Indian Power Companies Face Worst Ever Coal Shortage
India has traditionally struggled to produce enough coal to meet demand. However, the crisis of coal has never been this bad. According to reports coming in from the thermal power plants in India, coal stocks are critically low. This is all the more worrying since more than 70% of the total power produced in India is coal-fired thermal power.
Let us look at the magnitude of this coal shortage. Out of the 135 coal-fired power plants in India, around 16 plants had zero coal stocks and were running on a coal-in coal-out basis. But the overall condition is worse. Around 70 of these plants had coal stocks that would last for just about 3 days and 105 plants did not have coal for more than 10 days.
The Central Electricity Authority has prescribed 21 days coal as the ideal inventory but that is not the case with nearly 90% of the power plants. In the past, Indian power companies would import coal from countries like Australia and Indonesia. However, global coal prices have spiked in the last few months, forcing Indian power companies to rely on local coal.
India’s largest coal producer, Coal India, accounts for 82% of the local coal produced and it is almost operating at full capacity. Any further ramp-up will take time. In the current year, the unseasonal and erratic rainfall has badly impacted coal production and worsened the coal shortage in India. Indian coal prices are artificially low due to its inflationary potential.
Check - Power Crisis a Huge Problem for the Global Economy
The problem is also global, to an extent. The revival from the pandemic has led to a global surge in power demand. From UK to EU to China, there is an acute power shortage. Like India, China also relies extensively on thermal power, and its surge in demand for coal is pushing up prices in the global market.
In India, the low power prices have created a vicious cycle. Due to the low power prices, the state boards are forced to subsidize and power producers are bound by long term PPAs. The payment crisis gets transmitted from state electricity boards to power producers and onwards to the coal mines. It is this vicious cycle that needs to be broken.
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BSE All Set to Launch Trading in Electronic Gold Receipts (EGR)
A little over a week after SEBI approved the setting up of the gold exchange and trading in electronic gold receipts (EGRs), the BSE appears to be all set to go. According to a statement given by the BSE, the exchange was technologically ready to launch trading of Electronic Gold Receipts on its existing trading platforms. SEBI approval is still awaited.
In its last board meeting, SEBI approved setting up of gold exchanges that would permit trading in EGRs in lieu of physical gold. The EGRs will be similar to the warehouse receipts used to trade in commodities. The idea of EGR trading on a gold exchange was to ensure a uniform trading price for gold at a national level via a transparent market mechanism.
Check - SEBI Approves Setting Up Gold Exchange
Currently, the EGRs will be the third gold-linked product to trade on the exchanges. Gold derivatives (futures and options) as well as gold exchange traded funds (ETFs) are already permitted to be traded on the exchanges. Gold EGRs have already been classified as securities under the SCRA. Hence, the trading, clearing and settlement of EGRs will happen on the exchange platform itself.
EGRs can be held in the regular demat account. Clearing and settlement of EGRs will entail a multi-level interface of banks, vaults, importers, exporters, retailers, depositories, DPs etc. EGR clearing and settlement will also be guaranteed by the clearing corporation, like in the case of equities and F&O. The settlement guarantee fund (SGF) protection will also be available to EGR trading.
The gold exchange will offer the facility to convert gold into EGRs, trading in EGRs and reconverting EGRs back to gold. For this purpose, the exchange will work closely with vault service providers (VSP). These VSPs will be instrumental in converting gold to EGRs and back. They will also offer safe custody of physical gold backing such EGRs plus valuation and reconciliation.
To begin with, BSE is likely to launch EGRs in denominations of 1KG and 100 grams denomination for convenience. However, subsequently there would be addition of smaller denominations like 5 grams, 10 grams and 50 grams to attract retail investor interest. EGRs are fungible both ways and also fungible among the VSPs.
Also Read :- Gold Price Today
Automobile Sales Numbers Present a Mixed Picture for Sep-21
It was a tale of two stories for the auto sector sales in the month of September. Despite the upcoming festive season, the chip shortage has hit the sales numbers of most of the large passenger car companies. Smaller passenger car companies were better off, showing growth. Among other auto players, tractors and heavy commercial vehicles had a weak month while two wheelers remained under pressure. Here is the story.
Let us look at the large passenger vehicle manufacturers. Maruti Suzuki reported -54.91% lower Sep-21 passenger vehicle sales at 68,815 units. The other major player, Hyundai India, saw -23.6% fall in total vehicle sales for the month to 45,791 units while domestic sales in particular were down -34.2% at 33,087 units. Microchip shortages hit them hard.
