Indian FCCB crisis an opportunity for Chinese Banks

Increasing cost of finance and  risk of FCCB crisis  is forcing Indian business tycoons to look towards dragon for help.  The sinking sensex  has created havoc on atleast 100 companies who have to repay more than  US$ 7 billion before December 2012.

The growth story of India during 2005 to 2008 had made the FCCB (Foreign Currency Convertible Bonds) route as the preferred mode of financing to India Inc. Now, when the maturity is approaching , but the shares of these companies are unable to recover for number of factors a new crisis is emerging. These companies are required to repay an estimated sum Rs 33,000 crore.  From the current margins most of these companies will find it difficult to repay.

The option is to look  for cheaper loans to meet these repayment obligations. Finance at lower rates can come only from  trade surplus countries. Japan used to be one such source in past.  China can be one of such sources in the present situation. Chinese banks have more surplus than demanded by internal industry. This can be a win-win situation for both the countries.

How FCCB crisis can grip a company was seen in last week when GTL shares slipped below 50% mark in two days.  The other major companies which raised money via this route include 3i Infotech, Subex, Sterling Biotech, Country Club, JSW Steel, Tata Motors, Rolta, Educomp, Jaiprakash Associates, Tata Steel, Great Offshore, Suzlon, Firstsource, Pidilite, GTL Infra, Bartronics, Kinetic Engineering, Aban Offshore, Moser Baer and Hotel Leelaventure.

When Indian Stock market was zooming  and it was considered  to be more promising that China, many institutional investors in west came forward to invest in Indian companies with an option to convert to equity share subject to achieving targeted appreciation.  The players in Dalal Street have spoiled the mood  and shares of certain sectors – Infra, realty and capital goods have slipped down drastically and there does not  seem any possibility of turning around.

If the targeted price is not achieved on the browsers, the companies have either to repay the borrowed money or reset the conversion price at a lower rate as was done by Suzlon and Gitanjali Gems.  Many companies may not like to lose stake at lower rate.

In this situation the Chinese banks may emerge as the big winners since the companies would not like to default on FCCB redemption. Financing within India is very expensive and west has its own problems. Chinese banks get an opportunity to park their surplus at a higher rate than their internal rates, but that  is much reasonable for Indian corporate world. Thus, after toys, consumer goods and machines China may command over financial needs of India as well.

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Why does Gujarat Govt Charges Highest VAT on CNG?

Gujarat Government is as bad as a greedy business tycoon who spares no opportunity to extract maximum from the needy customers. Gujarat Compressed Natural Gas (CNG ) consumer pays highest Value Added Tax (VAT) in the country. The state is the biggest consumer of gas in the country, accounting for 40% of the total gas consumed.

In contrast to national Capital where there is no VAT on CNG a Gujrati consumer has to pay 15% VAT. Because of this, a consumer here has to pay between Rs37-38 per kg, as compared to less than Rs30 a kg in New Delhi.

Neighbouring state of the nation capital, Haryana has a rate of 5%. The host of D6 gas block Andhra is very close to Gujarat with 14.5% followed by Uttar Pradesh with 13.5%. Other states are at the same rate of 12.5% VAT.

Why does Gujarat levi so much excessive VAT? According to state energy minister, Saurabh Patel ,

"Gujarat is totally dependent on imported LNG to meet its gas requirements. CNG rates in Gujarat will go down by as much as 30% if Centre allocates cheaper D6 gas to the state."

The habitual statements of Gujarat Ministers to blame Center for all evils is the sad part. Rate of VAT has nothing to do with the source of Gas whether D6 or imported. This can only change the base rate. Getting more allocation of D6 gas will only change the base cost and not the VAT rate. Gujarat Govt should understand that people know the difference, only problem is that there is no body to raise there concern. 

This also does not mean that Congress is for lower rate of taxes. UPA government has levied 14.42% Central Excise duty (including 3% education surcharge) on gas. Base rate control is also with them for which there is no mercy. During the next 12 months the pricing formula to be followed by the Gas Distribution indicates a rise of at least Rs 6 per Kg before this year end. If Diesel price hike comes soon, the total hike on gas may also come immediately.

This is the time when the government should make the segmentation of fuels for passanger transportation and and goods transportation. It is the time where goverment should take a call and encourage cleaner fuels and technologies instead of penalising the users of clean fuels.

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Will Bihar follow Mamta or Modi ?

WILL BIHAR FOLLOW MAMTA OR MODI?

