Chillin' out till it needs to be funded
Original at INDIA.ADVANTAGES.US
The news: the government wants more money for sales made to Vedanta by providing Call options at bargain basement prices that are no longer considered valid per the latest decision today.
the opinion: The government should put down its foot and get the best price for the stakes. Also, it must push ahead and not allow Cairn to get away with cutting off ONGC interests in India in its JVs with a preemptory sale to Vedanta (again) and Jairam Ramesh did well to make sure Vedanta stopped and looked ( as it is in a hurry to get basement deals) in Orissa but these are delays not the end
A focussed existence on the Indian emerging market, did open our readers to a world of infrastructure financing, a few tweets about the upcoming budget’s focus on healthcare and social equalisation, education and information and lastly it engaged you in a deep and strong relationship of FDI to resource rich economies naming Australia and china the major players in Asia on that. In more detail we have discussed the Governments bountiful stakes in public sector corporations that have yielded nearly a trillion rupees to reduce the budget deficit from investing institutions.
Even as the FDI story gets weaker in India in 2011 ( in September 2011 itself India imported only $6 billion in capital, down 33% from September 2010 we still have the fastest growing Economy in the world putting the brakes on and our resource led corporations, not just Steel makers but the Coal India and the Reliance shale gas table purchases, the ONGC and the OIL purchases and we have frequent spats with each equity transaction in the area. Vedanta and thence Hindustan Zinc, BALCO, Sesa Goa and Sterlite are at the receiving end again, after Cairn got the shaft for more than 6 months for throwing short stuff at the Navratnas, we now have BALCO not being able to sell its residual equity stake to Vedanta as per agreement. The recent newsa is also not on Google or Facebook as our capital markets community is a little tired from all the heavy discussions in the credit policy, IT and now healthcare and infrastructure fields, so i decided to take the detour to point out these things that matter.
What this issue brings to mind?
Like all other sectors where India took its time, we will eventually lead in Resource led businesses too, but behind China and maybe Australia too as they have one or two mega corporations already. Thus, the first is apart from selling our stakes in the PSUs and solving the environmental tangles in each, what else will we achieve in this sector? A few more purchases and a lot of international bickering as each deal in the sector is red marked by the domestic economies and for now the superior deals on the table by international players except the Mittals and the Agrawals
CORPORATE GOVERNANCE ISSUES AND A LACK OF BIG GOVERNMENT
Most corporates questioned on corporate governance emanate from the big bullies of the resources sector and frequently the problem is compounded by easy access to graft and a question of public approvals for environment and the resources themselves in this sector. Also Indians will miss the big government support of the Chinese in these businesses when they go ahead with their global attempts, maybe our global corps will be only Airtel and Infosys( with onsite charges for manpower exported at big government determined prices)
A lack of policy because of a lack of precedent and a preeminent desire for perfect storms from the citizens may also be a determining factor in any such deals and consequently any global footprint we might desire.
A LACK OF BANK UNDERWRITING SKILLS IN SPECIFIC BUSINESSES
Though financing will never be a problem for signature deals, the way FDI potential of the economy has been reduced and increased without any permanent footprint of the global players we will feel a pinch in the cardiothoracic functions when we end up relying on promoter names for any underwriting or due diligencewe may have desired for any deals in the sectorr. As usual, the global finance players would thus continue to balk at refinancing India originated deals for a myriad other reasons and this basic fact. They are almost sight seeing members of the strategic conversations of the deal in true seventies fashion.
WHY DID THE BUILD UP LACK A PUNCH?
This sector does not gain adequate media attention because unlike Telecom and healthcare it is not been so much a part of the India story, but also because the antiquated emotions covering up for corporate governance and ‘sources’ mean a veil of secrecy even in decision making circles in our old economy lurking in this resource led sector build up in India. though Vedanta stocks are favored as defensives in many phases of the Capital Markets and they have thus a more loyal following than most, Vedanta still does not seem to merit trust or faith from any of the stakeholders, much like the Jindals some times and definitely prone to snake charmer deals than most
DAVOS starts tomorrow and it is our 62nd Republic Day anniversary, I doubt we will do much dealmaking and relationship building at Davos either