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As deadline arrives, Govt expects quality bids for BPCL

As the deadline for submitting the Expressions of Interest (EoI) for privatisation of BPCL close on Monday there is buzz of mixed interest amongst the bidders.

There is buzz that global majors BP, Total and Saudi Aramco are unlikely to put in a bid while there is talk that ADNOC and Reliance may be interested.

After four extensions, the government is hopeful that strategic sale of BPCL may go through without any further need to postpone the bidding deadlines.

The deadline for submitting the Expressions of Interest (EoI) for 52.98 per cent stake in the BPCL is ending on November 16. Prior to this, the bid start date was September 30, but it got postponed due to bidders’ request in wake of prevailing situation arising out of Covid-19 pandemic.

The Indian government proposes to disinvest its entire shareholding in BPCL comprising 1,14,91,83,592 equity shares held through the Ministry of Petroleum and Natural Gas, which constitutes 52.98 per cent of BPCL’s equity share capital, along with the transfer of management control to the strategic buyer (except BPCL’s equity shareholding of 61.65 per cent in (NRL) and management control thereon).

However, the profit-making oil major has not received interest as anticipated due to low oil prices, coupled with poor demand.


The shareholding of BPCL in NRL will be transferred to a Central Public Sector Enterprise operating in the oil and gas sector under the Ministry and accordingly, is not a part of the proposed transaction.

The government’s stake in BPCL is worth around Rs 47,000 crore at BPCL’s current share price.

According to an earlier research note by Emkay Global, according to DIPAM’s response to PIM queries, interested parties may include global players with limited knowledge on Indian corporate/PSU/accounting /takeover rules as well as parties seeking higher level of clarifications.

“The progress on BPCL’s sale is positive for OMCs in terms of deepening deregulation and profitability outlook. Given the tight fiscal situation, disinvestment would be of utmost importance to the government this year”, the report said.

Industry sources said that Total and Russian giant Rosneft are also not interested to bid in the current subdued market conditions.

The report said RIL can be a serious contender being mostly net debt free now and possibly include BP also as a partner. Other players are Aramco, ADNOC, Rosneft and ExxonMobil, as per the reports. With RIL deal not progressing, Aramco may now look at BPCL aggressively.


Industry sources, however, said that Reliance Industries (RIL) and UAE’s Abu Dhabi National Oil Company (ADNOC) may bid for the state-run oil major.

ADNOC already has footprint in India as it is the only overseas company that has crude stored in Indian caverns.

The process of the BPCL’s strategic sale has been impacted due to the pandemic and the deadline for submission of bids has been postponed four times. The previous deadline was September 30.

The Centre has allowed bidders of privatisation-bound PSU refiner to submit their interest for the company electronically through e-mail to prevent restrictions imposed due to Covid-19 from impacting the sell-off process.

The government is also keen to complete the deal within FY21 as disinvestment proceeds from it would help the government inch closer to this year’s ambitious disinvestment target of Rs 2.1 lakh crore. So far, just over Rs 5,000 crore have been mobilised.

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Business Economy

COVID19 disruption Casts Shadow on PLL-Tellurian Deal

In what may be a big casualty of Covid-19 related market disruptions, India’s Petronet LNG Ltd. may push back its $2.5 billion investment plan in US LNG developer Tellurian’s upcoming Driftwood LNG terminal in Louisiana or shelve the investment plan altogether.

Government sources said that with spot LNG prices now crashing to about $2-3 per million British thermal unit (mmBtu) and gas widely available in the market, it would make little sense to sign an agreement committing to pay on sea price of $3.5 to $4.5 per mmBtu for 40 years for the gas. The delivered price of gas would be even higher

The deal would have to be renegotiated given the current market prices or shelved, sources said.

A PLL official also said that with prices at record low levels and easily available, the company is more concerned about signing LNG supply contracts rather than investing in greenfield project that will meet needs after five to seven years.

