After weeks of a search for adding large shale gas assets, Reliance Industries still had surplus cash left over to decide on a new diversification for the group. Through its wholly owned subsidiary company Reliance Investments and Holdings , Reliance announced a $217 million deal or INR 1020 crore to buy a 14% stake in the most prestigious and most Indian of retail lifestyle and luxury hoteliering brands, the Oberois' East India Hotels.

Thanks to the purchase from Reliance and Mukesh Ambani, MAX's Analjit Singh can bid goodbye to their hotel ambitions, ITC have a reasonable stopper in acting against the existing promoters and the existing promoters now holding a commfortable 46% stake in the company can take it to a higher 52% in both EIH Hotels and EIH Associates that carry the mid market brands.  

ADAG group and Reliance have recently ben stopped from growing their own multiplex' franchise in the same manner with BIG watching as Inox and Fame made equity sales disregarding their ownership interest from ADAG. In the EIH case Mr Oberoi has seemingly been proactive to fend off a possible ownership play from ITC which owns 14.98% stake and can trigger an open offer any time while now Reliance would also be in play to trigger such an open offer with its purchase of a 14.1% stake at 33% premium to $4 per share where the shares were yesterday at $3 per share on the bourses. However as with Analjit Singh / Goldman's purchase of 4% last time their might be a plan to give Reliance management interest and say going forward as the next round of equity consolidation is played out in the company.

Max and Analjit Singh were to hold 26% in the final arrangement and a veto on the board (Bloomberg UTV) while here Reliance is already only INR 70 crore away from an open offer  based on this purchase price. Another 3.72 million shares added and Reliance would be announcing  an open offer, but more likely Oberois would be issuing more shares to themselves now that they have the money to buy a bigger stake in both EIH and EIH Associate Hotels 

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GMR Infra could never make good on its Intergen purchase with IFRS brining threat of on balance sheet recognition of $12-13 billion of debt, but the latest news is that Tata Power may buy that 50% stake off GMR Infra's hands, even as the next round in the India Infrastrcuture story is set to begin after equity investors dumped the big play infrastructure stories in the August series exits. Tata Power, never a darling of the indian exchanges may yet find a new leverage a source of brand recognition as investors spread out their canvas for a selection of the best plays to keep in their portfolio

(Reuters) - Tata Power Ltd is in talks to buy a 50 percent stake in U.S.-based power utility InterGen NV for $1 billion to $1.2 billion, a source with direct knowledge of the situation said on Thursday.

Tata Power plans to buy the stake from GMR Infrastructure(GMRI.BO), an Indian builder of roads and airports.

GMR declined comment. A spokeswoman for Tata Power was not immediately available for comment.

GMR Infrastructure, based in Bangalore, bought 50 percent of InterGen in 2008 for $1.1 billion from a fund owned by American International Group Inc. The rest of InterGen is owned by Ontario Teachers' Pension Plan.

News reports earlier this month had said China Huaneng Group, the nation's biggest electricity producer, was in advanced talks to buy a 50 percent stake in U.S.-based power utility InterGen NV for about $1.2 billion.

InterGen is a power generation firm and owns 12 power plants in the United Kingdom, Australia, the Netherlands, Mexico, and the Philippines. The company's plants have a generation capacity of more than 8,000 megawatts.

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The Indian FAO series closed out amidst lots of groans and desi shakedowns including yours truly as the fundamental nature of arbitrage linked opportunity creates a dynamic investor landscape. While metros have stopped growing their pie for equities, the recent SEBI bulletins highlighted by ET indicate equities may be finding favor in new pockets now.

Cities like Kochi, Rajkot, Hyderabad and Pune accounted for 5.4% of the total cash turnover of the National Stock Exchange (NSE) in June this year compared to 4.9% in ’09-10 and 4% in ’08-09, according to city-wise data on the cash market turnover published in Sebi’s bulletin for July ’10. Many other smaller cities, which are categorised as ‘others’ in the data, recorded an improvement in their share to 8.1% from 7.4% and 5.7%, respectively. 

