16th August, 2008:TWO years after it first got the Indian government’s approval to launch wireless telephony services in the country’s financial capital, Aditya Birla group’s Idea Cellular has finally landed in Mumbai.

According to an Aditya Birla group official, the services will be formally launched in the next few days with the entire infrastructure now in place. “We are ready... all of us at the Birla group have shifted to the Idea network,” the official said asking not to be named. The company has set up a network of 200-odd stores to offer its services, the official added. In some places, the marketing team is also offering the product.

The official said all beta tests were successful and now the sales and marketing team would takeover for the rollout of the operations. When contacted, Idea managing director Sanjeev Aga declined to comment on the impending launch of services.

India’s fifth-largest network, Idea Cellular’s journey to Mumbai was fraught with hurdles over spectrum allocation and it was finally allocated to the company this March. Idea had earlier targeted to launch its service by the last quarter of calendar 2007.

According to an extraordinary general meeting notice sent to the shareholders, Idea Cellular said it had set aside Rs 650 crore for the Mumbai roll out from its initial public offering funds raised in February last year.

Idea would be the seventh wireless telephony services provider in Mumbai which has more than 10 million customers with Vodafone Essar leading the pack with 37.89 lakh customers, according to Cellular Operators Association of India statistics till end July.

The Mumbai launch also comes at a time when the Department of Telecom (DoT) has asked the company to surrender one of the two telecom licences it holds for the circles of Punjab and Karnataka. Idea Cellular, which had acquired a controlling stake in Spice Communications for around Rs 2,700 crore in June, now holds two licences in these circles on account of this acquisition. The DoT, however, ruled out any move to refund the licence fees paid by Idea after it surrenders the licences.

16 August, 2008:CEMENT counters, which have reacted sharply to government diktat and higher international coal prices, will have to grapple with a demand-supply mismatch in the days to come. New capacities being built by several cement firms could limit their pricing powers — a factor that the Street is slowly beginning to price in.

The market is concerned that close to 49 million tonnes new capacity that is expected to be added during FY09, could put a downward pressure on cement prices. Domestic production was pegged at 167 million tonnes in FY08, which was broadly in line with the aggregate demand. One of the market indicators that is capturing the concerns over excess capacity is the ‘enterprise value per tonne’ numbers of various firms. Roughly put, the EV of a company is its market cap plus debt less cash and liquid holdings. It’s the number which an acquirer looks at while bidding for a company.

The EV per tonne for cement companies have fallen sharply and they are now available at valuations not seen in the past three years. For instance, Ambuja Cement is currently being valued at around $145 a tonne on an EV/tonne basis compared with $185 paid by the Swiss-based Holcim via its subsidiary for acquiring 14.8% from the Indian promoters in January 2006. (However, this excludes the non-compete fee that Holcim had paid).

Ambuja Cements ended Thursday’s trade 3.2% lower at Rs 84.7. Interestingly, the stock is trading at 11.8 times estimated calendar year 2008 earnings and 15 times estimated calendar year 2009 earnings. (Sections think that reflects a lower earnings per share next fiscal). ACC, India’s largest cement company, is now trading at an EV/per tonne of about $110 per tonne compared with $156 per tonne at the end of its financial year ended December 2005. ACC had declined 2.8% to Rs 609.7 on Thursday, and it is trading at 11.7 times estimated calendar year 2008 earnings and 11 times estimated calendar year 2009 earnings. Also, UltraTech Cement (after taking into account its recently commissioned clinkerisation unit in Andhra Pradesh) currently trades on EV/tonne at about $90 per tonne levels, a decline of nearly 25% over the past two and half years. UltraTech stock declined 2% on Thursday to close at Rs 620 and it trades at about 7.3 times estimated FY09 earning.

Even mid-sized players such as Shree Cement are being currently valued at an EV/tonne at about $ 68, a 48% decline over the past three years.

12 August 2008: THE 162-oil & gas exploration contracts signed under the New Exploration Licensing Policy (Nelp) regime may be reviewed if the government accepts the proposal of the BK Chaturvedi committee to levy a ‘special oil tax’ for crude production under pre-Nelp regime. The panel has also asked the government to revisit concessions given to oil & gas producers under the Nelp regime and examine “if a tax is consistent with these agreements”.

These observations could be significant since Cairn India is scheduled to start oil production in Rajasthan in 2009 and Reliance Industries is likely to start gas output from KG basin next month.

The petroleum ministry, however, has written to the Prime Minister’s Office (PMO), rejecting the proposal, particularly on gas. The ministry communicated this to the PMO after the Chaturvedi panel submitted its report.

“The committee has said that oil and gas is also produced in leases extended in the post-Nelp. The government may examine the terms of the agreement under which these concessions were given and see if a tax is consistent with these agreements,” an official said, adding the term “post-Nelp” could be a typographic error and would mean Nelp regime as there are no exploration & production (E&P) activities beyond pre-Nelp and Nelp.

Through six Nelp rounds, the government has signed 162 production sharing contracts (PSCs) with public and private sector oil companies like RIL, Cairn and ONGC. PSCs for over 50 more blocks under the Nelp-VII are yet to be signed.

