Oil and Natural Gas Corporation (ONGC) has taken control of Imperial Energy Plc for 1.3 billion pound ($1.9 billion) after an overwhelming 96.8 per cent of London-listed firm's total shareholders accepted its takeover offer.
The deadline for the state-owned firm's 12.50 pounds per share offer closed yesterday and 99,241,110 or 96.8 per cent of the shares were tendered, ONGC Videsh (OVL) informed the London Stock Exchange.
ONGC Chairman R S Sharma said the company owed the acquisition to the government support, which has seen OVL in the past seven years increase its number of projects to 39 in 17 countries, from just a single project in Vietnam.
OVL, the overseas arm of the state explorer, needed 90 per cent shareholders to approve its deal, which will result in delisting of Imperial.
Imperial will be delisted from LSE after it "squeezes out" the remaining untendered shares by posting them cheques of the offer amount and telling the shareholders that these untendered shares were no longer valid.
Imperial, the Leeds-based firm that has oil producing blocks in Tomsk region of western Siberia in Russia and Kastanai in north-central Kazakhstan, would be the biggest overseas ever acquisition by OVL.
It had paid $1.7 billion to buy a 20 per cent stake in Exxon Mobil Corp's Sakhalin-I field in Russia and $785 million for a stake in the Greater Nile project in Sudan, both in 2003.
OVL will fund the transaction through a combination of loans from the parent company worth $1 billion-equivalent rupee loan. ONGC would lend close to $1-billion to fund the transaction at 5.96 per cent interest rate.
The entire acquisition and subsequent delisting may take two to three weeks, the source added.
Wednesday, December 31, 2008
Tuesday, December 23, 2008
Essar withdraws Jamnagar SEZ plan
Mumbai-based infrastructure conglomerate Essar group has withdrawn its plans to build a 1,125 hectare Special Economic Zone (SEZ) in Jamnagar (Gujarat) because of the adverse economic environment, a commerce ministry official said.
The proposal was to set up a 16-20-million-metric-tonne-a-year petrochemical refinery at an investment of Rs 15,000 crore, one of the largest SEZ proposals, according to information available on the company’s website.
The Essar SEZ had received “formal approval”, a second-stage approval that means the project had land in its possession (an earlier stage is when SEZs receive “in-principle approval”, when their plans are approved but the land has not been acquired).
Essar did not respond to an email questionnaire asking why it had withdrawn and seeking details of its alternative plans.
The development comes soon after India’s largest realtor, DLF Ltd withdrew a “notified” SEZ in Delhi owing to doubts about its financial viability. Notification, which is the final approval for any SEZ application, makes the zone eligible for tax benefits under the SEZ Act of 2005.
Essar’s project was, however, already facing a controversy over the declaration of land.
In August this year Essar had requested the Board of Approval (BoA), an inter-ministerial approval body for these tax-free enclaves, to reduce the area of the SEZ to about a fifth of the originally proposed 1,125 hectare. Essar also wanted the zone re-classified from its original multi-product classification to one for petrochemicals and petroleum.
The department of revenue, which has a representative on the BoA, said the zone did not have the land in its possession and wanted to know how the zone received formal approval in these circumstances.
In its meeting on August 1, the BoA, which is chaired by Commerce Secretary Gopal K Pillai, had decided to examine the possibility of the developer misrepresenting facts.
The SEZ is located at a region where about 70 per cent of India’s imported crude lands through oil tankers. Essar already has a 10.5-million-tonne-a-year refinery at Vadinar in the area. Jamnagar also houses Reliance Industry Ltd’s 29-million-tonne SEZ-based refinery and 33-million-tonne export-oriented unit-based refinery.
Essar’s other SEZs in Gujarat include a 247-hectare engineering SEZ in Hazira, which is currently being developed.
The proposal was to set up a 16-20-million-metric-tonne-a-year petrochemical refinery at an investment of Rs 15,000 crore, one of the largest SEZ proposals, according to information available on the company’s website.
