Jitendra Kumar Gupta's blog

One reason why most countries, after the economic downturn last year, announced huge stimulus packages for infrastructure projects was because this would directly increase employment, boost demand and lift the sagging economies. According to data from the World Bank, every 1 per cent increase in infrastructure assets adds another 1 per cent to the gross domestic product (GDP) growth. OPPORTUNITIES In India's context, the opportunities are huge. Its poor infrastructure remains a major concern for its required economic growth. However, this is also an investment opportunity, given that if more money is ploughed into this sector, many companies will benefit immensely. This will ultimately translate into more value for shareholders in the long run. Opportunities Sectors Xth Plan ($/bn) XIth Plan ($/bn) Sectoral Share (%) % Change ...

Sun shining on T&D sector Jitendra Kumar Gupta / Mumbai May 28, 2010, 0:52 IST India’s largest player in the transmission and distribution (T&D) sector, Power Grid Corporation (PGCIL), has plans to spend Rs 1,00,000 crore over the next seven years, doubling its network to 1,57,000 km as compared to 77,000 km currently. Companies catering to the needs of the T&D segment can expect new orders being awarded by PGCIL as new investments gather traction and compensate for the delays in projects seen during 2009. For every rupee invested in setting up new power generation capacity, an equal investment is required in the T&D space to ensure that the power generated reaches the end consumer. India has an ambitious plan to build about 62,000 Mw of new power generation capacity by 2012 and another 1,00,000 Mw by 2017, which could require investments of at least Rs 8,00,000 crore. Even at a ratio of 60-65 per cent, this will require another Rs 5,00,000 crore of investments in Indi...

Time for a call on equities Jitendra Kumar Gupta / Mumbai May 27, 2010, 0:43 IST A lot of damage has already been done in the last few days due to global concerns over the euro zone, tightening liquidity (hence, slowing growth) in China, as well as the stance taken by Korea on nuclear proliferation. Indian equity markets have dipped over seven per cent. hough these concerns have not eased completely, market pundits believe the time has come to invest in Indian equities. An uneven road... Due to the global risk aversion, foreign institutional investors (FIIs) – who were net buyers of Indian equities to the tune of Rs 8,271 crore in the first four months of 2010 – sold stocks worth Rs 12,367 crore in the month of May alone. "It is mostly 'hot money'. Foreign investors are using every upside to sell their stocks," says Ambareesh Baliga, vice-president, Karvy Stock Broking. Analysts fear the near term, influenced by global issues, will continue to be volatile as the FII...

Building future on fast-growth track Jitendra Kumar Gupta / Mumbai May 26, 2010, 0:42 IST Reliance Infrastructure was recently awarded two road projects worth Rs 4,000 crore, making it one of the largest players in the promising road segment. In addition, the company has also emerged as a leading player in the infrastructure space, and is developing 23 large projects worth Rs 36,200 crore across other segments like airports, bridges & sea-links, metro rail and so on. It also has a significant presence in the power generation and transmission & distribution businesses, wherein the resolution over gas supply between Reliance Industries and RNRL could pave the way for Reliance Power’s mega power project in Dadri. Boost from infra Of the ongoing projects, almost 13 projects worth Rs 21,000 crore will be operational in the current year – which is significantly higher compared to just two projects commissioned in 2009-10 – boosting the company’s revenues and profitability. In the r...

Robust guidance, order book augur well Jitendra Kumar Gupta / Mumbai May 20, 2010, 0:55 IST A stellar performance for the March 2010 quarter has seen Larsen & Toubro’s (L&T's) share price outperform markets in the last three sessions and analysts upgrading the stock. On a standalone basis, L&T reported a 27.8 per cent rise in revenues and 18 per cent growth in net profits. More important, confidence levels have increased, led by a significant improvement in order inflow. The company’s order book (pending orders) crossed the Rs 1,00,000-crore mark. The current order book is almost 2.5 times its consolidated turnover and provides good revenue visibility for the next two-three years. Further comfort comes from the management’s confidence of achieving 20 per cent growth in revenue for 2010-11, besides 25 per cent in order book. Growth all around L&T generates about 85 per cent of its revenue from the engineering and construction (E&C) segment, which grew 30 per cen...

Engineering high growth Jitendra Kumar Gupta / Mumbai May 14, 2010, 0:20 IST Better demand, order inflows suggest turnaround for capital goods companies. India’s industrial production has improved consistently in the recent past, having grown at an average rate of 15 per cent in the first three months of CY2010. More important, the capital goods index (which reflects demand for machinery and other heavy equipment used in industrial activity) has grown at an average rate of 42 per cent. So, what does this mean for the country’s capital goods makers? After all, the sector saw tough times in 2009. The lag effect “Generally, if the capital goods index is showing strong growth, it will lead to growth in other industries or a broad revival of private capex, which may take another three-four months,” says CARE Ratings Chief Economist Madan Sabnavis. In the March 2009 quarter, India’s gross domestic product growth fell to 5.8 per cent as against 8.6 per cent in the same quarter of the previo...

Care for a speed demon? Jitendra Kumar Gupta / Mumbai May 16, 2010, 0:50 IST Though it is growing very fast, the auto sector needs constant innovation and cash. If the Indian economy grows 7-8 per cent annually, along with the growing number of middle class families, there are a lot of opportunities for the automobile industry. That’s why many foreign companies are eyeing the Indian market in a big way. On the back of economic growth and higher income, the two-wheeler industry has grown at over 10 per cent yearly in the last decade and passenger car segment by 15.7 per cent. The confidence increases primarily due to the low ownership of automobiles as compared to some other countries. According to the estimates, in India only 20 out of every 1,000 people own cars (of driving age), in sharp contrast with US and UK, where the ratio is 600-900 per 1,000. Here are a few points which could help investors analyse the industry and companies. STRUCTURE The Indian automobile industry compri...

India’s total installed capacity of hydro power is about 35,000 Mw as against a potential of 1,50,000 Mw. This gap is expected to shrink substantially as the sector is gaining attention and attracting higher investments. In fact, India's total hydro electric capacity is expected to reach 1,48,000 Mw by the 14th Five Year Plan ending 2027. Companies like SJVNL, which have experience and execution capabilities along with a strong balance sheet, will be a key beneficiary. SJVNL has an installed capacity of 1,500 Mw and is developing projects equivalent to 3,588 Mw, which will take its capacity to 5,500 Mw by 2016-17. The public sector hydro power generator, SJVN, is coming out with an initial public offer (IPO) and could be a good investment in the green energy space. Growth through diversification Besides growth coming from new capacities, SJVNL’s diversification into project consultancy, power trading, transmission and wind and solar energy should augur well in the long run. It is ...

Jaypee Infratech, a subsidiary of Jaiprakash Associates, was set up to develop, operate and maintain the 165-km, six-lane Yamuna Expressway connecting Noida and Agra in Uttar Pradesh. The project is estimated to cost Rs 9,740 crore, of which Rs 6,250 has been spent till February 2010. A part of the funds (Rs 1,500 crore) is proposed to be raised through an initial public offering (IPO) while the remaining will be cash generated from associated real estate development and debt. The project is expected to be commissioned by July 2011 and earn revenues in the form of toll for 36 years. Considering the huge cost of construction, mere collection of toll may not help recover the investments. According to estimates of Abhinav Bhandari, analyst, Elara Capital, the project will generate negative net present value (NPV) of about Rs 2,220 crore. The company will need to earn Rs 270 crore per year to recover just the initial investment. However, a lot will depend on flow of traffic and toll charg...