In September last year a non-binding memorandum of understanding (MoU) was signed between PLL and Tellurian that gave the Indian entity PLL the option to buy 5 million tonne per annum (mtpa) LNG from Tellurian’s Driftwood project on the banks of the Calcasieu river in Louisiana. In return, Petronet was to spend $2.5 billion for an 18 per cent equity stake in the $28 billion Driftwood LNG terminal.

The term of the MoU was to expire on March 31, 2020, which was extended to May 31 in February. It has now been extended till December end. But with deadline latest extension also nearing, PLL seems in be on no mood to commit investment. The change of government in the US has also made decision to move out from the project easier.

As a test to determine gas prices available on long-term contract basis now, PLL earlier this year invited bids for one million tonne per annum of LNG for 10 years. It asked bidders to quote a price below Japan/Korea Marker (JKM) that takes the price on long term as well as closer to spot prices. Though Tellurian placed its bid for the supply contract, it did not qualify from a list of 13 other suppliers.

The Tellurian deal, if concluded, will be the first long-term LNG deal under the Modi government since 2014. The previous long-term gas supply deals were signed before 2014. The deal for 7.5 mtpa of LNG from Qatar, 1.44 mtpa from Australia, 2.2 mtpa from Russia and 5.8 mtpa from the US were concluded by the previous UPA government.

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Economy India News

India’s Merchandise Exports Decline Over 5% in October

India’s merchandise exports in October declined by over 5 per cent on a year-on-year basis.

As per the Ministry of Commerce and Industry’s data released on Friday, merchandise worth $24.89 billion were shipped-out during the month under review as against $26.23 billion exported in the same period of the previous year.

In terms of sequential movement, the country’s merchandise exports in September had risen by 5.99 per cent to $27.58 billion from $26.02 billion exported in the same period of the previous year.

Accordingly, major commodities which have recorded negative growth during October 2020 vis-a-vis October 2019 were ‘petroleum products, cashew, gems and jewellery, leather and leather products’ amongst others.

“Non-petroleum and non-gems and jewellery exports in October 2020 were USD 20.31 Billion, as compared to USD 19.07 billion in October 2019, registering a positive growth of 6.51 per cent,” the ministry said.

Similarly, India’s imports declined, it fell by (-) 11.53 per cent to $33.61 billion in October from $37.99 billion reported for the corresponding month of 2019.

In September, imports declined by (-) 19.60 per cent to $30.31 billion from $37.69 billion reported for the corresponding month of 2019.

“Oil imports in October 2020 were USD 5.98 Billion, which was 38.52 per cent lower in Dollar terms, compared to USD 9.73 billion in October 2019,” the statement said.

“Non-oil imports in October 2020 were estimated at USD 27.62 billion which was 2.24 per cent lower in Dollar terms compared to USD 28.26 billion in October 2019.”

“Non-oil and non-gold imports were USD 25.12 billion in October 2020, recording a negative growth of (-) 4.90 per cent, as compared to non-oil and non-gold imports of USD 26.42 billion in October 2019.”

Consequently, India’s trade deficit narrowed to $8.71 billion on a year-on-year basis in October from $11.75 billion reported for the corresponding month of last year.

The trade deficit had narrowed to $2.72 billion in September from $11.67 billion reported for the corresponding month of the previous year.

“The merchandise trade deficit for October 2020 is in line with our estimates, printing at the highest level for this fiscal year,” said ICRA’s Principal Economist Aditi Nayar.

“As the economic recovery strengthens, we expect the current account surplus to decline substantially in Q3 FY2021, from the $20 billion recorded in Q1 FY2021 and the $12-14 billion expected for Q2 FY2021.”

According to EEPC India Chairman Mahesh Desai: “With the second wave of Covid 19 hitting

Europe, and the US reeling under the pandemic, Indian exports face a tough winter of global trade.”

In addition, Suman Chowdhury, Chief Analytical Officer Acuite Ratings & Research said: “The healthy pickup in exports seen in September could not be sustained in October, leading to a YoY drop of 5.1 per cent.”

“The primary factor behind the slip in exports has been the substantial drop in petroleum product shipments on a sequential basis by 54 per cent in October. Excluding POL, exports have seen a marginal YoY growth of 2 per cent given the steady growth in agricultural, minerals and pharmaceutical exports.”