The Essar SEZ had received “formal approval”, a second-stage approval that means the project had land in its possession (an earlier stage is when SEZs receive “in-principle approval”, when their plans are approved but the land has not been acquired).
Essar did not respond to an email questionnaire asking why it had withdrawn and seeking details of its alternative plans.
The development comes soon after India’s largest realtor, DLF Ltd withdrew a “notified” SEZ in Delhi owing to doubts about its financial viability. Notification, which is the final approval for any SEZ application, makes the zone eligible for tax benefits under the SEZ Act of 2005.
Essar’s project was, however, already facing a controversy over the declaration of land.
In August this year Essar had requested the Board of Approval (BoA), an inter-ministerial approval body for these tax-free enclaves, to reduce the area of the SEZ to about a fifth of the originally proposed 1,125 hectare. Essar also wanted the zone re-classified from its original multi-product classification to one for petrochemicals and petroleum.
The department of revenue, which has a representative on the BoA, said the zone did not have the land in its possession and wanted to know how the zone received formal approval in these circumstances.
In its meeting on August 1, the BoA, which is chaired by Commerce Secretary Gopal K Pillai, had decided to examine the possibility of the developer misrepresenting facts.
The SEZ is located at a region where about 70 per cent of India’s imported crude lands through oil tankers. Essar already has a 10.5-million-tonne-a-year refinery at Vadinar in the area. Jamnagar also houses Reliance Industry Ltd’s 29-million-tonne SEZ-based refinery and 33-million-tonne export-oriented unit-based refinery.
Essar’s other SEZs in Gujarat include a 247-hectare engineering SEZ in Hazira, which is currently being developed.
Monday, December 22, 2008
UK's largest union backs govt bailout for Tata's JLR
Tata Motors' case for state financial aid for Jaguar Land Rover today received support from Britain's biggest trade union, which wants the government to provide help by Christmas, as Tata has injected more cash into the company.
Tony Woodley, joint general secretary of Unite, said there was little reason for the British government not to act now that Tata Motors had injected more cash.
Jaguar Land Rover, which employs 15,000 people in Britain, was reported to have received "tens of millions" from Tata Motors, which will stave off an immediate cashflow crisis.
Tony Woodley, joint general secretary of Unite, said there was little reason for the British government not to act now that Tata Motors had injected more cash.
Jaguar Land Rover, which employs 15,000 people in Britain, was reported to have received "tens of millions" from Tata Motors, which will stave off an immediate cashflow crisis.
Tatas to raise Rs 15k cr more
Rating downgrades may make fund mop-up difficult
Hit by domestic slowdown and recession in the West, corporate giant Tatas are striving to raise over Rs 15,000 crore on top of the Rs 13,000 crore it got from the sale of equity in a telecom subsidiary.
Resource mobilisations through public offer of debt securities, sale of Tata Motors' vehicle loan pool, private equity placement and soliciting public deposits apart, the group is also seeking support from the UK and Dutch governments for rescuing its prized purchases Corus and Jaguar-Land Rover.
While Tatas' discussions with the governments in Britain and Netherlands have not taken a final shape either way, the market regulator has asked for clarifications on an open offer related to the sale of 26 per cent equity in Tata Teleservices to Japan's NTT DoCoMo. The company refused to comment on the development.
There were also no response on the quantum and options of fund mobilisation, but estimates show that it could be in the range of Rs 15,000 crore to Rs 20,000 crore.
After initiating the process for raising about Rs 2,700 crore through public deposits, Tata Motors is believed to be mulling to raise about Rs 10,000 crore by selling its vehicle loan pool, most probably to a group company. At the same time, another group entity Tata Capital is looking to raise about Rs 1,000 crore through a public offer of debt securities. The same company is also planning to raise about $350-500 million (about Rs 2,000 crore) through the private equity route.
The various fund-raising plans coincides with a string of rating downgrades for some group companies such as Tata Motors, Tata Steel and Tata Chemicals by credit rating agencies, including Standard and Poor's and Moody's — a development that makes raising debts difficult and costlier.
