Videocon, Larsen & Toubro and Oberoi group in news

By Vipin Agnihotri

Videocon acquires Planet M

Videocon, the Indian multinational has acquired Planet M, one of the leading music and entertainment retail chain for Rs 2 billion in order to reap the advantages of its brand image. According to sources, the acquisition has been done by NEXT, Videocon’s retail chain for consumer electronics and home appliances.

In my opinion, Videocon is highly ambitious with Planet M, which is a well-known brand amongst the youth. The group plans to increase its turnover by six fold, from about Rs 1.5 billion to about Rs 10 billion and then to Rs 20 billion in the next four years.

Larsen & Toubro negotiating with global shipping fleet owners

Larsen & Toubro is presently in the process of negotiation with global shipping fleet owners in order to realize its ambition of building ships worth over $ 1 billion. However, this big ambition has come to a halt because of the roadblocks laid by the Tamilnadu government.

It is worth mentioning in this regard that the shipyard will enable them to tap the growing domestic as well as global demand for ships. Because of its engineering expertise and competencies, L&T’s emphasis will be towards high end and high-tech ships. In general, L&T would be able to manufacture and repair as many as 25 big ships and 50 all types of ships respectively in a year. Moreover, the project will also garner employment to about 10,000 persons.

Oberoi Group chalks out expansion plans

Oberoi Group plans to invest about Rs 45 billion to augment its room capacity. Point to be noted here is that the amount will be invested over a period of five years. For the group, more than 15 projects are underway in various parts of Asia, Gulf and Africa. In India, the group is in the course of finishing its properties in Mumbai, Bangalore, Hyderabad, Gurgaon and Goa.

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The Latest India Real Estate News Round Up

Dhruva Jyoti Chowdhury, Kolkata, India

Sensing the tempting Real estate market in India, the giants of almost every other India sector are preparing to cash on the Realty sector in India. The giants that have emerged as top global companies for specializing in some or the other respective fields are now turning their head towards the booming real estate in the country.

Bullish on government’s commitment in infrastructure development, global giant General Electric (GE) has recently elaborated its plans to set up a $300-500 million infrastructure fund for the Real Estate sector.

GE’s statement came after Citigroup, Blackstone, IDFC and IIFCL announced their respective plans to set up $5 billion fund for infrastructure development.

Reports also suggests that the company is looking at financing real estate and is planning a $2 billion fund to be invested across all types of real estate - residential, retail, townships and special economic zones (SEZ) I India in particular.

The Hinduja Group India, plans to develop 4,000 acres of land held by its listed units for residential and commercial use, under a company called Asia Property Development Ltd, joining a slew of business houses looking to cash in on a real-estate boom in the country. It’s also in close door talks with the private equity players interested in partnering the group in this venture.

The Hindujas’ land bank would count among the some of the bigger ones held by Indian firms. For instance, Delhi-based real-estate firms DLF Ltd and Unitech Ltd have land banks of 10,255 acres and 10,900 acres, respectively. Others such as Sobha Developers have reserves of 2,747 acres of land.

With real-estate prices rising 200% in India’s tier 1, cities in the past two years, Indian business groups such as chemicals firm DCM Shriram Consolidated Ltd and the Wadia Group, which owns the Bombay Dyeing clothing company, have forayed into real-estate development, although on a smaller scale. Both intend to develop around 100 acres each.

Gurgaon based real estate company Emaar MGF is learnt to be finalising its plans to hit the capital markets by the end of this year. The company is planning to raise $1.1 billion by offering 15-20% of its equity to public, valuing the company at about $6.5 billion.

This will be the second big IPO in the real estate sector to hit the capital markets this year. Another Gurgaon-based real estate company, DLF is planning to hit the capital markets with a $2 billion issue.

Mumbai-based Larsen & Toubro Ltd is also planning to invest Rs 8,000 crore in real estate and urban infrastructure over a period of three to five years through its subsidiary L&T Infrastructure Development Project Ltd (L&T-IDPL). HDFC has a 25% stake in L&T-IDPL, and would also be contributing to the investment.

L&T has already invested over Rs 700 crore in real estate and urban infrastructure projects. The management has recently agreed to invest an additional over Rs 500 crore in the business this year. The urban projects are executed through yet another subsidiary of IDPL, L&T Urban Infrastructure. The various projects together are expected to yield around Rs 2,500 crore annually for L&T. The projects will be implemented in a phased manner, with each under different special purpose vehicles (SPV’s).

L&T is developing residential projects in Chennai, Vishakapatnam and Colombo, apart from developing an integrated township in Chandigarh in association with a local builders. They have recently acquired land in Nagpur in order to develop a residential project. L&T IDPL is also working with Bombay Dyeing on redeveloping a dilapidated building in Mumbai.

