ANALYSIS - Recession or no, India must score growing sugar fix

NEW DELHI (Reuters) - The shortfall in India's sugar crop drove global prices to six-months highs last month, but longer-term investors should be watching an even more bullish trend: unstoppable demand growth in the world's top consumer.
With a deeply embedded sweet-tooth culture that accounts for a tiny share of the typical family's food budget, India's demand for sugar is said to be nearly recession-proof; and growth is quickening as the country's rural majority -- too poor in the past to indulge -- taste more of the sweeter things in life.
Those trends may spell more volatile years ahead for sugar traders more focused than ever before on India, which has turned abruptly from exporter to importer this year as output halves from its peak two years ago after sugarcane crops were squeezed.
To meet the shortage, India eased imports of raws in February and on Monday announced that it would allow tax-free import of up to 1 million tonnes of white sugar, news that may stoke fresh gains in London futures already up 27 percent this year.
"Sugar is the cheapest source of energy in India. For a low-income family, it is the only source of energy because it is very cheap," said Meka Narasimha Rao, an official at the Indian Sugar Mills Association (ISMA).
Sales of ice creams, soft drinks, chocolates and cakes have surged as people thronged to eateries in new, swanky malls that have come up in recent years even in smaller cities, encouraging firms like unlisted Kwality Group to expand.
"The industry trend shows a growth of 22 percent in our business over the last year and we see the whole pattern quite positive for our industry and hence our expansion plans," said Nitin Luthra, chief executive of Kwality, a lead leading ice cream and confectionary firm.
Sugar demand is also being fuelled by higher incomes in rural areas, home to two-thirds of India's billion-plus people.

Govt wants Satyam to offer 51% to strategic investor

If the board decides to invite bids for 51 per cent, Satyam will have to issue around 697 million shares of Rs 2 each to expand the capital base from the current base of 670 million shares. At the average market price of around Rs 50, the deal would fetch around Rs 3,500 crore.
On the other hand, if the company divests only 26 per cent, it would have to issue only 235 million shares and raise only Rs 1,200 crore, which may not be sufficient, sources said.
Moreover, if Satyam divests 51 per cent, the average share price for the open offer would be lower than if the company divests 26 per cent (because in this case, the shareholder would benefit rather than the company, since the pricing would be more aggressive).
Satyam board member Tarun Das recently revealed that six or seven companies — both Indian and global IT, manufacturing and PE firms — have approached the firm for a complete buyout. To evaluate this, the company’s legal advisors Amarchand Mangaldas have appointed KPMG and Deloitte, who will give their findings in six weeks.
The strategic investors include Larsen and Toubro (which now has a 12 per cent stake in Satyam and has invested around Rs 670 crore in the company so far), Tech Mahindra, Aegis BPO (which is only interested in the BPO business), and the iGate-PE combine. L&T, in fact, has categorically expressed its interest to the government in acquiring management control in Satyam. -->