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After 6 months, India’s industrial production sees growth in Sep

A favourable base effect, along with inventory build-up prior to the festive season, accelerated India’s industrial activity on both sequential as well as on the year-on-year basis in September, official data showed on Thursday.

Accordingly, India’s factory output inched-up by 0.2 per cent on YoY basis. The Index of Industrial Production (IIP) had recorded a de-growth of (-) 4.6 per cent during the corresponding period of last year.

Significantly, this is the first time in the last six months that IIP readings on a YoY basis has shown a growth.

The Ministry of Statistics and Programme Implementation, in the Quick Estimates of IIP document, said the current index readings should not be compared with those of the months preceding the Covid-19 pandemic.

“With the gradual relaxation of restrictions, there has been a relative improvement in the economic activities by varying degrees as well as in data reporting,” the ministry said in the document.

Among major segments, manufacturing production de-grew by (-) 0.6 per cent from (-) 4.3 per cent reported for the corresponding month of last year.

However, electricity generation grew by 4.9 per cent from (-) 2.6 per cent during September 2019.

Similarly, mining output rose by 1.4 per cent on a YoY basis.

Furthermore, the data on a YoY basis showed that manufacturing of primary goods de-grew by (-) 1.5 per cent, capital goods by (-) 3.3 per cent, and intermediate goods (-) 1.4 per cent.

On the other hand, the production of infrastructure or construction goods inched up by 0.7 per cent and consumer durables by 2.8 per cent.

The sub-segment of consumer non-durables showed a growth of 4.1 per cent.

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Centre to boost jobs, infra and rural economy with stimulus 3.0

Union Finance Minister Nirmala Sitharaman.

Announcing a fresh round of stimulus package and terming it as ‘Atmanirbhar Bharat 3.0’, Finance Minister Nirmala Sitharaman laid down a total of 12 new measures to support the economy and industry, ranging from employment generation, collateral-free credit for stressed sectors to subsidised fertiliser for farmers.

Sitharaman announced the ‘Atmanirbhar Bharat Rozgar Yojana’ to incentivise creation of new employment opportunities during the Covid-recovery phase.

The employment scheme effective from October 1 will be applicable to eligible new employees joining the EPFO-registered establishments and for those who exited these concerns during the Covid pandemic (March 1-September 30, 2020) and drawing monthly wages of less than Rs 15,000.

Under the scheme, the central government will subsidise the Employees’ Provident Fund (EPF) contributions for two years.

The Centre will provide 12 per cent of the contributions of both employers and the employee for establishments with up to 1,000 employees. In the case of establishments with over 1,000 employees, the Centre will only subsidise 12 per cent of the employees’ EPF contributions.

Also, in order to provide a further boost to rural employment, the government will provide an additional outlay of Rs 10,000 crore for the Pradhan Mantri Garib Kalyan Rozgar Yojana.

The government will provide Rs 65,000 crore to farmers to ensure adequate supply of fertilisers in the upcoming crop season.

In a major decision to support the pandemic-hit industry, the government has also announced an Emergency Credit Line Guarantee Scheme (ECLGS 2.0) for providing much needed relief to stressed sectors by helping entities sustain employment and meet liabilities.

The ECLGS scheme for MSMEs, MUDRA loan borrowers and individuals has been extended till March next year.

In a bid to boost housing sales, Sitharaman announced an increase in the permitted differential between the circle rate and agreement value of housing units to 20 per cent from the current mandated limit of 10 per cent till June 30.

The increase in differential will be applicable in residential units of value up to Rs 2 crore.

Section 43CA of IT Act restricts differential between circle rate and agreement value at 10 per cent. However, prices may actually be lower than that, and the restrictions curbs sale of housing units.

To provide ease of doing business and relief to contractors whose money otherwise remains locked up, performance security on contracts will be reduced to 3 per cent earnest money deposit (EMD) for tenders will be replaced by bid security self-declaration. The relaxation will be available till December 31, 2021.

