Lufthansa bets on India growth; to boost ties with Jet Airways
Bullish on Indian market, European airliner group Lufthansa plans to enhance bilateral ties with Jet Airways for increased connectivity to new cities and launch flight from Brussels to Mumbai next month. Lufthansa Group, which operates 60 flights to and from India per week, has recently introduced the fuel-efficient A350-900 aircraft on Munich-Delhi route. “We are also looking to intensify the bilateral relationship between Jet Airways and Lufthansa,” Chairman of the Executive Board and CEO of Deutsche Lufthansa AG Carsten Spohr today said. Already, Lufthansa and Jet Airways operate code share flights on certain routes and this collaboration is likely to be expanded further. Code share allows an airline to book its passengers for destination where it does not fly through a partner carrier. Recently, the European major had expanded its partnership with Gulf carrier Etihad Airways — which is a strategic partner of Jet Airways. All the three carriers have significant presence in the European market. “We have some code share going with Jet Airways. We would like to intensify and may be enlarge our portfolio of code share… That means flights to second tier cities which we are not operating directly could be destinations where we cooperate in terms of code share,” Senior Director (South Asia) at Lufthansa Group Wolfgang Will said at a press meet. He also noted code share has been a healthy component in their services. Soon, Lufthansa would be introducing the A350-900 plane on Munich-Mumbai route apart from increasing the frequencies of its services between Pune and Frankfurt. “The services between Brussels and Mumbai would start by end of March,” he noted. Besides, the group would be naming one of its big aircraft flying to India as ‘Delhi’. “This shows the importance of Delhi as a hub and India as a market to us,” Spohr said. Meanwhile, the Airbus 350-900 plane has been configured to seat 293 passengers, including 224 in Economy Class. This aircraft consumes 25 per cent less fuel, emits 25 per cent less carbon dioxide and generates 50 per cent less noise. In the Asia-Pacific, Lufthansa Group flies to 18 destinations in eight countries, operating 249 weekly flights from this region to Europe. Davante Adams Jersey
HAL to invest about Rs 17,500 cr over 5 to 6 years
Hindustan Aeronautics Ltd today said its overall investment over the next five to six years is expected to be about Rs 17,500 crore, and it may go for loans from banks soon to fund its projects. The company also said it has contributed over Rs 5000 crore to the government exchequer through the buyback option. “…we will be happy if we get more funds, but we will present the case. Not waiting for two or three years till CCS sanctions to meet the current expectations and requirements, we are funding from our own reserves,” HAL Chairman and Managing Director T Suvarna Raju told reporters. Responding to a question at the Aero India 2017 air show here, he said “you may watch during the month of March, maybe we are going to take loan from the banks for our projects.” “Overall expected investment as of now, approximately is Rs 17,500 crore, spread over five to six years,” he added. On disinvestment activity of the company based on the government approval of 10 per cent of the shareholding in 2013, Raju said progress has been made in this regard with the identification of Book Running Lead Managers and preparation of draft red herring prospectus. Necessary documents are in place. “…10 per cent of the equity capital that is 3.615 crore of equity at the face value of Rs 10 would be considered for the IPO, the valuation will be done by the BRLMS and the other financial experts. We are awaiting for the valuations from them,” a senior company official added. Responding to a question about when the company will be filing red herring prospectus with SEBI, Raju said by the end of this financial year. Raju also said the option of buyback of 25 per cent of share capital and reserves of the company has been executed through which the company has contributed over Rs 5000 crore to the government exchequer. “During 2015-16 twelve crore five lakh shares have been offered for buyback amounting to Rs 4,284 crore apart from Rs 981 crore as buyback plan, in all amounting to Rs 5,265 crore. This is what we have paid back to the government by offering 25 per cent of the equity capital,” a company official said. Speaking about the financial performance of the company for 2015-16, Raju said it recorded the highest ever turnover of Rs 16,736 crore and registered a growth of 7.14 per cent compared with the previous year. He said the profit before tax of the company for the year was Rs 3288 crore, adding, against the target turnover of Rs 17,100 crore at the end of January 2017, the company has achieved sales of Rs 10,086 crore with a healthy profit of Rs 1,621 crore. T. J. Watt Womens Jersey
