Archive for the ‘India’ Category

Eurofighter Typhoon leads after technical evaluation but still not the favourite for Indian M-MRCA contract

November 7, 2010

The Telegraph today carries the story that the Eurofighter Typhoon came out best in the technical and flight evaluation just completed for the Indian M-MRCA contract for 126 fighters worth about 11 billion $. However the Telegraph’s conclusion that

The European-made Typhoon fighter is winning the fight for the $11.5bn (£7.1bn) contract to supply 126 fighters to the Indian Air Force in a deal worth $5 billion and 2,000 new jobs to Britain.

is a little premature.

In a recent interview Air Chief Marshal Pradeep Naik Chief of Air Staff said

The IAF has completed the Field Evaluation Trials on all six M-MRCA aircraft and has submitted its Staff  Evaluation Report to MoD for further processing.The likely time frame for completion of various activities before the contract is signed is about 6-8 months. So, we expect the contract to be signed by March 2011.

Now begin the strategic evaluations and these include a number of different levels of nested strategies. In addition to the IAF’s own views of what is required in its goals of becoming a Strategic rather than a Tactical Air Force and the mix of aircraft required for that, come the strategic requirements of the Armed Forces as a whole including the views of the Army and Navy not only for tactical support needs but also including the Navy’s carrier based fighter requirements. The Ministry of Defence and the Ministry of Finance are obviously involved together with the Prime Ministers Office (PMO) in the highest level of strategic evaluation of the National Interests. The initial costs, life-cycle costs and operating costs are all separate parameters in the final evaluation. Then the impacts of future jobs, technology transfer, development of indigenous capabilities and National political aspirations come into play here.

The reason I believe that the Telegraph story is a little too optimistic about the EurofighterTyphoon’s chances is that the “Medium” representing the first “M” of M-MRCA (Medium Multi Role Combat Aircraft) is a critical factor. In the “Heavy” class India has the Russian Su-30MKI, which is under series production at HAL in Nasik, India. The Heavy class will probably represent about 60% of India’s combat aircraft for some time to come. The need for a “Medium” fighter comes about because most of India’s MIG 21s are obsolete and “life-expired” and the IAF only has some 50 Mirage 2000s which are a decade old. The indigenous Light Combat Aircraft which was to have replaced the MIG 21s is a long way behind schedule and has not yet resolved all its technical issues. It is the need for around 15 -20% of the IAF’s combat aircraft being in the “Medium” class which generates the 126 fighters required in the current contract. The winner of this contract is likely to then sell another 80 -100 aircraft in a second phase.

The Eurofighter Typhoon and the French Rafale at around 24,000 kg maximum weight are close to the level that would be classed as “Heavy”. The aircraft coming closest to meeting the Indian definition of “Medium” are Lockheed Martin’s F-16 IN Super Viper and the Swedish Saab Gripen IN and they have both been configured specifically for the IAF.

 

JAS Gripen

JAS Gripen Image via Wikipedia

 

Political considerations cannot be ignored and this gives the F-16 an edge even though there can be a perception issue since the F-16 is the mainstay of the Pakistani Air Force and the IAF must be seen to be getting something superior to that supplied to the Pakistan Air Force. The Swedish fighter may actually be closest to Indian requirements but bears the political burden of the Bofors affaire and the perception issues in India that domestic Swedish politics may suddenly intrude into a long term supply arrangement which must last for some 30 years.

The Eurofighter cannot be dismissed but my top three at this stage would be:

  1. Lockheed Martin F-16 IN Super Viper
  2. Saab Gripen IN, and
  3. Eurofighter Typhoon.

But there are many angles to be looked at and there is a very long way to go before the contract is awarded in March 2011.

Obama in India: day 1: 10 billion $ of contracts worth 54,000 jobs in US

November 6, 2010

Reuters:

President Barack Obama announced $10 billion in business deals on Saturday as he arrived in India to boost U.S. exports and jobs after a mauling in mid-term polls, but he ran into immediate controversy over Pakistan. Obama flew into Mumbai, India’s financial hub, and announced the United States would also relax export controls over sensitive technology, a demand of India’s that will help deepen U.S. ties with the emerging global power and its trillion dollar economy.

Obama’s first act was to pay tribute to victims of the 2008 Mumbai attacks, but he was criticized for making no reference to India’s traditional foe Pakistan, which New Delhi blames for harboring anti-India militants. Pakistan-based militants killed 166 people in a 60-hour rampage through India’s financial hub, gunning down their victims at luxury hotels, a train station and a Jewish center. India says elements in the Pakistan state were behind the attacks.

