Rail Frieght Hike - Reaction-1

The Indian railway board has increased its tariff by 30% on 6th March which is as per my experience going to be dear to economic growth as Railways is transporting mainly bulk and steel which are the core segment of any economy and when world wide there is initiative to accelarate the growth process it is going to hit indian economy adversally .

-Surya Narayan Singh, Head-Rail Logisitcs, SRS Ltd

PWC: What's up?

Fund inflow in audit cos against FDI norms

Pankaj Doval, TNN



NEW DELHI: Serious violations of accounting principles as well as major financial irregularities have been detected in several entities of PricewaterouseCoopers India (PwC India), which would seem to indicate that the company has been wrongfully dressing up its own books and those of its network audit firms in order to remain profitable. Several PwC India top honchos, including chairman Deepak Kapoor and some senior directors, signed backdated invoices, which smells of large-scale financial manipulation, and could spell further trouble for the company already tainted by being the auditor in the high-profile Satyam scam of 2009.

The violations at PwC India have the potential to land it in serious trouble with various regulators like the corporate affairs ministry, the Reserve Bank of India (RBI) and auditing watchdog Institute of Chartered Accountants of India (ICAI).

They could also contravene the Indian Penal Code as falsification of accounts and misrepresentation of facts is a criminal offence.

Papers accessed by TOI show that PwC India entities, including tax and business advisory services company PricewaterhouseCoopers Pvt Ltd (PwCPL) and auditing firm Price Waterhouse (PW), had been falsifying accounts and backdating and manipulating invoices, to show money received as 'grant' after close of a particular financial year as income of the earlier year.The inflow of funds from PricewaterhouseCoopers Services BV, Netherlands, was first shown as 'reimbursement of expenses' - including in representation made to banks - but later invoiced as 'support' and finally as 'grant'. Surprisingly, the books of accounts classified this as 'sundry income', which again points to misrepresentation of facts.

Alarmingly, the infow of funds into auditing firms like PW and Lovelock & Lewes (LL) is in itself a violation of the country's FDI rules as existing regulations do not permit foreigners to either practice auditing or even to fund audit firms in India. PW and LL are audit firms registered with the ICAI and are thus prohibited from accepting any foreign investment.

When contacted, a spokesperson for PwC India said, "The documents TOI purports to have in its possession, if authentic, are private and confidential business documents. Also, as a policy we do not comment publicly on our internal matters. PwC has complied and will continue to comply with applicable laws, regulations, and professional standards." However, PwC India did not comment on any questions raised by TOI regarding the backdating of invoices and the possible involvement of its senior officials in the matter. TOI has already reported on the inflow of over Rs 200 crore from overseas into PwC India entities that enabled them to remain profitable and not sink in losses. The government had begun an inquiry into the matter.

According to the papers seen by TOI for fiscal 2009-10 and 2010-11, there were several instances of backdating of invoices and fictitious transactions. An amount of $3.93 million came into tax and business advisory services company PricewaterhouseCoopers Pvt Ltd (PwCPL) in end of June 2010 (fiscal year 2011), but was shown to have come in FY10 through backdating of invoice to March 31, 2010. This helped the company boost its revenues as this money was classified as sundry income.

Again, an amount of $7 million came into PwCPL in the first week of May 2011 (FY12), but was illegally shown in the books of FY11 through backdating of invoice to March 31, 2011, signed by Kapoor. Similarly, a sum of $7.5 million flowed into PwCPL in the third week of May 2011 (FY12), but was accounted for in the previous fiscal (FY11) by backdating of invoice to March 31, 2011. Another inflow of $3.5 million in PwCPL in end-June 2011 (FY12) was falsely shown in the books of FY11 through the backdating of invoice to the previous fiscal. The papers also showed a similar trend in the books of PW where an inflow of $1 million in end of June 2010 (FY11) was invoiced for in the previous fiscal (FY10).

A thorough investigation of the papers showed that the money from PricewaterhouseCoopers Services BV (Netherlands) came into PwC India entities as part of a broader 'grant agreement' (or addendum thereto) signed between the international company with PwCPL and other audit firms for enhancement of resources and skills, which in itself raises several question marks over why such a funding would be done.

However, in several cases the grant agreement in itself was signed months later than the dates mentioned on the invoice. For example, the payment of $7 million invoiced on March 31, 2011 was based on an agreement that, surprisingly, had been signed by PricewaterhouseCoopers Services BV on April 14, 2011. Importantly, as mentioned earlier, the money had actually flowed in only in May 2011. This clearly points to violations by PwC India and its senior staff to dress up and fortify its sagging books and make them look profitable.

