Phoenix plans to raise Rs 1,000 crore

This story first appeared in DNA Money edition on Saturday, Aug 24, 2013.

Mixed-use developer Phoenix Mills Ltd (PML) is expected to soon kick-start the process of raising Rs 1,000 crore following shareholder nod for the proposal at its 108th annual general meeting.

The funds mobilisation will be in one or more tranches through a public issue or a private placement or a preferential issue or any other kind of public issue or private placement as may be permitted under applicable laws from time to time, PML said.

The PML management did not share any details about this fund-raising exercise. However, it is very likely that the company may use some portion of the Rs 1,000 crore towards repaying debt.
PML’s standalone debt as of June 30 stood at Rs 284 crore, stake-wise effective gross debt at Rs 2,025.3 crore and consolidated gross debt at Rs 2,400.5 crore.

The consolidated debt, the developer added, went up mainly on account of new special purpose vehicles (SPVs) being consolidated. PML’s total debt figure across all SPVs edged up to Rs 3,167.4 crore in the April-June quarter compared with Rs 3,117.6 crore in the previous quarter.

There are some new launches in the pipeline, which may add up to approximately three million square foot (msf) spanning over 2013-14 to 2014-15. The rollouts will be spread over cities like Bangalore (1.4 msf), Chennai (0.4 msf) and Pune (0.4 msf).

Analysts put FY14 (estimated) at 1.4 msf and value at Rs 1,550 crore.

“Since the bulk of the new launches are in the premium segment, the success remains a key re-rating trigger,” said Parikshit Kandpal and Varun Chakri, research analysts with Karvy Stock Broking, in a June-end report.

Larsen and Toubro Ltd seeks to double overseas orders

This story first appeared in DNA Money edition on Friday, Aug 23, 2013.

Larsen and Toubro Ltd (L&T) is working on a template to more than double its international order flow this fiscal.

This, it feels, will go a long way in maintaining operating profit margins at 11-11.5% this year, given an overall financial weakness affecting the Indian infrastructure industry.

A M Naik, group executive chairman, L&T, said the management has worked aggressively on building a strong organisation outside India to bag infrastructure projects. “We are targeting order inflows of Rs30,000 crore in this fiscal. As challenges become more intense in the domestic market, we are focusing overseas.

Our strategy is to do as many projects in international markets as possible. This will help us overcome the overall slowdown experienced in the domestic market,” he said at the company’s 68th Annual General Meeting in Mumbai on Thursday.

In the next few days, the company is expecting Rs3,500 core worth of orders from Qatar in the power transmission and sub-station space. Another Rs1,500 crore to Rs2,000 crore worth of road projects from Doha, in addition to a metro project, is in the works.

The company sees a bulk of these international orders coming in from the Middle East. It’s also targeting the Commonwealth of Independent States (CIS) and Far East markets, thus widening its scope for any overseas business opportunity. The current domestic to international order flow mix in the company now stands at 75:25.

In fact, the infrastructure major has started to sharpen its focus on international orders over the last couple of years.

For instance, its order book stood at Rs6,000 crore, excluding IT, engineering and exports of products, in fiscal 2012 and the company achieved a figure of Rs12,000 crore in the last fiscal.

There have been some earlier reports that L&T is weighing divesting stake in Dhamra Port Company Ltd – L&T currently owns 50% through its subsidiary, Infrastructure Development Projects Ltd (IDPL) and the balance is owned by Tata Steel. Clearing the air, Naik said discussions (for IDPL stake sale) are still going on.

“In the current economic situation, valuations tend to get depressed. We are not in a distressed sale position. If we get the right value, we will go ahead with plans to dilute up to 20%,” said Naik.

The company management has clarified that it has no overseas fund raising plans citing strong cash flows and will be able to meet funding requirements. At a group level, the company debt stands at Rs60,000 crore, much of which comes from financial services and concessions business.

On how much of the debt is hedged and vice-versa, R Shankar Raman, CFO, L&T, said, “The debt is largely in Indian rupee (INR) as the revenue profile is INR as a result the question of hedging a significant portion doesn’t arise for the group,” he said adding that earning more dollars will be the best bet to deal with the depreciating INR.

Naik added, “The current situation in terms of economic development is not good at all. People say that the gross domestic product (GDP) growth is around 5% and sometimes one wonders if it is really the case looking at what is really happening on ground at present. The INR is reaching a new low on a daily basis and we really have no idea how further down will it go. The infrastructure sector has been going through troubled times since the last over two years now and I don’t see any improvements (in terms of possible economic recovery) in the next one year or so,” he said.