But Obama’s trip is also about business, with China now ahead of the United States in trade with India. The $10 billion in deals will support 54,000 jobs in the United States, White House aide Michael Froman said. The White House also announced Obama would support India’s membership of four global non-proliferation organizations, a move that will reassure New Delhi — left out of these groups after its 1998 nuclear tests — that Washington is recognizing its global clout.

He spends the night at the The Taj Hotel and flies to Delhi tomorrow afternoon. I expect a few more contracts to be settled with the 215 strong corporate leaders who make up the accompanying business delegation.

Obama travels to India looking to boost US jobs

November 6, 2010

The Times of India carries a smug story about President Obama’s visit to India which starts today:

President Barack Obama hasn’t been able to drive down unemployment in America, so he’s coming to India in search of US jobs. Four days after his party suffered heavy, economy-influenced losses in Congress, the president will arrive Saturday in Mumbai, India’s booming financial center, where he will meet with local business leaders and with American executives who have traveled to India in search of billions of dollars in trade deals.

The White House hopes to announce agreements on aircraft and other exports. The administration says that jobs and the US economy are the focus of Obama’s 10-day Asia trip, a message aimed at inoculating him against any criticism that he is concentrating on foreign affairs while Americans are suffering with unemployment at 9.6 percent. He left Washington shortly after the government reported the economy added 151,000 jobs in October but still not enough to lower the jobless rate.

Obama will be speaking to a gathering of Indian and American chief executives on Saturday, and he’s expected to announce the completion of job-producing commercial deals. The US has been looking for India to finalize purchases of Boeing aircraft and marine engines produced by Caterpillar, among other exports. However, serious disagreements remain, and they appear unlikely to be resolved during Obama’s visit.

President Obama will arrive in New Delhi with his largest business delegation ever to a country. The 215-member team of US business leaders will be looking to deepen commercial ties with India. Mr Obama will also address India’s Parliament – only the second US president to do so after Bill Clinton. India is hoping for an announcement on the lifting of nuclear curbs during the visit. New Delhi has long lobbied for Washington to allow the sale of sensitive technology that was denied to the country after it conducted a nuclear test.

 

Taj Hotel, Mumbai: Wikimedia Commons

 

The US wish list includes Defence agreements worth $ 12 billion among contracts creating upto 60,000 jobs in the US, verification processes for Indian nuclear plants and Indian promises for more market access.

On Saturday night President Obama will stay at the Taj Hotel in Mumbai which was the target of the terror attack on 26th November 2008 where 173 people were killed. India will be looking for the US support for Pakistan to be less forgiving of the terrorist training camps in Pakistan.

Coal still king as green power IPO struggles

November 4, 2010

Black vs. green. Wikimedia commons

“Green” is no longer as fashionable and trendy as it used to be. The slime of Climategate has had its impact as has the arrogance of the alarmists. But if the hard-headed world of business investments is anything to go by it seems “black” is begining to trump “green”. An earlier post described the huge success that Coal India’s IPO had. This needs to be contrasted with the tepid response to the the IPO for ENEL Green Power which also listed today.

http://www.reuters.com/article/idUSTRE6A31RH20101104

Waning investor interest in clean energy contrasted sharply with enthusiasm for coal on Thursday as shares in Enel Green Power fell on their debut while Coal India’s soared.

Enel Green Power (EGP), which generates clean energy from hydro and geothermal to wind and solar and is Europe’s biggest listing since 2008, dropped over 4 percent on its debut despite a cut price offered to lure investors.

Shares of Coal India, a similar sized share sale at around $3.5 billion, gained 40 percent in Mumbai on the same day.

“The struggle for renewables reflects the fact that they are quite capital-intensive, in a world that is capital-constrained, and face regulatory uncertainty,” Robert Clover, alternative energy equity analyst at HSBC said.

India, which has the world’s fifth biggest coal reserves after the United States, Russia, China and Australia, is riding an economic boom that is thirsty for fuel.

“Fundamentally, Coal India is a structural play on India’s rising energy demand,” said Binay Chandgothia, chief investment officer at Principal Global Investors in Hong Kong.

TOP EUROPEAN LISTING

Europe has seen a resurgence in public offerings as equity markets trade around 6-month highs, and many European companies have managed to get their initial public offerings toward the upper end of their price guidance.

