Indian renewable firms plan $2.5 billion in offshore dollar bond issues

Four Indian renewable power producers are planning to raise up to USD 2.5 billion via dollar bonds offshore because of caution among domestic lenders, banking sources said.

Four Indian renewable power producers are planning to raise up to

USD 2.5 billion via dollar bonds offshore because of caution among domestic lenders, banking sources said.

In addition to the four solar and wind power firms, a fifth company that invests in renewable projects, Adani Group, has raised USD 250 million via a loan but has yet to publicly announce the borrowing, the sources told Reuters.

A source working with one of the bond issues said foreign borrowing was attractive because state banks were reluctant to lend due to existing bad loans to the power sector, while domestic banks worried about falling tariffs for solar power.

Foreign investors have been attracted to the sector by India's commitment to expand renewable power capacity, with plans to invest close to USD 150 billion to meet its 2022 targets, analysts and bankers said.

New York-listed Azure Power Global Ltd, which has projects in the states of Rajasthan, Punjab and elsewhere, planned to raise USD 500 million via a dollar issuance, two bankers said.

Continuum Energy, a firm backed by U.S. bank Morgan Stanley that has projects in Tamil Nadu and Gujarat, planned to raise USD 400 million, the two bankers added.

The Wind and solar power firm Greenko Group, backed by Singapore sovereign wealth fund GIC and Abu Dhabi Investment Authority (ADIA), planned a USD 1 billion issuance to refinance a dollar bond raised three years ago, three bankers said.

IL&FS Energy, which has thermal and solar power projects, was considering a dollar bond issue worth USD 500 million, said a source with knowledge of the deal but not involved in the process.

The fifth firm, Adani Group, which is controlled by billionaire Gautam Adani, has already raised USD 250 million via an offshore loan to invest in its solar power project in Karnataka, one of the bankers said.

The companies did not immediately respond to requests for comment.

Solar tariffs hit a new low in May when SBG Cleantech, which has SoftBank Chairman Masayoshi Son as one of its promoters, bid 2.44 per unit for building a solar park in the western state of Rajasthan.

Solar power players bid for the right to build projects on parcels of land that are set aside by the government.

The player agreeing to sell the power it generates at the lowest price per kilowatt hour, are leased the land at a nominal price.

Despite the decline in tariffs, overseas investors scouting for higher yields are keen on such dollar bond issues, the bankers said, adding many were drawn by Indian Prime Minister Narendra Modi's commitment to boosting renewable power output.

India, a signatory to the Paris climate accord, has an ambitious plan to raise renewable energy capacity to 175 gigawatts (GW) by 2022 from a current capacity of 57 GW.

Abhishek Tyagi, a senior analyst at Moody's, said India would have to invest "close to USD 150 billion to meet its 2022 renewable energy targets," adding much of that was expected to come from foreign financing due to constraints among domestic lenders.

Happy Investing

Source:Moneycontrol.com

10 key points from Nobel Laureate Paul Krugman’s address in SBI Mega conclave

Nobel Laureate Paul Krugman addressed the audience in the SBI Mega Conclave on Wednesday.

Nobel Laureate Paul Krugman addressed the audience in the SBI Mega Conclave on Wednesday.


Here are 10 key points from his speech.

# Development in transportation technology has made trade easier. But now, the technological progress is in manufacturing not in transportation. Robots are going to change how we manufacture goods and eventually the shape of markets.

# Commenting on the current scenario of global trade, he said, world trade was open in the 1930s, currently it is in hyper-globalisation state.




# The world is not seeing a retreat from global trade, we are seeing the plateau. Global trade is plateauing because of protectionism.

# He pointed out that India being a rapidly growing emerging market has to rely on exports, particularly export of services.




# Giving credit to the policymakers, he said, India used to be a very restrictive country during his student days.




# South Korea went to become advance economy from being very poor one. Emerging economies today want to be like South Korea. However, It may not be possible to follow the footstep of Seoul or China as the opportunity window will get narrower for developing economies.




# Showing disappointment at the growth rate of India, he said, the country should be growing at eight percent not six.




# He opines that there doesn’t seem to be a fiscal problem in India. However, India has some short term macroeconomic issues on which It needs to work.




# He attributed globalisation as one of the reason behind Income inequality in wealthy countries.




# Commenting on India's case, he said, though there is income inequality and poverty in the country but the scheme to fight poverty are also become a driver for growth.