The company is restructuring its engineering and services business (a major part within L&T). A new subsidiary -- L&T Technology Services Ltd -- is being formed which will buy over the engineering piece which is with L&T Infotech.

“We will then transfer -- at the right time between now and April 1, 2014 -- within engineering also in that company thus making it a technology services company. This will make us a very strong engineering service provider. It’s too early to say if we will be listing that company,” said Naik.
 

Shot in arm for Wockhardt as pledged shares released

This story first appeared in DNA Money edition on Wednesday, Aug 21, 2013.

Drug-maker Wockhardt said its promoters and promoter-entities have completely released shares pledged by them earlier.

Over 6.97 crore shares held by Khorakiwala Holdings and Investments and another 442,785 shares held by Habil Khorakiwala were released. With this, promoters have no more shares pledged in the market.

Wockhardt did not share other details.

Analysts said the release of pledged shares is a positive for the stock, but it does not end troubles for the company.

Bhavika Thakker, research analyst with IIFL, said the June quarter has not been kind to the company.

One bad news followed another: US drug regulator FDA issued ‘Form 483’ – it is a post-inspection record of violations of quality or safety norms at the drug manufacturing plant – last week to Wockhardt’s Chikalthana unit, which contributes the largest chunk to the company’s revenues; before that, there was a warning letter; then, an FDA import alert for the Waluj facility. Even the UK drug regulator was not happy with the Chikalthana unit.

Consequently, Wockhardt’s stock plummeted 77% this fiscal so far (from Rs2,005.80 on April 1 to Rs454.25 on Tuesday).

“Release of the promoters’ pledged shares is just a short-term measure. I’d still advise a wait-and-watch approach on this stock. There are some serious operational issues that need to be addressed by the management to bring back confidence in the market,” said Thakker.

Analysts said Wockhardt now looks like a beaten-down stock. Although some traders may perceive in it a counter-bet, the stock does not make for a good pick from an investment perspective, they said.

“Any bad news from the Chikalthana facility will see the stock getting battered,” said an analyst. To preempt any such situation, Wockhardt has got on board the US-based Lachman GMP Consultant to assist it in reviewing all the regulators’ observations.

Tony Fernandes eyes railway hotels

This story first appeared in DNA Money edition on Monday, Aug 19, 2013.

Hospitality companies including Tune Hotels, owned by AirAsia promoter Tony Fernatndes, are in the race for setting up hotels at 14 semi-developed sites near key railway stations across the country.

Ircon International, a company under Railways, is offering multi-functional complexes (MFCs) that feature hotel rooms, designated space for food and beverage and operations facilities at key railway stations across India.

The total guest room inventory across these hotels is expected to be over 600.

Tune Hotels India Services (THIS) operates as a 60:40 joint venture between Tune Hotels and Mumbai-based Apodis Hotels and Resorts Ltd. While Apodis holds the master franchise for Tune-branded hotels in India, the management of these properties will be handled by THIS, which will also look after technical and development services and project management consultancy.

Apodis Hospitality Group, which also owns and operates bed-and-breakfast hotel chain Mango Suites along with Cafe XO restaurants, confirmed it is in the bidding participation.

Umesh Luthria, executive director and CEO, Apodis Hospitality Group, said the company is working on the tender document. “We are looking into the legalities of the tender document while simultaneously assessing the market demand. If it is an over 100-room hotel, then we will go with Tune brand and if the location has a smaller inventory of 50-70 guestrooms, then it will be Mango Suites,” he said.

The 14 sites are in Jammu, Allahabad, Haridwar, Udaipur, Jodhpur, Gwalior, Indore, Jabalpur, Raipur, Digha, Siliguri, Hubli, Madurai and Kannur.

With railways offering hotel developments on their land parcels, industry experts said a huge opportunity awaits the hotel chains operating in India.

The projects are located in close proximity to railway stations and some of the sites even have space for meeting rooms, banquet halls, food courts, supermarkets, shops for pharmacies and ATMs.

Shreenath Shastry, national director-hospitality and leisure, Knight Frank (India), the company which is handling the bidding process, said, “The organised segment will see value in the sites on offer because of prominent locations, clear title developments and ready markets.”

Sanjay Sethi, MD & CEO of Berggruen Hotels, said, “It will give an opportunity to a lot of new, improved, competitive and quality products to address the market. I’ll be very keen to explore this opportunity. While not all sites will be viable, at least 20-30% of the locations on offer would certainly make for ideal locations,” he said. Berggruen is in the process of creating a separate brand to tap the ever-growing budget and economy travellers, he said.