But EGP’s parent company Enel, an Italian power giant that also controls Spain’s Endesa, struggled to woo professional investors for the sale of up to a third of its renewable unit against a backdrop of underperforming green energy stocks

It was forced to cut the price to 1.6 euros a share from a price range of 1.8-2.1 euros, and early guidance of 1.8-2.4 euros, raising only 2.5 billion euros ($3.5 billion) compared with the 3 billion euros it had wanted to help reduce debt.

Institutional investors had raised concerns over EGP’s lower growth rate versus peers, its lack of a track record and uncertainty on green energy incentives, despite its wider geographical footprint and technology mix.

The Italian power giant, which also controls Spanish utility Endesa, eventually managed to get the deal away thanks to interest from retail investors, but it will raise less than its 3 billion euro ($4.2 billion) target, key to cut debt.

Even after the price cut, shares fell over four percent both in Milan and Madrid on the first day of trading.

“”In any jumbo IPO you want it to trade up so that you can say the market has a good feeling about it, but I don’t think a lot of people expected this to trade well given how much went to retail,” said a source close to the deal.

By contrast, an attractive IPO valuation for India’s dominant coal miner spurred demand from investors who applied for more than 15 times the number of shares on offer in the country’s largest-ever IPO. Enel Green Power IPO was just 1.1 times covered.

The Coal India listing comes at a time of record foreign fund inflows into Indian stocks and in one of the best years for IPO fundraisings for the country.

Sexy Coal India shares list with an opening gain of 32%

November 4, 2010

 

Bombay Stock Exchange

BSE: Image via Wikipedia

 

The Coal India IPO where the Government of India divested 10% of its shares in the worlds largest coal producer was massively oversubscribed. The share price was set at 245 Rs at the top of its offer range of 225 – 245 Rupees.

The shares were listed today and the price immediately zoomed to 324 Rs showing an opening gain of 32%.

The Economic Times reports:

The world’s largest coal producer today listed on the bourses with a handsome premium and zoomed over 32 per cent, over its IPO issue price of Rs 245 per share, to hit a high of Rs 324.75 in the first hour of trade on the Bombay Stock Exchange.

Partha S. Bhattacharyya, Chairman & MD, Coal India Limited says, “Many records have been broken and many peaks have been scaled. For the officials intensely involved in the process, the feeling largely resembles to that of a mother who has just given birth to a child. Indeed it is a moment of birth in the capital market that brings in huge responsibility on the management to rear the newborn baby into a strong and mature turnout by living upto the expectations of the investing community consistently.”

Prasad Baji, Senior VP, Edelweiss says, “Technically Coal India’s valuation is running not just as a coal company but since its model is different, it is selling in India where there is an assured offtake and its pricing will never see a price tag, therefore, it is not typically a commodity play as compared to other coal companies.

Investors included Janus Capital, Fidelity, Franklin Templeton and Capital International. Domestic investors included State Bank of India , ICICI Bank and Life Insurance Corp. Maximum subscription was in the high net worth category with subscription of around 25 times. Amit Aggrawal, a financial services executive who borrowed Rs 90 million to bid for Coal India shares, says that he would take some profits off the table at Rs 320 a share. “I may hold back some shares and sell them at a later stage,” says Mr Aggrawal.

Diwali

November 4, 2010

 

File:Karthigai Deepam.jpg

Diwali - The Festival of Lights: image wikimedia

 

Shubh Diwali

This year Diwali falls on November 5th.

The date is determined by the Hindu lunar calendar and there is no connection with Guy Fawkes.

According to Hindu calculations, Diwali falls on the 15th day of the dark fortnight in the auspicious Hindu month of Kartik (the month of October/November). This Diwali day falls on the amavasya or the no-moon day. Diwali  comes 20 days after the popular festival of Dussehra or Vijaya Dashmi.

A Happy Diwali to all.

Indra Dhanush 2010 concludes but UK hopes of selling Harriers is dashed

November 3, 2010

By all accounts both the IAF and the RAF are very satisfied with the joint exercise Indra Dhanush 2010 which has just concluded. But UK hopes of selling the Harrier seem to have stalled. The Financial Times reports that

Britain has hit an early obstacle in its bid to sell its fleet of Harrier jump jets after India, the most promising potential buyer, described the aircraft as “iffy” and obsolete.

