WISH YOU A VERY HAPPY DIWALI AND PROSPEROUS YEAR AHEAD!!!

SEE ALL OUR PREVIOUS DIWALI ROCKETS 
Asian granito, cupid, sks micro finance, century textile, Gulfoil lubricants etc etc.... 
ARE RISING ONE WAY!!!


Diwali Rockets for this year are:

1. Trigyn Technologies @115
Code: 517562
Add upto 100
Target 180-250-400
Long term stoploss 75

2. Banswara Syntex @ 150
Code: 503722
Add upto 140
Target 250-350-490
Long Term Stoploss 110

Nifty

Sell Nifty @ 8640-8660

Stoploss 8700

FULL CYRUS MISTRY LETTER (TATA)

Nifty

Sell Nifty 

Add 8660-8670

Stoploss 8730

New route to investing in Indian infrastructure.

MAULIK MADHU : Retail investors have to put in at least ₹10 lakh in InvIT, but there is no lock-in period

Scouting for new investment options? Here’s one to consider — infrastructure investment trusts (InvITs). Last month, the Securities and Exchange Board of India (SEBI) set the ball rolling for InvITs, nearly two years after it came out with regulations on them.

It gave the go ahead to IRB Infrastructure Developers, GMR and MEP Infrastructure to raise funds through InvITs. IRB InvIT Fund became the first one to file a draft red herring prospectus for an initial public offering of ₹4,300 crore.

Simply put, an InvIT is a trust created by a sponsor (IRB Infrastructure Developers, for instance) that will raise funds for investing in and/or lending to its infrastructure projects. An InvIT will raise money by issuing units to individual and institutional investors, which will be listed on the stock exchanges.

The money raised by an InvIT can be extended to the project SPVs (special purpose vehicle) or the project directly either by way of equity or loan.

With InvITs extending money to the SPVs for paying off some of their existing project debt, they will facilitate de-leveraging of the Indian infrastructure sector. They will also help free up developers’ capital tied in completed projects for deployment in other upcoming ones.

How it works for investors

To begin with, the minimum investment requirement of ₹10 lakh for individuals in case of publicly offered InvITs makes them an option only for wealthy investors. There is no minimum lock-in period for the investment.

According to Maadhav Poddar, Tax Partner, Real Estate Practice, EY, InvITs offer investors the opportunity to earn regular returns as is the case with corporate bonds and fixed deposits, with the added possibility of an upside on equity (capital gains).

While a unit holder has to pay tax on the capital gains made on the InvIT units sold by him, taxation of the regular payouts received by him from the InvIT will depend on the type of income.

Short-term (less than 36 months) capital gains made by a unit holder on the sale of InvIT units on the exchanges will be taxed at 15 per cent and long-term capital gains will be tax exempt.

For off-the-exchange transactions, short-term and long-term capital gains will be taxed at 40 per cent and 20 per cent respectively.

Dividends, if any, earned by an InvIT on its equity stake in project SPVs will be distributed to the unit holders as dividend income. It will be likewise for the interest earned by an InvIT in return for the loans extended by it to the project SPVs.

But, while dividends will be tax exempt, interest income will be taxed at the unit holder’s applicable income tax slab rate.

Apart from that, the revenue generated by the projects included under the InvIT will be treated as dividend income (tax-exempt) for distribution to the unit holders. InvITs have been mandated to distribute not less than 90 per cent of their net distributable cash flows to their unit holders.

This has to be done not less than once every six months in a financial year in case of publicly offered InvtITs.

Additionally, if the proceeds from the sale of any infrastructure asset by an InvIT or an SPV are not invested into another infrastructure asset, then these too have to be distributed to the unit holders. Any capital gain, made by the InvIT on such a sale that is distributed to the unit holders will not be taxed.

But, given that InvITs are a new product, one will have to wait and see how these products get structured, how they work on the ground and what the actual returns will be. That said, you must evaluate the quality of the underlying assets (projects SPVs included in the InvIT) and the credibility of the investment manager before investing.

