Brook­field to Ac­quire Am­bani Gas Pipe­line

Cana­dian firm to buy East West Pipe­line for an en­ter­prise val­u­a­tion of $2 bil­lion

The Economic Times - - Front Page - Ari­jit.Barman @times­group.com

Mum­bai: Cana­dian in­vestor Brook­field is set to buy the loss­mak­ing East West Pipe­line Ltd (EWPL), ear­lier known as Reliance Gas Trans­porta­tion In­fra­struc­ture Ltd, for an en­ter­prise val­u­a­tion of ₹ 14,000 crore ($2 bil­lion).

Brook­field is uniquely spon­sor­ing an in­fra­struc­ture in­vest­ment trust (In­vIT) called In­dia In­fra­struc­ture Trust as the ac­qui­si­tion ve­hi­cle to take over the 1,400 km com­mon car­rier pipe­line from Kak­i­nada on the east coast to Bharuch in Gu­jarat. The Com­pe­ti­tion Com­mis­sion of In­dia (CCI) ap­proved the trans­ac­tion last week. Brook­field has also filed an ap­pli­ca­tion with the Se­cu­ri­ties and Ex­change Board of In­dia (Sebi) for reg­is­ter­ing the In­vIT, ap­proval East West Pipe­line Ltd is a pvt co of Op­er­a­tional rev­enue:

Net loss: To­tal out­stand­ing debt: COM­MON CAR­RIER GAS PIPE­LINE FROM KAK­I­NADA TO BHARUCH

for which is ex­pected this month, fol­low­ing which a for­mal joint an­nounce­ment will be made, said mul­ti­ple sources aware of the mat­ter.

The pipe­line housed un­der EWPL is be­ing trans­ferred to an en­tity called Pipe­line In­fras­truc-

gas from KG Basin, also other sources to users in west coast

GAIL and Gu­jarat State Petronet for on­ward de­liv­ery na­tion­wide

Mukesh Am­bani

KEY FY18 FI­NAN­CIALS

884 CRORE 715 CR

13,715 CR

ture Pvt Ltd (PIPL), a wholly owned sub­sidiary of Reliance In­dus­tries Hold­ing Pvt. Ltd (RIHPL). That’s a hold­ing arm of Mukesh Am­bani and fam­ily, the pro­mot­ers of Reliance In­dus­tries Ltd (RIL).

The lo­cal cur­rency hit a record low at 72.92 to the dol­lar last Wed­nes­day, but has bounced back to close at 71.86 Fri­day amid re­ports of the gov­ern­ment con­sid­er­ing mea­sures to ar­rest the slide.

“Over­seas in­vestors are on a wait-and-watch mode amid emerg­ing mar­ket weak­ness,” said Man­ish Wad­hawan, man­ag­ing di­rec­tor and head of fixed in­come at HSBC In­dia, and one of the 12 par­tic­i­pants in the poll. “They may not im­me­di­ately rush to bet money un­less the fine prints come out on the pro­posed mea­sures (the Indian gov­ern­ment plans to take).” But the ru­pee and bond yields could see some respite on Mon­day, as the gov­ern­ment’s in­ten­sion has helped al­lay in­vestor ap­pre­hen­sion, Wad­hawan said. Most of the re­spon­dents bet on the ru­pee's wide trad­ing range till De­cem­ber-end. A ma­jor­ity of them have set a trad­ing range of 69.50-73 to the dol­lar, with a few pre­dict­ing even 68-75.

GOV­ERN­MENT MEA­SURES

While the gov­ern­ment talked about steps to curb non-es­sen­tial im­ports and boost ex­ports, cur­rency traders were look­ing for strin­gent mea­sures like an in­ter­est rate hike, float­ing of NRI bonds or open­ing of a spe­cial dol­lar win­dow for oil com­pa­nies that are the big­gest im­porters.

For­eign port­fo­lio in­vestors are, mean­while, seek­ing more clar­ity on the five-pronged mea­sures. They con­sider those re­lated to non-es­sen­tial im­ports and re­moval of debt in­vest­ment cap as the most im­por­tant ones.

“Curbs on non-es­sen­tial im­ports will lead to per­ma­nent so­lu­tions in con­trol­ling CAD (cur­rent ac­count deficit), paving way for sus­tain­able over­seas in­flows over a pe­riod of time,” said MS Gopikr­ish­nan, head of macro trad­ing, South Asia, at Stan­dard Char­tered Bank. “While the mea­sures would weigh on the mar­kets on Mon­day, but for it to sus­tain, in­vestors need more clar­ity,” he said. Ananth Narayan, as­so­ciate pro­fes­sor of fi­nance at SP Jain In­sti­tute of Man­age­ment and Re­search, said In­dia should look at long-term mea­sures, such as to sup­port the Make in In­dia and Make for In­dia pro­grammes, to re­duce the reliance on im­ports and sup­port the cur­rency. The gov­ern­ment has yet to clar­ify the items of the non-es­sen­tial cat­e­gory, the im­ports of which will likely be dis­cour­aged with higher im­port du­ties. This mea­sure should help cut the ex­pand­ing cur­rent ac­count deficit, or the ex­cess of over­seas spend­ing over rev­enue. CAD was at a four-quar­ter high of 2.4% of gross do­mes­tic prod­uct in the April-June quar­ter on the back of ris­ing crude oil prices.

“It will be im­por­tant to wait and see if any fur­ther mean­ing­ful mea­sures are around the hori­zon,” said Ashish Vaidya, head of trad­ing–In­dia at DBS Bank. “An­nounced mea­sures will have a mar­ginal pos­i­tive im­pact, but are not a gamechanger.”

BOND EX­PO­SURE

The gov­ern­ment also pro­posed to re­move the ex­po­sure lim­its of up to 20% of an FPI bond port­fo­lio to a sin­gle cor­po­rate group, and 50% to a sin­gle com­pany.

Over­seas in­vestors can in­vest in Indian cor­po­rate bonds up to Rs 2.67 lakh crore in a year. Last year, in­vestors used up about 80-90% of the limit, but that fig­ure has now dropped to 76% as global in­vestors shied away from Indian cor­po­rate debt pa­pers. “We should see some dol­lar in­flows next few months,” said Jayesh Me­hta, man­ag­ing di­rec­tor at Bank of Amer­i­caMer­rill Lynch. Growth is key to bring in for­eign cap­i­tal to In­dia. “The au­thor­i­ties should take mea­sures which will im­prove the coun­try’s growth, a key to at­tract global in­vestors,” Me­hta said.

In Septem­ber, over­seas in­vestors net sold around Rs 9,400 crore of do­mes­tic equities and debt se­cu­ri­ties. A fur­ther rise in share prices may be lim­ited, leav­ing lit­tle space for sig­nif­i­cant risk-re­turns for such in­vestors in the short term.

“Fri­day's news flow will not im­pact dol­lar flows im­me­di­ately but it may have a medium-term im­pact,” said Piyush Garg, head of re­search at ICICI Se­cu­ri­ties. “Mar­ket will be driven by move­ment in emerg­ing mar­ket cur­ren­cies, move­ment in the ru­pee and oil prices.”

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