The group, whose automotive arm is seeking a £1 billion (about Rs 7,000 crore) financial aid from the government in the UK for its British unit Jaguar and Land Rover, has also sought assistance for Corus employees in Europe.
On the front of NTT DoCoMo deal, an open offer was announced on November 14 and the Securities and Exchange Board of India (Sebi) was subsequently approached by the merchant banker of the offer, Lazard India Private, on December 1 for the regulatory go-ahead. According to the latest information available on Sebi's website, "reply (is) awaited from MB (merchant banker) on clarifications sought" regarding the Rs 949-crore open offer.
On Tata Motors, rating agency Crisil has said that the "performance of retail finance portfolio of Tata Motors and Tata Motors Finance has been weak," and pointed to higher rate of default by its borrowers to 9.7 per cent in November, 2008 from 6.2 per cent in September 2007. "The vehicle financing business of Tata Motors and Tata Motors Finance disbursed Rs 10,300 crore of loans in 2007-08 (April 1 to March 31), as against Rs 9,400 crore in 2006-07." About its public deposit scheme, through which it can raise up to Rs 2,700 crore, a Tata Motors spokesperson had said earlier in the month this was for "ongoing requirement."
"We also believe that from the investor's point of view, it is an appropriate fixed-income instrument, in the light of the current market environment."
The company met with a cold response from investors recently in its bid to raise up to Rs 7,200 crore through sale of shares to existing equity holders for part funding the JLR deal and promoters had to chip in to save the issue that closed in October.
Hit by domestic slowdown and recession in the West, corporate giant Tatas are striving to raise over Rs 15,000 crore on top of the Rs 13,000 crore it got from the sale of equity in a telecom subsidiary.
Resource mobilisations through public offer of debt securities, sale of Tata Motors' vehicle loan pool, private equity placement and soliciting public deposits apart, the group is also seeking support from the UK and Dutch governments for rescuing its prized purchases Corus and Jaguar-Land Rover.
While Tatas' discussions with the governments in Britain and Netherlands have not taken a final shape either way, the market regulator has asked for clarifications on an open offer related to the sale of 26 per cent equity in Tata Teleservices to Japan's NTT DoCoMo. The company refused to comment on the development.
There were also no response on the quantum and options of fund mobilisation, but estimates show that it could be in the range of Rs 15,000 crore to Rs 20,000 crore.
After initiating the process for raising about Rs 2,700 crore through public deposits, Tata Motors is believed to be mulling to raise about Rs 10,000 crore by selling its vehicle loan pool, most probably to a group company. At the same time, another group entity Tata Capital is looking to raise about Rs 1,000 crore through a public offer of debt securities. The same company is also planning to raise about $350-500 million (about Rs 2,000 crore) through the private equity route.
The various fund-raising plans coincides with a string of rating downgrades for some group companies such as Tata Motors, Tata Steel and Tata Chemicals by credit rating agencies, including Standard and Poor's and Moody's — a development that makes raising debts difficult and costlier.
The group, whose automotive arm is seeking a £1 billion (about Rs 7,000 crore) financial aid from the government in the UK for its British unit Jaguar and Land Rover, has also sought assistance for Corus employees in Europe.
On the front of NTT DoCoMo deal, an open offer was announced on November 14 and the Securities and Exchange Board of India (Sebi) was subsequently approached by the merchant banker of the offer, Lazard India Private, on December 1 for the regulatory go-ahead. According to the latest information available on Sebi's website, "reply (is) awaited from MB (merchant banker) on clarifications sought" regarding the Rs 949-crore open offer.
On Tata Motors, rating agency Crisil has said that the "performance of retail finance portfolio of Tata Motors and Tata Motors Finance has been weak," and pointed to higher rate of default by its borrowers to 9.7 per cent in November, 2008 from 6.2 per cent in September 2007. "The vehicle financing business of Tata Motors and Tata Motors Finance disbursed Rs 10,300 crore of loans in 2007-08 (April 1 to March 31), as against Rs 9,400 crore in 2006-07." About its public deposit scheme, through which it can raise up to Rs 2,700 crore, a Tata Motors spokesperson had said earlier in the month this was for "ongoing requirement."