New projects coming on line to boost transmission utility Power Grid
Commissioning of a few big ticket projects this quarter is likely to improve the earnings visibility of India’s largest power transmission firm Power Grid Corporation (PGC). An increase in the capitalisation -with assets which were under expansion beginning to contribute to profits -boils down to higher profit through assured returns (that is linked to equity contribution towards total assets). PGC is entitled to 15.5% return on equity deployed in all nominated commissioned projects. This is called regulated equity. Higher regulated equity translates into higher earnings for the next year. In its recent analyst meet, senior officials said that PGC was targeting capitalisation of Rs 1.46 lakh crore (including Rs 28,000 crore in FY17) over the next four years. Similarly, its capital expenditure is expected to be Rs 1 lakh crore in the next four years. Due to a high capitalisation schedule, the company has high certainty of over 16% annualised earnings growth between FY16 and FY20. Due to a high capitalisation, net profit grew 20% to Rs 1,930 crore in the December quarter as revenues from ransmission business rose 21.6%. The company has given a guidance of Rs 22,500 crore and Rs 28,000 crore of capex and capitalisation, respectively, till March. In the first nine months of FY17, it has capitalised assets worth Rs 16,000 crore. This means nearly Rs 12,000 crore of assets will be capitalised in Q4. The company may meet its guidance as phase 1 of the Rs 6,500-crore ChampaKurukshetra High Voltage Direct Line is likely to commission in February 2017 and phase 2 of North East-Agra Line will start operations in Q4 of FY17. Since April 2016, PGC has commissioned projects worth Rs 20,700 crore and incurred capex of Rs 17,900 crore -maintaining capitalisation to capex ratio of more than one. Logan Thomas Authentic Jersey
Clean energy cess collections rise, but spending low
The government’s collections from the clean environment cess imposed on coal, lignite and peat in 2010 are likely to touch Rs 54,336 crore by March, according to a finance ministry document. However, only Rs 9,021 crore, or about 17% of the expected total, has been spent through the National Clean Energy Fund (NCEF) to which Rs 25,810 crore has been transferred from the amount collected. The spending falls short of the estimated Rs 34,811 crore needed to subsidise some 55 renewable energy projects, as recommended by an inter-ministerial group. Funds from the cess are routed through the NCEF to finance and promote clean energy initiatives and research & development. The inter-ministerial group decides how the money is to be used. According to a government statement, about Rs 9,021 crore has been spent through NCEF although Rs 17,500 crore has been allocated to various ministries over the years. About Rs 12,400 crore was allotted to the Ministry of New & Renewable Energy, while some Rs 3,500 crore has provided to the Ministry of Water Resources, River Development and Ganga Rejuvenation. The government introduced the clean energy cess in 2010 with a levy of Rs 50 on every tonne of coal sold. This was increased to Rs 100 per tonne in 201415, Rs 200 per tonne in 2015-16 and Rs 400 per tonne this financial year. The government collec ted Rs 12,600 crore from the cess in 2015-16 and is expected to garner Rs 26,148 crore in 2016-17. An industry executive said with renewable energy costs declining, there may no longer be a need for subsidy , known as viability gap funding, for such projects. The government had also planned to offer in centives to power distribution companies to purchase solar and wind energy . “However, a very small portion of the fund found its way into funding these projects. Now with tariffs for solar and wind power generation declining, the requirement of viability gap funding for these projects are losing relevance,” said the senior renewable energy industry executive. “The government, therefore, needs to develop suitable mechanisms to encourage discoms to buy renewable power and consider a mechanism for making timely payments,” he said. Procurement-based incentives can help bridge the difference between the cost of renewable power generation and average power purchase cost, said another executive. Josh Ferguson Authentic Jersey
Lufthansa has no plans to buy equity in Indian carriers, says CEO Spohr
