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INDIA UPDATE: Energy and Infrastructure Engine chugs up the boom

ENERGY

Kirit Parikh report released today, recommends freer market pricing and a longer term solution for the Indian Oil Energy majors. The implementation and adoption by Pranab’s government of course is dependent on political and economic convenience.

The Oil Industry cannot support the burden of subsidies with the internal prices of Oil fluctuating in a wide band. Mr Parikh pegs losses at Rs 40000 Crs annually for the Oil companies. A Rs 6 increase in the price of Kerosene ( lower end derivative) is recommended. As losses on petrol are Rs 3 per liter, a price rise of Rs 4.70 per liter on Petrol and Rs. 2.30 per liter on Dieel are likely if free pricing is implemented ( State owned Oil companies)

ONGC and OVL to share the burden of subsidy with the government to the extent of early blocks granted by nomination and funded by the government

GAIL free from subsidy sharing formula because it has no production facilities

Rail Freight to catch on as the cost of diesel per Kilo Tonne per Kilometer is 20% of Road transport costs

KP recommends freeing of Petrol and Diesel Pricing at Retail

Also, Kerosene subsidy should be granted to families based on Smart Card and UID

AVIATION

Aviation major Jet negotiated a 11% stake in GMR MAS Hyd Airport Engg Company for fleet maintenance of Jet as per an MOU signed earlier in January

Jet Airways also improved Domestic yields by 24% in the final Quarter of 2009 and the industry is hoping for business and premium class demand revival in the coming two quarters. supply side controls and lower fuel prices also contributed to the increased yield

POWER / DIVESTMENT

NTPC issue pricing should flummox investors even as Power Grid and REC get in line. SAIL has got approval for a 10% Offer for sale and a 10% issue of new shares in the coming year and next. Steel Authority performance is no longer an industry benchmark, while NTPC’s lead in the Power sector is also likely in question as Power Distribution and Transmission become central to Policy.

MUTUAL FUND INDUSTRY

The Mutual Fund Industry’s innovative Liquid Plus schemes that now constitute 40% of the Rs 735000 Crore ( INR 7.35 trillion) Industry may soon be switched out as Government takes cognizance of the differential tax treatment ( Individuals 14%, Corp 22%) vs. Liquid Schemes 33%. Also RBI had earlier challenged banks on parking excess cash in these money market schemes with Mutual funds as more than Rs 1.35 trillion is parked in such schemes.

RETAIL LIFESTYLE

ITC Fortune has reported 2000 new rooms planned under the budget franchise in the next 2-3 years. 9 new hotels are coming online in 2010, 25 by 2014 which will be close to 6000 rooms

Maruti Suzuki led a great Indian Auto revival bringing sales of 175000 Cars in January domestically. Adding at least 50 K in Exports from Hyundai and Maruti alone, the figure, if repeated through the year could finally break the hold of 2- 3 wheelers in economic reporting, lol

INOX bought 200 additional screens into its fold with a 43% investment in Fame Cinemas, each screen costing them between 1.3 to 1.7 crores or $300K much below the market cost of $500K of setting up a new screen. It is increasingly looking unlikely that PVR will complete its purchase of DT Cinemas.

We have tweeted and carried in-depth analysis of each of these deals, subjects and factors in India’s new journey. Call us on ‘hyperchat’ if you need a breaking tweet.

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