Happy investing

Source:Moneycontrol.com

Uncertain about market trends? Invest through mutual fund SIPs

SIPs allow investors to initiate their investments with as low as Rs 500.

   

For an average retail investor, timing his investments may not be an easy task as it requires continuous research and tracking of the market. Thus, investors who tend to time their mutual fund investments often end up in buying more during bull market and under-invest in falling markets. The feature of regular automatic investments through Systematic Investment Plans (SIPs) saves an average investor from trying to time the market.

SIP is one of the best ways to invest in mutual funds. You don't need to think about market's volatility on a daily basis while routing your money through this mode. Even investors with a better understanding of markets should use SIPs as their main investment vehicle and make lump-sum investments only in case of attractive valuations arising out of steep market corrections.

"Financial discipline is one of the most critical factors to meet your long-term financial goals. SIP-based investment ensures investors remain disciplined and their financial plan is on track as a predetermined amount is automatically deducted from their bank account over periodic intervals and invested in selected mutual fund schemes. SIP also averages the cost of units during market corrections and eliminate the need for timing investments," says Manish Kothari – Head of Mutual Funds, Paisabazaar.com.

It is an investment process where you can start your investment with a very small amount of money. You also have the facility to opt ECS deduction option either on a weekly, monthly or quarterly basis. If you are doing investment for a longer term, then in such case it can be a trouble-free mode of doing investment, which can be an impressive factor for risk-averse investors. It is possible as the NAV gets average out over a period of time making your investment less risky in a longer time horizon.

"While the minimum investment amount in case of lump sum investments is Rs 5000, it can be as low as Rs 500 in the case of SIPs. Thus, even a small investor, who otherwise may not be able to invest regularly in mutual funds, can do so by investing through SIPs. The low minimum investment amount also allows small investors to easily diversify their monthly surpluses across several funds," says Kothari.

Power of compounding

SIP enjoys the benefit of compounding which helps in providing inflation-beaten returns. Compounding helps you gain an exponential growth over a time period. To understand it in a more easy way, under this process the interest on interest gets added to the principal amount at every regular interval, which over a time period of time gets multiplied and helps you to create a good amount of wealth.

"Compounding refers to making money on the gains made on the original investment. The earlier you start investing and the longer you stay invested, the higher would your returns from compounding. As SIPs allow investors to initiate their investments with as low as Rs 500, they can start investing early in their life and get higher returns due to the power of compounding," says Kothari.

Rupee Cost Averaging

The possibility of risk minimisation while making investments through SIP mode happens only because of the rupee cost averaging phenomenon which automatically averages out the unit due to market volatility over a period of time. This phenomenon makes it easy for investors to enter into mutual fund investments anytime they want to.

Let us have a look over this example:

Month	Monthly SIP (Rs)	Unit Price	No. of units purchased
January	2000	40	50.00
February	2000	30	66.67
March	2000	25	80.00
April	2000	30	66.67
May	2000	40	50.00
June	2000	35	57.14
Average Units		33.33	370.48

By going through the scenario where taxation is kept constant, if someone who invested the entire amount of Rs 12000 in lump sum in January at Rs 40 per unit, he would have owned only 300 units, and by the time he redeemed his money in the month of June, his investment would have been worth Rs.10500 only. But, by going through an SIP mode, he would have made Rs 12350 at the time of redemption. Note: This example is for illustrative purpose only.

Despite even the market remains volatile, irrespective of the intensity, if you are investing money in a disciplined manner for a specific time period through SIP mode, the increase and decrease of unit prices at that particular time get averaged out. This process liberates an investor to time the market while doing investments.

"SIPs force investors to continue investing during falling markets when most tend to stay away from it or even start redeeming their existing investments. Thus, these forced investments during market crashes helps average their cost of purchases and make higher gains as the market recovers," says Kothari.

Happy investing

Source:Moneycontrol.com

Green and growing: Arrow Greentech

A leading manufacturer of water soluble films in India, AGL is currently expanding capacity and continues to focus on creating niche products and monetizing the same.

   

With environment conservation gaining currency Arrow Greentech Limited (AGL) is an interesting growth stock to keep an eye out for.

A leading manufacturer of water soluble films in India, AGL is currently expanding capacity and continues to focus on creating niche products and monetizing the same.

Recently DSP Blackrock bought 4.71 lakh shares (4 percent of AGL’s equity) through open market purchases.

