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High FII ownership an overhang for Indian market: Credit Suisse (09-09-2015)

Due to relatively better economic fundamentals — including a less volatile domestic currency and better GDP growth momentum — compared to EM peers, the Indian market is touted to benefit from a stronger investor interest.

However, given that the Indian market already commands an overweight since the last one year after the BJP government came to power, a considerable exodus of foreign investment in the wake of a US Fed rate hike can’t be ruled out.

The retreat of foreign portfolio investment (FPIs) in the last one month seems to be supporting this premise even as nothing incrementally negative India-specific factor has played a role behind this liquidation. Since mid-August after China started devaluing yuan, close to $3.4 billion of FPI money has exited India. The change in sentiment is well reflected by a turnaround in their investing. As against buying of $23 million worth of India shares in mid-August, FPIs have been selling $175 million worth of equities on an average in 21 days.

According to Credit Suisse, high FII ownership of Indian stocks is an overhang for the Indian market. Data compiled by FE show that FIIs collectively own close to 17% stake in the BSE-200 universe, with there being as many as 81 companies where they enjoy at least 20% ownership. Credit Suisse, in a recent report, pointed out that falling commodity prices, which stand close to their 2004 levels, are changing trends in trade and capital flow. It notes that oil producers, who earlier exported capital through sovereign wealth funds, are currently facing a combined current account deficit of $100 billion against a $0.5 trillion of surplus, thanks to a near-50% collapse in crude oil pries in the last one year. In this scenario, capital flow from these countries may be reversing and not just slowing, it argues.

“As flows reverse, the seller could be price insensitive, and stocks with the highest rise in FII ownership, of late, could have an overhang,” adds the CS report dated August 31. The brokerage has listed several stocks, which, due to higher FII ownership, may witness selling pressure in the near future. The list includes Tech Mahindra, Eicher Motors, HDFC, Page Industries, Lupin, Idea Cellular and Adani Ports and SEZ  that have seen FII ownership increase anywhere between 10% and 31% since March 2011.

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‘Companies, shareholders must find common ground on exit strategies’ (09-09-2015)

Citing examples of several delistings that took place with companies re-organising their share capital, proxy advisory firm IiAS, in a report, argues that companies and shareholders need to find a common ground on exit strategies.

The report states that for a few unlisted companies, reorganisation of share capital has helped them reduce minority shareholding. It cited the case of Bosch Chassis Systems India (BCSIL), a subsidiary of Bosch Group, which was delisted in 2008.

At the time of delisting, the promoters offered an exit price of R600 a share (fair value of R10) to minority shareholders. After delisting, the promoters held a 97.94% stake. The remaining 2.06% was distributed among 4,344 shareholders.

However in an upcoming AGM, the company is seeking to adopt a resolution to increase the face value from R10 to Rs 100,000 a  share.

On consolidation, each shareholder will receive shares as per their entitlement. “For example, if a shareholder holds 10,000 shares, she will receive one share after the consolidation. Shareholders who hold less than 10,000 shares will be left with fractional entitlements. All such fractional holdings will be aggregated and the resulting number of shares will be transferred to a trustee for sale. The proceeds will then be distributed to the shareholders with fractional entitlements. Based on the recommendation of the independent valuers, the company has fixed the sale price at Rs 600 per share.” states that IiAS report.

But some shareholders claim that not only is this coercive, but also the exit price is low and does not factor in the improved company fundamentals. But the company says that since the shares are not traded on any exchange, the scrip is illiquid.

As there is no active market for the shares, it is difficult for shareholders to find interested buyers. The company reasons that the move will benefit these shareholders, who now get an exit opportunity. While shareholders may have a valid concern, companies have a right to delist: IiAS believes companies and shareholders must work together to clear the air of mistrust and find a common ground which is in the best interest of all stakeholders.

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Amtek Auto’s subsidiary Castex Tech comes under Sebi lens (09-09-2015)

As a crisis continues at Amtek Auto, markets regulator Sebi has begun a probe into alleged share price manipulation at its listed subsidiary Castex Technologies through forced conversion of foreign bonds.

Auto component maker Amtek is grappling with financial issues and its shares have also taken a beating in recent weeks, while exposure to its bonds have created ripple effects in the mutual funds and other market segments as well.

Sources said Sebi is seriously looking into the matter following allegations by some bondholders that efforts are being made to manipulate the share price of Castex Technologies by forcibly asking investors to convert their bonds.

In the wake of these complaints, the watchdog has started a probe into the issue, they added.

Both Amtek Auto and Castex Technologies could not be immediately contacted for their comments.

