S and P launches index of Indian equities for int'l investors

NEW DELHI: Standard & Poor's on Monday launched an equity index of 60-listed Indian companies, including the likes of Infosys, Bharti Airtel and Reliance Industries, to provide international investors with information on tradeable exposure to the largest and most liquid scrips in the country.

"The new S&P India Select Index was developed in response to growing investor demand for access to the leading companies in India. The index has a pool of easily accessible underlying stocks that provides a unique way for international investors to take part in India's growth story," R Ravimohan, Managing Director and Head of South and Southeast Asia, S&P said in a statement.

The 'S&P India Select Index' comprises leading companies, with no single scrip representing a weight more than 10 per cent in the index.

According to the leading index provider, the stocks that have reached the maximum percentage holding for Foreign Institutional Investors (FIIs) are excluded from the index in order to reflect the "lack of access of those stocks to foreign investors."

"The index is fully float adjusted and stock weights are determined by what is legally and practically available to foreign investors," the statement added.

The top 10 holdings by percentage of index weight are Infosys Technologies, Bharti Airtel, Oil and Natural Gas Corporation, Reliance Communications, Housing Development Finance, Reliance Industries, ICICI Bank, Hindustan Lever, Bharat Heavy Electricals, and Larsen & Toubro.
thanks to: economictimes.indiatimes.com

Short covering in Nifty futures; Aug ends flat

MUMBAI: Bouts of profit booking on weak opening of European markets led Indian stocks to shed all early gains on Monday.

National Stock Exchange's 50-share Nifty closed the day slightly higher at 4335.35 and August futures provisionally ended flat to spot. However, September futures settled at 1 point discount, indicating rollovers of short positions in the series.

August futures price gained 0.29 per cent while open interest shed 3.25 lakh shares. Nifty September futures price advanced 0.32 per cent and added 59 lakh shares in OI.

Call writing was observed at strikes 4400 and 4300 of August series and in September at strikes 4500 and 4400.

Put buying was witnessed in August series at strikes 4400 and 4300 levels while September series showed put buying at 4200 and 4000 levels. The options data indicates resistance at 4400 and support at 4200 levels.

"We saw short covering across the counters ahead of F&O expiry Thursday. Markets will remain volatile till the expiry. Data on US and India GDP, due on Aug 28 and 29 respectively, are of vital importance for the markets, also inflation data. Players should utilise every rally to lighten their commitments," said Subrato Basubani, analyst with Spark, a wealth advisory firm.

Realty and banking sectors were the major gainers while metal, power and oil & gas lost the most.

In banking, Bank of Baroda August futures gained 4.5 per cent while the contract ended flat to spot. Kotak Mahindra Bank near month futures price advanced 2.31 per cent and open interest added 1.16 lakh shares. ICICI Bank contract ended in a slight premium to spot.

DLF August rose 1.88 per cent while the contract closed at Rs 5 discount. HDFC jumped 3.36 per cent on short covering. However, HDIL futures dropped 2.17 per cent and shed 8.71 lakh shares in open interest.

Metal and commodity stocks fell on tumbling prices in international market.

Tata Steel futures fell 2.19 per cent, Sterlite Industries skid 0.44 per cent and shed 6.30 lakh shares and SAIL August futures slipped 0.34 per cent with huge additions in open interest, indicating short build up in the SAIL contract.

Total F&O turnover on NSE was Rs 45,979 crore, up 3 per cent from Friday.

Elsewhere, European stocks fell as concern deepened that credit losses will spread, threatening economic and profit growth. US index futures declined.
thanks to: economictimes.indiatimes.com

Short covering in stock futures, huge call writing at 4300 level

MUMBAI: After an initial hiccup, Indian markets recovered smartly in afternoon trade on Friday on the back of positive opening in European markets. National Stock Exchange's 50-share Nifty closed the day 0.84 per cent higher at 4319 and August futures provisionally settled at a premium.

The August futures premium widened to 10 points from 4 points Thursday. The contract price gained 0.98 per cent and added 10.5 lakh shares in open interest. Rising open interest coupled with widening premium indicates some longs being added in the contract.

Interestingly, huge call writing was observed at 4400 and 4300 levels while 4200 strike saw call buying. On the other hand, 4300 and 4400 puts shed positions in open interest where as 4200 witnessed put writing from bulls. The options data indicates Nifty range at 4200-4400 levels.

"Short covering was observed in banking, metal and auto stocks ahead of F&O expiry next week. Metal stocks gained as weak dollar bolstered the commodity prices in international markets," said Amrit Mehta, an independent analyst.

"The F&O expiry next week may fuel the volatility in the markets. On Aug 29, Indian GDP data for Q1FY09 will be released. This is a figure market is waiting anxiously for. For banking sector, next week will be a tough one. Bounce back in crude prices is expected to continue and it may impact bank stocks," said Praveen Kumar, an analyst with large brokerage

"On Aug 28, US GDP preliminary data will be released. Advance estimates are indicating US economy to grow 1.9% annualized rate. If the actual figure comes in line with the preliminary estimate then it would mean recessionary fears are over and the Federal Reserve can concentrate on inflation fighting and we can expect rate hikes in US," Kumar added.

In stocks futures, Hindalco futures gained 4.17 per cent and Sterlite Industries jumped 3.7 per cent on short covering. Steel Authority of India August advanced 3.67 per cent.

Axis Bank August rose 4.83 per cent, Kotak Mahindra Bank increased 3.35 per cent and HDFC Bank gained 2.16 per cent.

Tata Motors futures gained 1.81 per cent, Mahindra & Mahindra advanced 1.53 per cent and Maruti rose 1.77 per cent.

Total F&O turnover on NSE was at Rs 44,332 crore, down 14 per cent from Thursday.

Meanwhile, European stocks rose as investors speculated takeovers may increase and a drop in oil boosted airlines and carmakers. U.S. index futures advanced, while Asian shares retreated.

thanks to: www.economictimes.indiatimes.com

Prabhudas puts outperformer on Bharti Airtel: target Rs 973

MUMBAI: Prabhudas Lilladher has maintained ‘outperformer’ on Bharti Airtel for a target price of Rs 973. Bharti expects the industry’s wireless subscriber base to reach 500 million by 2010 and 750 million by 2015, implying a compounded annual growth rate of 15 per cent over the period. The company has reiterated sustaining 25 per cent market share.

There are 5-10 slots available in all the circles, except Mumbai and Delhi that will suffice the needs of most of the operators. Mumbai and Delhi have 2-3 slots for auction with around five operators offering 2G services. These two circles being the key markets for 3G services may see serious bidding, says Prabhudas.

Bharti expects the auction process to take place between Sept’08-Oct’08 and launch of services in 6-9 months. However, no datapoints were given on the 3G capital expenditure.

3G will help the GSM incumbents to garner additional spectrum in the key markets for offering voice and high-end services. The spectrum-starved operators would like to ride the 3G services before the launch of Rcom GSM panindia and new entrants like Datacom, Unitech etc. rolling out their network.

Bharti expects to launch its DTH platform by Oct’08, initially targeting 100-120 cities. Test trials on 10,000 employees and associates have shown good results, says the brokerage.

Prabhudas expects Bharti to report strong subscriber additions over the next 5-6 months and has maintained its wireless leadership. Faster access to 3G spectrum shall be the key trigger in the foreseeable future.

At market price of Rs 792, the stock trades at a PER of 15.5x and at an EV/EBITDA of 9x FY10E earnings.
thanks to: economictimes.indiatimes.com

Bargain hunting helps indices close higher

MUMBAI: Selective stock buying by deep pockets and short coverings in banking, metals and auto stocks on Friday saw indices close on a higher note.

The market started off on a weak note on the back of negative Asian cues and rising oil prices. But soon, traders covered short positions in interest rates sensitive sectors as inflation rose moderately. Positive opening of European market bolstered sentiments further.

Metal commodity prices surged on speculation that demand will pick up in China after Olympics and as US dollar continued to decline against basket of currencies.

Capital goods and power space lost momentum as the day progressed on worries of outcome of the second day meet of Nuclear-Supply-Group on India-US nuclear deal.

“Stocks were available at good valuations after yesterday’s fall so some value buying was seen. Market seems to be in a neutral to positive zone,” said Ajay Parmar, Head of Research, Emkay Global Financial Services.

Bombay Stock Exchange’s Sensex closed at 14,401.49, up 157.76 points or 1.11 per cent. The index touched a high of 14,428.52 and low of 14136.86.

National Stock Exchange’s Nifty ended at 4327.45, up 43.60 points or 1.02 per cent. The broader index touched a high of 4337 and low of 4248.

BSE Midcap Index closed 0.34 per cent higher at 5726.85 while BSE Smallcap Index was down 0.16 per cent at 6,925.85.

Biggest Sensex gainers were Sterlite Industries (4.34%), Hindalco Industries (4.26%), Hindustan Unilever (3.73%), HDFC (3.22%) and BHEL (2.76%).

