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Indian share markets recovered lost ground and remained above the dotted line in the post-noon trading session. Majority of the sectoral indices are trading positive with pharma, realty and FMCG stocks leading the pack of gainers. Only metal, auto and capital goods stocks are languishing in red.
Majority of the power stocks are trading negative with CESC Ltd and PTC India the biggest losers. Jaiprakash Power and National Thermal Power Corporation (NTPC) are among the few stocks trading in green. As per a leading financial daily, power producers received some relief after seven ultra mega power projects (UMPPP's) and 106 mega power projects have been exempted from higher import duty on power equipment. The Finance Ministry had earlier increased the import duty on power equipment from 5% for capacities below 1,000 MW and nil duty for capacities above 1,000 MW to over 22%. One UMPP by Tata Power (Sasan) and three UMPP's by Reliance Power (Sasan, Krishnapattnam and Tilaya) are among the projects that have been exempted from import duty. Apart from UMPP's, even mega power projects and expansion of existing mega projects that had received Power ministry approval till July 19 2012 will not have to pay incremental import duty. Tata Power has welcomed the move saying that easy import of equipment for power projects has been a major contributor to capacity additions in the 11th five-year Plan, with almost 50% of additional coal-based capacities depending on imported equipment. Reliance Power stock is down 1.1% whereas Tata Power stock is trading flat.
The realty/construction stocks are trading mixed with Peninsula Land and PVP Ventures being the biggest gainers and Orbit Corp and Prajay Engineering being the biggest losers. After witnessing a very difficult 15-month period ended June 2012, construction company IVRCL is looking at making some changes to its future strategies. This includes staying away from bidding for new road BOT projects for a period of three to six months. The rationale for doing so is the project related issues such as delays in land acquisition & payments, right of way and lenders being weary towards such projects. The focus for the company over the short term would be on completion of its existing road projects and monetizing them as soon as they start earning revenues. As per the management, this move would help IVRCL in reducing its overall debt burden, which stood at a high Rs 52 bn at the end of FY12 (June 2012), apart from improving margins. Finance costs for this period totaled to Rs 7.3 bn.
The company also plans to monetise its existing road projects, control costs by downsizing and also look at business opportunities overseas (targeting 50% revenue contributions from this segment in a period of 4-5 years). In addition, IVRCL is also looking to strengthen its manufacturing operations and focus on receiving its payments. IVRCL stock is down 0.4%.