"We also believe that from the investor's point of view, it is an appropriate fixed-income instrument, in the light of the current market environment."
The company met with a cold response from investors recently in its bid to raise up to Rs 7,200 crore through sale of shares to existing equity holders for part funding the JLR deal and promoters had to chip in to save the issue that closed in October.
Poor sales push luxury brands to discounts
Offer 30 to 50% price-offs as buyers stay away.
Fearing a drop in sales with corporate India facing job insecurity and pay cuts, luxury brands like Gucci, Jimmy Choo, Bottega Venetta, Salvatore Ferragamo, Ermenegildo Zegna, Moschino and Charriol have started offering discounts of 30 to 50 per cent on Autumn/Winter 2008 collections.
Earlier this week, Salvatore Ferragamo began offering 30 per cent discounts. Menswear and accessories brand Ermenegildo Zegna, too, is offering 30 per cent off on clothes and 40 per cent off on belts and shoes plus gift vouchers worth Rs 10,000 if the bill exceeds Rs 100,000 after discounts.
Even Gucci, the iconic Italian fashion and leather goods label, has deviated from its no-discounts policy for the first time and is offering 50 per cent off on selected bags and shoes in one of the most important months for luxury sales. The starting price for Gucci’s products is Rs 30,000 and for limited editions, upwards of Rs 150,000.
Globally, luxury and premium retailers had advanced their sales by a month to October as developed economies headed into recession. Likewise in India, sales are being held in December instead of January.
"Business is low as footfalls and spending has reduced. To increase volumes we are having our sales early this season in December instead of January," said Mohan Murjani, chairman of the Murjani Group which has introduced brands like Gucci, shoe and bag brand Jimmy Choo and Bottega Venetta, a luxury leather goods maker, in India.
These sales, he added, will only help the company meet it sales targets but would mean a decrease in profitability.
"The aspiring class is holding back on buying luxury goods, so there is an inventory build-up," explains Abhay Gupta, executive director of Blues Clothing Company, Versace’s exclusive franchisee in India.
“During a slowdown, luxury is the first segment to take a hit,” said Rajiv Popley, director of Popley and Sons and purveyors of luxury brand watches like Tag Heuer, Omega and Vertu (the British luxury mobile phone). “As such, we expect our luxury brands to take a dip of 10 to 15 per cent."
The Indian luxury market is estimated to be worth $1 billion. The market, according to an AT Kearney report, is slated to touch $30 billion by 2015.
The spenders, noted the report, are industrialists or owners of small businesses (49 per cent) and professionals from the aspiring class -- the corporate sector (29 per cent), followed by IT/ BPO (8 per cent), and others like doctors, lawyers, media and finance professionals.
Luxury goods marketers are basing their numbers on the fact that companies are cutting back on compensation packages and bonuses. "About 40 per cent of Indian organisations this year are looking at very conservative bonus payouts. This will have an impact across the board," said Sandeep Chaudhary, business leader, consulting, for India, Middle East and SAARC, Hewitt Associates.
The news is worse for senior-level executives in the Rs 1 crore compensation range. "Thirty-five to 50 per cent of senior executives’ compensation is variable pay and this will be impacted 20 to 25 per cent this year. Also, stock options, which account for 40 per cent of the annual pay of top-paid executives, are also down to 10 per cent," he added.
Fearing a drop in sales with corporate India facing job insecurity and pay cuts, luxury brands like Gucci, Jimmy Choo, Bottega Venetta, Salvatore Ferragamo, Ermenegildo Zegna, Moschino and Charriol have started offering discounts of 30 to 50 per cent on Autumn/Winter 2008 collections.