On July 31, Castex Technologies informed the BSE that its board of directors has decided to mandatorily convert all the outstanding bonds of USD 80.80 million out of FCCB (Foreign Currency Convertible Bond) issue of USD 130 million.

The conversion date for conversion of bond into equity shares, would be September 10, 2015, it had said.

“The board has also decided to mandatorily convert all the outstanding bonds of USD 56.60 million of FCCB issue out of USD 70 million. The conversion date for conversion of bond into equity shares, would be September 25, 2015,” the filing made in July had said.

Besides, the company’s board had approved issuance of mandatory conversion notices, in terms of the bond documents.

Shares of Castex Technologies dropped nearly five per cent to close at Rs 42.45 on the BSE today.

Amtek Auto, in August, had said that “there is temporary cash flow mismatch in the company.”

Last month, JP Morgan Mutual Fund restricted redemptions from two of its debt schemes u2014- Short Term Income Fund and India Treasury Fund.

The move came in the wake of a decline in NAVs (net assets value) of the schemes due to fund house’s exposure to Amtek Auto’s debt papers. These schemes have a collective exposure of about Rs 200 crore in Amtek Auto.

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Telecom stocks gain after govt clears spectrum trading guidelines; RComm surges over 12% (09-09-2015)

Telecom companies

Share price of Reliance Communication surged 12.47 per cent to Rs 62.70,

The Cabinet cleared spectrum trading guidelines on Wednesday under which telecom operators will be able to sell radiowaves to other service providers, a move that will help address the problem of spectrum shortage.

Cheering the announcement, share price of Reliance Communication surged 12.47 per cent to Rs 62.70, followed by Bharti Airtel and Idea Cellular which gained 2.55 per cent and 3.01 per cent at Rs 355.60 and Rs 150.50, respectively in the afternoon trade. Sensex was up 411 points at 25,730.

“Cabinet has approved spectrum trading today. Telecom sector has been demanding it for optimum utilisation of spectrum,” Telecom Minister Ravi Shankar Prasad said.

As of now only government is allowed to allocate spectrum to telecom firms through auctions.
The decision move is expected to increase efficient use of radiowaves by enabling telecom operators, who have a low subscriber base or unutilised spectrum lying with them, to trade in radiowaves.

(With inputs from PTI)

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Hero MotoCorp shares gain over 2% on launching its first global manufacturing facility (09-09-2015)

Hero MotoCorp Sensex

Hero MotoCorp shares rose as much as 2.27 per cent intraday on Wednesday after the company informed stock exchanges that it has inaugurated its first global manufacturing facility at Villa Rica, in Colombia. (Express Photo)

Hero MotoCorp shares rose as much as 2.27 per cent intraday on Wednesday after the company informed stock exchanges that it has inaugurated its first global manufacturing facility at Villa Rica, in Colombia.

Completed in a little over nine months since construction began, the Colombia plant is Hero’s 5th manufacturing facility, in addition to four assembly plants in India. This Plant will act as a hub for selling to the Andean countries. It can also be a strategic base for shipping to North American markets such as Mexico and the US.

At 1.00 pm, the share price of Hero MotoCorp was trading 1.84 per cent higher at Rs 2,359.95 on BSE. It opened at Rs 2,328.05 and had touched a high and low of Rs 2,369.80 and Rs 2,328.05, respectively, in trade so far. Sensex was up 1.87 per cent at 25,799.52.

In a BSE filing, the company said, “Spread over 17 acres (68,000 sq meters) of land at the Parque Sur free trade zone at Villa Rica in the state of Cauca – about 500 km south-west of Bogota, the plant will have an initial production capacity of 80,000 units per annum. This capacity will be expanded to produce 150,000 units per annum, in the next phase. The plant has been built at a project cost of $70 million of which $38 million has been utilized in CAPER and rest will be used as working capital over the next few years.”

With the commencement of operations at the manufacturing plant in Colombia, the New Delhi-headquartered Hero MotoCorp has become the first Indian two-wheeler manufacturer to set-up a manufacturing plant in Latin America.

Currently Hero sells its range of two-wheelers through 160 outlets spread across 133 cities and towns in the country. Hero has rapidly augmented its network by adding 69 outlets in 2015 alone. Some of the bestselling Hero products include – the 100cc Splendor iSmart, Eco Deluxe, and Passion-Pro; the 125cc Glamour; the 150cc Thriller and the 225c Karizma ZMR. Hero is also the only two-wheeler manufacturer to offer a 4 year warranty on all its models.

The promoters holding in the company stood at 34.64 per cent while institutions and non-institutions held 51.89 per cent and 13.47 per cent, respectively.

For the quarter ended June 2016, the company posted net profit of Rs 750.34 crore, up 33.33 per cent, against Rs 562.76 crore in the corresponding quarter a year ago.