Index losers comprised Satyam Computer (-3.18%), Grasim Industries (-1.85%), NTPC (-1.70%), Wipro (-1.04%) and Larsen & Toubro (-0.88%).

Market breadth, however, remained negative with 1414 declines against 1209 advances on BSE.

Tata Motors may sell stakes in group cos to raise funds

MUMBAI: The possible avenues through which Tata Motors could raise Rs 3,000 crore to bridge the gap between the old and revised rights issue structure, include selling of shares in group Tata companies, both listed and unlisted.

Some of them include Tata Steel, in which Tata Motors held 3.14 crore shares at the end of FY08, which is currently valued at nearly Rs 1,840 crore, coupled with partial dilutions in Tata Motor’s subsidiaries like Korea-based Tata Daewoo Commercial Vehicle and Tata Technologies, point out investment banking sources.

Tata Daewoo’s total income for the year ended March 31, 2008 was Rs 3,069.7 crore while its profit after tax was Rs 158.9 crore. Other immediate liquid assets available to Tata Motors, include its cash and bank balance of Rs 2,397.3 crore at the end of FY08.

Of course, the revised terms of the rights issue will only result in a 42% dilution of the company’s paid-up equity capital of Rs 386 crore, as compared to earlier estimates of 57%, point out analysts at foreign brokerage houses. Tata Motors’ fully diluted earnings per share was Rs 48.28 for FY08.

Tata Motors currently has 85% shareholding in HV Transmissions and HV Axles each. In the past two quarters the company has been diluting stakes in these two companies. HV Transmissions and HV Axles are valued at Rs 1,100 crore.

Incidentally, the Tata group had earlier planned to dilute equity in some of the subsidiaries like Tata Daewoo, HV Axles and HV Transmissions through an IPO. An auto analyst pointed out that since the market is on a downturn, and it would be difficult to get a good price, the main holding company Tata Sons will initially fund. Nevertheless, the Tata Motors stock declined 1.4% to Rs 417.95 on Thursday, given the bearish sentiment on the Street.

In the changed structure Tata Motors has decided to sell certain investments instead of its earlier plan of raising Rs 3,000 crore through issue of the convertible preference shares, one of three instruments of the proposed rights issue. However, other two instruments — issue of ordinary equity shares and offer of equity shares with differential voting rights — amounts to Rs 4,200 crore.

The proceeds of the divestment will be utilised for repayment of the bridge loan taken for JLR acquisition. The company has already monetised some of its investments in this year.

Tata Motors purchased JLR from Ford Motor for $2.3 billion in January. In May this year it announced plans to raise Rs 7,200 crore through the unlinked but simultaneous rights issue. The company also announced to raise between Rs 2,000 crore and Rs 2,500 crore ($500-600 million) from overseas markets through issue of securities. In all, the company plans to raise a total of Rs 9,500 crore to fund the JLR deal.
thanks to :- economictimes.indiatimes.com

Hindalco drops over 4 pc; HDFC surges 3 pc on BSE

MUMBAI Shares of Aditya Birla Group firm Hindalco declined over four per cent, while mortgage lender Housing Development Finance Corporation gained over three per cent, amid the benchmark index Sensex losing 78.52 points to close at 14,645.66 points.

Hindalco, the biggest loser among the 30 blue chips, plunged 4.53 per cent to close at Rs 129.65 on the Bombay Stock Exchange after touching an intra-day low of Rs 128.70.

Another Aditya Birla Group firm Grasim Industries ended the day at Rs 1,963.50, down 4.52 per cent, while more than 16,000 shares of the company changed hands today.

Anil Ambani-led Reliance Communication slipped 2.71 per cent to close at Rs 412.40, whereas corporate giant Reliance Industries lost 2.21 per cent to close at Rs 2,224.95.

Homegrown auto major Mahindra & Mahindra lost 2.56 per cent to close at Rs 568.10, despite the company announcing a joint venture with a Chinese tractor firm.

Among the sectoral indices, Oil&Gas, Metal, Power, Auto, Consumer Durables all closed in the negative territory following the trend of the benchmark index Sensex.

Meanwhile, Housing Development Finance Corporation jumped 3.12 per cent to close at Rs 2,359.75 and more than one lakh shares changed hands on the bourse.

Private sector lender HDFC Bank ended the day at Rs 1,200.40, up 2.14 per cent. It had touched an intra-day high of Rs 1,222 on day's trade.

Other gainers include software major Satyam Computers, engineering and construction major Larsen & Toubro, software exporter Tata Consultancy Services and FMCG firm Hindustan Unilever soared over one per cent on the exchange.

The IT index was the only gainer in the day's trade on the BSE and settled with a gain of 0.75 per cent at 3,926.38 points.

Citigroup cuts S&P 500 year-end target

Citigroup lowered its 2008 year-end targets for S&P 500 and Dow Jones Industrial Average by about 5 per cent due to the weak credit environment, and said a year's worth of tightening credit is only now being felt.

The brokerage cut its S&P 500 target to 1,475 and Dow Jones Industrial Average target to 13,250. "While global economic trends have been weakening, credit conditions continue to deteriorate and point to more bad news that may have not yet been discounted," the brokerage said.

Gold may slip below Rs 10,500 by end of Sept

MUMBAI: In line with the sharp fall in price in global markets, gold price in India is expected to fall below the Rs 11,000 mark per 10 gm by September, a top industry official said.

“Gold prices have witnessed a steep fall in line with the global markets and are likely to drop further and may touch the Rs 10,400 to Rs 10,600 per 10 gm-mark by September-end,” said Bombay Bullion Association (BBA) president Suresh Hundia on Sunday.
Domestic gold prices in July saw an inverted U-shaped trend. Trading initially at Rs 12,900 per 10 gm, it reached the peak of Rs 13,567 per 10 gm by mid-month before beginning its downward journey at the end of the month and finishing at Rs 12,557 per 10 gm, much below the level it had initially begun.
The gold price dropped from Rs 12,705 on July 26 to the present level of Rs 11,300 per 10 gm in the local bullion market. In the international market, the yellow metal dipped below $800 an ounce for the first time since December 2007.
As US economists see improved prospects for its economy, the dollar could be more attractive as an investment, particularly in times of crisis, making gold less lustrous like other precious metals. In the domestic market, gold demand has already started picking up and people have advanced their purchases before Diwali and wedding season, following a sharp decline in prices, bullion traders said.

Market participants expect the metal to test further lows in line with the steep fall in prices.

“The metal is losing its social value and more dependent on the foreign exchange,” said All India Sarafa Bazar president Sheel Chand Jain, adding that every rise in dollar would reduce the appeal of the metal. He said easing crude oil prices have also eroded the demand for gold as a hedge against inflation.
Gold in overseas markets hit an intra-day low of $773.90 an ounce, its weakest since November 20 last year, down from $811.25 late in the New York on Thursday as the dollar firmed up to a six-month high against the euro. Crude oil prices fell to $111.34 a barrel on demand fears. Bullion traders said prices would see more lows in the next few days following a fall in demand among stockists and jewellery fabricators.

Overall, there has been a shortfall in demand for physical gold in India, which usually stands at about 800 metric tonne annually. According to the BBA, India’s gold imports have fallen by almost 50% in the first quarter. BBA statistics said gold imports in the first quarter of this year is 101 metric tonne against 193 during the same period last year.
thanks to: economictimes.indiatimes.com/

The right portfolio

Courtesy- Vikas Agarwal, ET Bureau
The domestic markets have been quite volatile with a negative bias this year. There has been a flurry of negative news coming in from all quarters.

For example, the persistent high inflation rate - especially the core inflation rate that is driven by basic commodities, rising commodity prices in the global markets, a slowdown in the global economy, and no visible signs of improvement.

However, many investors harvested higher returns than the reference indices by investing with a well-balanced equity portfolio and booking profits from time to time.
thanks to: economictimes.indiatimes.com

Analysts pick Future Cap Holdings, HCL Infosystems, Vishal Retail, Wipro , New tips

Future Cap Holdings
cmp: Rs 360.50
target price: NA

Edelweiss has initiated coverage on Future Capital Holdings with an ‘accumulate’ rating as it feels that the company with its vertically-integrated model is likely to capture value across the chain in the high-growth consumption space.

“The company is building a vertically integrated capital-cum-agency business model through its investment advisory, financing and financial products distribution businesses,” says the report. The company is a focused investment advisor with $1.5 billion funds under advice in consumption-related sectors, it adds.

The brokerage expects its assets under management to grow to $5 billion by FY11E. It also expects the “company’s net revenues to grow seven-fold to Rs 7.7 billion in FY10E and profit after tax to grow to Rs 1.8 billion in FY10E”. The stock is trading at 12.6 times FY10E earnings and 2.5 times FY10E book, says the report. Edelweiss recommends investors to accumulate the stock at current levels from a long-term perspective (2-3 years).

