Sugar stocks, led by Bajaj Hindusthan shot up by over 6 per cent on the Bombay Stock Exchange after the government raised the price of ethanol for blending with petrol to Rs. 27 per litre today.
Shares of Bajaj Hindusthan, the country's largest sugar manufacturer, climbed 6.11 per cent to touch a month's high of Rs. 124.90 on the Bombay Stock Exchange in afternoon trade. Later, the scrip was trading at Rs. 121.85, up 3.53 per cent. Simbhaoli Sugars rose 5.40 per cent to a high of Rs. 39.95. Later the scrip was quoting at Rs. 38, up 0.26 per cent on BSE.
Ethanol is used a biofuel additive for petrol and can be made from sugarcane byproduct, molasses.
"The government's decision would help molasses producers get better price for ethanol. This has buoyed the stocks of sugar companies, which were under pressure for quite sometime," SMC Capitals Equity Head Jagannadham Thunuguntla said.
However, Shree Renuka Sugars tanked 0.15 per cent at Rs. 68.55, after hitting its months high at Rs. 71. Following the announcement, stocks of other sugar companies, including Balrampur Chini Mills also rallied (up 0.71 per cent), Dhampur Sugar Mills (3.25 per cent).
The government today approved an interim fixed price of Rs. 27 a litre for ethanol, higher from Rs. 21.5 a litre earlier.
A Group of Ministers (GoM) has recently reaffirmed Rs. 27 per litre price for ethanol to be paid by the oil marketing companies to the sugar mills.
Monday, August 16, 2010
Vedanta Agrees to Buy Stake in Cairn’s Indian Unit
Aug. 16 (Bloomberg) -- Vedanta Resources Plc, the mining company controlled by billionaire Anil Agarwal, agreed to buy as much as 60 percent of Cairn India Ltd. for $9.6 billion to gain access to India’s biggest onshore oil field.
Vedanta, based in London, will pay a total of about $8.5 billion to $9.6 billion in cash, the company said today in a statement. The price is a 32 percent premium to Cairn India’s average closing price over 90 days. Cairn Energy Plc, Cairn India’s parent, will return a majority of the cash raised to shareholders and invest the rest in exploration.
Vedanta is following the strategy of BHP Billiton Ltd., the world’s largest mining company, by adding oil assets to zinc, copper, iron ore and aluminum businesses. The purchase will give the company access to the Mangala deposit in Rajasthan. Cairn India is 62 percent held by Edinburgh-based Cairn Energy.
“The main issue is, why do a deal, just in terms of there is no previous experience in oil and gas,” Paul Cliff, an analyst at Nomura Holdings Inc. in London, said today by phone. “It will be financed by debt and although it puts some strain on the balance sheet we think it is doable. It’s a concern for investors because Vedanta is a metals and mining house with one of the most aggressive organic growth profiles.”
Credit-Default Swaps
Vedanta will borrow as much as $6.5 billion to fund the acquisition, Deputy Chairman Navin Agarwal said on a conference call today. J.P Morgan Cazenove and Morgan Stanley are acting as joint lead financial advisers along with Standard Chartered Plc, which is also arranging the financing together with Credit Suisse Group AG and Goldman Sachs Group Inc.
Credit-default swaps linked to Vedanta debt rose 116 basis points to 649, according to data provider CMA, the highest since May. Swaps are used to speculate on a company’s ability to repay debt and gain when perceptions of credit quality deteriorate.
Vedanta will buy at least 40 percent and up to 51 percent of Cairn India from London-listed Cairn Energy. The mining company will also make an open offer to Cairn India stockholders for as much as 20 percent of issued shares. The final number of shares sold by Cairn Energy will depend on the results of the open offer, which could take Vedanta’s stake to as high as 60 percent. The process will take about three months to complete, Cairn’s Finance Director Jann Brown said on a call today.
“It’s the right time to realize some of the value we’ve created,” Chief Executive Officer Bill Gammell said on the call. “This isn’t an exit from India for Cairn Energy Plc.”
Sesa Goa
Sesa Goa Ltd., another company controlled by Anil Agarwal, will end up with 20 percent of the explorer in a follow-up deal. The holding will consist of shares bought from Vedanta and through the open offer to shareholders. Sesa Goa will fund most of its purchase with its own cash.
Sesa Goa expects to have 120 billion rupees ($2.6 billion) in cash by the end of March next year, helping to fund the $3 billion purchase, Managing Director Prasun Kumar Mukherjee said by phone today. Sesa Goa had a cash surplus of 80.54 billion rupees as of June 30, according to its quarterly results.
Cairn Energy rose as much as 21.1 pence, or 4.5 percent, to 489.4 pence in London trading, and was at 483.9 pence by 11:39 a.m. local time. The stock has risen 46 percent this year. Sesa Goa fell as much as 9.6 percent in Mumbai trading. Vedanta climbed 5.3 percent to 2,161 pence in London after tumbling 20 percent last week, when the acquisition was reported.
Rich List
Cairn India’s current management will continue running the company after the acquisition, Anil Agarwal said in an interview with Bloomberg UTV today. Cairn India won’t be taken private and Vedanta will provide guidance to the management, he said.
Agarwal, with an estimated fortune of 4.1 billion pounds ($6.4 billion), is ranked 10th on the annual Sunday Times Rich List of the wealthiest people in the U.K., the London-based newspaper said in April. He built his wealth on aluminum, zinc, copper and iron ore after buying Shamsher Sterling Corp. in 1979.
