The Indian markets continued to move downwards on the back of persistent profit booking activity during the previous two hours of trade. Currently, stocks from the realty and metal spaces are leading the pack of gainers. They are followed by stocks from the banking and capital goods spaces. The BSE-FMCG Index is the sole gainer amongst sectoral indices at the moment.
The BSE-Sensex is currently trading down by around 110 points (down 0.6%), while the NSE-Nifty is down by about 45 points (down 0.8%). Mid and small cap stocks are also seeing some pressure with the BSE-Midcap and BSE-Smallcap indices trading lower by 0.9% and 0.7% respectively. The rupee is trading at 46.89 to the US dollar.
Power stocks are currently trading weak with CESC, Tata Power and Torrent Power leading the pack of losers. After seeing a tough time in acquiring strategic coal assets over the past few years, India’s largest power generation company NTPC is now looking at taking the tender route to secure itself for its future fuel requirements. A leading business daily has reported that the company has decided to invite offers from foreign miners that would be on a lookout for strategic investors. It is reported that the company will float a global offer through an expression of interest (EoI). This would be a good move as it would allow the company to target those players who would be genuinely interested as well as difficult to locate otherwise.
It is believed that NTPC’s coal requirements are likely to double to 30 m tonnes per annum by 2017. As such, it would require secure supplies of fuel to run its operations as well as keep its costs under control. It may be noted that the long term plan (by the year 2032) of the company is to increase its generation capacity by 4 times from the current capacity of 32,000 MW. As such, it would be looking at importing more coal to meet its requirements. However, the same could take a hit on profitability as imported coal costs about 40% more than the domestic coal. The company has looked at acquiring coal assets in countries such as Mozambique, Indonesia, Australia and South Africa for few years. However, it has not really been successful in this area.
The stock of Power Trading Corporation (PTC) is trading firm on the back of its subsidiary PTC India Financial Services (PIFS) being given a infrastructure financial company (IFC) status by the RBI. PFS is involved in providing debt and equity support to power projects. The key advantage for the company is that with the IFC status, PIFS will be able to raise money at cheaper rates and will help in reduce the cost of borrowings to a considerable extent. It is believed that IFCs can raise ECBs (External commercial borrowings) of up to 50% of their net worth through automatic route. They can also raise funds through tax-free infrastructure bonds. In addition, it also allows the company to increase its exposure to a single borrower or a group of borrowers. PTC currently holds 77% equity in PIFS, with the remaining held by GS Strategic Investment and Macquarie India Holdings. PIFS has so far sanctioned funds (both debt and equity) of around Rs 30 bn to more than 40 power projects.