HCL Infosystems
cmp: Rs 121.80
target price: Rs 155

CLSA has maintained an ‘outperform’ rating on HCL Infosystems while lowering the target price from Rs 230 to Rs 155 due to the further slowing down of PC sales. “HCL Infosystems’ sales are slowing down further and we now expect flat to negative year-on-year revenue growth in the segment in the June’08 quarter,” says the brokerage.

Around 30% of the company’s PC sales go to the retail segment, where the slowdown observed since late CY2007 has deepened, it says. Lower computer systems revenue assumptions are driving around 4-11% further cut in EPS estimates for FY08-10, it goes on to add.

According to CLSA, the demand of PC seems to be waning due to “cost-led 5-7% price hikes passed on by vendors, plus the lower financing options available (higher interest rates plus cut back in new loans from financiers)”. A 6.4% dividend yield provides some buffers to the stock, but upsides seem limited as a weak quarter looms, it adds.

Vishal Retail
cmp: Rs 415.90
target price: Rs 485

Kotak Institutional Equities has initiated coverage on Vishal Retail with a ‘add’ rating as it feels that the company would benefit from its ‘value’ model that has national scalability, thereby offering economies of scale.

“The company’s transformation to an integrated retailer dilutes its dependence on apparel while its emphasis on private labels is likely to support margins,” says the report.

It goes on to add that the company’s product mix is likely to under go significant changes in the near future, with negative margin impact of FMCG sales offset by higher share of private labels. The brokerage, however, feels that the “proposed rollout is aggressive” and that it would be “tempered by funding constraints”.

“We expect the total retail space to grow at 48% CAGR to 7 million sq ft by FY2011E, which is 30% lower than management estimates, after factoring in funding constraints,” says the report. Inflation and economic slowdown are concerns given the company’s concentration on lower income categories, it adds.

Wipro
cmp: Rs 433.30
target price: NA

ICICI Securities has maintained a ‘buy’ rating on Wipro even while viewing that the risk-reward is unfavourable at current valuations owing to deteriorating earnings visibility. The brokerage believes that Wipro’s upswing in the past weeks and the resulting par-valuations with Infosys is unjustified in the short term and expects profit booking at current levels.

“With FY09E and FY10E PE at 17.2 times and 14.1 times (versus 17 times and 14.9 times for Infosys), we believe Wipro will witness profit booking in the short term given lower earnings visibility and similar EPS CAGR through FY08-11E,” says the report.

As against a historically strong second quarter, Wipro’s Q2FY09 dollar-denominated revenue growth guidance indicates that the company is witnessing client-specific ramp downs in Q2FY09, it adds. ICICI Securities, however, believes that client-specific issues in material accounts (GM, Nokia-Siemens, Alcatel-Lucent) are likely to lead to a bounceback in revenue growth only post Q2FY09.

Disclaimer: The stocks recommended above are picked up at random from research reports of broking houses. Investors are advised to use their judgement before acting on these recommendations. ET does not associate itself with the choices.
thanks to :-economictimes.indiatimes.com

Sugar industry pushes for export freedom

NEW DELHI: The sugar industry has demanded a long-term policy to enable it to export regularly irrespective of variations in output. It mentioned that the irregular nature of sugar shipments from India is resulting in a low price realisation.

“Usually, importing countries do not look upon the Indian exporters as a reliable long-term supplier. So, Indian exporters suffer from that is reflected in the price realisation for Indian sugar,” Indian Sugar Mills Association (Isma) director-general SL Jain said.

Mr Jain said Indian sugar sells at a discount of almost $100 per tonne against the international price. Though it is admittedly a bit inferior quality than the refined sugar abroad, the huge price variation is not justified, he said.
The Centre in 2006 had banned export of sugar that was lifted in January 2007 after a gap of six months, though India produced a record output of 28.3 mn tonnes in the 2006-07 season (October-September).

The ban in the first crucial three months had badly affected exports in 2006-07 season and the overall shipment in the entire season was 1.8 mn tonnes. The industry has suggested that a piece of legislation be framed by the government, providing for a minimum export of sugar per annum, irrespective of variations in the indigenous sugar production.

“While prescribing such minimum obligation on individual basis, it should be left to the sugar factories to make additional exports, should they so desire,” said Mr Jain.

The industry has also demanded that export quotas, whenever fixed, be provided with a tradable character. Since factories in the non-coastal regions have to incur higher transportation and incidental cost to undertake exports, the tradable character of exports quota would facilitate such mills to negotiate with units located in coastal areas to fulfil shipment obligations.

In such a scenario, sugar mills in the coastal areas may export on behalf of their hinterland counterparts, or units located in distant places may also buy sugar from the coastal units and fulfil exports obligations. India is the second largest sugar producer in the world, next only to Brazil, and the largest consumer of the sweetener. Sugar production in 2008-09 season is estimated to touch 22 mn tonnes, while in 2009-10 it is expected to be 25 mn tonnes. The domestic demand, at present, is pegged at about 21 mn tonnes.

Meanwhile, industry experts fear that sugar exports may fall by over 60% to about 1.5 mn tonnes in the 2008-09 season on expectation of lower production coupled with rising domestic prices.

“The domestic prices have gone up while the global market has softened. Besides, the estimated lower production would also be one of the factors for the decline in exports next season,” an analyst said.
thanks to :-economictimes.indiatimes.com

FIIs sell shares worth Rs 1,195 cr this week

MUMBAI: Amid markets witnessing a volatile trade, foreign institutional investors turned out to be net sellers shedding equities worth Rs 1,194.88 crore this week.

FIIs invested in equities worth Rs 409.70 crore and offloaded shares valued Rs 1,604.58 crore till today, a net sale of Rs 1,194.88 crore as per data available on the SEBI and BSE website.

Triggered by weak global stock markets, the BSE barometer Sensex fell nearly three per cent to 14,724.18 points this week.

FIIs today invested in shares worth Rs 1,752.94 crore and shed equities worth Rs 2,326.92 crore, resulting in the net sale of Rs 573.98 crore, as per provisional data available on the BSE.

Reversing the trend, domestic institutional investors today bought equities valued Rs 23.32 crore in the Indian market.

Brokers purchased shares worth Rs 248.41 crore for their clients or retail investors, while non-resident Indian entities invested in shares worth 0.67 crore respectively.

Meanwhile, proprietors shed shares worth Rs 37.31 crore amid the Sensex falling 369 points today.

Facebook named world's top social networking site

SAN FRANCISCO: Facebook has overtaken MySpace to become the world's most popular social networking site with 132 million unique visitors in June, according to new figures from web tracking firm ComScore.
The study also found that Facebook's visitor growth far outpaced that of MySpace, with Facebook visits up 153 per cent on an annual basis, compared to just three percent growth for MySpace. Other social networks showing strong global growth include Hi5 (100 per cent) Friendster (50 per cent), Orkut (41 per cent) and Bebo (32 per cent).
Comscore said Facebook grew 38 per cent in the US, where it had 49 million visitors in June.
The strongest growth was in Latin America, where Facebook's visitors grew by 1055 per cent. The number of European visitors tripled to 35 million a month, while growth in the Middle East and Africa was 400 per cent. In the Asia Pacific region visitors increased 458 per cent.
"Facebook has done an exceptional job of leveraging its brand internationally during the past year," ComScore executive Jack Flanagan said in a statement from the company. "By increasing the site's relevance to local markets through local language interface translation, the site is now competing strongly or even capturing the lead in several markets where it had a relatively minor presence just a year ago."

Comscore said the dizzying increases were helped by Facebook's tiny global presence prior to its recent initiative to translate the site into other languages. A year ago, it had only one million unique visits a month in all of Latin America, three million in the Middle East and Africa, and four million in all of Asia Pacific.
Flanagan said international expansion was now the main target for the major social networking sites.
"While the social networking trend first took off in North America, it is beginning to reach a point of maturity in the region," Flanagan said. "However, the phenomenon is still growing rapidly in other regions around the world - especially as the established American brands turn their focus to developing markets."
thanks to :-economictimes.indiatimes.com

SEBI may weigh an alternative system for IPO pricing

MUMBAI: While the dismal performance of IPOs is largely attributed to a sluggish market, it is time to raise a more fundamental question: do we need a relook at the book-building system that’s used to price new stock offerings?

A review of the present book-building norms should figure in Sebi’s agenda on the next round of primary market reforms. According to a source familiar with the subject, Sebi may soon examine whether the book-building process is the most efficient price-discovery mechanism.

“In fixed price issues, the promoter fixes a single price. In the book-building issues too, he sets the issue price, though within a 20% band. So in the true sense, the market is not discovering the price,” said Prime Database MD Prithvi Haldea.

A predominant number of book-build IPOs gets subscribed (often in multiples) at the upper price band. It’s a reflection that almost all IPOs are underpriced, and rarely rightly priced. Stock market circles who favour a change in the rules argue that a real price discovery is possible only when there is no price indication from the issuer, and the price is freely determined through an auction. In such a system, one can have a circuit filter on the day of listing, as the real price discovery has already happened through the auction process.