Work underway on a route of the under-construction Delhi Metro Phase 4 project in East Delhi

Centre will also make an additional outlay of Rs 18,000 crore for Pradhan Mantri Awas Yojana (Urban), which is likely to help ground 12 lakh houses and complete 18 lakh houses, as per the Finance Minister.

In another boost for infrastructure development, the government will invest Rs 6,000 crore in the NIIF (National Infrastructure Investment Fund) debt platform, which will provide infrastructure project financing of Rs 1,10,000 crore.

Sitharaman said that the total value of the government’s stimulus support so far is about Rs 30 lakh crore, post the three rounds of ‘Atmanirbhat Bharat’ economic measure and the measures by the Reserve Bank of India amid the pandemic. Total stimulus accounts for 15 per cent of the GDP, with the Central government’s component being 9 per cent and the rest of the RBI.

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Pandemic To Reshape Global Economy: Moody’s

The global economic recovery over the coming year will be highly dependent on the development and distribution of a coronavirus vaccine, effective pandemic management as long as the virus remains a public health risk, and government policy support, Moody’s Investors Service said on Thursday.

In a new report, the agency’s baseline forecasts assume that difficulty in controlling the virus will hinder the gradual process of recovery in the short term.

However, Moody’s expects pandemic management will continue to improve over time, thereby reducing fear of contagion and allowing for a steady normalization of social and economic activity.

As a result, the virus is expected to become a less important macroeconomic concern throughout 2021 and 2022.

“The Covid-19 shock has triggered extraordinary fiscal policy responses from governments in advanced economies, including the US, Europe and Japan, facilitated by a large expansion of their central bank asset purchase programs,” said Moody’s Vice President-Senior Credit Officer Madhavi Bokil.

“Looking ahead, we expect advanced economy central banks to actively hold down yields across all maturities and to expand asset purchases to include a wider range of assets if the economic backdrop remains difficult. For most emerging market countries, the scope for additional rate cuts is limited and we do not expect emerging market central banks to carry on with quantitative easing measures once the recovery strengthens.”

The economic shock from the pandemic comes as the world is grappling with multiple challenges ranging from climate risks, a reassessment of the merits of globalization and increased social disaffection. Moody’s said the pandemic will likely usher in new secular shifts that will reshape the global economy, politics and international institutional frameworks.

These shifts, according to the agency, will be the most visible in four ways: an increase in populism and inward-looking policies in the event of a jobless recovery or a recovery that increases inequality, geopolitical realignment, a policy push for a “greener” economy, and a technological transformation that could make a large number of jobs obsolete.

Geopolitical and trade risks will remain a key focus in the year ahead as the relationship between the world’s two largest economies, the US and China has deteriorated.

The agency does not believe that the Biden administration would differ materially from the current administration with regard to these issues. Decoupling of the Chinese economy from the US is likely in the areas of trade, technology and investment. For other countries, the pandemic shock has also led to both economic and national security concerns about supply-chain vulnerabilities and economic dependencies.

The emphasis of various governments on shoring up domestic productive capacities can also be viewed as an attempt to reduce their codependence on the global economy, Moody’s said.

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India Enters First Ever Recession: Reserve Bank

Reserve Bank of India Governor Shaktikanta Das (Photo: IANS)

India has technically entered into a recession with a likely contraction in its GDP during the July-September period, according to a report by the Reserve Bank of India (RBI).

RBI’s Economic Activity Index estimates that India’s GDP growth for the second quarter of the current financial year was negative and the GDP contracted by 8.6 per cent during the quarter.

“India has entered into a technical recession in the first half of 2020-21 for the first time in its history with Q2:2020-21 likely to record the second successive quarter of GDP contraction,” it said.

The contraction is ebbing with gradual normalisation in activities and expected to be short-lived.

The RBI report said that at a time when global economic activity is besieged by the outbreak of the second wave of Covid-19, incoming data for the month of October 2020 have brightened the near-term outlook for the Indian economy and stirred up consumer and business confidence.

“Since the assessment of the performance of the Indian economy in the first half of 2020-21 that was presented in the Monetary Policy Report of October 2020, several developments point to a window of respite opening up and an unshackling of economic activity from the grip of Covid-19 as the festival season sets in,” it said.