Earlier this week, Salvatore Ferragamo began offering 30 per cent discounts. Menswear and accessories brand Ermenegildo Zegna, too, is offering 30 per cent off on clothes and 40 per cent off on belts and shoes plus gift vouchers worth Rs 10,000 if the bill exceeds Rs 100,000 after discounts.
Even Gucci, the iconic Italian fashion and leather goods label, has deviated from its no-discounts policy for the first time and is offering 50 per cent off on selected bags and shoes in one of the most important months for luxury sales. The starting price for Gucci’s products is Rs 30,000 and for limited editions, upwards of Rs 150,000.
Globally, luxury and premium retailers had advanced their sales by a month to October as developed economies headed into recession. Likewise in India, sales are being held in December instead of January.
"Business is low as footfalls and spending has reduced. To increase volumes we are having our sales early this season in December instead of January," said Mohan Murjani, chairman of the Murjani Group which has introduced brands like Gucci, shoe and bag brand Jimmy Choo and Bottega Venetta, a luxury leather goods maker, in India.
These sales, he added, will only help the company meet it sales targets but would mean a decrease in profitability.
"The aspiring class is holding back on buying luxury goods, so there is an inventory build-up," explains Abhay Gupta, executive director of Blues Clothing Company, Versace’s exclusive franchisee in India.
“During a slowdown, luxury is the first segment to take a hit,” said Rajiv Popley, director of Popley and Sons and purveyors of luxury brand watches like Tag Heuer, Omega and Vertu (the British luxury mobile phone). “As such, we expect our luxury brands to take a dip of 10 to 15 per cent."
The Indian luxury market is estimated to be worth $1 billion. The market, according to an AT Kearney report, is slated to touch $30 billion by 2015.
The spenders, noted the report, are industrialists or owners of small businesses (49 per cent) and professionals from the aspiring class -- the corporate sector (29 per cent), followed by IT/ BPO (8 per cent), and others like doctors, lawyers, media and finance professionals.
Luxury goods marketers are basing their numbers on the fact that companies are cutting back on compensation packages and bonuses. "About 40 per cent of Indian organisations this year are looking at very conservative bonus payouts. This will have an impact across the board," said Sandeep Chaudhary, business leader, consulting, for India, Middle East and SAARC, Hewitt Associates.
The news is worse for senior-level executives in the Rs 1 crore compensation range. "Thirty-five to 50 per cent of senior executives’ compensation is variable pay and this will be impacted 20 to 25 per cent this year. Also, stock options, which account for 40 per cent of the annual pay of top-paid executives, are also down to 10 per cent," he added.
Wednesday, December 17, 2008
BMW India announces opening of Platino Classic in Kochi
BMW India announced opening of Platino Classic, its dealership in Kochi. Platino Classic brings to Kochi the BMW standards of sales and service and the same international experience as any BMW dealership worldwide.
The showroom and workshop are headed by P P Ashique, Managing Director, Platino Classic. This is our 12th dealership of BMW in India.
Peter Kronschnabl, president, BMW India said, “With Kochi we also get access to Kerala which is an important market for us.”
The showroom and workshop covers approximately 11500 square feet (sq ft) of space.
The showroom is evolved on the signature-BMW concept of street display and the pavement flanking alongside as the customer area.
The workshop will have 4 service bays and 1 diagnostic bay capable of servicing 15-20 cars a day.
The showroom and workshop are headed by P P Ashique, Managing Director, Platino Classic. This is our 12th dealership of BMW in India.
Peter Kronschnabl, president, BMW India said, “With Kochi we also get access to Kerala which is an important market for us.”
The showroom and workshop covers approximately 11500 square feet (sq ft) of space.
The showroom is evolved on the signature-BMW concept of street display and the pavement flanking alongside as the customer area.
The workshop will have 4 service bays and 1 diagnostic bay capable of servicing 15-20 cars a day.
Saturday, December 13, 2008
ONGC's technical experts object to Imperial deal
The scientific and technical officers of Oil & Natural Gas Corporation, or ONGC, have objected to the company's decision to go ahead with the $2.1 billion acquisition of Imperial Energy of the UK, saying that the deal is over-valued and the assets not financially viable.