It is also worth mentioning that given the many investor safeguards in the SEBI 2014 regulations, experts feel that the risk quotient of InvITs may not be very high.

Adequate protection 

According to these regulations, a public InvIT has to invest at least 80 per cent of the value of its assets in completed infrastructure projects that have been generating revenue for at least a year.

This is to shield investors from construction risk and protect their investment from getting stuck in stranded projects.

Besides, a sponsor has to fulfil some pre-conditions for getting a certificate of registration for its InvIT from the SEBI.

A sponsor must have networth of at least ₹100 crore (in case it’s a company), have at least five years’ experience and a minimum of two completed projects.

To ensure the sponsor/s too has his skin in the game, the SEBI regulations stipulate that the sponsor/s must hold not less than 25 per cent of the units for not less than three years from the listing date.

Listing of the InvIT units on an exchange and periodic disclosures are meant to serve as other important safeguards

Rethinking The Oil Market: IMF Warns "Conventional Wisdom No Longer Applies"

Oil prices have plummeted by about 65% from their peak in June 2014 (see chart below), and there is now intense debate about why. One thing we know for sure is that the oil market has undergone structural changes, thus making this latest episode different from previous dramatic price fluctuations.

The collapse in prices has been driven in part by supply-side factors. These include the United States’ rapid increase in shale-energy production in recent years, and the US government’s decision to end a 40-year crude-oil export ban. Moreover, oil output from war-torn countries such as Libya and Iraq has exceeded expectations, and Iran has returned to world oil markets following its nuclear agreement with the world’s major powers. And Saudi Arabia, the largest member of the Organization of the Petroleum Exporting Countries (OPEC), has increased production to defend its market share.

With this glut in oil, many commentators are now asking if OPEC still matters. High demand for oil since 2000 gave OPEC, and Saudi Arabia in particular, significant influence over prices, but it also spurred investments in higher-cost production methods in other locales, such as oil sands mining in Canada and ultra-deepwater oil extraction in Brazil.

Because of the delay between investment and production for conventional oil production, these projects in non-OPEC countries peaked around the same time the oil market began to slow down, and when expectations about future demand for oil started to falter.

x

This dynamic prompted OPEC to change its response to price fluctuations. In the past, OPEC, and Saudi Arabia in particular, would stabilize the oil market by cutting production when prices fell too low and increasing output when prices rose too high, relative to OPEC’s price target. This time around, however, at a November 2014 OPEC meeting, Saudi Arabia blocked a motion by other members to reduce production in response to falling prices.

The Saudis have instead boosted output, resulting in immense pressure on higher-cost non-OPEC producers.Saudi Arabia seems to be taking a lesson from a 1986 price-fluctuation event, when massive, unprecedented production cuts in response to increased production by non-OPEC countries failed to stabilize oil prices.

Another factor keeping prices down is that non-OPEC producers have significantly reduced their costs. But this is likely a one-time event. In theory, as the chart below shows, the cost of producing oil is usually assumed to be constant and determined by immutable factors such as the type of oil and the geographical conditions where it is extracted.

In practice, however, the cost structure depends on a host of other factors, including technological improvements, human expertise, and so forth. So, in the case of shale-oil production, the industry appears to have enjoyed significant improvements to operational efficiency through old-fashioned trial and error, or “learning by doing.”Companies have quickly mastered the best methods as shale-oil production has matured in its investment cycle. But the cost of producing shale will now rise again, because such significant efficiency gains are not sustainable and the cost of capital is high.

That said, one defining feature of the “new oil market” brought about by the advent of shale oil is shorter, more limited oil-price cycles. Indeed, shale-oil production requires a lower level of sunk costs than conventional oil, and the lag between first investment and production is much shorter.

It is tempting to look at long-term oil futures – which increased gradually between 2000 and 2014, before falling abruptly after the November 2014 OPEC meeting – to predict where prices will go from here. However, futures have several limitations.

