning to expand its wings elsewhere in Africa in order to compensate for the loss it incurred during poor sales at home. Moving further, the Company is considering refurnishing other plants within three to five years.