German airline Lufthansa will soon start operating the Airbus A-350, the latest aircraft in its fleet, between Mumbai and Munich, Carsten Spohr, Chairman of the Executive Board and Chief Executive Officer, Lufthansa Group said on Wednesday. On February 11 this year, Delhi became the first destination in Lufthansa’s global network to which the A-350 was deployed when its maiden flight landed from Munich. The Airbus A-350 is considered one of the most modern long-haul aircraft as its average jet fuel consumption of 2.9 litres per passenger per 100 km means 25 per cent less fuel than any other comparable aircraft type, airline officials said. Addressing a press conference here, Spohr also announced that Brussels Airlines will start operating between Brussels and Mumbai. Lufthansa recently acquired stake in Brussels Airlines. Besides, Lufthansa will also christen one of its Airbus A-380 aircraft ‘Delhi’ and increase the frequency of flights between Pune and Germany, Spohr announced. The start of the Brussels Airlines flight to Mumbai and the naming of the Airbus A-380 after Delhi are expected in March this year. “The first thing that we do after buying Brussels Airlines is to help them fly to India,” Spohr announced, adding that naming one of the few Airbus A-380s that Lufthansa has as ‘Delhi’ points to the Capital as a hub and India as a market for the airline. “At this point we are not approaching any other airline to enter the Star Alliance,” the CEO said in response to a question on whether he would be talking to any Indian airline about handholding it to enter the Star Alliance, adding that he would be meeting with his counterpart in AI on Thursday to look at ways of “intensifying” the Indian carrier’s membership in the Alliance. The CEO ruled out the Lufthansa Group buying equity in an Indian airline saying that the focus of the German company was on airlines in Europe and that this would continue. Asked whether the recent three-year tie-up finalised between Etihad and Lufthansa will impact the Indian market, Spohr said, “Etihad group is an investor in Jet Airways so when we look to intensify our cooperation with Etihad we will also look to enhancing the bilateral relationship between Jet Airways and Lufthansa, which already exists but could offer room for more.” Spohr also announced that Lufthansa’s recently launched international low-cost airline will operate to India. Although he declined to specify by when this would happen, he did indicate the possibility of the low-cost airline looking at flights between Germany and Goa. “Germans love to go to Goa. There is no direct service. So we can look at these kinds of destinations,” he said. Lawson Crouse Jersey
Cab, auto-rickshaw drivers on strike meet Gadkari, demand government-run app
Striking taxi and auto-rickshaw drivers on Tuesday met Union minister for road transport Nitin Gadkari and demanded a government-run cab-hailing app on the lines of Ola and Uber. A delegation representing taxi and autorickshaw drivers told Gadkari their problems and urged him to get a mobile application developed to end the monopoly of private cab services. They alleged that app-based taxi services pay very less amount to the drivers. “The minister has promised us his support and expressed his desire to work for the benefit of the drivers… Tomorrow we will meet the senior officials of the ministry to discuss it in detail,” Delhi Taxi Tourist Transporters Association (DTTTA) president Sanjay Samra said. In their memorandum to the minister, the drivers alleged Ola and Uber were offering low fares and asked Gadkari to discontinue Ola and Uber cab services in the country. “They announced that the drivers will get Rs 6 per kilometre and asked for 25% in commission from the drivers. At this rate many Ola and Uber drivers are unable to earn enough to tend to daily needs,” Samrat added. The drivers launched a strike on February 10, much to the pains of the commuters who rely of app-based taxi services. Dion Phaneuf Authentic Jersey
CENTRE TAKES THE HIGH ROAD, RESCUES PRR
The long-drawn debate between the Bangalore Development Authority (BDA) and National Highways Authority of India (NHAI) over who would build the Peripheral Ring Road (PRR) around Bengaluru has finally come to an end. The Centre has agreed to take up the project under the Bharat Mala Pariyojana. Union Minister of State for Road Transport and Highways Pon Radhakrishnan confirmed the development and added that the NHAI was preparing the detailed project report. The 65-km-long PRR stretch from Tumkur Road to Hosur Road — which looks to ease the load off the Outer Ring Road — will now be funded and built by NHAI. Around 1,810 acres have already been earmarked by the BDA for the project. A source said the NHAI would