Source: Times of India, Delhi, 12 March 2012

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Surprise! Nearly half of IndiGo foreign-owned

Tushar Srivastava,

Caelum Investments, a little-known US-based firm owns 48% of IndiGo, company information accessed by HT has shown revealing details that were so far unknown about ownership and shareholding structure of India's most profitable airline.
 Caelum Investments is owned and run by Rakesh Gangwal, a  former CEO of US Airways.

Gangwal and Rahul Bhatia, group managing director of InterGlobe Enterprises, together set up IndiGo in 2006.

Other stakeholders include IndiGo's parent company InterGlobe Enterprises which owns 51.12%. Kapil Bhatia, executive chairman, InterGlobe Enterprises, his son, Rahul, Gangwal's wife Shobha and sister Asha Mukherjee hold the remaining stake.

Company officials confirmed the shareholding structure.

"Caelum Investments is owned by Rakesh Gangwal, who is based in Virginia," Aditya Ghosh, president, IndiGo told Hindustan Times.

Since its launch in 2006, the Gurgaon-based carrier has never shared details about its promoters and shareholders.

Caelum, sources said, is a Limited Liability Company registered in Delaware, USA.
"IndiGo's foreign ownership also explains it's less than enthusiastic response to foreign direct investment by foreign airlines," said an aviation expert.

IndiGo has reported profits for the last three years.

Company officials said the carrier clocked profits of R650 crore in 2010-11 and expects to make a profit this fiscal too at a time when other domestic carriers are expected to post combined loss of $2.5 billion (about R12,500 crore).

Experts and IndiGo's peers, however, have contested the airline's profitability claims.

"People like Vijay Mallya have questioned IndiGo's profitability. In a way, you can argue that its profitability is a precursor to an IPO," said Saj Ahmad, a London-based aviation analyst.
"If any airline has a long-term focus on profit and loss it is Singapore Airlines, which a couple of days ago gave its co-pilots the option to take two years' leave without pay because of the downturn," said aviation expert Captain Mohan Ranganathan. "If any airline is claiming to make a profit during this period it is far from the truth."

Ghosh said the carrier does not have any plans for getting listed on the stock exchanges.

"A company is listed to raise more funds. You don't have to be listed to be transparent," Ghosh said. "Our auditors are KPMG and internal auditors are PwC. We file our results with the aviation regulator and the registrar of companies."

"It's no surprise people question their profits and sustainability, particularly since its placed a massive order for 150 A320Neos when it hasn't even finished inducting the 100 A320s ordered in the mid-2000s. With under 40 destinations, one has to wonder why it doesn't have more routes," Ahmad said.

Source: Hindustan Times, New Delhi, 12 March 2012

Toyoto's road to rail switch for finished vehicles in SA

Irma Venter


Toyota South Africa Motors (TSAM) switched from road to rail in a decisive manner as it signed an agreement with Transnet Freight Rail (TFR), in which TFR’s Container and Automotive Business Unit, or CAB, would now directly handle the transportation of certain locally manufactured Toyota vehicles destined for the export and domestic markets, as well as vehicles imported into the country.


Under the previous arrangement Toyota vehicles were moved by a logistics service provider with a fleet of road carriers, which only considered rail for surplus volumes.

TSAM said the new agreement was in line with CAB’s stated strategy to offer an end-to-end supply chain solution. To that end the unit had increased its value proposition to customers by, for example, including vehicle loading and yard management in its portfolio of activities.

TSAM expected to benefit from the “significant bulk-carrying capacity” offered by TFR.

“This will translate into long-term savings on vehicle movement and general logistics overhead costs.”

Also making the move to rail an attractive option was the fact that it would lessen TSAM’s carbon footprint, said TSAM president and CEO Dr Johan van Zyl. Adding rail to the transport mix offered "significant benefits" as one consignment of vehicles moved per rail was equivalent to 10 vehicle carriers on the road, he explained.

“We believe that the new arrangement will lighten our reliance and impact on the road transport network and allow for significant cost savings in the longer term. As such we also believe that we will set an example as the leading vehicle retailer and exporter in South Africa to other manufacturers in South Africa to make use of the significant rail infrastructure that is available in the country,” he added.

The contract execution would be in three phases, with the first phase focused on the transportation of cars for the domestic market from Isipingo, in Kwazulu-Natal, to Kaalfontein, in Gauteng; phase 2 the transportation of imported cars from Durban to Kaalfontein and phase 3 the movement of imported cars, as well as cars for the export market, between Isipingo and Durban.

The Toyota plant is located in Durban.

Phase one had already started as a pilot project on October 17, when the first cars were loaded onto the train at the Isipingo terminal, and railed to the Kaalfontein terminal.

This service currently moves 500 vehicles a week, already removing 60 trucks from the N3 over the same period.

This would now be followed by phase 2.

The third and the last phase would be implemented at a later stage, as fit-for-purpose flat and open wagons were currently in the design phase.

