Sunday, June 24, 2012

Satyamev Jayate - Organic Food

Satyamev Jayate took on an important issue today, which affects us everyday without us realizing the ill effects that it causes to our health. Our food has been poisoned by excessive use of pesticides and harmful chemicals. You can watch the episode here (Toxic Food -  Poison on our plate). To know more about the effects of pesticides on our health, which include cancer, increases risk of neurological defects such as Parkinson's disease, causes congenital defects in children, affects fertility in males etc.  Please read the Wikipedia article here

Fortunately there are companies providing healthy, organic food options right at our doorstep. For example there is an company providing Organic Food right inside your office cafeterias, that too at reasonable prices. Companies such as American Express, GE, HSBC  etc provide organic meals at their office campuses in Gurgaon and Hyderabad. The food is catered by Organic Express, a two year old venture, started by alums of ISB and IIM. Organic Express currently provides organic food in over 15 locations in Hyderabad and Gurgaon. More details on Organic Express, which uses the highest percentage (>70%) of organic content in their meals, in India and perhaps in the world, can be found on their Facebook page. 

The latest episode was very pertinent and hope this sparks an organic food revolution in India. Happy Eating!!

Thursday, June 21, 2012

CCI Imposes 6000Cr Penalty On Cement Manufacturers!

Kudos! CCI found some gumption and imposed a heavy fine on 11 cement companies, which they found guilty of collusion and cartel-ization . However what is ironic is that this was done on the basis of a complaint by builders association. Wonder who will investigate the cartel among the builders themselves. Despite severe cash crunch faced by these builders and leverage to support land banks, the real estate prices go up every month, like clock work. 

The eleven cement manufacturers, on whom the penalty has been imposed, are ACC, Ambuja Cements Limited, Ultratech Cements, Grasim Cements now merged with Ultratech Cements, JK Cements, India Cements, Madras Cements, Century Cements,   Binani Cements, Lafarge India and Jaypee Cements.

Wednesday, June 20, 2012

Educomp's FCCB Repayment Could Trigger 200+ Cr Loss

Educomp announced today that it had tied up loans of $155 million to repay its FCCBs that are coming up for redemption and also for further capex. In addition, it also announced that it had further raised 10 million in FCCBs from IFC and dilute further equity of up to $50 million and Rs 149.5. Would also allot additional equity ($15 Mn) and warrants ($40 million) on a preferential basis to promoters at a price of Rs 193. Which is at a premium to current market price.  The shares are today trading 9% up at Rs 149 on the back of this news.

There is a surprise waiting for Educomp's investors in Q1/Q2 in the form of a loss of almost $32 million dollars of redemption premium on FCCBs, that they had (it appears) not amortized over the duration of the FCCBs + further loss of about Rs 50-60 Cr on unamortized component of MTM loss on 78.5 million dollars of FCCBs that were outstanding for a total loss of over Rs 200 Cr.

What may comfort the investors is the share allocation at a premium to FIIs (at Rs 149) and the proposed allotment to promoters at Rs 193 (equity and warrants) . However the loss in Q1 or Q2 (depending on when the FCCBs are repaid, would offset these notional gains from allocation at premium.

Sunday, June 17, 2012

RBI: When In Doubt Pout! And Why They Are Wrong?

RBI today left its key policy rates (Repo / Reverse Repo) and CRR unchanged. While the announced policy is consistent with the strong noise it has been making on keeping inflation rate in check, and given that headline inflation level rose in May, the move was not entirely unexpected.

That said, I do not entirely agree with this policy. In it own words current inflation is due to supply constraints and not necessarily demand driven. Food and Fuel are driving inflation in the mix. Interest rates only have a marginal impact on demand for fuel especially the one that we import. The non-import variety (electricity, coal) need encouragement and support in the form of lower interest rates to keep prices low with higher production

Food inflation, which perhaps is the most sensitive matter, needs improved infrastructure, greater farm equipment etc to fuel growth. By keeping interest rates high the RBI will  likely achieve the opposite.

Core inflation is anyway on a downtrend should have signaled RBI to reduce policy rates. 

Monday, June 11, 2012

S&P Threatens To Junk India's Credit Rating?

“Slowing GDP growth and political roadblocks to economic policymaking could put India at a risk of losing its investment-grade rating which is just one notch above speculative-grade and carries a negative outlook,” said S&P primary credit analysts Takahira Ogawa and Joydeep Mukherji. S&P had earlier in the year downgraded India's credit rating, from stable to negative. Markets in India fell after the release of this note. 

It is however interesting that, S&P had last year downgraded United States as well. However investors had given it (S&P) a thumbs down, by pushing up American stocks (US stocks are up 30% from the lows seen last year), further denting their credibility, which was anyways low.  S&P, we must remember, played a key role in the economic bust of 2008, as its credit analysts (as well as those from other credit rating firms) had wrongly labeled  the junk credit default swaps as being rated AAA (Tripple A) , the highest rating denoting the instruments were risk free, leading to massive blow up for several investors including banks that relied on their rating. 

What is shameful and ironic for the firm further is that this comes a day after Spain, which S&P rates a couple of notches above India, sought 100 billion Euro bail out. Which raises the questions as to why is S&P so quick to denounce India's economic prospects and is willing to go soft on other nations? What is interesting is that post the downgrade in the US,  the head of S&P (who, interesting of Indian origin) was made to step down due to external pressure. 

That said, there are problems that India must focus on and improve governance and pick up pace of reforms to win back investor conference that seems to be dwindling by the day. These investors were not waiting for S&P to tell them that. 
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