US Offers $6 Billion to Support Auto Lender GMAC

The Bush administration on Monday expanded its bailout of the U.S. auto industry, saying it was buying $5 billion in equity in auto and mortgage finance company GMAC and increasing a loan to General Motors by $1 billion.
CNBC.com
The action was the latest in a lengthy series of emergency government moves aimed at easing the worst credit crisis since the 1930s and limiting the severity of a year-long recession.
The Treasury Department said it would buy $5 billion in senior preferred equity with an 8 percent dividend from GMAC as part of an effort to ensure the solvency of a company considered crucial to GM's survival.
It also said it would lend up to $1 billion to fund GM's purchase of equity in support of GMAC's reorganization as a bank holding company. That loan would come on top of assistance extended to the No. 1 U.S. automaker earlier this month. Sales Decline
The government agreed on Dec. 19 to rescue GM and Chrysler LLC with up to $17.4 billion in loans to stave off a collapse that would have cost hundreds of thousands of jobs and dealt a severe blow to an economy already in recession. Of that amount, $13.4 billion was earmarked for GM.
President George W. Bush said at the time that it would be irresponsible to let the automakers die. The White House moved on its own after Republicans in the Democratic-controlled Congress blocked a deal to provide emergency funds.
U.S. auto sales have plunged to 25-year lows in recent months and are not expected to recover substantially until after 2009 under the most optimistic of outlooks. The recent steep drop in sales, which automakers and analysts have linked to the credit crisis that took hold in September, has pushed both GM and its smaller rival Chrysler to the brink of collapse.
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The Treasury said it was dipping into a $700 billion financial bailout fund approved by Congress in early October to buy the equity in GMAC and extend the loan to GM.
GMAC won Federal Reserve approval to become a bank holding company last week, a move intended to give it freer access to emergency government funds and help it avoid bankruptcy. GMAC has had to raise additional capital to achieve bank holding company status.
The company, co-owned by GM
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and private equity firm Cerberus, has lost $7.9 billion over the last five quarters as the credit crunch raised its borrowing costs sharply and the value of many of its assets plunged. Dividend Restrictions
GMAC agreed to restrictions on dividend payments and executive pay as part of the equity injection. The bonus pool available to the top 25 executives was cut by 40 percent from 2007 levels, a Treasury official told reporters on a conference call.
GMAC said in a statement that GM and a Cerberus management affiliate have agreed to buy $1.25 billion in new GMAC shares. Previously announced separate exchange and cash tender offers have been satisfied, it said.
Representatives of GM and Cerberus could not be reached for comment.

Can investing in land assure good returns in future?

The lucrative long-term return on land plots may tempt you to buy, even at a time when the real estate sector is reeling under the impact of a slowdown. In such a market scenario, can investing in land still assure you of good returns in the future? What is the best way to invest in this precious asset and what are the crucial determinants to assess your prospective buy?

There are various ways to invest in land. Global real estate consultancy Jones Lang LaSalle Meghraj (JLLM) shares some key factors that are necessary to consider. “Identifying a piece of land that is in close or reasonable proximity to future market drivers is important.

Next, one should inquire into the legal status of the land and establish if it is for sale. Finally, locate the owners and make a purchase proposal. For maximum future returns, its is important to make one’s investment while entry costs are low,” says Anuj Puri, chairman and country head of JLLM.

One must especially keep in mind certain aspects to avoid any legal hassles later. For instance, land may be under litigation or may be earmarked for a government project. It could be categorised as forest land or could even be in a Coastal Regulation Zone.

It may also lack basic facilities such as water and power supply or fall in a politically or socially challenged sector. Any or a combination of these factors can subtract or nullify the investment potential of land. Hence all negative possibilities should be covered before purchase.

Another aspect which cannot be neglected is the paperwork needed. A number of documents are necessary in land purchase and need to be checked. The title deed (a legal document proving a person’s right to property), the encumbrance certificate (which proves that the land is not under some sort of legal dispute), the release certificate (in case the land was previously pledged to someone else), the surveyor’s report (to establish its exact dimensions) and — if the owner is an NRI — the power of attorney that gives his representative the legal right to act on the NRI’s behalf, are all significant documents that should be given careful consideration.