AGL’s Products

Incorporated in 1992, AGL (market cap Rs 654 crore) is a leading company in water soluble film technology. Through its key product Watersol (water soluble film), the company is currently serving end markets of agro-chemicals and embroidery. The key benefit it brings is the avoidance of human touch in handling harmful chemicals and the optimum usage of such agri-chemicals – for example, application of certain pesticides. Currently, about 81 percent of AG’s revenue (FY 2016) comes from royalty income, 7 percent from consultancy and 12 percent from the sale of water soluble film based products. AGL’s manufacturing unit is in Ankleshwar and major institutional clients are in the field of agro-chemicals (eg: UPL).

Water Soluble Film and its Market

Water soluble film, manufactured from PVA (Poly vinyl alcohol), is a biodegradable packaging film which can dissolve in water or waste. Globally, North America is the largest market for water soluble film, having a 35 percent market share. Detergent industry (~37 percent) is the largest end user segment, followed by agrochemical packaging (35 percent).

As per ALG’s annual report, global PVA film market is about USD 500 million and is presently growing at 5 percent. Quicker adoption of this technology for applications as diverse as healthcare, agro-chemicals, embroidery, dyes, cement, enzymes, fish baits, edible films packaging etc. hold promises for steady increase in demand.

Kuraray (Japan) and Sekisui Speciality chemicals are among the largest producers of PVA and films. Aicello Corporation, The Nippon Synthetic Chemical Industry and Arrow Greentech are the other known players. Over the years, China has developed a large capacity which, in turn, increases the competitive intensity for the low margin applications of water soluble films.

Positioning of Arrow Greentech - Healthy royalty income backed by scores of patents

AG boasts of 32 registered patents related to water soluble film technology which helps it to garner healthy royalty income and consultancy fees that has grown at CAGR (compounded annual growth rate) of 58 percent between FY16.

So far the company has monetized 3 out of 32 patents in the form of consultancy fees for the technical know-how, royalty income and sale of related products. Going forward, the company has plans to monetise its remaining patents which have high functional applications (refer table). Recently, AGL is exploring prospects of water soluble film for drug delivery with various pharma companies.

The company has alliances with technology leaders in various end markets like Proquimia (cleaning and hygiene products), Tsukioka and Trace tag (security products) in order to make more end consumer products. In the near future, the company is focusing on high margin products like embedded edible film, mould release film and detergent films.

Three-fold capacity expansion for the water soluble films

AGL is currently tripling its water soluble films capacity from 150 tonnes to 450 tonnes and the new capacity is expected to post a utilization of 75 percent in the current fiscal year. We estimate segmental revenue contribution from sales of products would ramp up to 25 percent by FY19 from 12 percent currently. This would help in meeting the existing demand for water soluble films/related products from the domestic clients.

Key Risks

Currently, company imports all its raw materials including PVA which exposes it to price volatility of these materials. Import threat from Chinese players are low as the company caters to relatively high value added applications – except for embroidery. However, presence of international players like Kuraray in India is a more credible threat.

Valuation

 

Compared to leading global companies in the PVA film segment, AG trades at slight premium (12 percent on average). However, given the fact that company is at the early stage of growth (revenue CAGR of 14 percent for 2017-19E) a sustained premium is justified due to array of patents (higher share of royalty income), potential for monetization and the capacity expansion.

 

 

In our projections, we estimate 50 percent utilization for the added capacity in FY18. Due to reduced percentage share of royalty income, blended EBITDA is expected to moderate to 73 percent in FY19. At the current price, the stock is available at 15.7x projected earnings of FY19, which is attractive in our view. Investors having an appetite for high beta growth stock can consider this for accumulation.

Happy investing

Source:Moneycontrol.com

Modi’s bold engagement with Israel

Modi’s bold engagement with Israel – how should markets read this?

The remarkable shift in India’s foreign policy stance is one reason why investors should take note of rising risk premium.

Modi’s historic visit to Israel comes with the usual benefits in the areas of defense and technology. What’s unusual is the strategic diplomatic shift wherein India has now officially de-hyphenated foreign policy for Israel from Palestine. What’s more – this is happening at a time when geopolitical alliances are shifting rapidly.


Defense and diplomatic ties – on a strong footing

As a prequel to PM Modi’s visit to Israel, diplomatic and defense collaboration had been strengthening. Over the past year, India has successfully tested jointly developed long range surface-to-air missile (70 km range) and Israel-made SPYDER quick reaction surface to air missiles. In April 2017, India-Israel inked deals worth USD 2 billion for the advanced missile system – the largest ever contract for the state-owned Israel aerospace industries.