The Association of Scientific and Technical Officers (ASTO), the largest organisation of ONGC officers, has written to Petroleum Secretary R S Pandey and ONGC Chairman R S Sharma, complaining that the cost of acquisition and field development cannot be recovered since production at Imperial’s assets are in inhospitable geographies.
ONGC’s overseas arm, ONGC Videsh (OVL), on Wednesday posted bid documents for its 1,250 pence-a-share cash offer for Imperial Energy, tabled in August after getting the go-ahead from the Cabinet Committee on Economic Affairs (CCEA). That time, Imperial shares were trading at just 1,050 pence in the open market. The offer will be open till December 30, after which OVL will have two weeks to pay Imperial’s shareholders who tender their shares.
Crude oil has dropped 60 per cent since ONGC first offered to buy Imperial in August. This steep fall, along with the depreciation of the rupee against the dollar, has taken the sheen out of the deal.
“The quality of the deal is questionable. Russian companies such as Rosneft have refused to partner in the deal at this cost. It seems that Rosneft is aware of the real conditions of the field and the real worth of Imperial Energy,” Amit Kumar, president- central working committee of ASTO, said in the letter.
OVL’s bid gave the company a 10 per cent internal rate of return (IRR), taking crude oil at $121 a barrel, but with the fall of the rupee and crude oil the IRR has come down to 3-4 per cent.
“The current crude (oil) production of the company (Imperial) is close to 12,000 barrels a day only. This figure is also debatable as the technical team that visited the fields found that the production was around 8,000 barrels a day. The upside of production, as being planned, calls for huge investments in the field in addition to the investment being made to acquire the company. The field terrain is very tough and inhospitable,” said ASTO.
The access to the field for any developmental work and operations remains open for only five to six months in a year — that, too, in winters. “In this scenario, the anticipated increase in production is going to be tough and may not meet the targets set forth in coming years. It may also be noted that the production from this field can only be brought to the country at a very high cost,” said the association.
The Association of Scientific and Technical Officers (ASTO), the largest organisation of ONGC officers, has written to Petroleum Secretary R S Pandey and ONGC Chairman R S Sharma, complaining that the cost of acquisition and field development cannot be recovered since production at Imperial’s assets are in inhospitable geographies.
ONGC’s overseas arm, ONGC Videsh (OVL), on Wednesday posted bid documents for its 1,250 pence-a-share cash offer for Imperial Energy, tabled in August after getting the go-ahead from the Cabinet Committee on Economic Affairs (CCEA). That time, Imperial shares were trading at just 1,050 pence in the open market. The offer will be open till December 30, after which OVL will have two weeks to pay Imperial’s shareholders who tender their shares.
Crude oil has dropped 60 per cent since ONGC first offered to buy Imperial in August. This steep fall, along with the depreciation of the rupee against the dollar, has taken the sheen out of the deal.
“The quality of the deal is questionable. Russian companies such as Rosneft have refused to partner in the deal at this cost. It seems that Rosneft is aware of the real conditions of the field and the real worth of Imperial Energy,” Amit Kumar, president- central working committee of ASTO, said in the letter.
OVL’s bid gave the company a 10 per cent internal rate of return (IRR), taking crude oil at $121 a barrel, but with the fall of the rupee and crude oil the IRR has come down to 3-4 per cent.
“The current crude (oil) production of the company (Imperial) is close to 12,000 barrels a day only. This figure is also debatable as the technical team that visited the fields found that the production was around 8,000 barrels a day. The upside of production, as being planned, calls for huge investments in the field in addition to the investment being made to acquire the company. The field terrain is very tough and inhospitable,” said ASTO.
The access to the field for any developmental work and operations remains open for only five to six months in a year — that, too, in winters. “In this scenario, the anticipated increase in production is going to be tough and may not meet the targets set forth in coming years. It may also be noted that the production from this field can only be brought to the country at a very high cost,” said the association.
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