Industry sources said the 14 sites are only the first tranche. In all, there are over 100 developments in various stages of  planning and development.

Tata Group’s Ginger, Accor’s Formule 1 and Lemon Tree’s Red Fox are the other major players in the budget hotel segment, and are likely to participate in the bidding process as well.

The final date for submission of the bids is September 5 and the technical bids will be opened the next day.

Aman gives fillip to DLF debt-cut plan

This story first appeared in DNA Money edition on Friday, Aug 16, 2013.

Despite slowdown in the hospitality business, Aman Resorts, realty major DLF’s hospitality chain, has seen significant improvement in both operations and perceived valuation, lifting the parent’s hopes of selling Aman profitably and cut its own heavy debt.

In fact, the hotels business has contributed Rs 10.4 crore to DLF’s first quarter consolidated net profit of Rs 181 crore, a turnaround from loss-ridden quarters of last fiscal.

In an earnings call, Ashok Tyagi, group CFO, DLF, cited improved operations and better foreign exchange translation as key reasons for Aman operations turning profitable.

To divest non-core assets and reduce debt, DLF agreed to sell the Aman Resorts portfolio (excluding Aman Hotel, Delhi) back to its founder Adrian Zecha for $300 million.

Zecha was, however, not able to arrange the funds in time, leading to expiry of the exclusivity period in June. The DLF management later initiated discussions with a few other buyers even as Zecha remains in the fray.

Tyagi said the company was confident of closing the Aman Resorts deal soon and that the transaction will be value-accretive compared to its earlier valuations.

Saurabh Chawla, ED-finance, DLF, said, the hotel business will likely post an Ebitda number of $20 million this fiscal on the back of  “an exceptionally good January-June period” and given that the group is “slated to open four properties across the globe”.

The DLF management will be expecting increase in the valuation of Aman Resorts, considering that new hotels / resorts in international markets like Italy, China, Vietnam and Jordan will be added to its portfolio, and the business has also started generating profits.

Cox & Kings expects windfall from Rupee fall

This story first appeared in DNA Money edition on Friday, Aug 16, 2013.

Travel and tour operator Cox & Kings said it is expecting to benefit in a big way from the depreciating rupee, which has cut costs for inbound tourists.

Peter Kerkar, Group CEO, Cox & Kings, said, “The benefit of rupee decline helps us because a large percentage of our revenues is in foreign currency. The initial signs are showing travel to India should certainly become more attractive.”

While the gains were not reflected in the first quarter results, company officials said the real fall in rupee against dollar came in June and hence the impact will be visible in the upcoming quarters.

With the Indian travel, tourism and hospitality sectors set to enter the peak season from October, industry players are gung-ho on the prospects.

“India is finally looking affordable from a global perspective. We are hoping that our last two quarters of the current fiscal — when our international offices send business to India as well as the incoming traffic into the country — should be boosted by this current situation,” Kerkar said in an recent earnings call.

On the other hand, Anil Khandelwal, CFO, Cox & Kings, said the company hasn’t seen any slowdown in terms of leisure holidays.

“People will continue with their travel plans irrespective of depreciating rupee against the dollar. That’s because, people basically keep a budget for travel in their mind and plan their holidays accordingly,” said Khandelwal.

According to Union tourism ministry, foreign tourist arrivals were up by 1.9% to 12.8 lakh despite April-June quarter being a lean season.

Wockhardt says one more unit under FDA scanner

This story first appeared in DNA Money edition on Thursday, Aug 15, 2013.

Pharma major Wockhardt’s regulatory troubles over its manufacturing facilities do not seem to end.

After its Waluj unit in Aurangabad,  foreign regulators have  expressed concerns over its the largest revenue contributing unit of Chikalthana in the same district.

According to a senior Wockhardt official, both US Food and Drug Administration (FDA) and the UK Medicines and Healthcare Products Regulatory Agency (MHRA) had conducted inspections at its Chikalthana, Shendra and Waluj Cephalosporin plants in July.

“The Chikalthana plant was jointly inspected by USFDA and MHRA in the last week of July and they have raised observations. We have 483s, some of them are more serious and some are minor in nature. We are reviewing all the questions and observations and will respond to the FDA next week,” the official said on an earnings call.

No critical observations were recorded by the MHRI for Wockhardt’s Shendra plant that caters to the UK, Irish and the US markets. The USFDA is expected to inspect the Shendra facility next month. The inspections by the regulators at its Waluj Cephalosporin plant were satisfactory, said the official.

For fiscal 2013, the Chikalthana facility contributed $230 million to the company’s sales.