require around Rs 41,000 crore for the project. Of this, Rs 25,000 crore would be for land acquisition and compensation (according to the new Act), while the construction will cost Rs 16,000 crore. Now that ownership is out of the way, the focus is on the compensation package. A source in NHAI said they were looking into various models to take up the project. They can either take up the project on the usual PPP model or the hybrid annuity model (the Bengaluru-Mysuru six-lane project will be taken up under this mode). Under this model, the concessionaire would fund 60 per cent of the project cost while the rest would be borne by the Centre. The Centre hopes that by doing so, it can attract a number of bidders. The NHAI officials in Bengaluru said the current project details were being worked out in New Delhi. For years, the PRR project was like a game of football between NHAI and BDA. As the ORR was saturated, the state government, headed by the then Chief Minister SM Krishna, had mooted PRR to be constructed by the BDA. Later, however, NHAI officials had asked the state government to hand over the project. But during the time, the BDA had intervened and took over for the implementation which never took off. Then, the BDA said NHAI would construct it and the latter said the BDA had taken over the project. Only during the last meeting, it was decided at the Chief Secretary level that the project will be handed over to the Centre. PC Mohan (MP, Bengaluru Central) told Mirror that he had taken up the issue in parliament, and it was heard. “It’s a good sign for Benglauru. PRR is a much-needed project… we need to connect it from one point to another point. PRR will ease the pressure on city’s roads. Vehicles entering the city from Tumkuru side will have direct exit towards Tamil Nadu on Hosur Road,” he added. Bharat Mala Pariyojana Through Bharat Mala Pariyojana, the Union Ministry of Road Transport and Highways takes up a detailed account of the National Highway network with the aim to improve connectivity. ABOUT PRR The Peripheral Ring Road (PRR) is aimed to decongest the city’s roads, especially the Outer Ring Road, which is used by at least 10,000 trucks every day. To relieve the traffic pressure on ORR and other major roads of Bengaluru city, a Peripheral Ring Road of 65 km was planned outside of the ORR. This road would not only improve connectivity to areas beyond the ORR, but would also ease congestion. It will start from Hosur Road and extend till Tumkur Road, passing via KR Puram, Bellary Road, Old Madras Road and Sarjapur Road. The project is to take off from near Makali on Benglauru-Pune road and connect with Hosur Road. Mark Jackson Jersey
HDFC and NHAI likely to raise Rs 10,000 crore via Masala bonds
Housing Development Finance Corporation (HDFC) and National Highway Authority of India (NHAI) are set to raise funds from the international markets as the US’ Federal Reserve is widely expected to raise interest rates at least three times this year. Together, they could raise up to Rs 10,000 crore by selling rupee-dominated masala bonds (Rs 5,000 crore each) to investors before the end of this fiscal mostly, said multiple sources with direct knowledge of the matter. An email sent to NHAI remained unanswered till the time of going to press. “We have received in-principle approval to raise another Rs 5,000 crore via rupee-denominated bonds,” Keki Mistry, VC & CEO, HDFC, told ET. “We will deploy the proceeds in housing loans as we see larger demand over time as a result of the government’s continued focus on housing. We will look for a right time to enter the market and borrow money under the programme,” he said. “India is an attractive investment destination and the confidence of foreign investors is reflected in their continuing interest in investing in equity and debt of Indian companies,” he said. While NHAI has appointed three bankers –– Axis BankBSE 0.20 %, Standard Chartered Bank and Nomura –– HDFC is in talks with bankers, sources said. Individual banks could not be contacted immediately for comments. “Bankers would be aiming to raise the whole sum or most of it, before the financial year ends as US rate increases look imminent, adding to borrowing cost,” said a senior banker. HDFC, India’s largest mortgage lender, was the first to tap the masala bond market last year collectively raising Rs 5,000 crore worth of masala bonds. These bonds, listed on the London Stock Exchange, has three-year maturities and are priced a few basis points lower than its domestic corporate bond rates. Yields of those LSE-listed bonds have fallen recently pushing up prices. “Indian borrowers tap masala bond market either to diversify their borrowing