For starters, futures didn’t help predict the current market breakdown, most likely because long-term futures markets are, by default, slow to adjust to new information.

Moreover, futures contracts give only limited medium-term guidance because they either don’t extend out far enough, or the markets are not deep enough.

As in other commodity markets, oil futures are subject to an imbalance between long- and short-term positions. For example, there is a higher demand among oil producers for short-term hedging than there is among manufacturers for long-term positions. Producers are typically willing to accept relatively lower prices to hedge their risk because they can’t pass cost increases on to their customers. Manufacturers, on the other hand, have more flexibility in this regard, because, even for energy-intensive manufacturing, oil is still only one small part of a company’s larger cost structure.

Some of the oil-price factors listed above are temporary, but others are structural and permanent. The debate about the causes and effects of the price slump since 2014 will continue, which both reflects and underscores a fundamental point: the conventional wisdom about the global oil market no longer applies.

The "World's Most Bearish Hedge Fund" Reveals Its Next Big Short

We have previously dubbed Shannon McConaghy's Horseman Global the world's most bearish hedge fund for one reason: as recently as a few months ago the fun had taken its net equity short position to an unprecedented -100%. At the end of September, it had modestly trimmed this short to a more modest -87.5%

What is perhaps just as impressive is that despite the fund's massive bearish bias, if only in equities, it has managed to keep its YTD return virtually flat, with more profitable than unprofitable months so far in 2016. The offset? A whopping 66% gross long position in bonds.

And while we have recently documented Horseman's pessimistic outlook on Japan, when it comes to the most bearish hedge fund in the world there are shorts, and then there are shorts. In its latest, October, letter to clients the fund reveals what it believes may be just one example of the latter, having taken its exposure in the sector to a massive -20%, and what - if true - could be the next "big short" idea.

This is what Russell Clark, CIO of Horseman, said in its latest letter to clients:

x

You fund made 1.44% net this month, with gains from the short book and the currency book offset by losses from bonds.

 

“I know he is a good general, but is he lucky?” is apparently a quote from Napoleon. I often think about this quote when looking at the investment management industry. There are numerous successful fund managers who I have looked at and met, who I would describe as more lucky than good. There are far more fund managers I have met who I would describe as good, but unlucky. In fact, the market will almost by definition create more unlucky managers than lucky managers, as almost all jobs in fund management tended to be created at market tops.

 

This is quite well known, and it is why most investors are always try to invest where no one else is, in some bombed out sector that lacks excitement. While I understand this, it has two very major problems. Firstly, how can you be sure it’s totally bombed out? As my first boss pointed out to me, the difference between a stock that has fallen 80% and a stock that has fallen 90% is 50%. Secondly, liquidity at lows can mean you will not be able to exit for many years.

 

From my point of view, why don’t we try and do the opposite? Pick out sectors that have been fashionable with managers that have been in the right place at the right time, and then short sell what they own. It has two big benefits. First I find timing this to be much easier. And second, at the top of the market liquidity is plentiful. The only issue is you have to be able and willing to short sell.

 

So how do you pick a sector or strategy that is at the top of the cycle? Perhaps the best sign of all is a fund that has grown assets rapidly. In the US, I find funds that have reached 20bn in AUM from 5bn in AUM within one or two years are typically great places to look. I feel that when a fund manager grows that quickly, they are typically focusing on maximising management fees over performance.

 

So what funds have we been looking at recently. As detailed in my recent note on Japan based US REIT funds, these funds look particularly egregious to me. Furthermore, they are raising assets even though US REITs in Yen terms have gone nowhere in the last few years. I find this an exciting area to short, and we have taken this sector to 20% of the fund this month. I find there are a number of equity income funds that have also grown rapidly over the last few years, and I am looking carefully at their long positions for short ideas.