But is it profitable to invest in land in the current market situation? Some advise caution. “The current economic recession is leading to unprofitable business for everyone, whether it be a company or an investor. The downturn is obviously not the right time to invest in property as it is not going to reap any positive or profitable results. To make a profitable deal, the investor should wait for at least 2-4 years,” advises Vijay Jindal, CMD of SVP Builders India.

More :- economictimes.indiatimes.com

Sharekhan puts 'buy' on Balaji Telefilms; target Rs 268

MUMBAI: Sharekhan has maintained ‘buy’ on Balaji Telefilms for a target price of Rs 268. The company has denied any plans to launch a Hindi general entertainment channel, dismissing the media reports on the company's GEC plans as pure speculation.

Sharekhan opines that the launch of a Hindi general entertainment channel in the current cluttered and highly competitive scenario will have severe financial implications for the company and also affect its core business of television content. Hence, the brokerage is inclined to believe that the reports of the launch of a general entertainment channel by the company are mere speculation.

The company has launched a new show, ‘Kootukari’, on Surya TV. Earlier ‘Kalyani’, another of its show on Surya TV, had gone off air in mid July 2008. Balaji Television will be offered additional slots on various channels of Sun Network, which will help it, increase the number of programmes under the sponsored segment.

Sharekhan’s interaction with the company's management suggests that the maximum number of programmes that could be launched in the sponsored category can go up to eight against the current four shows. However, despite an increase in the sponsored programming hours, the contribution of the sponsored content business to the company's top line and bottom line shall remain relatively small.

The brokerage has understood that no further development has taken place on the proposed stake sale by STAR. The promoters of Balaji Televisions had been given 240 days (ending April 2009) to buy out STAR's 25.99 per cent stake in the company at Rs 190 per share. Considering the quantum of the amount involved (Rs322 crore), Sharekhan expects the promoters to rope in financial/strategic partners which might lead to an open offer. The open offer would be a trigger for the stock.

Sharekhan’s outlook on the television content business of Balaji Television remains positive, as the company is a scaleable player in a non-scaleable business. However, the near-term profitability of Balaji television would be affected by a drop in the realisations due to the end of the company's exclusivity arrangement with STAR and the going off air of one of its popular shows, ‘Kahani Ghar Ghar Kii’.

At the market price of Rs 148.7, the stock trades at 7.5x FY2010E earnings per share (EPS) of Rs 19.9.
thanks to: economictimes.indiatimes.com

Should Apple lose sleep over Google phone?

In the 15 months since it introduced the first iPhone, Apple has radically changed our expectations for mobile phones. But the rest of the industry isn't standing still. We're likely to see a fresh round of innovation as T-Mobile rolls out the first handset based on Google's Android operating system. And Research In Motion is fiercely defending its mobile e-mail turf with very good new products. Of the two, outsider Google faces the tougher challenge. But based on a preliminary look at the T-Mobile G1, announced on Sept. 23, launching in the U.S. and Europe in late October, I'd say it has a shot.

Apple set this whole competition in motion by building a single, excellent phone within an ecosystem that it controls totally, including the right to approve all third-party software. In contrast, Google is pushing an open platform, meaning any handset manufacturer can design hardware that runs Android. The closest relative to Android is Windows Mobile, which remains awkward to use after a decade of tweaking by Microsoft.

I spent only about an hour with the G1 ($180 with two-year contract; unlimited data plans start at $25), which is co-branded by Google and handset maker HTC. Disappointingly, the phone is a bit thick and heavy. The screen slides up to reveal a keyboard, but the way the keys are recessed between raised areas on either side makes for slightly uncomfortable typing. And while the big touchscreen is nice, you can't resize objects simply by pinching or stretching them with your fingers. Once you get used to this trick on the iPhone, you expect it on every handset.