resources or get a large sum at a cheaper cost,” said Ajay Manglunia, executive VP (fixed income), Edelweiss Finance. “If such overseas deals are sold 15-20 basis points less than their domestic corporate bonds, issuers stand to gain.” “HDFC and NHAI are top-rated issuers, and will play a crucial role in deepening the masala bond market,” he said. One alluring factor is the relative stable exchange rate as global investors, including hedge funds and private banks, are supposed to take the currency fluctuation risk on such investments unlike in dollar-denominated bonds where issuers take the same. “We have signed contracts worth Rs 5 lakh crore for infrastructure, roads, ports….we are receiving good response for the public-private partnership, build-operate-transfer and hybrid annuity (models),” Nitin Gadkari, road transport, highway and shipping minister had said a few days ago. Lucas Johansen Authentic Jersey
NHAI-hybrid annuity model: HAM model tailored to cut risk for developers, but bankers need more comfort to lend to these projects
Although nearly 40 road projects worth around Rs 35,000 crore, to be built via the hybrid annuities model (HAM) have been bid out by the government since December 2015, more than a dozen of these are stuck for want of financial commitments. Since it is mandatory to have financial closure within 150 days of the projects being awarded, there is a real chance many of these will fall by the wayside. As opposed to the build-own-transfer model, the HAM model was tailored to reduce the risk for the developers with National Highway Authority of India (NHAI) shouldering the obligation to acquire land, obtain the environment clearances, estimating traffic and collecting the toll. However, bankers are apprehensive that developers now have too little skin in the game. With 40% of the project cost coming as a grant from NHAI, the concessionaire’s equity participation is reduced to just 15% of the remaining 60% of the project cost, or a mere 9%. Given their mixed experience with lending to the roads sector, it is not surprising bankers are being cautious. They are reluctant to fund the projects even after it was decided thatNHAI’s grant of 40% would be drawn down in the early stages of construction rather than being a milestone-based release of funds. An analysis by CRISIL of eight projects shows the bids have been somewhat aggressive—it turned out the average number of bidders had increased from three to 10 and that only four of the projects were viable. In such a situation, bankers are right in saying this will expose developers to cost over-runs while the annuity payments are fixed; indeed, the costs budgeted for by builders are lower than those estimated by the NHAI. Even otherwise, risks associated with road projects are not low, which is why lenders want the concession agreement to build in a stiff compensation in the event of a default. They are looking at nothing less than 90% of the outstanding debt. If bankers are not given the requisite comfort, the new scheme to get roads projects could also trip up. Jonathan Jones Authentic Jersey
Union Budget 2017: Petroleum Ministry gets cracking on creation of oil goliath in India
The ministry of petroleum and natural gas has started discussions with state-run oil and gas companies to take forward the Budget proposal to create a globally competitive “oil major” by consolidating the firms. The ministry officials have met heads of all public-sector oil companies and asked them to suggest possible merger scenarios, said a person close to the development requesting anonymity. Finance minister Arun Jaitley had announced in his Budget speech on February 1 that the government plans to merge state-run oil and gas entities to create an integrated firm having the strength to compete with international and domestic private oil and gas majors. He had emphasised that the move will provide the merged entity “capacity to bear higher risks, avail economies of scale, take higher investment decisions and create more value for the stakeholders”. The move will require the petroleum ministry to do a lot of ground work and think of ways to initiate the proposed consolidation, before the department of investment and public asset management steps in to execute the plan. There are 18 oil and gas state-run utilities including Oil and Natural Gas Corporation (ONGC), Oil India, GAIL (India), Bharat Petroleum Corporation, Indian Oil Corporation and Hindustan Petroleum Corporation. The idea has been received with mixed reactions by the industry. Though some have welcomed it, ONGC chairman Dinesh Sarraf had on February 9 told Reuters that the oil explorer’s overseas arm, ONGC Videsh, should not be