 

My other observations about fund management has been that investors are pulling out of active strategies and buying passive strategies. There are good reasons for this, as the unpredictable shifts in momentum in the markets have caused active fund management to underperform significantly.However, it feels to me that passive strategies have grown too fast too quickly. I think active fund management is about to have its day in the sun.

 

Given that the Horseman Global fund is short equities and long bonds, that is about as active as you can get. Or in other words, I am getting bullish on bearishness!

Clark then gives the following drilldown on the US REITs sold in Japan to justify his bearish stance:

This month profits came from the short portfolio, in particular from the European and Japanese banks, automobile and consumer staples sectors.The long portfolio incurred a modest loss.

 

In Japan one perk of getting old is a gift of a silver cup from the prime minister in the year you celebrate your 100th birthday. As the Japanese population is aging, almost 32,000 people were eligible to receive the gift this year, up 4.5% from last year, the government decided to present cups made of silver plate rather than sterling, this year, reducing total spending on the gifts.

 

The birth rate in Japan has been low for many years (1.4 per woman versus 1.9 in the US and the UK) and the country has very little immigration. As a result the population is ageing. According to the estimate by the Internal Affairs and Communications Ministry, the ratio of people 80 or older accounts for 7.9 percent of the total population, which is more than the entire population of Sweden. The National Institute of Population and Social Security Research forecasts that people aged 65 or older will account for 36.1 percent of the total by 2040. For more information on Japan’s depopulation please refer to Shannon McConaghy’s notes entitled ‘South West Japan Trip’. In our opinion depopulation is a major deflationary force as it suppresses domestic demand.

 

The generation of 21-year-olds entering the workforce is the first to have grown up in a broad state of deflation. Since their birth year in the 1995 residential land prices have fallen 47% including a fall over the last year. With the ratio of abandoned houses expected to rise from 16% to 28% by 2033 it is likely that land prices will continue to fall. With real estate making up 23% of the core consumer price index it is hard to see sustained inflation.

 

Deflation has also suppressed wage growth, with average monthly earnings falling 8% from Yen 315,000 in 1996 to Yen 289,000 in 2015, the most recent August data shows another decline in average monthly earnings YoY. In turn, tumbling expectations of future security have fuelled savings. A student from Tokyo recently interviewed by the FT said “I often surprise myself. I am more conservative than my grandmother, she lived in a time of war.” Another student said: “Deflation lives in our minds and has become normal. I am sure that if you gave me Y100,000 now, I would save 99 per cent of it.”

 

The Bank of Japan adopted ‘Quantitative Easing’ some 15 years ago. The resulting low domestic interest rates, have fuelled the ‘Carry Trade’, a strategy in which a Japanese investors seek foreign denominated assets that offer higher yields than domestic assets. But ‘Carry Trades’ are inherently unsustainable as they are founded on the belief that currency rates over time will not adjust back to reflect relative inflation and interest rate differentials. Examples include Japan’s overseas investments into Australian dollar assets before the Global Financial Crises which swiftly lost money as the currencies corrected.

 

US-Reits sold in Japan have seen large inflows from Japanese investors recently as they offer ~25% yields. In our opinion they are riskier than generally perceived, please refer to Russell Clark’s note entitled ‘Japanese US REIT funds and the buy case for Yen’ and ‘Japanese US REIT Fund – an update’.We expect Japanese fund flows into US REITS to reverse at some point. Over the past few weeks we have built a 17% short position in US REITS. We remain positive on the Japanese Yen relative to the US dollar as carry trades collapse.

While Horseman is clearly bearish on Japan, however, its biggest net short exposure remains in the US, where it has a nearly -40% net position.

Finally, while hardly known for its longs, here is the breakdown of the fund's Top 10 long positions.