“One should keep in mind that this year TSAM will manufacture close on 155 000 vehicles and will retail in excess of 100 000 units in the local market,” said Van Zyl, putting the volumes involved into perspective, even though not all of these vehicles would be moved by TFR.

“Each of these vehicles has to be distributed on time and without damage to each customer, either here or in our export markets.”

TSAM exports vehicles to 57 markets, including Germany, Namibia and Russia.

The company did not want to quantify the estimated cost savings such a move would provide the company.

Source: http://www.engineeringnews.co.za/article/toyota-signs-up-to-move-vehicles-by-rail-2011-12-14

Volumes up @ Mundra Port

Pallavi Pengonda


Mundra Port and Special Economic Zone Ltd (MPSEZ) announced on Monday that its board of directors approved the change of the firm’s name to Adani Port and Special Economic Zone.


Earlier this month, the company announced its September quarter financials, wherein it posted 29% year-on-year (y-o-y) growth in its net profit to Rs 273 crore.
That growth is higher than the 20% net profit growth the company reported in the June quarter. However, revenue growth in the September quarter at 44% to Rs 588 crore has been better than the 27% revenue growth reported in the June quarter.
Revenue growth in the September quarter was mainly helped by good cargo volume growth. MPSEZ handled 16.8 million tonnes of cargo, which represents a 33.5% increase on a y-o-y basis.

Cargo handled is higher on a sequential basis as well. For the September quarter, cargo volume growth was driven primarily by coal volumes. Container volumes, too, registered decent growth of 16%, which according to analysts indicates strong exports and imports. However, slowing exports means that container traffic growth is at risk in the days to come.

On the operating front, MPSEZ’s operating profit rose by a commendable 51% to Rs 410 crore and the margin, too, improved on a y-o-y basis to 66.2%.

However, operating profit margin was higher in the June quarter at 68.5%.
But the strong operating profit growth could not translate into a similar kind of growth at the net level. One reason is that depreciation costs were higher.
Secondly, the company’s interest expenses have increased substantially.
MPSEZ’s loan funds have increased sharply by around 61% to Rs 4,355 crore as on 30 September from March.

Free cash flow (FCF) is likely to be affected. Higher-than-expected growth in capital expenditure in the first half of fiscal 2012 (FY12) and loans to subsidiaries are likely to lead to another year of negative FCF at the stand-alone level, according to analysts from JPMorgan. They estimate Rs 400 crore negative FCF at stand-alone level in FY12 against an earlier estimate of a positive Rs 910 crore.

Since MPSEZ announced its September quarter financials, the stock is down by 14% to Rs 135.90 compared with an 8% decline in the benchmark Sensex. While valuations may appear attractive after the recent decline, investors should keep a tab on traffic growth—a key metric for this stock.

Courtesy: Mint
Copyright © 2007 HT Media All Rights Reserved

Third port @ Azhikkal, Kerala?

Amritha Pillay

Kerala plans to set up its third major port at Azhikkal, following the central government’s directive to coastal states to set up such facilities.

If the Azhikkal port development plan works out, the state would have three main ports — already operational Kochi Port Trust and the planned Vizhinjam port. Vallarpadam, which facilitates transhipment cargo, is part of the Kochi Port Trust.

Major ports are central government controlled ports, administrated as trusts, except for Ennore port, which is run as a company.

“The Central government had asked coastal states to open another major port in the state. We have proposed Azhikkal port to be developed as a major one,” said Oommen Chandy, Kerala chief minister, on the sidelines of CII World Economic Forum-Indian Economic Summit here on Monday.

Azhikkal is in the Kunnor district, around 200 km from Vallarpadam.

It would be interesting to see how will the three ports compete for volumes, as the only existing container terminal Vallarpadam continues to face various issues.

Vallarpadam port started operations in February this year, but continues to face hurdles. The port requires dredging to be carried out to widen its channel. Also, there has been constant lobbying to ease the existing cabotage policy in order to attract transhipment cargo in the true sense.

Cabotage is the transport of goods or passengers between two points in the same country by a vessel registered in another country.

“The Vallarpadam port is witnessing certain teething problems, dredging and the cabotage policy being the main issues,” the minister said.

The much talked about Vizhinjam port is also delayed on various counts, the latest being requirement of security clearance.

In the first round of bidding, the port had received only one bid, but it failed to receive security clearance as a Chinese player was part of the consortium. In the fresh bidding, two technical bids have been received and the security clearance is awaited.

Courtesy: DNA

2011 good for LA Port

Ronald D. White

At the ports of Los Angeles and Long Beach, imports rule. Improvement projects are designed around the fact that the harbor handles 40% of the nation's Asian imports. Officials once joked that their biggest export was Southern California smog.

It may have to rethink that emphasis.