The search for new destination by entrepreneurs is leading them to Bihar, an unexpected idea five years ago. Adani to Britania all are looking for the opportunities in the state provided the Nitish government is willing to lay land carpet to them.

Land acquisition is the burning issue. Success of Mamta in West Bengal is seen as the out fall of Singur agitation. So many would like to copy the act of opposition. Unfortunately, national political parties too are trying to push their political agenda via this short cut. Can Nitish take risk and assist Industrialists in setting up the projects and accelerate the growth of one of the most laggard state – Bihar?

Mamta CM via Singur

Nitish and his team understands the risk. Bihar state cabinet in January approved new rules relating to the conversion of agricultural land into non-agricultural, which effectively absolves the government of responsibility in getting land for industry. These rules leave buyers free to purchase agricultural and other land directly from farmers at market rates and use it for industrial purposes, after paying a conversion fee.

But this decision is not making industry happy, because Bihar is not a state where required infrastructure for business is is available all around. Infrastructure is still in its nascent stage in Bihar. New projects are eyeing the locations like Hajipur, Bhagalpur, Muzaffarpur and Gaya where some industrial estates exist. The state is power deficient with a gap of over 2,400 MW, but nearby Chhatisgarh has sufficient excess power to fill the gap.

Ruchi Soya Products

Look at the list of companies eager to exploit the early bird advantage - Godrej Agrovet , Ruchi Soya, JP Associates, Bangur Group and Britannia. Adani group is also willing to participate in power and agro based industry.

Godrej Agrovat is setting up a Rs 70-crore cattle and poultry feed mill at Hajipur, across the Ganga river from Patna. Ruchi Soya is setting up agro-processing centres at Kaimur with an investment of Rs 200 crore. JP Group wants to put up a cement plant in Muzaffarpur district. Biscuit major Britannia, which is setting up a 50,000-tonne bakery at Hajipur.

If the transformation takes place Bihar will emerge as the next growth engine for eastern India. This part of the country has cheap labour and high growth potential. But the road is not so smooth. Political agenda always marches ahead of the development. In this democracy sensualism wins votes, sales the news and gets the headlines.

Narendra Modi is finding difficult to take forward the development agenda in Gujarat, facing tough opposition of NGOs and media. Chndrababu Naidu in Andhra could not take it through for long. Trying to walk on industrialisation road Buddhdev lost in Bengal How tactfully, Nitish can walk on this road would decide the destiny of Bihar.

Compulsory English brought down Guj HSC result

The Gujarat Higher Secondary Certificate examination results of the General & Commerce Stream declared by the Gujarat Secondary and Higher Secondary Education Board (GSHSEB) on 26th May, 2011 were the worst in last six years.

This year 77.04% students in general stream were declared successful, which is lower by 8.87 percentage points than last year’s results. The decision to make English compulsory has brought down the pass percentage of class XII general stream.English was made compulsory subject in HSC with the objective to make them prepared for competitive examinations. 66,163 students failed to clear English, which is the highest failure in any one subject.

The Jamkandorna centre in Jamnagar had the highest result of 99.05% and the lowest was 27.02% of Nizar centre in Surat. 235 schools of the state had 100% result. The result of English medium school (87%) was better than those of the Gujarati medium schools (76.58%), which is change in the trend, so far Gujarati medium schools have been doing better.

The Gujarat Secondary and Higher Secondary Education Board (GSHSEB) declared the results of HSC general stream on Thursday. Of the total of 3,53,543 students who had appeared for the examination, 2,72,373 cleared it.

Of all the students, 3,49,393 appeared for HSC commerce stream and 2,68,823 of them were declared Eligible for Qualifying Certificate (EQC). The commerce stream result was 76.94%, a dip by 8.89 percentage points from last year’s.

Girls out numbered boys as the success ratio of girls was better than boys. 88.16% of Girls passed the examination as compared to 79.03% of boys. Interestingly, more boys (1,44,187) had sat for the exam than girls (1,24,636).

From this year Gujarat Board has introduced grades as well as percentile ranks. The idea is to reduce the psychological pressure on the students. The students who scored marks in the range of 91-100 were awarded A1 grade. The board awarded E1 and E2 grades, which means 'Need more improvement', instead of marking 'fail' in the certificates of the students who did not fare well. In all, 84,151 students were given E1 and E2 grades.

There were no A1 grades in six districts - Dangs, Banaskantha, Patan, Porbandar, Narmada, Gandhinagar and Tapi. Adivasi dominated district Dahod produced the top result in the state with 88.10% while Narmada district scored the lowest with 56.42%.