Government continues to take the ordinance route :: HDFC Securities

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The Government approved an ordinance to make amendments to the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013. This was put in place by the United Progressive Alliance government.

The salient features are as following:

?    It does away with the requirement of written consent from 70 per cent of landowners for PPP projects in the infrastructure sector pertaining to national security, as well as for affordable housing projects and industrial corridors.

?    It also does away with social impact assessments for such projects.

?    There is no change in the clause relating to compensation for the land acquired. Land compensation for rural land continues at 4x the market price and urban land at 2x the market price.

?    The retrospective clause, which stipulates land-acquisition proceedings will lapse in case compensation is not paid or physical possession is not taken within a mandatory timeframe of five years, has also been relaxed. According to the amendment, the clause will now be applicable after 10 years.

Public -Private Projects account for 60 per cent of the Rs 18 lakh crore worth of stalled projects. 

There are our views on the subject

?    The ordinance will cut land acquisition time and to that extent aid in early implementation of the projects

?    However, the cost of acquisition will remain high. This does not address the need for cheaper land to be competitive

?    Cost over runs, due to the earlier delay in land acquisition, would however not be there.

The road sector, especially the BOT sector will be the main beneficiary. NHAI will have more teeth to speed up the land acquisition process. Relaxed provisions will help augment supply for affordable housing. The recent FDI relaxation for affordable housing will also pick up with the easier availability of land. Infrastructure stocks L&T, IRB, Ashoka , NCC, KNR and  Sadbhav should benefit.

Market Perception

After a failed winter session of the Parliament, the markets do not think very highly of the ordinance route. So stocks could gain one day to lose their sheen the next day.

Our view on the Ordinance route

The ordinance route is not a healthy route. But is the only option under the circumstances.
However, an ordinance is only a short term arrangement to enable the government to legally move in the direction. It saves time.

But at the end of the day, unless the Government is able to get the bill passed by the Parliament, it will be of no use.

The winter session of the Parliament was a complete failure. The government should marshal all its resources and the political acumen to prod the opposition into compliance and get the bills passed in the Budget session. But if it is going to fail in that, it should focus on improving the economy through measures that do not require the Rajya Sabha nod. The annual budget is one such item.
 
IDBI to sell part or entire stake in Care Ratings

Public sector IDBI Bank Ltd will sell a part or its entire 16.62% stake in credit rating agency Credit Analysis and Research Ltd (Care) after the bank?s board approved the share sale in a meeting yesterday.

The board at its meeting held on 29 December 2014 has permitted the sale of IDBI Bank?s part or whole shareholding of 4,818,292 equity shares (4.82 million) in CARE in one or more lots subject to compliance with all applicable laws, regulations and guidelines,? IDBI said without giving any more details.

IDBI is the largest shareholder in the ratings company and its stake in CARE rating is valued at Rs.684 crore currently.

Jindal Stainless to demerge business into three verticals via slump sale route

In a bid to reduce its mounting debt and to ensure better management of its business verticals, Jindal Stainless Ltd - India?s largest stainless steel producing company - said yesterday that it would de-merge its ferro-alloys, coke oven and stainless steel businesses into three different entities via the slump sale route.

According to the de-merger plan, shareholders of Jindal Stainless Ltd will be issued shares by the resulting de-merged company, Jindal Stainless (Hisar) under the share entitlement ratio of 1:1.

The company?s stainless steel business has been hived off to Jindal Stainless (Hisar) for a lump sum of Rs 2,809 crore. Under this, the parent company will part with its stainless steel manufacturing unit at Hisar in Haryana. Jindal United Steel will get the company?s hot strip plant in Odisha for a lump sum of Rs 2,412 crore, while the coke oven plant will go to Jindal Coke for Rs 492 crore.

The de-merger only distributes the debt of Rs 11,600 crore as on March 31, 2014 to the three de-merged entities, which does not really resolve the company?s issues.However, the de-merger opens the door for the company to sell-off some of its assets ? to third parties which then could be used to reduce the debt.
 
Cabinet clears hiking stake in IFCI to 51% by infusing Rs 60 crore

IFCI would be soon a government owned company. The Union Cabinet in its meeting Monday approved a proposal to infuse Rs 60 crore in it. The government currently has 47.93 per cent stake in IFCI, which is the country?s oldest financial institution. ?A contribution of Rs 60 crore to the capital of the company would raise the shareholding of the government to 51 per cent,? said the release.
 
Bharti holds the launch of VoIP packs

Bharti Airtel, India?s largest cellular operator, on Monday said it had decided against launching the recently announced special data packs for voice-over-internet-protocol (VoIP) calls, using applications such as Skype, Viber and Line.

The move follows news reports suggesting the Telecom Regulatory Authority of India (Trai) could issue a consultation paper on over-the-top companies (which deliver audio, video and other media over the internet without the involvement of a multiple-system operator in the control or distribution of content), including VoIP service providers.

Trai is yet to officially start consultations in this regard.

What the S&P didn?t do this year?

The S&P 500 closed at a new high on Monday. This was the 53rd time that the broad index has closed at a new high this calendar year.

However, what it didn?t do this year is also very important. This is the first calendar year ever in which the index has avoided four consecutive days of declines. According to the Dow Jones Indices, it has never happened.
 
S&P 500 inches to a new record

Key U.S. Indices closed mixed Monday as with S&P 500 and the Dow Jones Industrial Average going in different directions and the Nasdaq closing unchanged.

The S&P 500 edged up to another record close rising 2 points to 2,091. This was the 53rd new high closing for the broader index this calendar year. The Dow Jones Industrial Average, however, snapped a seven-session winning streak, falling 16 points to 18,038.

The Nasdaq Composite closed unchanged at 4,807.Oil prices resumed their south bound journey the fire  at Libya's central oil export port failed to nip oversupply concerns in the bud. A global supply glut has been exacerbated by flagging demand in key regions such as China and reluctance by OPEC members to limit production.

West Texas Intermediate crude slipped 2% to $53.69 a barrel after jumping more than 1% earlier in the session. The energy SPDR an ETF that tracks the S&P 500?s energy stocks, remains down 9.2% for the year.
 
Gilead Sciences moved was 3.7% higher after the biotech company announced it had expanded an agreement with Janssen R&D Ireland. Earlier, Morgan Stanley analysts upgraded Gilead to "overweight" from "equal weight," citing recent selloffs triggered by AbbVie's deal with Express Scripts.

The Manitowoc Company jumped nearly 9% as activist investor Carl Icahn disclosed a 7.77% stake. Icahn hopes to break up the company's heavy machinery and cranes segment and its food-service equipment branch into two separate businesses.

Sony shares were down 0.52% even after the studio reported $15 million sales from its digital distribution of controversial film 'The Interview.' The film has been streamed or purchased two million times via Google Play and YouTube.

Google's Gmail email service has become unavailable in China after a steady decline in traffic since Friday. The Chinese government is reportedly behind the block, The New York Times reported. Google shares down 0.76%.

Composite volumes for both the NYSE and Nasdaq were at roughly two-thirds of their 30-day average. Trading is expected to be light throughout this holiday-shortened week.
 
Greek drama: The global trading mood on Monday was dented by renewed uncertainty about the political landscape in Greece. The country?s parliament rejected Prime Minister Antonis Samaras?s candidate in a third and final presidential vote on Monday, meaning parliament will now have to be dissolved and a snap election held.

Greece?s ATHEX Composite index tumbled after the failed vote. But the pan-European Stoxx Europe 600 index closed higher, shaking off early losses.