Unlike the trend in tier-II and III cities, the four metros have not seen much improvement in their share even though the stock exchanges recorded a sharp rise in securities turnover during the period. While Mumbai continues to dominate the broader picture with the share of 56.2% in June compared to 55.9% in 2008-09, the other three — Delhi, Kolkata and Chennai — saw their contribution decline substantially to 12.2%, 7.3% and 1.7%, respectively, from 15%, 9.2% and 2%. They recorded a fall despite a sharp rise in NSE’s turnover from Rs 27.5 lakh crore in ‘08-09 to Rs 41.2 lakh crore in ‘09-10. The figure amounted to Rs 11.3-lakh crore in April-July this year. 

What August underlined was the growing disaffection amongst investors with the 9000 strong investor club that seems to manage all price points on the Indian exchanges. Well, having had an eventful month ourselves with 25 days of gains marred by one last week of gainsaying and abject failure we have much to say on the indian price discovery mechanism. 

 

My secrets are thus: DIIs are the most inconsequential class of investors and have already exited these markets almost completely having counted their gains from the Day 1 post crisis in June/July 2009 or even in Jan-March 2009 when the markets spiralled to the bottom. The FIIs on the other hand are fresh and hungry still for investment plays and so is LIC amongst others who have a fat chequebook. But while I have no objections with the broker club on the bourses as I have said quite a few trend making notes and they have borne fruit, I find that the way lack of interest and weakness during the 7 days to expiry in F&O was used by a dozen bears to drive down the 5500 series of the Nifty totally OTM and wasted a real derogatory comment on the maturity of the Indian bourses. Stocks had fundamentally discovered 5580 as the new level and just because of a phantom of expiry, the index lost momentum and nearly changed direction. These unfortunate occurences will never be seen as coincidences as players might wish them to be and neither are these event any basis or triggers for the sell down witnessed,. It has still dented the principles of fair play and is unlikely to stand good for one of the largest public markets in the world. 

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While Cairn is happy enough exiting the country in less than three years, with Mangala having just ramped up this year, Vedanta is unlikely to get away with the audacious offer very quickly as the government vets its options. Cairn has shared Mangala fields with ONGC ( Interest in one block of 30%) and also the field in KG Basin is 51 owned by ONGC 

ONGC, GAIL and OIL in consortium to bid for Cairn stake

Because of the ownership interest ONGC is likely to practice its right of first refusal as the Vedanta sale may make its own part-shares worth much less and limited to the oil take everyday. Having made such momentous finds and being a specialist ONGC would be well within its rights to exercise its option for control. It has already received $3 billion worth of credit lines in the newly created consortium

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Reliance and ICICI Bank gave way to Unitech, PNB and Infosys as networks reviewed the Stock markets great climb back, recovering to its January 2008 levels. Even as the Nifty loses Unitech again as the company demerges and splits. Unitech may come back along with new peers GMR and JP associates and DLF may also try a bit of recovery with ICICI Bank and Reliance nearly losing 30% each from 2008. PNB Unitech and Infosys were among the 6 that nearly doubled in the same period. Infrastructure may now lead the regeneration for the Economy, India in relentless pursuit of double digit growth, after a reckoning for reality and construction led global happenstance of 2008.

As Dr Reddy and Bajaj come back to the National Stock Exchange Nifty index, the index also scaled a 2 year high led by these new market champions. Also evident is a supersizing of economic criteria and increased appetite in the financial markets even as credit growth remains sluggish and inflation becomes hard to control. Public Sector Banks, Lifestyle scrips like Talwalkars, Dominos' Jubilant Foods and much more threats of competition from USE and MCX in derivatives and commodities and new bank licenses that demand $250mn net worth tabs mark a new maturing of these financial markets still making do with a not more than 25 million investor population and 5% weightages in Emerging Market Indices and ETFs

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With Vedanta hooking up into the energy sector without prior experience, likely red flagged by the DGH/MoE for immediate follow up, the valuation for Cairn at $8.5 Billion for 40% of Cairn Energy's stake seems set to end up as the total outgo for a new entrant like Vedanta, policy riding rough shod over private exit ambitions. But as I am told Vedanta will be one of the only apart from BHP Billton to straddle mining and Oil interests. With three fields including Mangala in India, Cairn is fairly valued at $16 billion, which comes to around Rs 400 per share for the listed Cairn India, currently moving at a 10% discount, thus making $8 billion the asking price for a 50% stake covering the promoter purchase and the first open offer from VEdanta. After that the mandatory open offer for 20% will kick in and if completed Vedanta will end up with 75% of Cairn, LIC holding 2.5% and another holding 15%

Even IDFC has one share in Oil E&P fields thru its Private Equity Arm in a state owned GSPC/Andhra find and the p revailing prices of oil and gas are only likely to rise despite limitless capacity additions in NELP VII, or acquisitions by Reliance. 