Tractor sales remained under pressure due to delay in Rabi season sowing and an erratic Kharif cropping pattern. For the month of September 2021, Mahindra & Mahindra reported -7% fall in tractor sales to 40,331 units. The Nanda group owned Escorts reported -25.6% fall in tractor and farm equipment sales at 8,816 units in Sep-21.
Among the two-wheeler manufacturers, Bajaj Auto reported -16% fall in domestic sales and a -9% fall in overall sales, largely on the strength of better export performance. While domestic sales of two-wheelers stood at 192,348 units, overall sales for the month of September stood at 402,021 units. Exports continue to be the saving grace for Bajaj Auto.
Among the HCV and MCV manufacturers; both Tata Motors and Ashok Leyland put up a good show in September. Tata Motors reported 55% growth in overall global sales, largely driven by JLR thrust. However, even overall domestic sales were up 26% at 55,988 units. Ashok Leyland reported overall growth of 12% in total vehicle sales. However, sales of medium and heavy commercial vehicles (M&HCV) were up 39% in Sep-21.
Among the passenger car manufacturers, smaller players were not hit too hard by the chip shortage and managed to grow September sales. For Sep-21, MG Motors reported 28% growth in sales, Toyota grew sales by 14%, Skoda grew sales by 131% and Nissan grew sales nearly 3-fold. In all these cases, the growth was on a very small base.
Bharti Airtel Rights Issue - How to Apply for Rights Issue Online
The Rs.21,000 crore rights issue of Bharti Airtel opened on 05-Oct and will close on 21-Oct. Effective 05-Oct the Bharti Airtel Rights Entitlement (RE) has also started trading on the stock exchanges under the NSE symbol "AIRTEL-RE". These RE or rights entitlement can be either bought or sold in the exchanges just like you buy stocks.
The company had fixed 28-Sep as the record date for entitlement to the rights issue so investors must have bought the shares of Bharti Airtel at least 2 trading days prior to 28-Sep to be entitled to the rights shares. The rights will be in the ratio of 1:14 i.e. 1 rights share for every 14 shares held. Each RE represents 1 rights share of Bharti.
The rights price was fixed at a steep discount to the market price at Rs.535. The rights is normally priced at a steep discount to make to attractive to existing shareholders. While the rights issue will be open till 21-Oct, the RE trading will only be permitted till 14-Oct after which the RE trading will cease. Hence RE can only be bought or sold till 14-Oct.
To understand how the RE gets priced, we will look at a real time price snapshot. Remember that RE is a right without an obligation. To that extent, it is more like a call option.
The closing price of Bharti Airtel on 04-Oct was Rs.681.40, which represents a premium of Rs.146.40 over the rights price. The Bharti Airtel RE is locked 40% higher at Rs.204.95 and the Rs.58.55 appreciation that you see in the RE price is over the theoretical price of Rs.146.40. The RE price will keep changing on a real time basis based on the outlook.
Investors can either exercise the right or they can just sell the RE in the market at the current market price. Such REs were already credited to the demat accounts of eligible shareholders as on 04-Oct.
Interestingly, the entire rights price of Rs.535 per share is not payable on application, in case you subscribe to the rights at Rs.535. Only 25% of the total price or Rs.133.75 per share is payable on application, while the balance will be payable in two tranches in the future. The specific deadlines for payment of the remaining instalments will be intimated separately.
Steps to invest in Bharti Rights issue via Registrar & Transfer Agent (RTA)
This can be done by going through the following steps. KFIN Technologies (formerly Karvy Computershare is the registrar to the Bharti Rights issue)
Step 1: You can visit the website page of Bharti rights issue on KFINTECH at the link below.
For demat holders in Bharti, click on the "Email & Mobile Registration" link
Step 2: Select the depository NSDL / CDSL or select physical in case you are holding physical shares.
Step 3: Enter important details like DP ID, client ID and Captcha Code and click on Submit.
Step 4: If your email id and mobile is not registered, you can registered them here.
Step 5: As per the terms of the rights offer, an amount equivalent to 25% of the rights amount can be paid online via NEFT online or through the Unified Payment Interface (UPI). Full money will be debited and to the extent not allotted, your money will be refunded.
When the rights shares are allotted around 18-Oct, you will be intimated by email and also by mobile SMS.
Steps to invest in Bharti Rights issue via Internet Banking Account - ASBA Facility
If you have the ASBA facility with a bank, then applying for the Bharti rights is just like applying for any IPO via ASBA. Here are the steps.