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Surging Gold Price Pushes Demand, Gold Loan Growth

Incessant surge in gold prices led to higher demand for gold loans amid the pandemic and increased the asset under management of major gold loan NBFCs, according to a report by World Gold Council (WGC).

The report said that the outstanding organised gold loan is expected to grow to Rs 4,051 billion ($55.2 billion) in FY 2021 from Rs 3,448 billion ($47 billion) in FY 2020.

“The 28.8 per cent rally in domestic gold price this year has led to increased demand for gold loans. Borrowers have benefited from higher loan value for the same collateral while lenders have benefited from lower loan-to-value (LTV) ratios on their existing loans and higher demand,” it said.

With a higher gold price and greater liquidity needs arising with the onset of COVID-19, it was believed that COVID-19 would induce higher gold recycling from consumers. However, consumers used their gold holdings as collateral to obtain their financing needs rather than outright selling.

Also, the rural economy has performed strongly this year, reducing the need for distress selling.


“Demand during the pandemic has pushed gold loan AUM (Assets Under Management) higher for India’s leading gold loan NBFCs – the AUM of Muthoot Finance and Manappuram Finance increased by 15 per cent and 33.4 per cent y-o-y respectively in Q2 2020,” it said.

Kerala-based Federal bank reported 36 per cent increase in gold loan AUM y-o-y in Q2 2020. Indian Bank has witnessed 10 per cent increase in average ticket size of gold loans to Rs 88,000. Recent industry interaction and media articles have also mentioned higher demand for gold loans.

Banks have aggressively promoted and launched gold loan schemes since the outbreak to capitalise on these lucrative schemes, as per the report.

Somasundaram PR, Managing Director, India, World Gold Council said: “The gold loan industry has traditionally been a pillar of support for small businesses and households in need of emergency short term assistance. In addition to unorganized lending that normally co-exists with any robust gold market, the regulated Institutional framework of “gold loans” in India has made it ubiquitous over the past decade which is indeed a boon.”

He noted that Covid has boosted demand for gold loans through banks and non-banking financial companies.

“Gold loans will benefit not just from the demand side but supply side dynamics too as many banks and non-banking institutions target this product segment on account of its acceptable risk profile,” he added.

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Equity market, FII inflow witness huge rise

The Indian equity market has been on a fresh record run of late backed by a surge in foreign institutional investments (FII). In the past three days alone, net FII inflow in the Indian capital markets stood at Rs 14,786.57 crore.

On Tuesday, the Sensex crossed the psychological mark of 43,000 points for the first time ever. The surge in the Indian market comes in line with the global markets, after pharmaceutical major Pfizer said its experimental Covid-19 vaccine is more than 90 per cent effective based on initial trial results.

Further, the bull-run started globally along with the domestic markets after it became clear that Joe Biden, the Democratic candidate would be the next US President. This positive trend comes despite the anticipation that Donald Trump’s exit from the White House may trigger a collapse in the stocks markets.

Markets rallied on hopes of fewer regulations, easing of protectionist measures brought in by Trump and a bigger stimulus package for the US economy under a Biden administration. Further, hopes of ease in H-1B visa norms also led to a spike in the IT stocks.

FIIs have been the biggest push for the recent bull-run in the Indian markets. Post the significant outflow in September, foreign funds made a comeback in October and the flow has strengthened further in November.

FII inflows in October stood at $2.5 billion. However, at a time when FIIs have been net buyers, domestic institutional investments (DII) have remained net sellers. In October, DII outflow stood at $2.4 billion, highest monthly outflows since March 2016.

So far in November, net DII outflow stands at Rs 9,826.17 crore, while net FII inflow stands at Rs 17,947.80 crore.

