INDUSTRY UPDATES - 25/05/2013

Vedanta Resources raises $1.7 billion in country's largest offshore bond offering




Vedanta Resources Plc., has announced the pricing of its offering of bonds in the aggregate principal amount of $1.7 billion. The bonds are being offered and sold in two tranches, consisting of (i) $1.2 billion aggregate principal amount of 6% bonds due January 2019 and (ii) $500 million aggregate principal amount of 7.125% bonds due May 2023.



In a statement issued on Thursday, Vedanta termed it as a landmark transaction for the company and said it believes this represents one of the largest corporate high yield bond issuances out of Asia,ex-Japan.



Vedanta intends to use the proceeds of the offering to refinance a portion of its obligations under its existing 2010 term loan facility that was entered into to partly finance Vedanta's acquisition of a controlling stake in Cairn India. This is likely to result in a cancellation of Vedanta's commitments under a bridge facility, and to pay related fees and expenses and for general corporate purposes.



Commenting on it, Anil Agarwal, chairman of Vedanta Resources Plc., said: "This transaction demonstrates the financial strength and global recognition of Vedanta Group as a major natural resources corporate. It is our fourth bond transaction and each time we have been met with increasingly overwhelming response by investors."



The bonds are being offered and sold in a private offering to qualified institutional buyers under Rule 144A of the Securities Act of 1933, as amended ("Securities Act"), and outside the United States under Regulation S under the Securities Act. The offering is expected to close on June 3, 2013, subject to customary closing conditions.



Bank of America Merrill Lynch, Barclays, Citigroup, J.P. Morgan, The Royal Bank of Scotland and Standard Chartered Bank are acting as joint global coordinators, joint lead managers and joint bookrunners and Deutsche Bank is acting as joint bookrunner.

Wheat spot market seen steady



A steady trend is likely to be witnessed in the coming days in the physical market, while futures market may remain positive on buying interest, said trade experts.

Around 2,500 bags of wheat arrived at the Karnal Grain Market Terminal on Friday.

In the physical market, after witnessing an uptrend earlier this week, Dara wheat ruled flat and quoted at Rs 1,405-1,410 a quintal. Mill delivery was at Rs 1,405, while delivery at the chakki was at Rs 1,410.

Desi variety was sold at Rs 2,300. Steady domestic demand and easy availability of stocks kept dara wheat and flour prices unchanged, said Radhey Sham, a wheat trader. In Delhi’s Lawrence road market, a benchmark for the country, wheat mill quality traded at Rs 1,550-1,590.

On the NCDEX,June contracts increased by Rs 10 and traded at 1,595 a quintal. According to the market experts, increased demand for the commodity mainly led to rise in wheat prices.

While, wheat spot prices on the exchange went up by Rs 5 and traded at Rs 1,460 .

With a steady trend in wheat, flour remained unchanged and quoted at Rs 1,670 . Similarly, Chokar ruled flat and sold at Rs 1,250-1,275 a quintal.

Sugar turns sour on sluggish offtake



Sugar prices declined by Rs 10-20 a quintal on Friday on slack demand and higher sales. A drop in the futures market added to the bearish trend.

In the Vashi wholesale market, spot prices dropped by Rs 10 on higher arrivals from producers. Naka prices dipped by Rs 10-20 tracking Rs 20 drop in mill tender rates. Sentiment was weak, said sources.

A wholesale trader said that prices in physical and futures markets continued the bearish trend, tracking slack physical demand and improved chances of import due to lower international prices.

Supply is ample in local markets in absence of neighbouring States’ buying. Vashi market reopened after three week’s long continuous closing but demand could not improve as expected and it remained subdued, he said.

In the Vashi wholesale market, arrivals were about 68-70 truckloads (of 100 bags each) but slack local demand kept dispatches limited to about 48-50 truckloads.

Inventories in the Vashi market increased for the second consecutive day due to lower retailers’ offtake.

On Thursday evening, merely 11-12 mills offered tenders and sold 20,000-25,000 bags at lower price of Rs 2,940-3,020 (Rs 2,960-3,020) for S-grade and Rs 3,040-3,120 (Rs 3,070- 3,120) for M-grade.

On the NCDEX, sugar June futures dropped further by Rs 38 to Rs 3,017, July by Rs 31 to Rs 3,073 and August by Rs 38 to Rs 3,129 .

The Bombay Sugar Merchants Association's spot rates were: S-grade Rs 3,122-3,201 (Rs 3,127-3,232) and M-grade Rs 3,212-3,426 (Rs 3,232-3,421).

Naka delivery rates: S-grade Rs 3,030-3,090 (Rs 3,050-3,100) and M-grade Rs 3,140-3,200 (Rs 3,150-3,220).

Coal India must meet full requirement under fuel supply pacts: CERC



The Central Electricity Regulatory Commission (CERC) has said that Coal India should meet the full requirement under fuel supply agreements (FSAs) with power utilities.

The regulatory body’s views have come after the Power Ministry sought its advice on two issues.

One, whether the existing policies permit Coal India to meet its FSA commitments (for post-March 2009 power projects) through supply of imported coal on cost-plus basis.

Two, whether the additional cost of imported coal under the existing provisions of power purchase agreements (PPAs) can be allowed to be passed through. On May 20, CERC told the nodal Ministry that it was Coal India’s responsibility to meet the full requirement under FSAs even if it has to resort to imports.

Strong monsoon phase seen into first week of June



All available indications point to a strong phase of South-West monsoon in the first week of June, after seasonal rains break over Kerala coast. This would be underwritten by a wet phase of Madden-Julian Oscillation (MJO) wave that passes above the Indian Ocean during this period.

