Indian Highest foreign exchange earner is remittance and it has been higher than Indian exports and UAE forms 25% of the inflows into India. So any crisis in Dubai will have more impact for India than any other country in my view. Indian demand has come from its consumption and this has been possible due to large Indian work force working in Gulf region feeding rural demand in India.
Dubai, part of the oil-exporting United Arab Emirates, said on Wednesday it would ask creditors of state-owned Dubai World and Nakheel to agree to a standstill on billions of dollars of debt as a first step toward restructuring.
Dubai World, the conglomerate that led the emirate's expansion, had $59 billion of liabilities as of August, most of Dubai's total debt of $80 billion. Nakheel was the builder of three palm-shaped islands off Dubai.
The news shook markets recovering from the collapse of the U.S. housing bubble and contagion that threatened to rupture the global financial system last year.
US was India’s biggest export destination until 2007-08, the emergence of oil-rich UAE as the biggest buyer of Indian goods, according to disaggregated data now available with the commerce ministry, is primarily because of a paradigm shift in the gems & jewellery business.
UAE pips US as India’s top export market http://www.financialexpress.com/news/UAE-pips-US-as-India-s-top-export-market/545394/
Indian exports to the UAE for the period 2006-2007 standing at $11.7 billion as compared to $7.33 billion in 2005-06.”
UAE Ambassador Mohamed Sultan Abdulla Al Owais said UAE’s trade volume with India — $87 billion — represented more than half of India’s trade with Gulf Cooperation Council (GCC) member-countries.
With dark clouds gathering around the global economy once again on concerns that two of Dubai-owned companies may default on their debt obligations, fledgling corporate India, which has begun spreading its wings globally in recent years, is feeling some impact here. India infrastructure companies especially have exposure to the Dubai economy and its once-booming real estate business.
Let’s run a status-check on which companies, especially in the infrastructure sector, are exposed to Dubai and how it may impact their businesses.
YD Murthy, Executive VP - Finance of Nagarjuna Construction, said that the company has only one venture in Dubai, a 440-apartment project, and is going slow on it.
The company is also doing a Rs 100-crore water pipeline project at Dewa, Dubai. “There is no default payment problem at the Dewa project,” Murthy said. “The company’s Middle-East exposure is mostly to government-owned agencies,” he added.
Larsen & Toubro has exposure in multiple segments in Middle East, R Shankar Raman, Executive VP - Finance told CNBC-TV18. “The company has exposure in the hydro-power segment. Our total exposure to the Middle-East over the last two years is to the tune of USD 200 million,” he added.
The infrastructure player has no exposure to Dubai or real estate exposure in UAE, Luv Chhabra, Director of Corporate Affairs at Punj Lloyd said. “We are doing only oil & gas projects in Abu Dhabi where there are no concerns at all,” he said. “40% of our order book comes from West Asia. The crisis has particularly hit the real estate sector in Dubai. No impact is expected in other states like UAE capital, Abu Dhabi.”
MM Miyajiwala, Executive VP and CFO at Voltas, said the company is executing a Rs 900-crore project in Dubai as part of a joint venture where Voltas has 37% stake. “We are executing the project for Emaar and the client has fully funded the project. Thus, we are not anticipating any delays,” he said. “Our order book is primarily from Abu Dhabi and Qatar. Dubai also has not defaulted on any of our payments.”
Bank of Baroda has some real estate exposure to Dubai accounting to 5–6% of its loan book but CMD MD Mallya there won’t be any impact. “Interest on all loans in Dubai have been paid till last due,” he said. “Bank of Baroda has 10 branches in the Gulf region. It has small banking exposure, mainly for remittances in the region.”
Mallya added that the bank also has exposure in Abu Dhabi, Ras-Al-Khaimah and Bahrain.
The company said it had not exposure to Dubai real estate.
DLF has no exposure to Dubai, it said.
The company does not have any direct/indirect investment in Dubai and West Asia, it said. “Any of the Indiabulls Group companies and in particular Indiabulls Real Estate doesn’t have any direct or indirect investment in Dubai or Middle East,” the group stated in a release.
Hiranandani Group
The unlisted group is constructing a project in Dubai, 97% of which was already sold and 65% payment had been received, Chairman Niranjan Hiranandani said. “The Dubai market crash won’t have any negative impact on the company.”
Hiranandani added that Indian property prices should go up because of the Dubai market crash.
Hiranandani added that Indian property prices should go up because of the Dubai market crash.
Omaxe is likely to exit its two real estate projects in Dubai. “We will soon decide on exiting the Dubai realty projects,” Dow Jones quoted Omaxe Chairman Rohtas Goel as saying.
“We had planned a Rs 2,850 crore investment in Dubai,” he said. “We have already paid Rs 50 crore to Nakheel as first instalment and may seek refund if we exit the Dubai project.” He added that Omaxe was yet to receive possession of any land from Nakheel.
“We had planned a Rs 2,850 crore investment in Dubai,” he said. “We have already paid Rs 50 crore to Nakheel as first instalment and may seek refund if we exit the Dubai project.” He added that Omaxe was yet to receive possession of any land from Nakheel.
HDIL has no exposure to Dubai, it said.
Dubai World’s investment arm, Istithmar, holds 13% stake in SpiceJet
The oil exploration company has deployed six rigs in West Asia.
Here’s how the stocks reacted on the indices. Prices are those trading at 14.00, Friday:
Company | Price | % Chg |
Aban Offshore | 1,215 | 7.70 |
HDIL | 295.5 | 6.97 |
Indiabulls Real Estat | 190.7 | 5.45 |
Bank of Baroda | 517 | 5.44 |
SpiceJet | 44.7 | 5.40 |
Nagarjuna Const | 153.75 | 4.86 |
Omaxe | 91.05 | 4.56 |
Punj Lloyd | 197.05 | 4.44 |
DLF | 339.1 | 4.28 |
Larsen & Toubro | 1,562.10 | 4.20 |
Unitech | 3.05 | 3.95 |
Voltas | 162 | 3.31 |
Hiranandani Group |
4 comments:
Good piece of analysis. I would only underline that indian economy can be resiliant to all these factos, as the domestic opportunties will grow now. Companies will start looking inward.
Kerala Based FEDERAL BANK and SOUTH INDIAN BANK will also be affected and a good percentage of Private Investment Managers and Fund Managers who were catering to the NRI's in Dubai
India Remittance is very important many southern state rural income comes from expatriates, So only whenever Crude moves higher Indian Market has always gone that way. India has highest remittance in the world as per IMF data and already we face problem in U.S with U.S Two US senators having introduced a legislation seeking to prohibit companies that lay off large number of American workers, from subsequently hiring temporary workers (such as tech professionals) from outside the US. The proposed ‘Employ America Act’, if passed, could severely hit tech companies that had resorted to axing jobs during the economic downturn even as they continued to file for H-1B visas. The IT industry has expressed concern over the proposed legislation given its ramifications on businesses. But industry watchers also point out that the possibility of the new legislation being passed on a standalone basis may be somewhat low at a time when the US is slated to look at comprehensive immigration reform next year.
dubai dont have oil reserves. but the gulf is sitting on 30% of oil reserves. it has to divide among tiny shaikdoms. if gulf countries come forward to rescue dubai, it will be good sign. in any case the development as hostile weather cannt be tourist spot. india is big country will obsorbe this shock. but the labor from south state will suffer, they are real suffer and they were real hero in building mega projects.
let we see monday opening as indian and dowjones are aheading for correction also. along with this desert mirage.
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