On the diplomatic front, high level visits to Israel have been pretty consistent since 2014 when the NDA came to power. The Home Minister, President and External affairs minister have visited Israel, in 2014, 2015 and 2016, respectively.
While the defense and military collaboration is nothing new, it has strengthened over the years as both nations continue to face broadly common threats of terrorism and border conflicts.

 India – the largest importer of arms from Israel


As per SIPRI (Stockholm International Peace Research Institute), India’s share in global arms imports have increased by 13 percent during 2012-16 (vs. 9.7 percent in 2007-11 period). Israel is the third largest exporter to India after Russia and USA. However, for Israel, India is their biggest export market for arms (USD 599 million in 2016).


Israel’s arm export to India (USD million)



Source: SIPRI



One of the key imports from Israel which has drawn attention is the import of unmanned aerial vehicles (UAVs). In the year 2016, as per SIPRI database, air defense systems have constituted 28 percent of Israel’s arm exports and India has been the largest importer of the same. Not surprisingly, the current visit aims at sealing another such deal on UAVs/drone (Heron TP) expected to be worth USD 400 million.


 A subtle but substantial change in foreign policy


What stands out in this visit is the strategic importance attached to India-Israel relations. This has not only been addressed in a symbolic way by the first ever visit by an Indian PM, but also in terms of India’s stance towards Israel – de-hyphenating reference to Palestine. In our view, this indicates an independent foreign policy approach for Israel unlike in the past when relations with Israel were measured in context with India’s relation with Arab world.


While this looks like a step towards stronger relations between India and Israel, it also hints at a re-assessment of geopolitical fault lines. With this, India overtly aligns to US-Israel geopolitical axis as far as defense deals and military cooperation is concerned.


The timing of this development is significant. There has been almost a U turn in the Trump-Xi relation with respect to latter’s handling of North Korea’s isolation. North Korea, on the other hand, continues to up the ante with the recent ICBM missile test. Trump made it clear to Prime Minister Modi during the latter’s recent visit to the US that he is counting on India for isolating North Korea. US’s arm sales to Taiwan incidentally has further flared up the Asia’s regional tensions.


Sino-India relation – a new low?


On the Sino-India relationship, border issues on the north-east front has escalated suddenly and could take a while to ease. Hope lies in the Modi-Xi interaction on the sidelines of G-20 meeting in Germany followed by NSA level meet later in July. While Xi Jinping may have internal compulsions for the aggressive diplomatic stance, as he awaits party’s endorsement of a second term, geo-political tensions have risen with China having dominant economic influence on India’s hostile neighbour.


Given this backdrop of the historic visit of India’s PM to Israel, a remarkable shift in India’s Middle-East/Israel foreign policy stance and the unprecedented and rapidly moving geopolitical equations, it is prudent for investors to take note of rising risk premium. In the context of already elevated valuations, a correction in benchmark indices cannot be ruled out in the event of increased geopolitical tension.




Happy Investing
Source:Moneycontrol.com

How to reach your retirement goal?

How to reach your retirement goal?

Let us take scenarios from previous table to see sample results-

This table is an excellent proof of importance of starting investing at a young age.

Please note that the monthly SIP amount is increasing @10% every year. Thus, 1 lakh monthly SIP will double to 2 lakh SIP in approximately 7 years.

Also, current savings column is assumed savings as of today, and is invested in an instrument giving you 18% annual return. The monthly SIP instrument also gives you an average annual return of 18%.

Now, you will be able to understand the value of an indexed pension of a government servant with medical cover till the end of life.

Hope this series addresses all your queries on retirement corpus required, how you can reduce the required corpus and what you need to do to achieve the same.

Happy investing!

Sorce:Equitymaster.com

Defusing the Retirement Bomb: Part III

Defusing the Retirement Bomb: Part III

The previous articles in this series discussed how you can reduce the required retirement corpus. The last questions to solve the retirement puzzle are-

1. How much money do you need to retire 10/15 years from now? Is 1 crore enough to retire in India?
2. How to reach your retirement goal? How much savings and annual returns do you need?

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How much money do you need?

The following table answers this-

The later your retirement is, the more money you will need due to inflation.

I have taken 30x multiple of annual expense here. If you want to be more conservative, and would like to take a 50x multiple, you can increase the required corpus by 67% or simple multiply annual expense at the time of retirement by 50.

Please note that this is for people with no pension.

Happy investing

Source:Equitymaster.com