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We already know Advertising forms bulk of Indian M&E revenues. In fact for TV it is 3 out of 4 revenue dollars that come from sponsorship and advertising. Indian M&E is INR 600 billion ( latest PWC report) and of course Cnema and TV are the major bearers of revenue till the social web converts its minutes into Dollars too.

The Indian Shampoo advertisers are about to g for another jugular to remind us of the tenuous connection with L'oreal roping in the Bachchan Bahu and Miss World Ashwarya Rai and P&G roping in belles by the dime, with all the slow mo specialists in light hearted Salman and abhay Deol  'sequels' ( seemingly originals but quiet elemenatrily lots of the same things :( ) Katrina, Neha Dhupia and Shilpa Shetty joining Dove for the up and coming campaign. Wonder, like sportsmen, bollywood belles will also get to testimonials for banks, with DeutscheBank and Stanchart making their intentions known in retail and HSBC busy as the World's local bank. The feminine allure or even the attractiveness allure is quite a tab for everyone's get rich dreams as the inflation brakes may finally be scrubbed off your ankles too.

Cadbury's payday has come and gone for a good 2010 there was no Canon in canon's campaign and Coke was forgotten in the Modi aftermath. But it is high time we got rid of the shampoo and the DTH from our eyes and got to some good new advertising, with India and Facebook competing for the same global dollar :)

 

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For some it would measure the robust nature of the Capital Markets, for most concurrently it would also show case the unidirectional progressive trends in the Indian Economy and the Fiscal Reforms Mechanisms, budgetary or other wise. When I just reviewed my first post MBA portfolio in India's sunrise sectors, I found a loss of many midcaps to corporate governance issues and the growth of some sectors as well as some timely exits after 5 years. The last first, the portfolio was anchored on two bellwethers, first BSES Ltd an epitome of efficiency, now part of Rinfra and exited at a 1000% gain in 1998/9 providing me much impetus during my early youth A INR 50K or $1700, the investment was worth INR500k at exit or $10k.

The other, part of the dot bust, was worth INR 32K when i bought it in 1995, and worth INR350K to me when I exited in May 2000, was NIIT Ltd, the Education sector now seeming to take off on its promised charter in 2010. I also had INR 25K-50K in upcoming promoters like S&S Power ( Circuitbreakers) , NEPC Micon ( Wind energy , ignonimous exit) Reliance Capital ( worth 10k in 1995, Now INR 77K so $320 now worth $1639 and ATV Projects in which I could only invest the residual INR 4k now worth INR 700/- worth a few OTM lots in the Options exchanges

The surprise of the pack, though my Capitaline software could never tell me if its turnkey projects were Oil customers at the time was my investment worth $1k in Aegis Logistics. Today, Cum Bonus and still invested I am looking at $1K growing into a $17,872K as of Friday's closing. Thus the $12k portfolio of that time after counting a 150% rupee depreciation to INR47,has still yielded more than $240K without including any reinvestments as the money was well spent. Also we are moving into new residence today, which my wife is taking care of. Only I wonder,w with all this reform, why they could not find me a formal leadershi p position in time and how I can grow this on my own, all alone.

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Much as the diffuseers on a Red Bull F1 engine, IDFC has been accumulating kinetic energy leading with Rinfra and GMR in growing FDI in Indian infrastructure plays. Now that it has been a consistent performer, IDFC would necessarily use the uptick in investment banking and asset management revenues to greater branding in the institutional circuits, esp for getting maximum pricing benefits in European borrowings.