Godrej Properties, the real estate arm of the Rs 7,500-crore Godrej group, is in deliberations with private equity investors to raise Rs 200 crore for its two realty projects in Hyderabad and Kolkata. The company is looking to dilute 49% stake in both the projects to PE investors.

The two projects may be set up as a special purpose vehicle in which the majority stake will be retained by Godrej Properties. Advance stages of discussions are continuing with two funds including the London-based real estate fund Trikona Capital.

Outsourcing and technology giants ‘Xansa’ has also entered into an agreement with Alpha Tiger Property Trust Ltd for sale and leaseback of the company’s real estate interests in India for Rs190.87 crore.

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L&T bets big on real estate;

bags Rs 610 cr order from Dubai co... Source: INDIATIMES NEWS NETWORK

Larsen & Toubro and Eastern Contracting LLC (Eastern) have jointly bagged an order worth Rs 610 crore from Victory Heights Golf Residential and Development, to build a residential property in Dubai Sports City. The project is expected to be completed in 660 days. The order win spurred L&T shares to an intra-day high of Rs 1,967. At 12:45PM, the shares were up 1.39% at Rs 1,954, with volume traded on BSE at 1,27,451 shares against the two-week average of 2,22,564.

L&T and Eastern Contracting, a Bukhatir group company which undertakes a variety of turnkey and other construction projects in United Arab Emirates, have formed a joint venture to execute this project. Taking a cue from rising demand for commercial and residential projects in India, L&T expects to carve out a niche for itself. The engineering major is planning to invest Rs 8,000 crore in real estate and urban infrastructure over a period of three to five years through its subsidiary L&T Infrastructure Development Project, according to media reports.

The company has already invested Rs 700 crore in real estate and urban infrastructure projects. The management will also be investing an additional Rs 500 crore in the business this year. L&T Infrastructure is developing residential projects in Chennai, Vishakapatnam and Colombo, apart from an integrated township in Chandigarh in association with a local builder. The company recently acquired land in Nagpur for a residential project. L&T Infrastructure has also undertaken a redevelopment project of a dilapidated building in Mumbai along with Bombay Dyeing.

What's next for Stock Market?

By Vipin Agnihotri

No doubt, Bombay Stock Exchange (BSE) Sensex is making valiant attempts to decisively cross the 14,697 peak it reached on February 8 but has not been able to ever since.

In theory, the NSE Nifty, which is not a free-float index such as the Sensex, has managed to cross its previous peak. “Two large IPOs, DLF and ICICI Bank, will divert part of the funds that could otherwise have gone into the secondary market,” pointed out Rangita Chatterjee, stock market expert.

Last week, the Sensex failed to get its chin above the 14,697 bar and dropped back to end the week at 14,003, down 506 points. The biggest contributors were Reliance Industries (with 98 of those 506 points), Larsen & Toubro (47) and ITC (44). Investors are wondering which way the breakout will happen.

As far as money flow into the stock market is concerned, it has come into the notice of The India Street that Life Insurance Corporation of India is planning to invest Rs 115,000 crore in equity and corporate debt.

In addition, pension funds will be allowed to invest partly in equity. Furthermore, private sector mutual funds will get access to surplus PSU funds. “The Reserve Bank of India is releasing $5 billion of its over $200 billion forex kitty for investment in infrastructure. As India’s economy grows and the equity cult spreads, more money will keep pouring into the stock market,” pointed out N Yadav, business journalist based at India.

But experts believe that there are reasons to being cautious in the short term. First and foremost, public governance is abysmal, and getting worse as elections approach. Quite a number of times it is downright foolish as in the quest to squeeze tax resources with not a thought on how poorly those already raised are being utilized.

In my opinion, the fringe benefit tax on sweat equity is one example. Another one is the levy of a 12.3 per cent service tax on sale of tickets for international flights out of India. The result: ticketing business has gone to other countries.

“The most valuable state-owned company is ONGC, which has been headless ever since the Government refused an extension to its former chairman who made the firm hugely profitable,” pointed out Ramesh G, CEO of India research.

It is worthwhile remembering that the man nominated by an internal committee, RS Sharma, was refused the post by the Prime Minister’s Office and now, funnily, has been re-nominated! Similarly, State Bank of India, which has an unbelievable uninterrupted dividend history of over 150 years, is valued at $17 billion, less than private sector ICICI Bank and far lower than ICBC of China, which is valued at over $230 billion.

To see how the private sector extracts value, it is of utmost importance that one observes the $1 billion valuation sought to be extracted by Reliance Communication by hiving off its tower business into a separate entity.

The present stock of 110,000 towers is expected by the telecom regulator to grow to 350,000 by 2010. Reliance Communication’s valuation has shot up.

On the other hand, that of public sector Bharat Petroleum, Hindustan Petroleum and Indian Oil Corporation are languishing, because of the burden of subsidy forced upon them. Its not that these managements cannot extract value but, sadly, they are not allowed to. All in all, it’s better, therefore, to await a better opportunity to invest.