Nifty

Trend of Nifty is not yet clear so no fresh figures till then

One can go stock specific

Executive Chairman Jack Ma’s 2016 letter to shareholders

Alibaba Group holds its annual shareholders meeting this week. Here’s Executive Chairman Jack Ma’s 2016 letter to shareholders:

Dear Alibaba Shareholders,

On the day of our IPO in September 2014, I said that what was important was not the money that we raised, but what that money represented: the trust and confidence of investors around the world. Since that day, the global economy has struggled, oscillating between hope and despair. Alibaba Group also experienced many trials and tribulations, but we never forgot the trust you placed in us to live up to our responsibilities and keep our promises.

Over the last two years, the Alibaba team has produced outstanding results. In fiscal year 2016, we continued to build out the world’s largest retail ecosystem. Gross merchandise volume transacted on our China retail platforms surpassed an unprecedented RMB 3 trillion. In the fiscal year prior to our IPO, mobile revenue accounted for a single-digit percentage of total revenue from our China retail marketplaces; in our most recent quarter, mobile contributed more than 75% of total revenue. Our mobile monetization rate now exceeds that of the desktop, making Alibaba Group the largest mobile commerce company in the world. We have more than 430 million annual active buyers, which means one out of every three individuals in China has made a purchase on our retail marketplaces. Additionally, our cloud computing business, digital media and entertainment businesses, and the strategic bets we have made on innovative, emerging technologies are demonstrating strong growth that we believe will be sustainable for years to come.

We’re proud of our accomplishments, but we want to do far more. We are not merely trying to shift buy/sell transactions from offline to online, nor are we changing conventional digital marketing models to squeeze out a little additional profit. We are working to create the fundamental digital and physical infrastructure for the future of commerce, which includes marketplaces, payments, logistics, cloud computing, big data and a host of other fields.

Supported by the twin pillars of cloud computing and Big Data, our goal is to empower merchants with the ability to transform and upgrade their businesses for the future. Eight years ago, we began to strategically invest in Alibaba Cloud in order to fulfill this mission. Today, Alibaba Cloud hosts 35% of total websites in China while also providing clients with cloud computing and big data services. Alibaba Cloud is a company with cutting-edge technology and an extensive range of products and now ranks among the world’s top three cloud computing companies. Most importantly, Alibaba Cloud seeks to enable all businesses, large and small, to benefit from the greater operational efficiency and lowered costs that cloud computing can provide.

The widespread adoption of cloud computing is important, yet it is just a piece of a larger picture that we see coming into focus.  Throughout history, technological disruptions have followed similar trajectories: 20 years of technological disruption followed by 30 years of further rapid change as new technologies are applied throughout society. The internet revolution is a historical inflection point, much like when electricity was introduced, and it may have an even greater impact. Over the next 30 years, with computing power as the new “technology breakthrough” and data as the new “natural resource,” the landscape of retail, financial services, manufacturing and entertainment will be transformed.

Our traditional e-commerce business is already undergoing rapid change and progress. In the coming years, we anticipate the birth of a re-imagined retail industry driven by the integration of online, offline, logistics and data across a single value chain. With e-commerce itself rapidly becoming a “traditional business,” pure e-commerce players will soon face tremendous challenges. This is why we are adapting, and it’s why we strive to play a major role in the advancement of this new economic environment. We already see meaningful changes taking place today in the operations of our merchants’ businesses. For example, every day, more than 6 million businesses currently use our merchant mobile app, called Qianniu, which helps them improve sales and marketing, as well as enhance overall management quality and efficiency.

We hope to not only help businesses in China, but also extend our reach so we can help companies all over the world to grow. Over the past two years, we have seen growing resistance to globalization due to the uneven distribution of its benefits.  We believe, the commerce infrastructure we have created in China– marketplaces, payments, logistics, cloud computing and big data, all working in concert–can be applied on a global scale to lift up small and medium businesses and ordinary consumers around the world. The personal privilege of becoming a special advisor to the United Nations on youth entrepreneurship and small businesses, and advocating for the successful inclusion of eWTP (electronic world trade platform) into the official G20 Leaders Communiqué issued at the Hangzhou Summit are among our many efforts to make a difference on this front.

