Elevated Inflation in India; Sensex Declines

Mayank Mehta, Chandrasekhar Atreya and Sanjay Barot
14 Jul, 2010
New York City

Stocks in Mumbai lost and turned negative in late evening trading. The benchmark wholesale price index jumps 10.55% in June. Essar Power agrees to acquire Navbharat Power. Entertainment World Developers is planning an IPO. Piramal sells its diagnostic unit to Super Religare.

[R]5:00 PM Mumbai, 8:30 AM New York – Stocks in Mumbai lost and turned negative in late evening trading. The benchmark wholesale price index jumps 10.55% in June. Essar Power agrees to acquire Navbharat Power. Entertainment World Developers is planning an IPO. Piramal sells its diagnostic unit to Super Religare. NTPC is planning to buy coal mines overseas.[/R]

Stocks in India traded higher all day but declined and turned negative late afternoon after touching the highest level since February 2008.

The benchmark Sensex Index lost 0.27% or 47.74 to close at 17,938.16 with two thirds of the stocks declining. The index rose as high as 18,167.22 during the day.

The wholesale price index jumped 10.55% in June from a year earlier, after rising 10.16% in May, the Commerce Ministry said in a statement in New Delhi today.

If inflation persists at more than 10%, some action is required by the Reserve Bank of India, said C. Rangarajan, Chairman of the Prime Minister’s Economic Advisory Council in New Delhi yesterday.

Echoing the same sentiment, Montek Singh Ahluwalia, Deputy Chairman of the Planning Commission, said the central bank should make whatever adjustments it feels necessary as inflation above 10% is not acceptable.

Essar Power Ltd, a subsidiary of London-listed Essar Energy Plc, is acquiring 100% stake in 2250 megawatt Navbharat Power Pvt Ltd in Orissa. Essar Power plans to initially acquire a 76% stake, with the balance 24% to be acquired upon completion of certain project milestones.

Navbharat Power, which has already got all major clearances and coal supplies, is a coal-fueled power plant being set up in Dhenkanal district of Orissa. The $2 billion project is to be implemented in two phases, with the first phase of 1,050 megawatt and phase two of 1,200 megawatt. The project includes the allocation of the Rampia Coal block of 112 million and a 4.7 million tons per annum coal-linkage with Coal India Ltd.

Entertainment World Developers Ltd is planning to raise up to Rs 4,500 crore in an IPO. The company filed a draft prospectus with the market regulators on Tuesday, the company said in a statement.

The proceeds will be used for construction in ongoing projects and to buy back some of the convertible debt issued by a unit run by ICICI Venture and Mumbai-based mall developer Phoenix Mills that owns 40.3% of Entertainment World Developers.

Piramal Healthcare Ltd has agreed to sell its diagnostic unit to Super Religare Laboratories Ltd for Rs 600 crore, making Super Religare India’s largest provider of laboratory services.

The combined entity will have about 170 laboratories serving more than 12 million customers annually, Piramal said in a statement today. Piramal is also in talks to acquire 10% stake of Super Religare and the companies expect to finalize the purchase by tomorrow, said Gopal Vaidyanathan, Director of Strategy at Super Religare, in an interview today from Mumbai over phone.

Amid doubts over continuation of tax rebates to new Special Economic Zones, the government today approved three new proposals including that of Videocon Industries. Videocon was given permission to set up special economic zone for electronic hardware and software in Navi Mumbai over 100 hectares.

Coastal Ferrotech Ltd got approval for SEZ in Haldia in East Medinipur and Infoparks Kerala in Ernakulam district.

NTPC Ltd is planning to buy coal mines overseas to help it source as much as 67% of the current import of that fuel by the company.

New Delhi-based NTPC will use part of its cash reserves of $3 billion and also raise debt to fund the purchase of mines in Australia, Indonesia and Mozambique, that can supply as much as 10 million tons of coal per year, Chairman R.S. Sharma said by telephone today.