The Android software is far more interesting than the G1 hardware, in part because the developers tried to tear down the walls that divide applications. Other mobile-phone operating systems get you only some of the way to this goal. On a Windows Mobile handset or an iPhone, if you click on a Web address in an e-mail message, the phone opens a Web page in a browser. Click on a phone number in a Web page, and the phone usually dials it. But a task as simple as copying text from a Web page and pasting it into an e-mail is difficult to impossible on handsets.

Android tries to fix this by organizing activities in terms of users' needs and desires rather than predetermined programs. In a sense you are always in a browser, even when it doesn't look like it. Not surprisingly for a product designed by Google, search is central: If you start typing while browsing the Web or looking at a picture, Android will search the phone contents and the Web based on the text. This instant search could prove to be either extremely helpful or really annoying. I will explore it in a more detailed review of the G1 closer to its launch. One problem with the initial Android release is its Google-centricity. The search, of course, is Google search, and e-mail is optimized for Google's Gmail. The phone pulls contacts from Google Contacts, so you'll need to jump through hoops to keep the phone's contact list in sync with Outlook or the Mac Address Book.
thanks to: economictimes.indiatimes.com

Tata Motors to sell stake in 6 arms

MUMBAI: Tata Motors is learnt to have initiated talks with private equity (PE) funds to sell up to 25% stake each in its six profit-making unlisted subsidiaries. The biggest of the lot is the wholly-owned arm Tata Daewoo Commercial Vehicle Company. Others include HV Excels, HV Transmissions, Tata Motors Finance, Tata Technologies and Telco Construction Equipment (Telcon).

A banker close to the development said the move is part of the company’s plan to raise Rs 3,000 crore through divestment of stakes in its subsidiaries and selling shares in listed firms. Tata Motors is also raising Rs 4,200 crore through a simultaneous, but unlinked rights issue to finance the $2.3-billion acquisition of Jaguar Land Rover (JLR) in June.

“The company feels that it need not hold large holdings in these subsidiaries. Thus, the company will bring them down by 20-25 % in each of them. However, it would like to hold a majority stake in these firms, which are mainly supplying components to it or financing its products,” the banker added. Another banker said Tata Motors would conclude the stake sale by June 2009.

The company had raised $3-billion bridge loans in June this year. Of this, $2.3 billion has been utilised for the JLR buyout and the rest was spent to meet JLR’s working capital expenditure. Tata Motors will pay back the bridge loans in June 2009.

It is learnt that JLR would return $700 million to Tata Motors and mark the loans on its balance sheet.
When contacted, a Tata Motors spokesperson told ET: “Tata Motors has already announced, on August 20, 2008, its intention to review the current investment portfolio and pursue a programme of monetising certain investments over the coming quarters.

We will be announcing these divestment decisions as and when they are taken up by the company. It would not be possible for us to comment on specific companies or initiatives at this stage.” Tata Motors has started selling shares in Tata Steel as part of its fund-raising programme. On Thursday, it sold one crore shares worth Rs 485 crore to Tata Sons.
thanks to: economictimes.indiatimes.com

Gold recovers on firm global cues

NEW DELHI: Gold prices recovered by Rs 170 to Rs 13,130 per 10 gram in the bullion market here today increased demand triggered by a firming trend in global markets.

Traders said buying activity gathered momentum in the precious metals on reports of a firming trend in global markets, which normally sets prices here.

Gold, which fell by over Rs 220 per 10 gram, bounced back as the metal in New York rose on fresh buying by stockists at existing levels.

The metal in New York rose heading for the second straight weekly gain as talks on the 700 billion dollar bailout by the US government to ease the credit crunch stalled.

Standard gold and ornaments, which had lost Rs 220 each in previous day's trading, staged a strong comeback and shot up by Rs 170 each to Rs 13,130 and Rs 12,980 per 10 gram, while the sovereign gained Rs 50 at Rs 10,500 per piece of eight gram.