But the challenge in any new system would be taking care of the interest of retail investors. To ensure this, the QIB portion of 50% in an IPO could be sold through a closed book auction. “The auction should remain open for a day. An auction shall help the issuer get the best price for the shares from QIBs. And then, the lowest QIB bid should be the fixed price for retail investors,” added Mr Haldea.

The logic is since QIBs are sophisticated investors with a better understanding of valuations, they don’t need an indicative price range for an IPO. Some of the investment bankers also think that retail investors (who don’t really help in the price discovery system) should be brought in at a later stage.

According to Kotak Mahindra Capital senior V-P Gesu Kaushal, “Over the last few years, many companies have successfully done IPOs through the book-building mechanism. We could consider having an indicative price band as a variation to the current book-building process given the volatile market conditions.

And over the longer term, as the market matures further, we could consider the French auction process for QIBs with a common clearing price for retail investors.” “Modifications are required on these counts. Also, in the extant process, the need of the hour is to reduce the time between deciding the price band and opening the issue for subscription,” said another senior i-banker.

Mr Haldea felt there was also a problem when several QIBs did not get shares in an IPO despite their willingness to pay a higher price. “Even if a QIB sees a higher value in an IPO, it still has to bid within the price band and be subjected to a uniform proportionate allotment,” he said.
thanks to :-/economictimes.indiatimes.com/

Resurgere Mines and Minerals IPO subscribed 1.15 times

MUMBAI: The initial public offering of Resurgere Mines & Minerals India on Wednesday got subscribed 1.15 times on the last day of the offer, as per the NSE website. The price band of the issue has been fixed between Rs 263 to Rs 272, and it closes on August 13.

The issue, through which the company is planning to raise about Rs 121.04 crore, received 51,25,020 bids, around 3,94,380 bids were received at the cut-off price, against 44,50,000 shares on offer.

The qualified institutional buyer’s portion got subscribed 0.98 times, the non-institutional investors was subscribed 0.70 times of the shares on offer, retail investors portion received 0.02 times subscription and the employee portion got subscribed 0.10 times.

The company plans to utilise the issue proceeds for purchasing plant and machinery and purchase railway rakes to set up own logistics infrastructure facilities and funding working capital requirements.

Nirmal Bang puts 'buy' on SBTL

MUMBAI: Considering full capacity utilization and six fold expansion, SBTL is set to show robust top-line growth of 499 per cent and bottom-line growth of 478.3 per cent in FY09-10. EPS will grow from Rs 0.84 in FY08-09 to Rs.4.35 in FY09-10 on expanded capital, according to securities firm Nirmal Bang.

The brokerage has assigned a ‘buy’ rating on the stock with a target price of Rs.44 per share on FY 09-10 earnings estimates of Rs 4.35 (PE 10* Rs 4.35EPS) and Rs.78 on FY 2010-11E (PE 10*Rs 7.8 EPS) on expanded capital.

Global demand for petroleum is predicated to increase by 40% by 2025. Hence, the concerns about oil supply and energy security have motivated many countries to consider alternative fuels i.e. liquid biofuels, renewable fuels derived from Biomass.

SBTL is the only listed biodiesel company with first mover advantage meeting the standards specified by IS 15607. It ventured into biodiesel operations with a Semi Automatic Multi-feed biodiesel plant at Nalgonda with capacity of 40,000 liters per day.

The company is going with further Greenfield expansion of 250 TPD at Vizag (Andhra Pradesh) fully automatic multi-feed technology to produce biodiesel from variety of feedstocks. This will increase its capacity by 6 times.

India consumed approximately 47.80 MMT of diesel in FY 07-08. With National biofuels policy likely to be approved in FY 08-09 and minimum 2% mandatory blending of biodiesel, the demand is likely to reach 1 million ton. SBTL is fully prepared to take advantage of this opportunity.

SBTL has taken initiative to go for planting of Jatropha and Pongamia through farmers by entering into long-term seed purchase contracts and is also on the verge of entering into long term contracts for the plantation in waste lands.

In Jan'08 SBTL bagged order for supply of 300,000 liters of biodiesel every month to APSRTC across its twelve depots in Hyderabad and Secunderabad. The State owned APSRTC consumes 18 lakh liters of diesel every day to operate its fleet of 22000 buses.

M&M is launching their first Biofuels powered vehicles for commercial use by year-end. M&M is also confident of fitting the new engines to all its existing models and is in the advance stage for testing B-100 (Biodiesel).

Further, Indian Railways has also called for tenders to procure 140000 liters of biodiesel per day. SBTL has participated in the tender and stood at L1 status.

On Wednesday, SBTL shares closed at Rs 25.65, up 0.20 per cent from previous close.
thanks to :- economictimes.indiatimes.com

Hindalco to set rights at Rs 96 a share

MUMBAI: Hindalco Industries, India's top aluminium producer, aims to set its rights issue at Rs 96 a share and tweak the ratio to 3 shares for every seven held from 1:3, three bankers familiar with the deal said on Wednesday.

The month-long rights issue is set to open in September, said the bankers who declined to be identified because they were not authorised to speak to the media.

Company officials could not be immediately reached for comment.

Hindalco sent a notice to the stock exchange on Wednesday saying its board will meet on Aug. 14 to determine the price and other terms of the issue.

Hindalco shares closed at Rs 142.40 on Tuesday.

Dabur Pharma gains on Fresenius investment

MUMBAI: Shares of Dabur Pharma extended gains after German healthcare group Fresenius said its unit will invest 10-30 million euros over the next 2-3 years to double Dabur Pharma's API plant capacity.

At 1 pm, the Dabur Pharma share was up 2.73 per cent at Rs 64 with volume traded at 11,529 against two-week average of 11,950 shares.

Sharekhan puts 'buy' on Aban Offshore; target Rs 4829

MUMBAI: Sharekhan has maintained ‘buy’ on Aban Offshore for a target price of Rs 4,829, an upside of 93.6 per cent. Aban Offshore, one of the largest oil drilling companies in Asia, is benefiting from increased oil exploration and production activities globally. The resulting robust demand environment is leading to firm day rates for the company’s assets.

In addition to re-pricing of its assets at higher day rates, the company is also benefiting from the efforts taken to substantially ramp up the asset base through organic and inorganic initiatives.

Sharekhan expects the company to receive three jack-up rigs in the next couple of quarters, which would significantly improve its financial performance going forward. The company is also looking to raise capital, which the brokerage views as positive, as it would result in reducing the high debt levels of the company.

At the market price the stock trades at 7.1x FY2009 and 5.2x FY2010 estimated earnings.

Buy Punj Lloyd for target Rs 532: Sharekhan

MUMBAI: Sharekhan has recommended buy on Punj Lloyd for a target price of Rs 532, an upside of 84.1 per cent from current level. Punj Lloyd is the second largest erection procurement and construction player in the country with a global presence.

Sharekhan believes that Punj Lloyd along with SEC and Simon Carves, is well integrated and poised to tap the global opportunity available in hydrocarbons and infrastructure sectors.

The company has witnessed a five-fold increase in its average order size from $30 million to about $130-140 million. This move-up on the value chain has made Punj Lloyd more competitive in executing larger and complex orders.

Sharekhan expects the spectacular order flow to continue for Punj Lloyd. The current order book of Rs 20,162 crore is 2.6x its FY2008 sales and imparts strong visibility. The brokerage expects Punj Lloyd’s consolidated revenues and profits to grow at a CAGR of 30.5 per cent and 44.1 per cent respectively over FY2008-10E.

At the market price the stock trades at 16.6x and 12.5x its FY2009E and FY2010E fully diluted EPS respectively.
thanks : economictimes.indiatimes.com

Resurgere Mines IPO subscribed 0.42 times on day one

MUMBAI: Resurgere Mines & Minerals India on Monday got subscribed 0.42 times on the first day of its initial public offer.

The issue, through which the company is planning to raise about Rs 121.04 crore, received bids for 18.75 lakh shares against 44.50 shares on offer, as per the latest data available on the National Stock Exchange.

The price band of the issue has been fixed between Rs 263 to Rs 272, and the offer would close on August 13.

At the upper end of the price band the company would raise up to Rs 121.04 crore, while at the lower level it would raise about Rs 117.04 crore.

The portion reserved for qualified institutional buyers, which included foreign institutional institutions, domestic financial institutions and mutual funds, got subscribed 0.65 times the shares on offer, while non-institutional investors received bids for 0.57 times of the shares on offer.

However, portion reserved for retail investors remained under subscribed.

The company plans to utilise the issue proceeds for purchasing plant and machinery and purchase railway rakes to set up own logistics infrastructure facilities and funding working capital requirements.

Abhinav Bindra wins men's 10m air rifle gold

BEIJING: World champion Abhinav Bindra clinched India's first ever individual gold medal at the Olympics, winning 10m air rifle event at the Beijing Games here today.