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Core Sectors Lead the Demand For Construction Equipment

Work underway on a route of the under-construction Delhi Metro Phase 4 project in East Delhi

“The demand for construction equipment is picking up for the past couple of months and it is expected to accelerate further owing to the demand from sectors like roads, railways, energy, irrigation and others,” Jagadish Bhat, Managing Director and CEO, Ajax Engineering…reports Venkatachari Jagannathan

Construction equipment companies are smiling as demand from core sectors like roads, railways, irrigation, energy and other sectors for their products is picking up, said top officials of industry majors.

Major industry players like Schwing Stetter India and Ajax Engineering are expanding their capacities to cash in on the impending surge in demand.

“It is smiling time for us. Business during September and October was better than corresponding period of 2019. Similarly, November business is also looking good,” VG Sakthikumar, Managing Director, Schwing Stetter India, told IANS.

According to Sakthikumar, the machines of the rental players have got deployed in projects.

“The demand for construction equipment is picking up for the past couple of months and it is expected to accelerate further owing to the demand from sectors like roads, railways, energy, irrigation and others,” Jagadish Bhat, Managing Director and CEO, Ajax Engineering, told IANS.

Both Bhat and Sakthikumar said trade enquiries for their machines have picked up.

“The demand is from highways, railways, metros, and sectors. Bulk of the proposed $1 trillion investment mentioned in the National Infrastructure Pipeline will happen next year,” Sakthikumar said.

The companies are hoping to close this fiscal with better revenues than what they had expected when the Covid-19 pandemic lockdown happened.

“Last year, we closed with a turnover of about Rs 1,730 crore. This year, we hope to close with a business of Rs 1,400-1,500 crore,” Sakthikumar said.

Schwing Stetter India makes concrete mixers and other machinery used in construction works. It also sells earthmoving equipment of XCMG, China.

The Indian company is a wholly-owned subsidiary of German group Schwing Stetter. The German group is owned by the Chinese XCMG group, which is ranked sixth globally among the construction equipment machinery makers.

Sakthikumar said with the demand picking up, the company will take some time to shift some of its plant and machineries to its new Rs 230-crore plant being built in Tamil Nadu.

“The production is going on in full steam at our existing facilities while component suppliers are trying to match our needs,” Sakthikumar said.

Queried about the market trend for Ajax Engineering Bhat said the company started seeing recoveries from August onwards and in October the performance was good.

“We see the recovery to be better than expected. During the first six months, the turnover was about Rs 250 crore. Going by the enquires and orders we expect to close this fiscal with a turnover of about Rs 800 crore,” Bhat remarked.

According to him, apart from demand for self-loading concrete mixers, there is good demand for boom pumps and concrete pumps.

“These machines are bought under finance and the non-banking finance companies (NBFCs) have started loosening their purses. After October, there is a general momentum but has not touched the pre-Covid levels. After November, increased disbursals are expected,” Bhat said.

Ajax Engineering has decided to invest Rs 140 crore this fiscal in setting up a new plant for making slip form concrete pavers, batching plant and also in capacity expansion, Bhat added.

“As a part of Make-in-India or Atmanirbhar Bharat (self-reliant) programme we have built a slip form concrete paver which is now being field-tested. Currently, concrete pavers are imported, each costing about Rs 10 crore. Our product is thus an import substitute,” Bhat said.

With about Rs 800 crore turnover, Ajax Engineering will start commercial production of the 12-metre slip form concrete pavers soon as the first machine was tested and validated in couple of road projects.

“We should be competitive by 20-25 per cent as compared with imported machines. We also plan to export the machines,” Bhat added.

“Slip form concrete pavers are majorly built by German and American companies and Ajax Engineering is the first Indian company to do so,” an industry official preferring anonymity told IANS.

Normally about 100-150 slip form concrete pavers are imported per year by India.

The concrete paver and the boom pumps will be made at the Rs 100 crore new plant proposed to come up at Doddaballapur near Bengaluru where Ajax Engineering has acquired 20 acres of land.

According to Bhat, another Rs 40 crore will be invested at its existing plant in Gowribidanur Industrial Area, Kudumalakunte village, Karnataka to increase production capacity of the transit mixers, and concrete batching plants.

The fresh investments will be made from company’s internal accruals.

According to Bhat, construction of the new plants will begin in three or four months.

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