Air Chief Marshall PV Naik, the head of the Indian Air Force, said on Tuesday he would be looking to acquire modern aircraft of fourth-generation capabilities or better. “The Harrier doesn’t fit into that category,” the Air Chief Marshall said. His dismissive remarks over the “iffy” Harrier came soon after Air Chief Marshal Sir Stephen Dalton, the chief of the UK air staff, acknowledged the possibility of a sale while paying a visit to India to boost military co-operation and exports.

The distinct lack of interest shown in the Harrier, which was decommissioned in the defence review primarily on grounds of cost, will be a blow to ministers who are seeking to generate some much-needed revenue from the disposal.

Air Chief Mashall Naik’s words will particularly sting because the Ministry of Defence has spent more than £500m upgrading the Harrier avionics over the last five years and the jets could potentially remain in service until the mid 2020s.

Sify News reports the conclusion of the exercise:

The joint air force drill between India and United Kingdom (UK) held under the banner of ‘Indradhanush’-III at Air Force Station Kalaikunda in West Bengal’s West Midnapore District concluded on Tuesday. The Royal Air Force of UK participated with modern Typhoon Eurofighters, the E-3D Sentry, and VC-10 mid air re-fueller, while the Indian Air Force (IAF) fielded the SU-30 MKIs, Mirage 2000s, Mig 27s and its AWACS for the first time in a joint Air Exercise.

 

Eurofighter Typhoon

Eurofighter Typhoon: Image by Destinys Agent via Flickr

 

Pilots of the Royal Air Force said that the purpose of this exercise was to enhance understanding between the Royal Air Force and the Indian Air Force. “The whole purpose of the exercise of the ‘Indradhanush’ has been to enhance understanding between the Royal Air Force and the Indian Air Force and whosoever increase…competence as an Air Force and it’s been on air front a very, very successful exercise,” said Guy Lockwood, a pilot of the Royal Air Force of United Kingdom.

“We have learned good things from them. They follow the NATO procedures, we follow our own. When we fought together we realised they have got some good things, they realised that we have also got some good tactics, we fought together, so it was a good experience,” said Susil Kumar, a pilot of the IAF.

During the initial two-days of the exercise on October 18 and 19, elaborate briefings on standard operating procedures, rules of exercise and familiarisation of the local flying area was carried out.

The exercise ‘Indradhanush’ began on October 21 and continued for 12-days.

 

Day 3 at Kalaikunda: image http://chhindits.blogspot.com

 

 

Manufacturing in India and China powers ahead and driven by domestic consumption

November 2, 2010

Reuters reports on the latest PMI (Purchasing Managers Index) numbers:

 

image: whatsinbiz.wordpress.com

 

Manufacturing growth in India and China powered ahead last month and U.S. industry also picked up steam, according to data on Monday that suggested the global economic recovery may be on firmer footing.

China’s official purchasing managers’ index (PMI) rose to a six-month high in October of 54.7 from 53.8 in September, easily beating market forecasts of 52.9.

The strength of China’s official PMI was especially striking because the index normally heads down in October, said Yu Song and Helen Qiao, economists at Goldman Sachs. “The fact that the PMI went up despite this seasonal bias suggests real activity growth was likely to have been exceedingly strong in October,” they said in a note. The survey showed manufacturers continued to run down stocks last month to meet rising domestic orders. “These readings bode well for a recovery of output in coming months,” Ting Lu at Bank of America Merrill Lynch told clients. A companion PMI produced by Markit for HSBC painted a similar picture, rising to 54.8 from 52.9 — one of the largest month-on-month rises in the history of the survey.

Manufacturing in India — Asia’s other emerging powerhouse — put in a performance every bit as strong as China’s. India’s manufacturing was supported by strong domestic consumption. The HSBC Markit PMI for India, Asia’s third-largest economy, rose to 57.2 in October from 55.1 in September.

Mirroring a report from Japan last Friday, South Korean manufacturing shrank for the second month in a row as the HSBC/Markit PMI fell to 46.75 in October — the lowest since February 2009 — from 48.8 in September.

An unexpected rise in Britain’s manufacturing index to 54.9 will increase doubts that the Bank of England will soon embark on more quantitative easing. It followed official data last week that showed the UK economy grew at a surprisingly strong rate of 0.8 percent in the third quarter from the second.

Equivalent surveys from Europe are due on Tuesday, but Britain’s PMI showed manufacturing growth picked up pace last month for the first time since March.