The 25-year-old, who qualified fourth for the event, shot an overall score of (596+104.5) 700.5 in a thrilling finale which went right down to the last shot.

Bindra's historic feat makes him India's first-ever individual gold medallist, bettering the silver medal feat of double trap shooter Rajyavardhan Singh Rathore in Athens 2004.

"He is the best shooter in the world and I think his is a morale boosting feat for everyone in the contingent," a jubilant Indian Olympic Association President Suresh Kalmadi said after Bindra's win.

"We are all very happy. He is a very hardworking athlete. The entire shooting contingent is celebrating. We are very proud of him and it is just the beginning," national coach Sunny Thomas said.

"Abhinav is a very calm and composed guy and doesn't get very excited," Thomas added.

Bindra, a Khel Ratna awardee, had earlier won the gold medal in 2002 Commonwealth Games in the pairs event and silver in the individual event.

Earlier, Gagan Narang had failed to qualify for the finals of the same event after falling short in the count-back.

The silver in the event went to Chinese Zhu Qinan (699.7) while Finland's Henri Hakkinen (699.4) had to be content with a bronze.
thanks to :- economictimes.indiatimes.com

US stocks fall moderately

NEW YORK: Stocks declined moderately on Monday after sharp gains last week and as oil prices fluctuated on concerns over fighting between Russia and Georgia.

Oil market traders questioned whether the conflict between Russia and Georgia over the breakaway province of South Ossetia could lead to supply disruptions in the region. Some rebound also was to be expected after oil fell $4.82 on Friday, sending the stock market sharply higher.

Light, sweet crude rose 52 cents to $115.72 per barrel on the New York Mercantile Exchange.

Despite Monday's moves, Wall Street is relieved that the price of oil has fallen more than $30 from its July 11 high of $147.27, easing worries about overall inflation and a key pressure point for consumers.

In the first hour of trading, the Dow Jones industrial average fell 34.36, or 0.29 percent, to 11,699.96, after the blue chips' 300-point jump Friday.

Broader stock indicators also declined. The Standard & Poor's 500 index fell 3.95, or 0.30 percent, to 1,292.37, and the Nasdaq composite index fell 6.60, or 0.27 percent, to 2,407.50.

As with oil, a retracing of last week's steep stock market advance wasn't a surprise as some investors looked to cash in gains. The jump in stocks Friday led the Dow industrials to a run-up of 3.60 percent for the week. The Standard & Poor's 500 index advanced 2.86 percent last week and the Nasdaq composite index added 4.46 percent.

The dollar, whose recent strength has helped drive oil lower, was mixed Monday against other major currencies. Gold prices rose.

BSNL's $10 bn IPO hopes to buck frail market

MUMBAI: State-owned phone company's plans to raise $10 billion in the biggest local IPO must overcome waning foreign investor interest in a country whose share markets have dropped by a quarter this year. There has been no timeline for Bharat Sanchar Nigam's (BSNL) IPO, but the company expects the issue in six months. Bankers said the target can be met only if the process is fast tracked and other issues such as union opposition are ironed out. While smaller IPOs have been completed this year despite the market selloff, thanks to a large pool of willing local investors, the biggest deals will struggle without foreign participation. "For foreign funds, equity is definitely no longer the preferred asset class," said Jayesh Shroff, who helps oversee about $3.5 billion at SBI Mutual Fund. "They are quite wary of it and Indian IPOs do not fit their strategy now." Andrew Holland, managing director of strategic investment group at DSP Merrill Lynch, said poor secondary markets, the global credit crunch and nervousness about weakening growth forecasts for India have kept foreign funds on the sidelines.

Also Read The government said in January it aimed to list BSNL by selling 10 per cent, but put the plan on hold after opposition from its communist allies and trade unions. India's biggest IPO, January's $3 billion offer from Reliance Power, was subscribed within minutes of opening, helped by big institutional funds. Foreign funds own 4.7 per cent of the firm or nearly half the stake sold in the initial public offer. Its success was due in part to heavy subscription from foreign hedge funds, overseas banks and portfolio managers. But in July, UTI Asset Management, India's oldest mutual fund, put off a $480 million IPO, joining other heavyweight listing candidates on the sidelines after foreign funds wanted the valuation cut by a quarter.

MUMBAI: State-owned phone company's plans to raise $10 billion in the biggest local IPO must overcome waning foreign investor interest in a country whose share markets have dropped by a quarter this year. There has been no timeline for Bharat Sanchar Nigam's (BSNL) IPO, but the company expects the issue in six months. Bankers said the target can be met only if the process is fast tracked and other issues such as union opposition are ironed out. While smaller IPOs have been completed this year despite the market selloff, thanks to a large pool of willing local investors, the biggest deals will struggle without foreign participation. "For foreign funds, equity is definitely no longer the preferred asset class," said Jayesh Shroff, who helps oversee about $3.5 billion at SBI Mutual Fund. "They are quite wary of it and Indian IPOs do not fit their strategy now." Andrew Holland, managing director of strategic investment group at DSP Merrill Lynch, said poor secondary markets, the global credit crunch and nervousness about weakening growth forecasts for India have kept foreign funds on the sidelines.

Also Read The govern ment said in January it aimed to list BSNL by selling 10 per cent, but put the plan on hold after opposition from its communist allies and trade unions. India's biggest IPO, January's $3 billion offer from Reliance Power, was subscribed within minutes of opening, helped by big institutional funds. Foreign funds own 4.7 per cent of the firm or nearly half the stake sold in the initial public offer. Its success was due in part to heavy subscription from foreign hedge funds, overseas banks and portfolio managers. But in July, UTI Asset Management, India's oldest mutual fund, put off a $480 million IPO, joining other heavyweight listing candidates on the sidelines after foreign funds wanted the valuation cut by a quarter.

Subscribe to Austral Coke IPO Keynote

MUMBAI: Keynote Research has recommended ‘subscribing’ to the initial public offering of Austral Coke and Projects with a long term view only. The company has come out with an IPO of 72,60,000 equity shares (excluding green shoe option of 10,89,000 shares) of Rs 10 each, aggregating to Rs 142 crore, it is in the price band of Rs 164-196 per share. The IPO closes on Aug 13.

Austral Coke & Projects, a LAM Coke manufacturer has a capacity of 0.375mn tpa. Its current manufacturing facilities are located at Bhuj.

The company is set to expand coke manufacturing capacity from ...375 mn tpa to 0.525mn tpa and install a power plant of 8 MW. The expansion project, which also includes acquisition of mines, will be funded through the proceeds of the IPO.

Acquisition of coking coal mines in Mozambique can provide raw material
security, once the mines become operational. Keynote believes mines to insulate the company against adverse price trends in coke.

The brokerage believes that ACPL will be able to grow primarily due to robust industry fundamentals (hardening coke prices, reduced supply from China and Australia). Keynote expects revenues and earnings to grow at 44.8 per cent and 33.1 per cent CAGR respectively, during February 2008 - FY11. While they expect coke prices to cool off after steep up cycle of the last two years, the brokerage believes prices overall will remain firm on account of the China factor.

Gremach Infrastructure Equipment, a group company is into equipment rentals. The brokerage notes with concern ACPL’s intention to continue the construction equipment rental business, which can lead to a direct conflict of interest.

Based on Keynote estimates, the IPO is priced at 11.1xFY09 and 7.4xFY10 earnings, which is expensive vis-à-vis industry leader GNCL’s 9.2xFY09 and 6.0xFY10 earnings. On the EV/EBITDA the IPO valuation looks attractive at 9.3x vis-à-vis 12.9x for GNCL

No decision on issuing shares to Suzlon: Shanthi Gears

MUMBAI: Gearbox manufacturer Shanthi Gears on Friday said it has not taken any decision on issuing shares to wind turbine maker Suzlon Energy.

"... the company has neither taken any decision nor entered into any agreement with Suzlon Energy for the issuance of any shares in the company to Suzlon Energy," the firm said in a filing to the Bombay Stock Exchange.

Shares of the company closed at Rs 73.75, up 9.42 per cent on the BSE.

Rajnikant Patel's exit turns spotlight on BSE hot seat

Incidentally, the meeting assumes significance, given the fact that it was the second board meet in the same month (the first was on July 12). This, according to exchange officials, was the first sign that something was amiss within the board. Officials also say that Mr Patel was “not attending office on all days in the recent past”.

Starting his career in the exchange as director (surveillance and inspection) in 2001, Mr Patel rapidly moved up the ranks to become CEO in 2004, succeeding Manoj Vaish who quit to join a market research firm. His meteoric rise notwithstanding, Mr Patel marks his exit from the exchange as yet another boss who has been unable to reverse the BSE’s flagging fortunes, from the time it lost market leadership to rival NSE.

The immediate challenge for Asia’s oldest bourse is to find someone who will be willing to pick up the baton from where Mr Patel has left. Given the unsavoury track record of board room conspiracies and the near-insurmountable gap in market share, it will require a braveheart to throw his hat into the ring.