As an infrastructure NBFC, it has much more advantages despite the 15% CAR requirement which for its 26% current par score is nary a problem. Even as Button and Webber continue the tournament conquest, IDFC can easily double its book of assets with a great infrastructure project pipeline in the country across aviation, toll highways, ports and power. PFC in fact has already established targets for lebnding more than it could in its incipient charter in the last 5 years. FIIs are discerning investors and as accumulation in key infra plays and midcap lifestyle plays continues in August, the Indian dream is slowly plodding its path to glory, waiting for some quick additions to the larger infrastructure portfolio of the nation in India and internationally thru Reliance, Adani Enterprises and others.

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For any special situsations strategy fund manafgers out there, Indian markets have had screaming opportunities in the three strategies above which while not signalling turnarounds do signal sector wide up ticks and great unlocking of value in the businesses. 

 

Unitech is demerging its "non core" assets worth $1 billion into a new Unitech Infra company which will own three amusement parks in Delhi, Noida and Chandigarh, 11 hotels with 2100 rooms and 10msf in real estate going to 35 msf in three years. It also has an order book  going from a $100 million in Power transmission projects now to $1 billion in the pipeline by end 2010. That is one great piece of value you must own. The real estate industry conditions have finally moved after months of inactivity and a particularly brutal bout of credit sdqueeze from banks' real estate credit overexposure. Strong Management and direction and also the take off of its telecom business ( again in a separate company as Uninor) will keep this flagship of the group a great builder of value in the new lifestyle economy ethos.   Unitech has also bought back its London AIM listed Unitech Corporate Parks for $159.6 million under Unitech Ltd as part of the plan last week.

Credit rating agency Fitch on Tuesday placed four real estate companies — Unitech, Omaxe, Ansal Properties and Parsvnath — on rating watch positive, in view of the improvement in industry fundamentals. Rating watch positive reflects the possibilities that the ratings can either be upgraded or affirmed at the current levels, Fitch said.

Fitch said sustainable operating performances, continued de-leveraging by developers over a longer period could lead to rating upgrades in the second half of the year. “The fundamentals of the domestic realty sector are improving, as seen by better liquidity and improved demand,” Fitch said.

 

IDFC is the consolidation play, managing an asset book already as much as $8.080 Billion in the preferred Infrastructure sector. Infrastructure financing / refinancing is fail safed by government regulation and lets this industry pioneer to establish value leadership with current lending net capital adequacy standing at a high 26% even against the speciality NBFC requirement of 15% 

 

The bigger lifestyle play, as also under professional; management and deeper roots that preclude private equity investment, ITC has just split its stock this week and is trading at alittle below $4, The business has the largest investments in retail distribution and rural retail as also the expertise and the brand valuations in Tobacco, Foods , Paper and Hotels where it remains an acclaimed international brand with the Taj from Tatas and the last of the Oberoi/Trident franchises. 

 

Just a heads up, a lot of current research is available for these blue chip plays.  

 

Meanwhile the ADAG company Reliance Media World, now Reliance Broadcast Networks is doing well in radio and outdoors, owning 21% of the radio market with a 64% ad inventory utilisation signalling the good times. Radio is 50% of this Reliance Media play. RBNL is planning its first profits in 2012 and is a PE play with high 7% QoQ growth in June 2010

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Not much fun, i admit, wesp when you are busy guiding the world's destiny..but signing up at Postrank connect is a must and we want to say that at the top of our  voice. The new world is here. The boat ghas sailed. In true digital tradition, you can will yourself on the bus at any place you want..

 

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Portfolio investment in Indian companies has gone up significantly, July adding between $3.6 to $ 4 billion in FII investment which is continuing in the first few sessions in August 2010 as well. Midcap stocks seem to be holding special interest in this accelerating economy, esp the few available in real estate and infrastructure like IRB, IVRCL and JP Infra (JPINFRATEC) Also there are the usual under the surface speculations on increasing FDI limits in real estate to compete with official moves in updating FDI status in Telecom, Media and Defence. 

The corresponding Net FDI number in June was a little over $2 billion. In June FIIs had stocked up on Oil Marketing Cos land BPCL is continuing  good run even now. Check out our top 1% portfolio at http://next.advantages.us Last year FII purchases were easier with consistent QIPs from issuers in tough but remunerative real estate and infra sectors as well as PSU divestment candidates

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