Flash October figures for Germany, released last month, also gave a strong reading although much of Europe remains mired in debt and poised to cut public spending to deal with it — a move that will crimp economic growth going forward.

It seems that the Chinese and Indian motors are being fuelled primarily by domestic consumption which continues to grow strongly. Perhaps this is not so surprising considering that the growth of the consuming “middle-class” in India and China is probably the fastest it has ever been. In India this growth is probably twice the growth of the total population (and there is some belief that population growth rates drop sharply for people as they enter the “consuming middle-class”).

Japanese manufacturing is being hampered by the strong Yen and Korean manufacturing is yet to pick up. In Europe, the weak Euro is driving German exports and UK manufacturing is showing very strong. The low Dollar value may be beginning to help US exports as well.

Joint RAF / IAF exercise Indra Dhanush 2010 enters final phase

October 31, 2010
Eurofighter Typhoon

Eurofighter Typhoon: Image via Wikipedia

The joint UK / India air exercise Indra Dhanush 2010 which began on October 18th at Kalaikunda Airbase in West Bengal’s West Midnapur District has entered its final phase and is due to end on November 3rd.  The RAF is participating with its Euro-fighters, VC-10 mid- air refuellers and E 3 D Sentry Airborne Early Warnings and Control Systems (AWACS) while the IAF is flying the SU 30s, Mirage 2000s, Mig-27s and their newly acquired AWACS.

So far some 120 flying missions have been flown. In the final phase a large number of aircraft in offensive and defensive roles are expected to be launched in ‘Waves’ in a limited airspace to test the skills of the fighter pilots, the AWACS and the ground controllers. High Value Air Asset (HVAA) protection missions which require a large number of aircraft are also to be carried out.

The exercise takes place with the backdrop of the 11 billion $ order for 126 MMRCA fighters that is to be placed soon by the Indian Air Force. The six competing fighters that the IAF has flight-tested over the last year include Boeing’s F/A-18 Super Hornet, Lockheed Martin’s F-16IN Super Viper, Dassault’s Rafale, the Russian MiG-35, the Swedish Saab Gripen NG and the Eurofighter.

Coal India IPO: Coal becomes sexy again

October 23, 2010

Coal India Limited (CIL) is an Indian state-owned coal company headquartered in Kolkata, West Bengal, India and the world’s largest coal miner with revenue exceeding Rs 45,797 Cr or $10.3 billion U.S. (FY2008-09). It is owned entirely by the Union Government of India, under the administrative control of the Ministry of Coal.

 

Coal India Ltd.: Reuters graphic/ Christine Chan

 

As part of its divestment programme to raise about 9 Billion$, the Government of India has put up  10% of Coal India Ltd. in an IPO conducted this week. If priced at the top of its 225-245 rupee price range, the IPO would swell Government coffers by about 3.5 Billion$ and Coal India would have a market value of $35 billion, ranking it seventh among listed Indian firms. As the Economic Times puts it “The response to the Coal India (CIL) initial public offering (IPO) that finally closed early Friday morning, after lead managers were forced to extend the time limit to deal with a deluge of applications, has been phenomenal. Against the issue amount of Rs 150 billion, bids came in for Rs 2.54 trillion and the final total could be higher.
While retail investors seem to have been relatively circumspect — the retail portion was over-subscribed only 2.32 times — and employees even more so — the employee portion was not fully subscribed — both institutional and highnet-worth buyers seem to have participated with gusto.”

 

coal mine in India

Open cast coal mine in India: Image via Wikipedia

 

While a portion of the shares were held for employees the mining unions discouraged their members from applying. But with the opening price when the shares list on November 4th expected to be around Rs 300 – 320 there is a backlash among the union members who are going to have lost out. The institutional portion was oversubscribed 25 times.

Coal India has reserves of about 277 billion tonnes of which around 60 billions tonnes are currently recoverable by open cast mining. Current annual production is about 400 million tonnes and expected to rise to about 650 million tonnes in 5 years. India currently imports about 100 million tonnes of high grade coal mainly for steel making. Coal India has a major investment programme ongoing for the installation of coal washeries to improve the notoriously poor quality (high levels of abrasive ash) of Indian coals. Most Indian coals have very low values of Sulphur content so that sulphur dioxide emission is not a major concern.

The enormous interest of the institutional investors – both from within and from outside India – is a healthy indicator that simple business considerations rather than pseudo-environmentalism is still the governing factor.