Alibaba is a company aiming to help solving social problems. In 20 years, we hope to serve 2 billion consumers around the world, empower 10 million profitable businesses and create 100 million jobs. This will be an even more difficult journey than the one behind us.

Sharing these past two years with you has inspired hope and confidence about the future. It has reinforced my belief that digital disruption will bring us closer to a level playing field for young people and small businesses. It has reinforced my belief that perseverance will make the world better. I can already see this future unfolding, and I am more excited today than I was when I started Alibaba seventeen years ago …

Let us make it easy to do business anywhere!

Jack Ma

Alibaba Group Executive Chairman

10.13.2016

Emerging Equities Outshine Developed Markets

In the years before the 2008 financial crisis, investors flocked to equities in fast-growing emerging economies. But when the crisis put the brakes on global growth, that attraction to emerging markets proved a fickle one, and investors sought safe haven in less risky investments. In late 2016, however, the pendulum is swinging back again, with investors citing several reasons for renewed confidence in emerging market equities. Among the most surprising? Their politics are relatively more stable than in the developed world.

Start with Latin America: In Brazil, embattled president Dilma Rousseff was ousted in August and her successor, Michael Temer, is advocating pro-business measures such as the auctions of infrastructure and energy contracts to private companies that won’t, unlike in previous years, require partnerships with state agencies. In Argentina, the 2015 election of President Mauricio Macri ended a decade of populist rule, and Macri has carried out a series of economic reforms, including removing export taxes and allowing Argentina’s peso to float freely. The settlement of old debts, in particular, allowed the country to return to the international credit market for the first time in 15 years.

In Asia, the bright spots are Indonesia and India. Equity strategists on Credit Suisse’s Global Markets team believe that Indonesian President Joko Widodo will have more room to pursue his reform agenda after securing support from the country’s second-biggest party, and the country is already benefiting from a recently approved tax amnesty scheme. In India, promising reforms include the recent passage of a bankruptcy bill and another overhauling the tax structure for goods and services. Compare all of the above to the politics in the developed world, which has witnessed a host of populist movements that could usher in measures damaging to economic growth, including protectionist policies and immigration limits, and the developing world seems surprisingly stable, politically speaking.

Growing populism in both the U.S. and Europe has already helped prompt minimum wage hikes and, more broadly, wage growth in developed markets has outpaced productivity growth. The wage trend, the Global Markets strategists say, is the key driver of margin compression in developed markets. The situation stands in sharp contrast to that in emerging markets, where overall wage growth recently fell below productivity growth for the first time in a year; in China and Brazil, it’s the first time in a decade. In large part due to the widening wage-productivity gap, the Bank forecasts a 60 basis point increase in margins for emerging market companies by the end of 2016.

The currency landscape also appears favorable for emerging market equities. Despite a strong rally over the past year, emerging world currencies (excluding China) are still the cheapest they’ve been since the early 2000s. Global Markets strategists estimate that 25 percent of total returns come from currency movements, calling it “the critical driver of performance.” Strategists also note that there are signs that central banks in some countries are working to keep their currencies cheap by building up foreign exchange reserves. This has a tendency to bolster equities because central banks usually don’t fully “sterilize” their increases in foreign reserves—that is, they don’t mop up all the extra liquidity they create when spending their domestic currency on foreign assets. And that additional liquidity will boost domestic asset prices, strategists say.

Though GDP growth in emerging markets has long outpaced that of developed markets, the gap has shrunk in recent years. But the strengths of emerging markets today have both Credit Suisse and the International Monetary Fund projecting that the gap will widen once again, with emerging markets’ growth increasingly leaving developed markets in the dust over the next decade. Yet the valuations of emerging market equities have yet to reflect those views. On a sector-adjusted basis, emerging market equities are trading at a 15 percent price-to-earnings discount to developed market equities. On a price-to-book basis, they look even cheaper, trading at 30 percent discount to developed markets, near the bottom of their ten-year range (as of September 2nd). Western shoppers often savor shopping opportunities in developing countries, which offer discounts they can’t get at home. It may again be time for investors to do the same.