The BSE desperately needs to carve out for itself a meaningful presence in the derivatives segment if it is to nurse any hopes of improving market share. Market-watchers feel some innovative product is badly needed, as the NSE scores way up on liquidity.

Combining cash and derivatives volumes on any given day, BSE’s market share barely works out to 10%. Its market share in the cash segment has remained constant between 35-40%, but its biggest failing has been the derivatives segment, where it has no presence worth mentioning.

The BSE’s benchmark index, Sensex, may have a better brand recall compared with the NSE’s Nifty. But it is the Nifty futures which institutional investors turn to for hedging their portfolio. The same holds true for traders.

A significant chunk of the NSE’s cash market volumes results from the arbitrage between the cash and futures market. To add to BSE’s woes, some of the recent changes in the margining system are expected to further erode BSE’s market share.

In May this year, the Securities and Exchange Board of India allowed cross-margining between cash and derivatives segments, under which an investor buying a stock in which he already has a short position in the futures segment will not have to pay the value-at-risk (VaR) margin twice over.

An investor would be able to avail of this facility only if both his cash and derivative market positions are on the same exchange. Since much of the derivatives trading takes place only on the NSE, more business is expected to shift to that bourse.

Other threats loom, but there are also opportunities if the BSE is willing to make a tectonic shift. The BSE should ensure that its failure in equity derivatives should not be repeated with currency futures trading which is expected to commence soon.

The exchange has to revive its Indonext platform that it does not lose these firms to a dedicated exchange for small and medium enterprises in future.

Overseas investors lose up to 50% in India funds

MUMBAI: Unlike in the previous years, Indian equities have not paid off for overseas retail investors. The year so far has not been very good for India-dedicated offshore funds, as most of their investments have eroded by 40-50% over the past seven months.

Offshore funds specialise in investing in foreign companies or corporations. These funds have non-residential investors (often high net worth investors and institutions) and are regulated by the provisions of the foreign countries where these are registered. Most of these funds are set up in tax havens like Mauritius or Cayman Islands.

As per international fund ratings major, Morningstar’s rating log, the average year-to-date return (as on July 31, this year) of India-dedicated equity funds is as low as -39% (when converted to US dollars).

According to experts, a reason for this could well be the fact that offshore funds only invested in liquid large-cap stocks, a segment that led the market fall in the initial months.

“These funds have fallen in line with their benchmark indices; the Asian benchmark MSCI has fallen in and around 45% over the same period. Funds are likely to fall in such market conditions,” said Mirae Asset Global Investment CEO Arindam Ghosh.

Mirae Asset has an AUM of $54.64 billion in emerging markets and provides advisory services to off-shore funds that have invested over $2 billion in India. According to a fund manager who advises three India-dedicated offshore funds, such an underperformance by offshore funds could be because of the currency effect.

“With most funds valued in US dollars, and with dollar depreciating against most currencies, it would notionally appear that funds have fallen sharply. Very positively, offshore funds have taken a beating in a market that has fallen by over 40%,” the fund manager said.


From what fund managers say, the perception of investors towards India as a short-term investment destination has changed significantly over the last few months. Many investors have also downgraded their short-term target on India and the region.

There has been no redemption pressure as yet, they added. “We expect India to be in the investment radars of foreign investors as it is already an over-sold market. Offshore funds investing in Indian equities are already seeing some inflows. Retail foreign investors have a long-term view on India,” Mr Ghosh added.

PNB declares 130% dividend for FY'08

MUMBAI: Country's second largest public sector lender Punjab National Bank today declared a dividend 130 per cent for the financial year ended March 31, 2008.

The shareholders at their Annual General Meeting has declared an annual dividend at the rate of 130 per cent at the rate of Rs 13 per share, on every Rs 10 share held, PNB said in a filing to the Bombay Stock Exchange.

For the financial year ended March 31, the bank had reported a 35 per cent growth in consolidated net profit at Rs 2,203.09 crore, while the total income rose to Rs 16,653.72 crore, from Rs 13187.40 crore in FY'07.

In the first quarter ended June 30, PNB announced a 21 per cent growth in net profit at Rs 512.40 crore, while the total income was at Rs 4594.62 crore.

Shares of PNB closed at Rs 491.40, up 1.62 per cent on the BSE.
thanks to :- economictimes.indiatimes.com

Anagram recommends buying NTPC on declines

MUMBAI: Anagram StockBroking has recommended ‘buying on decline’ in NTPC at around Rs 160. NTPC is India's largest and most efficient power producer with capacity of 27850 MW (excl JVs). Through joint ventures the company has emerged as an integrated power company undertaking EPC business, coal mining, equipment manufacturing etc which will ensure timely execution of projects and better PLF.

The company has targeted to add 22430 MW in eleventh plan out of which 1990 MW has already been added. By the end of 2012, 80 per cent of its capacity will be coal based, 16 per cent gas based and 4 per cent hydro.

Growth in topline comes with capacity addition as the company's have no pricing power as tariffs are capped (14% ROEs) but looking at the current deficit scenario and capital expenditure plans till 2011-12, the company will grow at 15 per cent CAGR over four years.

As super critical technology comes onstream, Anagram expects the company to generate revenues from sale of carbon credits. The stock trades at 21.5x its TTM EPS of Rs 8.2 and 2.7 times its book value.

During Apr-Jun 2008-09 quarter, the company formed joint venture with BHEL and Bharat Forge.

NTPC has been allocated seven coal blocks of which two are in joint venture with Coal India. The company intends to mine 12 mtpa by 2011-12.

Anand Rathi puts 'buy' on Kotak Bank

MUMBAI: Anand Rathi Securities has a ‘buy’ call on Kotak Mahindra Bank around the current price of Rs 575 for target Rs 750 and stop loss of Rs 500.

Based on the chart pattern to date, the stock is likely to get support around Rs 520.

The brokerage suggests accumulating more if the stock comes close to the support level. If it moves above Rs 750 level it could even touch Rs 790 levels.

Kotak Mahindra Bank, after a descent consolidation, exhibits a trend reversal; rise in RSI from over sold zone indicates a medium term buy.

Sharekhan assigns 'hold' to Tata Motors for target Rs 545

MUMBAI: Sharekhan has maintained ‘hold’ on Tata Motors for a revised target price of Rs 545. The companys' results for Apr-June 2008-09 are below the brokerage expectations due to lower than expected margins. However, the profit after tax of the company is higher than their estimate mainly on account of a higher other income and a lower tax outgo during the quarter.

The net sales for the quarter grew by 14.4 per cent to Rs 6,928.4 crore on back of 3.9 per cent volume growth and 10.1 per cent realisation growth during the quarter.

Domestic sales of commercial vehicles increased by 15.9 per cent to 71,049 units while that of passenger vehicles declined marginally to 52,450 units. Export sales volume declined by 34 per cent to 9,220 units.

An increase in the overall expenses, such as raw material cost, employee cost and other expenses, led the operating profit margin to decline by 130 basis points to 7.7 per cent. Hence, the operating profit dropped by 2.9 per cent to Rs 530.5 crore in Apr-Jun 2008-09.

A higher other income and lower tax outgo helped the adjusted profit after tax to grow by 59.3 per cent to Rs 412.37 crore. After accounting for foreign exchange loss of Rs 199.9 crore and profit of Rs 113.7 crore on sale of the stake in Tata Auto Components, the reported net profit declined by 30.1 per cent to Rs 326.2 crore.

Tata Motors has not reported the consolidated results for Apr-Jun 2008-09 since the financial statements of Jaguar and Land Rover are under compilation and have not been finalised yet. However the performance of the subsidiaries was also affected by the rising commodity prices and interest rates during the quarter.

Sharekhan’s outlook on the commercial vehicle industry remains cautious considering the lower availability of finance, the rising interest rates and the slowdown in the economy.

In view of the pressure on the company's profit margin, Sharekhan has downgraded their consolidated estimate for 2008-09 by 7.3 per cent to Rs 54.6 and that for 2009-10 by 12 per cent to Rs 60.8.

At the market levels, the stock trades at 6.5x its FY2010E consolidated earnings and is available at an enterprise value /earnings before interest, depreciation, tax and amortization of 3.1x.
thanks to :- economictimes.indiatimes.com

Sharekhan reiterates buy on Ratnamani Metals, target Rs 1,110

MUMBAI: Sharekhan has reiterated 'buy' call on Ratnamani Metals and Tubes for a target price of Rs 1,110 per share. The Apr-Jun 2008-09 results of the company are in line with the brokerage expectations. The company's revenues grew by 31.4 per cent to Rs 249.7 crore on account of a strong volume growth in both the stainless steel and carbon steel pipe segments.

The operating profit of the company grew by 24.1 per cent to Rs 56.4 crore in the quarter. The operating profit margin declined by 133 basis points to 22.6 per cent due to an increase in the other expenses. The company's other expenses as a percentage of sales increased by 353 basis points to 11.2 per cent in Apr-Jun 2008-09.