Step 1: You must login to your net banking account and click on "Demat & ASBA Services".
Step 2: Click on the Bharti Airtel Rights issue link
Step 3: Fill in details like PAN, Depository Name, DEMAT ID (Depository ID + Client ID)
Step 4: Make ASBA payment. The money is not debited in the case of ASBA but only blocked and the actual debit happens to the extent of allotment on the allotment date.
In both cases, if the shares are not allotted to you, the money gets refunded to your bank account.
Important Note: If your bank does not support ASBA, the RTA would have sent you Composite Application Form (CAF), which you can fill up and submit to the branch of any self-certified syndicate bank (SCSB). You can also pay via cheque / DD.
Adani Pays $3.50 Billion in SB Energy Holdings
In the biggest inorganic renewable energy deal in the Indian markets, Adani Green Energy bought SB Energy Holdings for a consideration of $3.50 billion or Rs.26,000 crore. It was an all-cash deal and marks the biggest inorganic investment of Adani Green in the renewable energy space. Adani Green is among the most valuable companies of the Adani Group.
SB Energy Holdings was formerly held jointly by Softbank of Japan and the Delhi based Bharti group in the ratio of 80:20. Post the acquisition, SB Energy Holdings becomes a 100% subsidiary of Adani Green Energy. This investment will be part of the massive $20 billion renewable energy investment committed by the Adani Group over the next 10 years.
The Modi government had made the shift to renewable energy and enhancement of the green energy mix a matter of policy commitment. This move by Adani will be one more step towards that larger commitment to renewable energy. Adani Energy is already among the largest companies in the world in terms of installed renewable energy capacity.
SB Energy today marks one of the few high quality renewable energy portfolios available in India. SB Energy has renewable assets with 5 GW of renewable capacity. This includes 1.70 GW of operational renewable assets, 2.56 GW of renewable capacity under construction and 700 MW of assets near construction. These capacities are spread across 15 projects.
Out of the total 5 GW renewable portfolio of SB Energy Holdings, nearly 4.18 GW or 84% of the total capacity is solar energy. Wind accounts for 7% of the total renewable capacity and the balance 9% is a hybrid of wind, solar and hydro power capacity. The average project size of each of the 15 projects is around 330 MW.
In terms of strategic fit, this acquisition will boost Adani Green Energy’s operational portfolio to 5.4 GW and its overall growth to 19.8 GW. Due to the acquisition, AGEL has already locked in an expansion of 4X operational capacity over the next few years. Nearly 88% of the proposed 19.8 GW capacity will have sovereign counterparties, which largely de-risks the business model.
Gold Imports Cross $5 billion in September 2021
The month of Sep-21 saw a surge in gold imports which was one of the key factors triggering a spurt in merchandise trade deficit for Sep-21 to an all-time high of $23 billion. For September, the total gold imports stood at $5.1 billion; a growth of 750% from just $601 million in September 2020.
Even in volume terms, the total gold imports in Sep-21 stood at 91 tonnes compared to just 12 tonnes in Sep-20. Total gold imports for the quarter ended Sep-21 were 170% higher YoY at 288 tonnes. This surge in imports was an outcome of lower gold prices and higher stocking by jewellers ahead of the year-end festive demand for gold.
India has been the second largest consumer of gold after China for many years now. This year, the prices of gold have fallen 15% after scaling a high of $2,072 per troy ounce in the global market. Lower gold prices encouraged heavy stocking demand by jewellers in India. With the rupee relatively stable, the local gold prices also fell in tandem with global prices.
Local gold prices in the Mumbai market has been around Rs.45,500 per 10 grams compared to Rs.56,000 per 10 grams at the peak last year. That is because, gold has normally been a safe haven asset and tends to underperform when growth in the economy is reviving and the equity markets are outperforming. Lower prices have driven gold demand.
Check - Gold Price Today
In the current festive season in India stretching from Navaratri in October, to Christmas in December, India is expected to report 35-40% of full year jewellery sales. That is why the festive months become important leading to aggressive stocking of gold by the jewellers. That has resulted in this surge in gold imports.
However, the RBI is not too comfortable with high gold imports as it means precious foreign exchanges gets used up for gold, which is considered an unproductive asset. In the past, the government had imposed quotas and duties to curtail the imports of gold. With its implications for the rupee and the trade deficit, it remains to be seen how the RBI and government react to this surge in gold demand.