India Closing Report – Week Of September 24-28, 2012


The CDS currency series on the USD is finally trading below 53 as expected starting back from 53.5 2 days ago an dis this time likely to go below 52 intra day in the Ne October series as gold and Silver importscome to a standstill before Diwali on Nov 13. International prices of Gold move in tandem with Indian jewelry demand and the bottom is a certainty the market has seen over the last 20 years internationally and locally

Retail FDI aspirants are active and biudding up their real final control equation wary of the $100 m in 3 years and the back office requirement as they run for good M&A possibilities int he space. Aviation rerating from FDI is abviously because of more international demand for listed stock from Spicejet and Jet to Kingfisher and perhaps unlisted Indigo and Air India as well

The jump in Nifty is a little bit of a surprise , one expecting the bull commentators to again not again get any returns in the fresh series gambles and while new picks have not succeeded the enduring stories from ITC to ICICI BANK and IDFC have not disappointed. JP ASSOCIAT deserved the run and TELCO’s (TATAMOTOR) mysterious run continues flummosing all and sundry a nightmare compared to REliance Capital and Rel INfra’s expected rise and fall on good and bad days in a spree

BHARTI is still at reasonable levels but given that it is  a less than 50% holder in front office big retail with almart expect some investor groups to leave it for its portfolio fo international /US investments The bump isn profitability if that is the hope is still a mirage a nd a lot tof hard work from the management returned in kind by new consumers and governments important for that to happen. Th eDCHl case is a mite mysterious as ell, ICICIBANK obviously relying on the IPL franchise name to the latest tranche of loansin 2011 and now the immediate restructuring while YES holds out for franchise assurances. USL rise is likely limited from here as promotores have already haked therir stake for collateral , almost the entire 27.7% and their hoep from a Diageo/KFA investor treasury purchase is on debt improving the bottomline from a upto 50% drop in interest costs


The Air india Debt restructuring package – FAIL

English: The Local Head Office of State Bank o...
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The Airline’s debt restructuring package of $ 4.4 bln rides on a INR 74.08 bln preference share issue that will require additional provision under the original RBI dispensation itself. thuis the package is back on the drawing board with SBI Caps the advisor, having earlier announced as being accepted/proposed by the lender(s)

The Investment banker’s proposal required new provisions of INR 96.18 bln for the INR 224.5 bln debt to be restructured and an additional INR 221 bln guaranteed by the government. It also requires conversion of the existing overdrafts to longer term loans of INR 112 bln leaving INR36.5 as Cash credit used ( and not new avl limits)

India’s Aviation Blues: Preference shares and write offs to bleed banks instead

Air India sat pretty while everyone cried foul on the aviation industry, airlines’ stopped pying the gas billa t the airport and while vendors have been paid and /. or prioritised, banks continue to suffer, printing credit lines, much like the Eruopeans without any collateral, reusing old paper and where loans are dead certain to be lost to fantasies, issue preference shares to themselves. They should have been adminstering the airlines in bankruptcy court buit as of now, no leasing arrangement for athe aircraft, no stoppage to airlines expansion and no money to pay salaries, contagion spreading to banks instead of cutting losses.

1940s-2007 Air India logo
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A random quote to a ftalphacville post on Flynn scores that also segues to my next post on the general increase in abstraction and problem skills as a way of life. So you know I am not really complaining banks made the deal. Banks should.

Air India’s 787 purchases – Can India get a Aircraft leasing corp now?

1940s-2007 Air India logo
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There is definitely a case for an independent agency to warehouse the leases for big Aircraft carriers and / or facilitate a sale for Boeing and Airbus by taking on a Sale and earning on our books from the Lease to Air India and even private Aircraft. I am probably just shooting from the hip and details can work out to prove or disprove the project.

However, such an agency will make an income stream permanent, serve the national cause with the right budget in the right hole and find an income stream for eithe r Banks / or State companies as a aircraft leasing corporation

Currently 27 aircraft ( Dreamliners albeit not the 8 series) are on oder with Airlines/international agencies using the Sale and Leaseback option for Air India with the carrier paying the rentals. It is definitely convenient for Air india and serves the cause of modernising the fleet. According to DNA, even as the government stands ground , still waiting to approve the deal, 11 aircraft are scheduled into Air India’s roster next year for 4500 hours each from Delhi / Mumbai..For at least one return sector per day ( flying 12-13  hours per day)

State Bank of India revamps Air India again

SBI revamped AIR India’s loans to an average 15 year tenure as per a recent plan approved by RBI the company alone accounts for more than half of Indian aviation’s debt overhang and over $1.5 bln of working capital and $3 bln in term loans were restructured in the latest exercise. The bank accepted CCPS issue against the working Capital loans allowing the airline to pay the bank thru redeemable cumulative preference shares, the bank still not becoming an equity holder for the sole reason that it is a government owned airline.

Air India is also getting Govt equity of $5 bln over 10 years with $1.35 bln issued this year ( we still use USDINR=50 as rupee tries to make a 48-53 range)

Something tells me that will only pay for the airline’s immediate default and its daily operational losses will continue nothing changing about the management and operational staff habits that make for the demise of the airline. In the mean time fare hikes by private airlines will happen as highly efficient companies like Jet and Indigo bleed and or resort to sale / lease back despite being anointed full service airlines liable to charging “full fares” for their service. Low fare airlines like Spicejet and premium experience jugglers like Kingfisher remain stuck in the middle, having adopted most global best practices and created sumptuous fare without being able to carry home any profit

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