Ratnamani Metals and Tubes interest cost declined by 29.8 per cent to Rs 3.6 crore while its depreciation charge rose by 20.9 per cent to Rs 6.4 crore in Apr-Jun 2008-09.

During the quarter, the company made a provision to the tune of Rs 7.86 crore for mark-to-market loss on its exposure to foreign exchange contracts. Sharekhan has considered this as one-off item. Consequently, the net profit of the company grew by 35.6 per cent to Rs 30.6 core. The reported net profit increased by 12.6 per cent to Rs 25.5 crore in the quarter.

The combined order book of the company stood at Rs 700 crore at the end of Apr-Jun 2008-09 as against Rs 650 crore at the end of Jan-Mar 2007-08.

Sharekhan has revised their earnings estimates for 2008-09 and 2009-10 mainly to factor in the lower operating margin in the future and mark-to-market forex loss. Sharekhan’s fully diluted earnings per share estimates for 2008-09 and 2009-10 now stands at Rs 126.2 and Rs 152.3 respectively.

At the market price the stock trades at price-to-earnings of 6.2x and 5.2x its FY2009 and FY2010 estimates.

Nifty Aug premium tapers as investors baffled by weak cues

MUMBAI: In extremely choppy trade, Indian stocks ended lower Monday led by weak cues from global markets. National Stock Exchanges' 50-share Nifty fell by 0.41 per cent to end at 4395.

In F&O, Nifty August ended at 5 points premium against 19 points Friday. The contract price slipped 0.74 per cent while open interest added 18 lakh shares. Cost of carry was positive, indicating long build up at lower levels.

Bears have written calls from strikes 4400 to 4600 and have bought 4400 and 4500 puts. Bulls have bought calls at higher level and written puts at lower level, putting Nifty in a range of 4300-4500 for near term.

“If global cues remain negative, bears will take control and may drag the Nifty to 4100 levels. Any improvement on global front can push Nifty to 4500-4550 levels. Market will remain volatile until there is a strong trigger either side. Investors should not bet aggressively till volatility subsides," said T Venktesh, fund manager at Arnava Global.

“Also, Moody’s is negative on the Indian growth story and has said that fiscal deficit may widen if oil stays at current level (of $124-125). At this point one should buy in-the-money puts at 4500 strikes,” Venktesh added.

Capital goods, power and oil & gas sector dragged the most today while consumer durables, metal and healthcare stocks gained.

Reliance Industries August futures fell 2.34 per cent while open interest added 6.6 lakh shares. Reliance Natural Resources gained 1.46 per cent and Reliance Petroleum jumped 2.82 per cent.

Tata Steel advanced 1.23 per cent and added 5 lakh shares in open interest. SAIL climbed 4.37 per cent and open interest added 23.23 lakh shares. Larsen & Toubro slipped 1.57 per cent while GMR Infra rose 3.11 per cent.

ICICI Bank dropped 1.19 per cent and SBI fell 0.96 per cent. HDIL gained 3.83 per cent on short covering while DLF skid 2.45 per cent.

Total F&O turnover on NSE was Rs 43,364 crore, down 11 per cent from Friday.

“FOMC meeting tomorrow and the decision on interest rates by US Fed Chief Bernanke will influence US and global markets in general. The market is faced with big challenges like rising interest rates and high inflation. Volatility will continue for some more time, till clarity emerges on all these fronts," said Praveen Kumar, analyst with DBM Fund Management.

Meanwhile, European stocks fell for a third day and US futures retreated as concern that banks' earnings won't recover anytime soon overshadowed gains by energy companies. Asian shares also declined.
thanks to :- economictimes.indiatimes.com

Anil Ambani enters private equity space

MUMBAI: Anil Ambani has quietly entered the fledgling private equity space. His financial services arm, Reliance Capital, has launched a whollyowned subsidiary, Reliance Equity Advisors Ltd (REAL), to offer the entire bouquet of private equity services. Ramesh Venkat, group CFO of the Anil Dhirubhai Ambani Group (ADAG), has been given the additional responsibility of spearheading REAL.

To begin with, REAL has put in place a 15-member advisory team and received regulatory approval to build an initial corpus of $1 billion. Of this, ADAG will contribute 15-20% while the balance will be mobilised by two linked funds, one based in Mauritius and the other in India.

Mr Venkat told ET that REAL has started talking to investors to put together a $1-billion fund. “The initial response has been very good. There is good investor appetite for our fund. We expect to close the fund in a few months,” he said. Mr Venkat is a director of REAL.

Mr Venkat said the fund will focus on sunrise sectors such as services, logistics, realty and pharma. The ticket size of investment will be in range of $15-100 million. In addition to providing growth capital and means for financial restructuring, REAL will lend money and expertise to help Indian companies in acquiring foreign assets.

This initiative is completely different from Reliance Capital’s PE avatar. While Reliance Capital has been acting as a proprietary PE investor, REAL is an advisory PE player. In other word, Reliance Capital invests with its own money while Reliance Equity Advisors uses money from investors to put in companies.

Like any other PE advisor, Reliance Equity Advisors will earn fees against its advisory services. The scale of operations is different as well. Reliance Capital had a maximum PE investment of Rs 2,000 crore while REAL will kick-start its operations with a $1-billion fund. Some other funds will be launched once the first fund is saturated.
thanks to :- economictimes.indiatimes.com

Asian stocks drop as oil slide raises fears

HONG KONG: Asian stocks fell to their lowest level in more than a year on Tuesday as shares in resource firms such as BHP Billiton were pummeled by a slump in oil and metals prices to multi-month lows. Oil hovered just above a three-month low on signs of declining U.S. fuel demand, helping to lift the dollar to a seven-week high against a basket of major currencies.

But the steep decline in crude prices to $120 from a record high above $147 in mid-July is worrying some investors in Asia who had at first cheered the benefits in a region where countries are grappling with double-digit inflation. Instead, the commodity declines are now reinforcing fears of a slowing global economy, one year after a downturn in the U.S. subprime mortgage market helped spark a financial crisis still reverberating around the world.

European shares were set for a mixed open, as the focus shifted towards a Federal Reserve meeting later on Tuesday. The U.S. central bank is expected to leave U.S. interest rates unchanged, partly due to easing energy prices.

"At the moment, people are taking the view that the glass is half-empty, rather than half-full," said Greg Goodsell, equity strategist at ABN AMRO in Sydney.

"Rather than looking at the positive side, that weaker commodities take the pressure off inflation, people are seeing it as a product of slower growth." The declines in resource firms, combined with the concerns over the global economy, brought the MSCI index of Asian stocks outside Japan at one point to its lowest level since March 2007, before it pared some of the losses. The index was down 1.8 percent as of 0600 GMT. U.S. crude futures were down $1.23 at $120.18 at 0600 GMT.

A survey on Monday showed OPEC oil supply rose for a third consecutive month in July due to higher output from the world's top exporter Saudi Arabia and smaller increases from other members.

The falls in crude prices came even as Tropical Storm Edouard churns across the Gulf of Mexico, with forecasters expecting it will likely hit the Texas coast, a major U.S. oil and gas centre, with near-hurricane strength.

But energy companies have so far reported few production slowdowns, easing some of the concerns. Metal prices also slumped. Spot platinum dropped to as low as $1,530.00 an ounce, its weakest in more than six months, from $1,551/$1,571 late in New York on Monday, on fears of falling demand from struggling global auto makers. Gold edged down about $4 to $890.95/892.00 an ounce.

COMMODITY SHARES SLUMP

The falling prices of oil and metals dented commodity shares in Asia, with Australian resource firm BHP Billiton Ltd losing 6 percent and Hong Kong-listed oil offshore producer CNOOC down 5.4 percent.

"Global slowdown worries have prompted an unwinding in the commodities market, which in turn has spurred a sell-off in commodity-linked stocks," said Steven Leung, director with UOB Kay Hian in Hong Kong. "If the U.S. dollar continues to advance we will see commodity stocks taking further hits in the short term."

The resource-heavy Australian index fell 1.4 per cent, while the Hong Kong and Taiwan indexes dropped more than 2 per cent each. Tokyo's Nikkei average swung between gains and losses, to end down 0.1 percent.

Falls in commodity-related shares were offset by gains in exporters such as Honda Motor which benefit from a weaker Japanese yen.

The dollar benefitted as investors sold other major currencies against the U.S. unit given expectations that other economies are also slowing. The dollar index, which measures the U.S. currency's performance against a basket of six currencies, rose 0.3 percent to 73.685 and reached as high as 73.699, the highest since mid-June.

The Australian dollar extended its slide, striking a four-month low of $0.9234 against the U.S. currency, after the central bank on Tuesday left the door open for the first cut in interest rates in seven years, that some investors believe could come as soon as September.
thanks to :- economictimes.indiatimes.com

Japanese shares down ahead of US Fed meeting

TOKYO: Japanese shares fell slightly on Tuesday as cautious investors held back ahead of an interest rate decision by the Federal Reserve later in the day.