India Cements cuts capex to Rs 250 crore

This story first appeared in DNA Money edition on Wednesday, Aug 14, 2013.

India Cements has cut its capital expenditure plan of Rs 300 crore by Rs 50 crore, company officials said on a recent earnings call.

“The company’s current gross debt stands at Rs 3,230 crore and the company doesn’t intend to spend on capacity expansion in fiscal 2014. However, it may look at expansion over the next 2-3 years,” Mihir Jhaveri and Prateek Kumar, analysts at Religare Institutional Research, said in a company note on Monday.

The capex in this fiscal would largely be spent towards maintenance and some debt reduction.

In the first quarter, India Cements spent towards capex of Rs 60 crore, while it was Rs 530 crore for the entire last fiscal.

The company’s profitability was hit due to weak realisation despite its industry leading volume take-off in Q1. The company’s sales increased 3% on-year to Rs 1,240 crore, but its operating profit and net profit declined 31% and 59% yoy to Rs 193 crore and Rs 43.9 crore, respectively.

Rajesh Kumar Ravi, analyst, Karvy Stock Broking, said in his company note said while sales volume rose 11% yoy (as compared with industry growth of 3-4%), the company’s net realisation declined 1% quarter on quarter and 6% yoy.

“This was despite cement price improvement in Andhra Pradesh market during later part of the first quarter. Net realisation decline (3% below our estimate) resulted in Ebitda decline of 31% yoy (versus our estimate of 19% decline) and adjusted net profit decline of 59% yoy (versus our estimate of 39% decline).”

Eros to finalise NYSE IPO by August-end

This story first appeared in DNA Money edition on Wednesday, Aug 14, 2013.

Eros International, a leading global media and entertainment company, is likely to finalise its New York Stock Exchange (NYSE) listing plan by this month-end.

The company had filed for an initial public offering (IPO) for $250 million with the US Securities and Exchange Commission in March last year.

Eros International has a BSE-listed subsidiary / associate company called Eros International Media (EIML). The latter’s officials could not be reached for comment.

An industry source, however, said EIML is very likely to disclose the NYSE listing details at its annual general meeting on August 28.

In another development, EIML has partnered with YM Movies of music luminary A R Rahman to produce a Hindi feature film which will mark the latter’s debut as a film producer.

“It is a 16-year relationship with Eros and this time it is extending the role a bit more. It is about exploring the other side of creative partnership,” said Rahman in a statement.

The yet-to-be-titled film has been conceived and written by Rahman with help from international and local talent and will celebrate youth’s sensual love, art and self-discovery.

IHCL sees room rates rising in Oct

This story first appeared in DNA Money edition on Tuesday, Aug 13, 2013.

Indian Hotels Co Ltd (IHCL), the Tata group hospitality flagship, has reported a 42.42% decline in consolidated net loss at Rs19 crore in the first quarter fiscal 2014 over corresponding quarter last year. Total income from operations during the April-June quarter was 7% higher at Rs908 crore on year.

Anil P Goel, executive director-finance, IHCL, said the company saw an occupancy of 59% across the portfolio of hotels in India. “The average room rate (ARR) for the quarter at Rs8,300 was slightly lower as compared with the last year.

Operating margins, at 11%, were in line with last year. We have been able to bring down financing costs by 23% over the previous fiscal,” he said.

With the Indian hospitality set to enter the business season in the next 45 days, the company is hopeful of marginally increasing the room rates.

Deepa Misra, senior vice president–sales and marketing, IHCL, said there has been an overall 20% increase in supply of hotel rooms during April–June, 2013 over last year.

“Most of the new supply (about 69%), has come in the upper upscale, upscale and midscale segments and 28% in luxury (largely Chennai and Hyderabad). Demand growth has been 17% for this period. However it is still trailing supply growth by 3% which has had an impact on the hotel industry occupancy and average room rates (ARRs),” she said.

On the international business front, Goel said the portfolio has performed very well with all the three hotels in the US reporting encouraging results in the first quarter.

“Both Boston ($300 - ARR) and San Francisco ($300 - ARR) have touched 80% occupancy while it is 77% at The Pierre ($640 - ARR) against 65% last year. We will be looking to increase the ARRs in these markets.

“The UK market has been quite stable, Maldives is likely to stabilise by the time we get into the business season, hotels in Sri Lanka, Malaysia, Bhutan and Sydney are doing fine as well,” said Goel.

As of August 2013, the company has a total inventory of 14,506 rooms. In the current fiscal, IHCL will add 12 hotels (mainly through management contracts) and inventory of 1,575 rooms.