NTPC looks to lower coal costs

Thu, 10 Dec 12:30 pm

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After languishing in the red since the morning session, the markets saw a spurt of buying activity leading key indices to reach for the positive territory. While buying activity is being witnessed in stocks from the capital goods and metal sectors, stocks from consumer durables and FMCG sectors have failed to elicit sufficient investor interest and are seeing declines currently.

The BSE Sensex is currently trading higher by around 10 points while the NSE Nifty is almost flat. Stocks from the midcap and smallcap space are seeing gains with the BSE Midcap index and the Smallcap index trading higher by 0.2% and 0.8% respectively. The rupee is trading at 46.71 to the US dollar.

As per reports, power generation major NTPC is all set to float an international tender for direct procurement of coal. This is for the first time the company is doing so, and in the process would be cutting out some government owned trading firms such as MMTC India Ltd and State Trading Corp. of India Ltd (STC) which were the usual channels for NTPC’s coal importing requirements. This move will help NTPC bring down its generation costs by enabling it to buy coal at competitive rates as also avoid paying commissions to the intermediaries. The company is slated to float the tender by January or February 2010 for long term contracts of direct procurement of the key commodity input. This will entail a price guarantee for 2 to 3 years linked to certain indices. The company is currently in the process of finalizing the terms and conditions for the tender along with the quantity required. This may also bring in the added benefit of a more stable and steady supply of the fuel for the company which has in the past seen many fuel shortages at its various plants. The stock is currently trading flat on the bourses.

As per a leading business publication, domestic auto behemoth Tata Motors plans to acquire Japan's Sumitomo Corp's 53.5% stake in truck and bus maker Swaraj Mazda. If successful, the deal may also mandate Tata Motors to have an additional 20% open offer to other shareholders of Swaraj Mazda. The deal is reported to be worth up to US$ 54 m, and will help the company boost its commercial vehicles business. Tata Motors currently has a majority 65% share in the Indian commercial vehicle segment. Swaraj Mazda has small 3% market share in the segment. Thus if the deal goes through, it will help Tata Motors strengthen its presence in the commercial vehicle segment that has been seeing a lot of competition lately with the other players too entering into alliances and joint ventures. Tata Motors is currently trading marginally lower.