The committee has suggested a special tax on crude output for blocks given in pre-Nelp regime. The tax should be temporary and should be 100% of the benchmark for PSUs such as ONGC, and 40% for private or joint ventures between public and private companies.

In a communication to the PMO, the oil ministry has said domestic gas price is highly controlled at a fifth of the prevailing global price of around $15 per million British thermal unit (mBtu) and any attempt to impose windfall gain tax on gas is unjustified. These comments are significant since RIL is set to produce about 25 million metric standard cubic meter of gas (mmscmd) daily from next month. Gas output would soon go up to 40 mmscmd.

“There have been some proposals to examine windfall profit tax on oil and gas production. We have sent our comments to the competent authority that gas prices prevailing in India are actually very low and, therefore, (it is) difficult to justify a demand for any kind of windfall taxation, especially on the production of natural gas,” an official said.

“Having opted for a PSC regime over the concession system, the government of India has automatically provided for capture of all upside potential (higher revenue) by means of an increasing higher take for the government in the form of profit petroleum, higher corporate tax payouts and increased royalty,” an official source added.

12 August, 2008: CORPORATES planning to borrow overseas can look forward to some respite. The government is likely to revisit the interest rate ceiling for overseas borrowings, though relaxation of the overall cap is ruled out for now.

The review comes against the backdrop of interest rates rising globally, leading to representations from the industry for relaxation of the interest rate ceiling. “We have received several representations to revisit the interest spreads. We are looking into it,” a finance ministry official said. Commerce & industry minister Kamal Nath had also written to the prime minister, stressing the need to revisit the external commercial borrowings (ECB) policy.

It may be pointed out that the government had raised the interest rate ceiling on May 29, pegging it at the year-ago levels. The ceiling was revised to 200 basis points over 6-month Libor from the earlier 150 basis points for overseas borrowings by companies for maturities between 3-5 years. For maturities over 5 years, the ceiling has been hiked to 350 basis points over 6-month Libor from 250 basis points.

The industry, which has been finding it difficult to raise money even after this revision, has submitted several representations to the government. Their contention is that interest rates have gone up globally, and small companies with not-so-large balance sheets are finding it hard to borrow within the prescribed spreads.

August 7, 2008: THE battle between Kolkata-based Emami and the Mumbai-based Parikh family over the control of Zandu Pharmaceuticals Works has reached the courtroom. The Parikhs, promoters of Zandu, have filed a petition in the Bombay High Court challenging Emami’s purchase of shares in the company from the Vaidyas, co-promoters of Zandu. On the other hand, Emami has sent legal notices to directors of Zandu claiming it has not received the agenda of Zandu’s annual general meeting to be held on August 9.

Zandu Pharmaceuticals’ chairman and leading corporate lawyer, YP Trivedi confirmed the legal tussle between the Parikhs and Emami. He told ET: “I am against any litigation. Litigation is always useful only for lawyers. I have asked both the parties to sit together and resolve all the differences.” Emami has appointed law firm Kanga & Company while Zia Mody is representing the Parikhs. Zandu’s managing director Girish Parikh was not available for comment.

The Parikhs moved the high court after they failed to get a stay on Emami’s acquisition of Zandu shares from the Company Law Board (CLB). Emami bought the shares from the Vaidya family for around Rs 120 crore in May this year. The Parikhs have claimed that they enjoy the right of first refusal (RoFR) in the case of sale of shares by the Vaidyas and therefore, the transaction was illegal. The Parikhs hold nearly 25% stake.

The CLB had advised the Parikh Group to approach the stock market regulator, Sebi, over the Vaidyas’ alleged violation of the RoFR. Accordingly, the Parikh Group moved Sebi on the matter. Sebi is yet to clear the mandatory open offer to be launched by Emami. Under Indian laws, any acquisition beyond 15% is required to be followed by a mandatory 20% open offer. Emami has to launch the mandatory offer, subject to Sebi approval, as its holding in Zandu is 27.5%.

Emami denied that there was any such RoFR between the promoters of Zandu. An Emami official said they — Emami and its advisor Anand Rathi — had done proper due diligence on the so-called RoFR issue before the purchase of Zandu shares from the Vaidyas. The Parikh and the Vaidya family set up Zandu more than a century ago.

In a communication dated August 4 to the Zandu directors with copies to the stock exchanges, Emami said the shareholders should receive the agenda of the AGM as per the Companies’ Act, 1956. Emami sources told ET that Zandu had not transferred some shares to Emami which it had bought from the Vaidyas in physical forms.

The AGM assumes significance as five nominees of the Parikh family would seek the shareholders’ nod to be appointed on the Zandu board. The Zandu board is dominated by independent directors, which includes MR Trivedi and also PP Vora, K Natarajan, SS Handa and AV Shah. On June 7, the same board had dropped a proposal to offer shares to the Parikhs on a preferential basis following a legal notice from Emami.

The Zandu share price, meanwhile, went up 5% to Rs 17,272 a share on Wednesday on the Bombay Stock Exchange compared to Emami's open offer price of Rs 7,315. Ever since Emami has launched the takeover bid, the Parikhs are buying shares from the market, leading to an unusual rise in its share prices, disclosures to the stock exchanges show.