Strategy pays off
ONGC Mittal Energy strikes its first deal
| It does appear that Mittal's considerable clout in Africa, coupled with ONGC's technical expertise helped them reverse recent high profile unsuccesful bids to gain overseas oil fields. |
| Earlier, a subsidiary of China-based CNPC had beaten the Indian combine with its bid of $4.18-billion bid for Petrokazakhtan. India and China have been scrambling for overseas oil exploration blocks, given the voracious demand for petroleum products in both countries. |
| India imports nearly 70 per cent of its 115 million tonne annual oil requirement. ONGC's production of crude oil in the first half of 2005-06 was approximately 13.1 million tonnes or 1.05 million barrels of oil per day. |
| Media reports indicate that the winning Indian combine could get access to exploration blocks with a potential to produce up to 650,000 barrels of oil per day. |
| It is understood that the Indian combine would also need to invest about $6 billion (approximately Rs 27,000 crore) over the next few years in developing the local infrastructure in Nigeria. |
| No doubt, this would limit the Indian combine's ability to fully leverage high crude oil prices, but analysts highlight the benefits of long term and partnership-based nature of oil contracts. This potential upside in oil output helped the ONGC stock rise about one per cent to Rs 983 on Friday. |
| For September 2005 quarter, ONGC's operating profit expanded 12.53 per cent to Rs 7155.34 crore over September 2004 quarter. Its profit before tax grew 14.74 per cent to Rs 6076.99 crore in the same period, which was helped by a rise in other income on account of the revenue stream from ONGC Videsh and MRPL (approximately Rs 265 crore). |
| The ONGC stock has gained about 5.7 per cent over the last week, helping it to more-or-less offset the weakness observed towards the end of October. |
| Nevertherless, the stock trades at only about eight times estimated 2005-06 earnings. |
| Satyam's Net venture |
| The stock market is happy that Satyam's internet adventure is finally over. With an initial investment of $5 million in Sify, Satyam Computer Services has managed to gain $117 million from Sify (it was called Satyam Infoway till January 2003), which began operations in 1998-99. |
| Though the returns seem quite impressive, Satyam would have made a lot more money had Sify made the right moves in the last seven years. |
| Started as a wholly owned subsidiary, Sify was listed on the NASDAQ in October 1999, and Satyam's stake came down to 56 per cent. Over the next few months, Sify acquired 100 per cent stake in IndiaWorld for Rs 337 crore in cash and Rs 110 crore in Sify stock. In 2002-03, Satyam, sold its stake in Sify to Softbank Asia and Venture Tech and its Sify holding reduced to 37.15 per cent. |
| Sify is yet to make profits since its inception. Plus, its acquisitions have resulted in write-offs which has taken the accumulated loss to Rs 1,241 crore. |
| While internet stocks have rebounded from 2003, the Sify stock has not benefited as much. Indian portal Rediff.com's stock appreciated 1,300 per cent since the beginning of January 2003 till November 9, while Sify has appreciated only 120 per cent. |
| With 2004-05 revenues of $82.8 million, Sify's market cap is about $200 million. On the other hand, the much-smaller Rediff.com with revenues of $12.6 million has a market cap of $423 million. |
| This is because Rediff.com has managed to cut its losses from about $19 million in March 2003 to $1.4 million in March 2005. Though Sify's loss in the same period has fallen from about $28 million to $7 million, it is still quite high. |
| Satyam Computer Services received $62.6 million for the sale of its residual 31.61 per cent stake in Sify from Infinity Capital, which translates into an additional earnings per share before tax and transaction cost of about Rs 8.8. |
| Infinity Capital will infuse an additional Rs 172 crore in Sify taking its stake to 40 per cent. With new management and additional funds, Sify will be able to make an impact in India's internet industry, which is growing rapidly. The stock market cheered Sify's exit as Satyam gained 3.4 per cent to Rs 651.70. |