MJO INFLUENCE



Though travelling high up, the wave is able to influence ground weather by facilitating formation of clouds, precipitating rains, even triggering storms and monsoon onset. The Climate Prediction Centre of the US National Weather Services has said that the Indian Ocean, South India and Sri Lanka are expected to get impacted.

AUTO-PILOT MODE



The strong phase would kick off from May 28 and last for 11 days until June 7. Gusty winds might bear down over Kerala and Konkan-Mumbai coasts and trigger copious rain. Rains may relent later, depending on how monsoon dynamics become established by that time.

Normally, a strong phase helps monsoon shift to auto-pilot, which means that the strength of the flows would be enough to carry it along with or without an MJO wave.

Available indications suggest that this could indeed be the situation, and the monsoon is shown as running up whole peninsula and East India thanks to concurrent activity in the Bay of Bengal. US forecast models have also indicated thatJune could likely witness normal to above normal rainfall.

Meanwhile, India Met Department said on Thursday that rainfall could scale up along the West Coast and Lakshadweep from Sunday.

This would set the stage for copybook-style conditions culminating likely in onset of the monsoon early next week, according to international weather models

THUNDERSHOWERS



A prominent pre-monsoon atmospheric formation is already setting up a chain of thunderstorms over peninsular and South India.

The weather-setting trough of lower pressure runs from South Jharkhand to South Tamil Nadu across South Chhattisgarh and interior Andhra Pradesh.

The trough receives moisture from the seas on either side, which combines with the hot air to set up clouds and thundershowers along the line. Thundershowers are forecast to break out over Kerala, Karnataka, Lakshadweep, South Konkan, Goa, South Madhya Maharashtra, Andhra Pradesh and Tamil Nadu until Sunday.

Rasi Seeds buys Bayer’s hybrid corn seed business



Rasi Seeds Pvt Ltd has acquired the hybrid corn seed business of Bayer BioScience in India for an undisclosed sum. The acquisition will immediately help Rasi double its share in the fast growing Indian hybrid corn seed market, estimated at close to Rs 1,000 crore annually.

“Bayer was looking to divest its corn seed business for some time now and we have acquired it,” said M. Ramasami, Chairman and Managing Director, Rasi Seeds.

India was the only geography, where Bayer Crop Science had a presence in the corn seed segment, through its subsidiary BioScience.

However, Ramasami refused to comment on the deal size citing non-disclosures as part of the agreement, signed on Friday. The deal is expected to be completed by May 31.

Bayer was one of the top 10 players in the Indian corn seed market and its volumes were around 3,000 tonnes a year, almost same as that of Rasi.

Multinationals Pioneer Hi-Bred, a subsidiary of DuPont and Monsanto, followed by Syngenta are the major players in the Indian corn seed market estimated annually at close to 90,000 tonnes.

Besides bringing Bayer’s five to six hybrid varieties to Rasi’s portfolio, the acquisition will also give the Attur, Salem-based firm access to the multinational’s corn germplasm and breeding stations in Bangalore, Hyderabad and in North India, said Arvind Kapur, Chief Executive Officer of Rasi’ vegetable seed business.

“We aim to increase the corn seed volumes to around 10,000-12,000 tonnes in the next few years and will also explore the markets in South-East Asia,” Ramasami said.

Rasi clocked a turnover of over Rs 400 crore last year and earned bulk of its revenues from the Bt cotton hybrids.

Corn is one of the fastest growing cereal crops in India and its acreage has increased to 8.7 million hectares with production exceeding 20 million tonnes on rising demand from segments such as poultry and livestock feed and starch makers.

The Indian hybrid seed market estimated at $2.4 billion in fiscal 2013 is expected to grow to $3.2 billion by 2016 at an compounded annual growth of 11 per cent.

Kloeckner to cut 2000 more jobs as it sees crisis lasting longer



Reuters reported that German steel distributor Kloeckner & Co increased planned job cuts to more than 2,000, the third time it has broadened the scope of its restructuring program in less than a year.



Kloeckner said on Friday it now planned to cut more than 2,000 jobs, or 17 percent of the workforce, by the end of 2013 and shut 70 sites around the world to boost its annual operating earnings by EUR 160 million from next year.



When it announced the restructuring program in 2011, Kloeckner had planned to cut 700 jobs. It last said in November it would reduce its headcount by 1,800.



CEO Mr Gisbert Ruehl told investors at Kloeckner's annual general meeting on Friday “The European steel industry is in a deep crisis that will certainly last a while longer.”



He added “There are signs that some small and medium sized competitors lacking access to capital markets were facing difficulties in obtaining financing.”

Nigerian govt recovers Ajeokuta Steel from Indian firm



It is reported that the Federal Government of Nigeria has recovered the Ajaokuta Steel Complex in Kogi State, after years of litigation.



Mr Smart Adeyemi a senator lawmaker representing Kogi state said that the federal government is also in the process of negotiating the return of the Iron Ore Mining Company, Itakpe, also the state.



The Federal Government has been locked in arbitration with Global Steel Holdings Limited and Global Infrastructure Limited at the International Chamber of Commerce, London, for the return of Ajaokuta since 2007.



The legal tussle started in 2008 when Global Steel dragged the federal government before the ICC.



The Indian firm was allegedly accused of going against the concessional agreement, which led to a face off between the firm and the company’s workers. The agreement was terminated in 2008 by President Umaru Musa Yar’Adua, who set up an Interim management Committee to oversee it.

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