A similar firming trend was extended in the white metal as silver ready rose by Rs 250 to Rs 20,850 per kg and weekly- based delivery by Rs 295 to Rs 21,095 per kg. Its coins also traded higher by Rs 100 to Rs 28,300 for buying and Rs 28,400 for selling of 100 pieces.
thanks to: economictimes.indiatimes.com

Stocks to watch on Tuesday

MUMBAI: Reliance Industries’ special economic zone in Raigad, Maharashtra, may take off if the company announces a better compensation for farmers willing to part with their land, media reports quoted ministers in the state government as saying.

According to the rehabilitation package announced by RIL in 2006, the displaced farmers will be given Rs 25,00,000 per hectare. RIL also promised a job to one person in each family in the industries that came up in the zone. This may give a boost to the RIL stock, which ended down 2.45 per cent at Rs 1,884.10 on BSE Monday.

The promoters of Emami, Agarwals, have nearly doubled the open offer to acquire 20 per cent stake in ayurvedic pharma firm, Zandu Pharmaceutical Works. The offer was raised to Rs 15,000 a share from Rs 7,315 earlier.

The attempts of Agarwals to enter the board of Zandu have been stalled by the Parekhs, who have raised their stake by nearly 2 per cent in the past couple of months through open market purchases. Emami currently holds 27.5 per cent stake in Zandu while the Parekhs hold over 40 per cent in the company.

On Monday, Zandu shares fell by 5 per cent to close at Rs 16,728 on the BSE, while Emami fell by 2.9 per cent to Rs 279.60. Zandu shares had touched a high of Rs 24,643 on BSE on July 24.

Allcargo Global Logistics has firmed up plans to set up two greenfield ports on both coasts of the country. The company’s shares, which ended 4.18 per cent lower at Rs 848.95 on Monday, could see some upside.

Shares of Usher Agro are likely to witness some action on reports that private equity firms such as Blackstone, TPG, Blue River Capital are eyeing more than a 40 per cent stake in the agri-processing firm. The company’s shares rose 2.99 per cent to Rs 199.75 on Monday.

Jet Airways is in talks with Bangalore-based infrastructure developer GMR Group to buy at least 24 per cent stake in a proposed aircraft maintenance, repair and overhaul venture, to be set up at Hyderabad. Jet Airways shares ended 1.06 per cent lower at Rs 511.30 on BSE.

ICICI Bank has Rs 375-cr exposure in Lehman Brothers

NEW DELHI: Country's largest private sector lender, ICICI Bank today said its London subsidiary has 57 million Euro (about Rs 375 crore) exposure in the Lehman Brothers which has filed for bankruptcy protection.

"ICICI Bank UK Plc holds 57 million euro of senior bonds of Lehman Brothers Inc potential losses are not material," the bank said in a statement. The bank said it had undertaken transactions with the US-based troubled investment banker as part of treasury operations.

"The exposure to Lehman Brothers' entities on account of these transactions and potential loss thereon are not material," it said. ICICI Bank shares plunged by 5.82 per cent to Rs 591.35 on the Bombay Stock Exchange.

Lehman Brothers, which is a 158-years-old-financial institution has filed for bankruptcy protection, after losing around USD 60 billion (About Rs 2,76,000 crore) in sinking real-estate market.

Another investment bank Merrill Lynch is being bought over by Bank of America for USD 50 billion, while world's largest insurer American International Group (AIG) is also facing financial crisis. Meanwhile, Lehman has suspended operations of its three Asian arms.

Lehman Brothers Asia Ltd, Lehman Brothers Securities Asia Ltd and Lehman Brothers Futures Asia Ltd have suspended its operations with immediate effect, including ceasing to trade on the Hong Kong Securities Exchange and Hong Kong Futures Exchange, until further notice.

Alembic shares up 9% on NSE block deal

MUMBAI: Shares of Alembic soared nearly 9 per cent after 2.05 million shares, or 1.4 per cent of equity changed hands in a block deal on the NSE, at Rs 42 each. The identity of the buyer or seller was not immediately available. At 1 pm, the company's shares were up 8.82 per cent at Rs 45.65 after touching a high of Rs 45.85 in trade so far.

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.

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