Vedanta was the first Indian company to list its shares on the London Stock Exchange in 2003, according to its website, and employs 30,000 people with operations in India, Australia and Zambia. The company said in 2008 it would spend $20 billion in India over four years on mines and power plants.
The company’s plans to increase Sesa Goa’s production to 50 million metric tons annually from 2014 won’t be affected by the transaction, Navin Agarwal said. Vedanta plans to complete the deal by the first quarter of 2011, he said.
The premium Vedanta is paying for Cairn India reflects the potential of the Rajasthan block, where only one of seven fields has begun production, Vinay Nair, a Mumbai-based analyst at brokerage Khandwala Securities Ltd., said by telephone.
“Even though Vedanta is not a full-fledged oil or exploration company, they’ve shown their management expertise on the mining side,” helping to unlock that value, Nair said.
Vedanta, based in London, will pay a total of about $8.5 billion to $9.6 billion in cash, the company said today in a statement. The price is a 32 percent premium to Cairn India’s average closing price over 90 days. Cairn Energy Plc, Cairn India’s parent, will return a majority of the cash raised to shareholders and invest the rest in exploration.
Vedanta is following the strategy of BHP Billiton Ltd., the world’s largest mining company, by adding oil assets to zinc, copper, iron ore and aluminum businesses. The purchase will give the company access to the Mangala deposit in Rajasthan. Cairn India is 62 percent held by Edinburgh-based Cairn Energy.
“The main issue is, why do a deal, just in terms of there is no previous experience in oil and gas,” Paul Cliff, an analyst at Nomura Holdings Inc. in London, said today by phone. “It will be financed by debt and although it puts some strain on the balance sheet we think it is doable. It’s a concern for investors because Vedanta is a metals and mining house with one of the most aggressive organic growth profiles.”
Credit-Default Swaps
Vedanta will borrow as much as $6.5 billion to fund the acquisition, Deputy Chairman Navin Agarwal said on a conference call today. J.P Morgan Cazenove and Morgan Stanley are acting as joint lead financial advisers along with Standard Chartered Plc, which is also arranging the financing together with Credit Suisse Group AG and Goldman Sachs Group Inc.
Credit-default swaps linked to Vedanta debt rose 116 basis points to 649, according to data provider CMA, the highest since May. Swaps are used to speculate on a company’s ability to repay debt and gain when perceptions of credit quality deteriorate.
Vedanta will buy at least 40 percent and up to 51 percent of Cairn India from London-listed Cairn Energy. The mining company will also make an open offer to Cairn India stockholders for as much as 20 percent of issued shares. The final number of shares sold by Cairn Energy will depend on the results of the open offer, which could take Vedanta’s stake to as high as 60 percent. The process will take about three months to complete, Cairn’s Finance Director Jann Brown said on a call today.
“It’s the right time to realize some of the value we’ve created,” Chief Executive Officer Bill Gammell said on the call. “This isn’t an exit from India for Cairn Energy Plc.”
Sesa Goa
Sesa Goa Ltd., another company controlled by Anil Agarwal, will end up with 20 percent of the explorer in a follow-up deal. The holding will consist of shares bought from Vedanta and through the open offer to shareholders. Sesa Goa will fund most of its purchase with its own cash.
Sesa Goa expects to have 120 billion rupees ($2.6 billion) in cash by the end of March next year, helping to fund the $3 billion purchase, Managing Director Prasun Kumar Mukherjee said by phone today. Sesa Goa had a cash surplus of 80.54 billion rupees as of June 30, according to its quarterly results.
Cairn Energy rose as much as 21.1 pence, or 4.5 percent, to 489.4 pence in London trading, and was at 483.9 pence by 11:39 a.m. local time. The stock has risen 46 percent this year. Sesa Goa fell as much as 9.6 percent in Mumbai trading. Vedanta climbed 5.3 percent to 2,161 pence in London after tumbling 20 percent last week, when the acquisition was reported.
Rich List
Cairn India’s current management will continue running the company after the acquisition, Anil Agarwal said in an interview with Bloomberg UTV today. Cairn India won’t be taken private and Vedanta will provide guidance to the management, he said.
Agarwal, with an estimated fortune of 4.1 billion pounds ($6.4 billion), is ranked 10th on the annual Sunday Times Rich List of the wealthiest people in the U.K., the London-based newspaper said in April. He built his wealth on aluminum, zinc, copper and iron ore after buying Shamsher Sterling Corp. in 1979.
Vedanta was the first Indian company to list its shares on the London Stock Exchange in 2003, according to its website, and employs 30,000 people with operations in India, Australia and Zambia. The company said in 2008 it would spend $20 billion in India over four years on mines and power plants.
The company’s plans to increase Sesa Goa’s production to 50 million metric tons annually from 2014 won’t be affected by the transaction, Navin Agarwal said. Vedanta plans to complete the deal by the first quarter of 2011, he said.
The premium Vedanta is paying for Cairn India reflects the potential of the Rajasthan block, where only one of seven fields has begun production, Vinay Nair, a Mumbai-based analyst at brokerage Khandwala Securities Ltd., said by telephone.
“Even though Vedanta is not a full-fledged oil or exploration company, they’ve shown their management expertise on the mining side,” helping to unlock that value, Nair said.
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