In October, Los Angeles had its biggest month ever for exports, and 2011 is shaping up to be a record year for outbound goods. The Port of Los Angeles handled 193,548 cargo containers filled with exports, a 28.1% increase compared with October 2010, buoying what would have been a drop for the month in overall cargo traffic.

"It was a great month for exports, which are beginning to play more of an important role for us here," said Phillip Sanfield, spokesman for the Los Angeles port.

Los Angeles and Long Beach are the nation's first- and second-ranked container ports, respectively. That makes them an important barometer of the strength of the U.S. economy and a huge jobs engine. More than half of the state's 1.1 million cargo-related jobs are in Southern California.

Long Beach was still tallying October cargo traffic, but preliminary numbers showed declines of 20.3% in imports and 20.8% in exports.

Through September, Long Beach's exports were up 1.8% to 1.1 million containers and imports increased 0.4% to 2.3 million, but it's operating with six cargo terminals this year instead of seven, said Long Beach Port Deputy Executive Director J. Christopher Lytle, with Hyundai moving to the Port of Los Angeles and taking a 10% share of Long Beach's cargo with it.

"The numbers reflect a particularly soft import economy," said Lytle, who is set to become the port's executive director on Jan. 1. Retailers, he added "are being very cautious about their inventories."

Los Angeles' export surge included raw materials and agricultural goods such as cotton and grains. California also manufactures and exports a lot of high-value goods, including electrical and industrial machinery; computers; optical, photo and medical equipment; and aerospace components.

"Adjusting for inflation, we are on a pace to see the best year ever for California exports," said Jock O'Connell, Beacon Economics' international trade adviser. "We've got a fairly minimal exposure to the weaker markets in Europe, and we have benefited strongly from the weakness of the U.S. dollar, which makes U.S. products a bargain internationally."

Christopher Thornberg, founding partner at Beacon Economics, said that California "has shown surprising economic strength in recent months," including job growth of 1.8% over the year, rising taxable sales and falling industrial vacancies. "This can be traced back in part to the strength of the export boom."

Strong exports couldn't overcome weak import numbers. October is typically the last strong month for holiday cargo destined for U.S. stores shelves. But the peak season surge never materialized, becoming instead what the maritime research firm AXS Alphaliner referred to as this year's "peak season flop."

There was a modest increase of imports of 5.5% at the Port of Los Angeles in October, to 349,545, compared with a year earlier. The port moved a total of 712,586 filled and empty containers in October, up 4.4%. Through the first 10 months of the year, Los Angeles is running just 0.7% ahead of its 2010 pace for overall cargo traffic, at 6.6 million containers.

Many ocean shipping lines expected another strong year for U.S. import trade similar to the post-recession gains shown throughout 2010. Instead, too many ships fought for too little cargo, and fuel costs rose. Only three of the world's 20 biggest ocean shipping lines showed a profit in the first half of the year, AXS Alphaliner said.

Casualties included one of the only two U.S.-based shipping lines in the Transpacific trade.

On Thursday, Charlotte, N.C.-based Horizon Lines discontinued its service from the U.S. West Coast to Guam and China. Horizon Lines said the amount that it could charge to haul a 40-foot container fell 37% this year to $1,500, the worst since the recession, while fuel costs climbed more than 40%.

Horizon Lines was one of four new players in the Asia to U.S. West Coast trade that shut down their routes within two years of beginning their service.


Courtesy: Los Angeles Times

Well done, Mundra Port!

Mundra Port and Special Economic Zone (MPSEZ) continued to outperform the major ports in the country in terms of both container and bulk cargo volume growth during the September quarter.

However, the slowing western economies may impact the growth rate of container volumes in the coming quarter, thereby pulling down the performance of the company.

In the quarter ended September 2011, volumes at Mundra port grew 34% year-on-year compared with a combined growth of 1% year-on-year of all the major ports. With this, MPSEZ has now become the fourth-largest port in terms of total cargo volumes in the country.

In the September quarter, cargo volumes at Mundra increased year-on-year by 41% to 12.40 million metric tonnes (MMT). Coal imports were the main driver for the company which grew 56% year-on-year.

The government has started levying a minimum alternate tax (MAT) of 18.5% on book profits on SEZ developers effective this financial year. Though the company has filed a PIL against the levy of MAT on SEZ developers, MAT provisions have been made and it has considered a MAT credit of 55 crore for the current quarter.

Coal imports from Mundra port is likely to increase after the commencement of two power plants near the port.

Container volumes handled at Mundra Port is set to get a boost with the commencement of double stack container trains from Container Corporation of India between Patli in the national capital region and the Mundra port.

On a trailing 12-month basis, MPSEZ's stock trades at price to earnings (P/E) multiple of 26.6. The stock price seems to fairly value the growth potential and future expansions.


Source: Economic Times