India Gears Up For Auction Of Small And Marginal Oil Fields

India is gearing up for the auction of small and marginal oil fields relinquished by government-run oil companies in a bid to revive hydrocarbon exploration in the country. The objective is to monetise Discovered Small Fields (DSF) at the earliest to increase the domestic hydrocarbon production, according a press statement issued by the government after approving the policy for the same.

Under the policy, the ministry of petroleum and natural gas has decided to put up for auction 67 oil and gas fields across 46 contract areas, estimated to hold over 625 million barrels of oil and oil equivalent gas, spread over 1,500 square kilometres in onshore, shallow water and deep-water areas. These fields were held by government controlled Oil and Natural Gas Corporation Ltd. (ONGC) and Oil India Ltd. (OIL) and relinquished after the earlier fiscal regime did not allow them enough leg room to monetise the assets. Under the new policy, interested companies will bid for the amount of revenue they can share with the government once these discoveries are monetised.

Analysts and industry watchers expect smaller oil sector firms to express interest in the auction. Welspun Enterprises Ltd. will bid for the marginal fields up for auction through its existing joint venture with the Adani Group, the company’s Managing Director Sandeep Garg told BloombergQuint in an interview. The joint venture company, Adani Welspun Exploration Ltd. (AWEL), holds one block in the prolific Mumbai Offshore basin and is yet to commence production from the reserve.

Given lower crude oil prices, Hindustan Oil Exploration Company Ltd. (HOEC), Deep Industries Ltd. and Selan Exploration Ltd. could be among the companies that will bid for these marginal fields, Sumit Porkhana, deputy vice-president and oil and gas analyst at Kotak Securities said in a phone interview.

These are marginal fields and not much work has been done on them. Companies aim to estimate the potential reserve of a basin and they try to monetise the resource by selling their stake to a larger company, instead of getting into the tedious business of exploration.

Sumit Porkhana, Deputy Vice-President And Oil & Gas Analyst, Kotak Securities

HOEC confirmed to BloombergQuint that they will look to bolster their portfolio in the coming auction. “The government has got the fiscal regime right this time. Companies just have to commit the number of wells they dig and then share the revenues they promise with the government. There is no pass cost reimbursement to ONGC, oil cess is exempted and marketing freedom has been promised for these blocks. You cannot ask the government for anything more,” P Elango, managing director at HOEC said.

HOEC has participating interest (PI) in 10 hydrocarbon discoveries with a controlling stake in 7 such reserves.

Map of all contract areas on offer under marginal oil field bidding rounds (Source: Directorate General of Hydrocarbons)

The Most Lucrative Fields

Among the offered fields, those in Mumbai high offshore basin will be the most sought after, a top official with a private sector oil company said. Next in priority will be those in the Krishna-Godavari offshore basin.

However, onshore reserves are not likely to see very aggressive bids, the official said. The size of an onshore block – at 10 square kilometres – is rather small, which limits the exploration play only to a restrictive area, he explained.

Another oil top industry official said that explorers may offer to share around 25-50 percent revenue with the government based on the cost profile of the well, and the estimated crude oil price. Both officials requested anonymity as they did not want to disclose their company’s strategy before bids open.

But all is not going to be easy for newbies to India’s upstream oil and gas sector. Established public sector units like ONGC and OIL will be looking to win back their relinquished fields. ONGC Chairman, DK Saraff told BloomberQuint in an earlier interview that the company will bid in the marginal oil field auction.

ONGC could not develop fields due to unfavorable fiscal regime, the ministry of petroleum and natural gas has improved the fiscal regime to make marginal fields viable. We believe some fields will become economically viable under the new regime.  

DK Saraff, Chairman, ONGC