merged as such horizontal integration would create monopoly. A GAIL (India) executive, as reported by FE earlier, had said their business model is distinct from others and it may remain a separate vertical even in case of a merger. HomeEconomy Union Budget 2017: Petroleum Ministry gets cracking on creation of oil goliath in India Union Budget 2017: Petroleum Ministry gets cracking on creation of oil goliath in India The ministry of petroleum and natural gas has started discussions with state-run oil and gas companies to take forward the Budget proposal to create a globally competitive “oil major” by consolidating the firms. By: Prasanta Sahu and The Financial Express | New Delhi | Updated: February 15, 2017 7:56 AM 84 SHARES FacebookTwitterGoogle+LinkedInEmail oil The ministry officials have met heads of all public-sector oil companies and asked them to suggest possible merger scenarios, said a person close to the development requesting anonymity. The ministry of petroleum and natural gas has started discussions with state-run oil and gas companies to take forward the Budget proposal to create a globally competitive “oil major” by consolidating the firms. The ministry officials have met heads of all public-sector oil companies and asked them to suggest possible merger scenarios, said a person close to the development requesting anonymity. Finance minister Arun Jaitley had announced in his Budget speech on February 1 that the government plans to merge state-run oil and gas entities to create an integrated firm having the strength to compete with international and domestic private oil and gas majors. He had emphasised that the move will provide the merged entity “capacity to bear higher risks, avail economies of scale, take higher investment decisions and create more value for the stakeholders”. The move will require the petroleum ministry to do a lot of ground work and think of ways to initiate the proposed consolidation, before the department of investment and public asset management steps in to execute the plan. There are 18 oil and gas state-run utilities including Oil and Natural Gas Corporation (ONGC), Oil India, GAIL (India), Bharat Petroleum Corporation, Indian Oil Corporation and Hindustan Petroleum Corporation. The idea has been received with mixed reactions by the industry. Though some have welcomed it, ONGC chairman Dinesh Sarraf had on February 9 told Reuters that the oil explorer’s overseas arm, ONGC Videsh, should not be merged as such horizontal integration would create monopoly. A GAIL (India) executive, as reported by FE earlier, had said their business model is distinct from others and it may remain a separate vertical even in case of a merger. However, unlike as was believed after Jaitley’s announcement that one large behemoth will be created, oil minister Dharmendra Pradhan had clarified that it will not be a merger of all companies, that more than one large company could be created or smaller firms may be merged into larger Navratna companies. News channel ET Now, sourcing wire agency Newsrise, on Tuesday tweeted that according to an oil ministry official, at least one merger between oil firms will be announced by September 30. Talking about the merger scenarios, a government official not wanting to be named said there are various options to consolidate the public sector oil companies. “These include creating a holding company, or creating two companies by merging the upstream ones together and downstream ones separately.” The official reiterated what Pradhan said and added that the third option could be merger of smaller companies with larger ones. According to a recent Fitch Ratings report, though the move could reduce inefficiencies across the sector and create an entity that is better placed to compete globally for resources and less vulnerable to shifts in oil prices, a merger would face significant execution challenges. The main hurdles, according to the report, will be faced in terms of managing the integration of employees, addressing overcapacity in the merged entity, and winning the backing for merger from private shareholders. Some experts like former Planning Commission member Kirit Parikh have argued against the government’s move. “When these activities are combined into one unit, inefficiency in one activity can be hidden by the efficiency of another. This reduces the incentive to be efficient for the loss-making company and reduces resources for growth and investment for the profit-making company,” Parikh wrote in The Times of India, even as he admitted that one giant oil corporation will increase the bargaining power of the company in purchasing crude in the international market. Scott Wedgewood Jersey