The benchmark Nikkei 225 Stock Average slipped 18.52 points, or 0.14 percent, to 12,914.66 in its third straight losing session. The broader Topix index dropped 0.04 percent to 1,247.15.

While lower crude oil prices and a relatively stable dollar-yen exchange rate helped boost sentiment, Japanese markets stood largely idle as investors awaited Wall Street's next move, said Kenichi Hirano, operating officer at Tachibana Securities in Tokyo.

``U.S. stocks are at a crucial point right now,'' Hirano said. ``Whether they will rebound or fall further will be influenced in part by tonight's (Fed) meeting.''

Also souring the mood in Japan were reports that the government would downgrade their assessment of the country's economy in its August economic report due out Thursday.

Leading decliners were insurance and steel issues. Japan's second-largest steelmaker JFE Holdings, Inc. plunged 7.19 percent to 4,390 yen; Nippon Steel Corp. lost 4.88 percent to 526 yen. Major nonlife insurer Mitsui Sumitomo Insurance Group Holdings, Inc. shed 5.90 percent to 3,190 yen.

The consumer finance sector, however, gained on news of a possible merger between Orix Corp. and Credit Saison Co. Major credit issuer Credit Saison surged 11.22 percent to 2,330 yen, and leasing company Orix added 2.59 percent to 15,070 yen.
Pulp and paper companies and rubber products makers benefited from falling oil prices.

Oil prices fell below US$120 a barrel in electronic trading Tuesday in Asia on expectations the economic downturn in the U.S. will erode consumer demand for crude products.

In currencies, the dollar fell to 107.78 yen Tuesday afternoon from 108.22 yen late Monday. The euro was trading at US$1.5505 compared with US$1.5567
thanks to :- economictimes.indiatimes.com

HCL Q1 net dives 59% as forex losses weigh

NEW DELHI: HCL Technologies, the country’s fifth-largest IT services firm, on Friday posted a 58.8% sequential and 71% year-on-year decline in net profit for the quarter ended June 30, 2008 at Rs 141 crore, on the back of a forex loss of nearly Rs 300 crore. Consolidated revenue for the quarter grew 11.5% sequentially and 34.5% y-o-y to Rs 2,168.8 crore on the back of volume growth, largely in the US and Europe.

The company declared a 150% dividend for the quarter. HCL Technologies also announced the appointment of CEO Vineet Nayar to its board of directors, effective August 1.

During the quarter, the company’s EBITDA (earnings before interest, tax, depreciation and amortisation) grew 17.4% sequentially and 46.3% y-o-y to Rs 508.4 crore. Operating margins improved to 23.4%, against 21.6% in the same quarter last year, as utilisation rates improved. Utilisation levels improved to 73.9% at the end of the quarter, against 71.3% at March-end. The company won deals worth $310 million during the quarter.

HCL Technologies reported a forex loss of Rs 299.9 crore during the quarter as the rupee dipped over 7% against the dollar. Of this, Rs 133.4 crore was due to unwinding of forex covers during the quarter and another Rs 38.7 crore was cash loss. The remaining Rs 127.7 crore was mark-to-market forex loss. HCL had reported a forex gain of Rs 250.4 crore in the same quarter last year. “We look at forex covers as a long-term strategy. Over the past three years, we have made a net forex gain of $0.4 million,” said Mr Nayar.

For the year ended June 30, 2008, the company’s net profit declined 16.9% to Rs 1,124.8 crore. Consolidated revenue for the year stood at Rs 7,639.4 crore, a growth of 26.6% over FY07. EBITDA for the year grew 26.7% to Rs 1,693.9 crore. Operating margins for the year remained flat at 22.2%. The tech firm signed deals worth $1 billion during the financial year.

Forex loss for the year stood at Rs 306.7 crore, against a gain of Rs 328.1 crore last year. HCL now has a forex cover of $2 billion for the next seven quarters.

“The year has been great for HCL Technologies. US revenues crossed $1 billion while Europe crossed $500 million. Among verticals, financial services and manufacturing crossed $500 million each in revenues,” HCL Technologies chairman & chief strategy officer, Shiv Nadar said.

US improved its contribution to HCL Technologies’ revenues to 57.4% at the end of June, against 55.9% in the previous quarter. The growth in US was led by financial services, lifesciences and manufacturing verticals. Europe accounted for 29.1% of revenues, while Asia-Pacific made up for 13.5%.

Hi-tech manufacturing became the largest contributor to HCL’s revenues this year with a 30.7% contribution. The vertical accounted for 28.7% of revenues last year as did financial services, which now accounts for 27.3%.

Consolidated IT services, including software and infrastructure services, registered a revenue growth of 28.6% during the year while BPO services revenues grew 13.7%.

“We are trying to break the linearity in BPO services by focussing on platform-based BPO and outcome-based pricing, the results of which will be seen in the next few quarters,” said HCL BPO chief executive, Ranjit Narsimhan.

The tech company also improved its revenue mix according to contract-type. Fixed-price contracts, which offer a greater scope to increase margins, accounted for 35% of HCL’s contracts, against 30% last year.

“Going forward, we expect margins to remain intact and utilisation at the same levels,” Mr Nayar said. The firm crossed the 50,000-employee mark and had 50,741 employees at the end of June. It has earmarked $150 million as capex for 2009. The company is setting up 16,000 more seats in SEZs in Noida, Chennai and Bangalore.
thanks to :- economictimes.indiatimes.com

Gujarat wants centre to bend rules on power allocation

CHENNAI: The Gujarat government has asked for all the power from the proposed 1,000 MW project in a joint venture with the state-run Neyveli Lignite Corp (NLC) in Tamil Nadu, though the norms are that at least 57 per cent of the electricity generated to be fed to the national grid.
"We have already written to the central government asking for the entire power for consumption in our state. We are waiting for a response," a Gujarat government official who requested anonymity said on phone from Gandhinagar.
NLC too has written a letter to the centre expressing the Gujarat government's desire.
The lignite-fuelled power plant is proposed at Valia in Gujarat where the state-run Tamil Nadu-based NLC has been roped in as 74 per cent partner. The rest of the equity in the Rs.51.4 billion project will be held by the Gujarat Power Corp.
The pact between NLC and Gujarat government was signed two years ago to mine 12 million tonnes of lignite per annum and set up a 1,500 MW power project in two phases.
The first phase proposes to mine eight million tonnes of lignite and build a 1,000 MW power plant.
A senior NLC official explained that by a formula that has been in force for more than two decades, any joint venture with a state-run power company requires 57 per cent of the electricity generated to be supplied to the national grid.
The official, however, cited the case of a similar project between the Andhra Pradesh government and the state-run National Thermal Power Corp in Simhadri where the state was allowed to utilise the entire 1,000 MW generated.
He said even NLC, which is setting up a 250 MW power project in Rajasthan, will supply the entire output to the state, adding that the Gujarat government has the option of roping in the private sector as a partner if its demands were not met.
"The reason why they want to come to us is because we have much better experience in mining and handling lignite-fired power plants," the official said, adding that NLC had a mining capacity of 24 million tonnes per annum and an installed capacity of 2,490 MW.
A joint venture company will be formed once the power allocation issue is sorted out, the official added.

Ambani divorce papers may soon be in public domain

MUMBAI: The famous, but so far unseen, family agreement, which formalised the split between Mukesh and Anil Ambani, may soon become public.

"The MoU, if required, would be produced before the court by Smt Kokilaben, mother of the Ambani brothers," according to Ram Jethmalani, counsel for Reliance National resources (RNRL), an Anil Ambani group company, which is engaged in litigation with the Mukesh Ambani-controlled Reliance Industries over natural gas supply from the Krishna-Godavari (KG) basin. Mr Jethmalani spoke to ET on the sidelines of the legal proceedings in the Bombay High Court.

The family agreement assumes significance in view of the arguments advanced by RIL's lawyer Harish Salve that the MoU was a 'ghost agreement' as nobody has seen it yet and questioned the enforceability of such an MoU.

Thus, the 'family agreement' may take centre stage at the Bombay HC next week. "It's a private document between the Ambani brothers. Besides broad framework of the demerger, it also has the details of the division of the personal assets of Ambani family," said a person broadly familiar with the contents of the MoU.

A single-judge bench of the HC, in an earlier order, had directed the Ambani brothers to renegotiate the gas sales agreement as per the family agreement or the MoU. The MoU has not been submitted in the court as evidence. Mr Salve has argued that the RIL board was not party. "It's a piece of trash, as far as this case in concerned," said Mr Salve.

The case will come up before a two-judge bench of the Bombay HC on Tuesday, when RIL's counsel is likely to complete his submissions and Mr Jethmalani will begin his argument.
thanks to :- economictimes.indiatimes.com