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Why Sensex rallied over 450 points today (09-09-2015)

sensex and nifty

The BSE Sensex and NSE Nifty opened on a strong note on Wednesday tracking firm global markets and continued across-the-board buying. (Express Photo)

The BSE Sensex and NSE Nifty opened on a strong note on Wednesday tracking firm global markets and continued across-the-board buying.

At 12.19 pm, Sensex was up 458.87 points at 25,776.74. Similarly, Nifty was up 144.50 points at 7,832.75 during the same time.

Below are the reasons why Sensex jumped over 450 points today

1. Global markets: Asian shares surged with markets in China stabilising and Japanese stocks posting their biggest one-day gain since the height of the global financial crisis in 2008.Japan’s Nikkei soared 7.7 per cent, its biggest single-day gain since October 2008, apparently galvanized by hopes of corporate tax cuts. China major stock indices rose in early trading on Wednesday, extending Tuesday’s nearly 3 per cent gain.

2. Indian rupee opened on a strong note against the dollar and advanced by 24 paise to 66.31 against in early trade following sustained selling of the US currency by banks and exporters.

3. Finance Minister Arun Jaitley said the government in the next few days will bring out a list of tax exemptions to be phased out as part of the exercise to reduce corporate tax rate to 25 per cent in four years.

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JSW Energy, JPVL shares extend gain on hydro power projects deal (09-09-2015)

JSW Energy Jaiprakash Power

JSW Energy shares extended gains on Wednesday after the company on Tuesday announced that it has bought two hydro power projects of debt-ridden Jaiprakash Power Ventures (JPVL) in Himachal Pradesh for Rs 9,700. (Reuters)

JSW Energy shares extended gains on Wednesday after the company on Tuesday announced that it has bought two hydro power projects of debt-ridden Jaiprakash Power Ventures (JPVL) in Himachal Pradesh for Rs 9,700 crore.

At 11.31 am, JSW Energy shares were trading 4.24 per cent higher at Rs 77.40 apiece. It opened at Rs 76.55 and had touched a high and low of Rs 78.80 and Rs 76, respectively, in trade so far. The share price of JSW Energy climbed around 10 per cent to Rs 74.25 on Tuesday.

The two projects bought by JSW Energy are 300 MW Baspa-II and 1,091 MW Karcham Wangtoo. Besides, JSW Energy has also entered into a binding agreement with JPVL to acquire 500 MW Bina thermal power plant in Madhya Pradesh.

Share price of JPVL was trading 1.37 per cent higher at Rs 5.93 in the morning trade. The scrip jumped 5.02 per cent to Rs 5.85 on Tuesday.

In a BSE filing on Tuesday, JPVL said, “The company has concluded the Sale of Securities of Himachal Baspa Power Company Limited (HBPCL) to JSW Energy at an Enterprise Value (EV) of Rs 9,700 crore reduced by mutually agreed adjustments, including inter-alia Rs 300 crores which is payable upon receipt of certain additional consents and approvals related to the Karcham Wangtoo HEP.”

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Infosys shares gain over 3% after being cleared in US visa violation case (09-09-2015)

Infosys

The US Labor Department has cleared Infosys Ltd of any wrongdoing and closed its investigation after American technology workers at Southern California Edison complained their jobs were wrongfully outsourced to foreigners working on H-1B visas. (Photo: Reuters)

Infosys shares gained over 3 per cent in morning trade on Wednesday after the company said that the US Labor Department cleared the IT major of any wrongdoing and has closed the investigation into US Visa violation case.

At 11.15 am, the shares were trading 3.14 per cent higher at Rs 1,092.60. On NSE, the shares were trading 3.17 per cent higher at Rs 1,092.40. Sensex was up 304.40 points at 25,622.27 during the same time.

A statement by Infosys said: “Infosys is pleased to report that the US Department of Labor concluded its investigation with a determination of compliance regarding labor condition applications filed in the Southern California Edison project. Infosys fully cooperated with the DOL in its investigation, and over 145 files were reviewed, with no violations found.”

The issue first was reported in June this year following reports that Infosys and TCS had displaced US employees with cheaper resources from India, thereby allegedly violating labour regulations.

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Navkar Corporation shares gain over 5% on debut (09-09-2015)

Navkar Corporation

Navkar Corporation shares gained as much as 5.6 per cent on Wednesday in morning trade after opening around 2 per cent down than its issue price. (Reuters)

Navkar Corporation shares gained as much as 5.6 per cent on Wednesday in morning trade after opening around 2 per cent down than its issue price.

At 10.21 am, shares of the logistics company were trading 2.3 per cent higher at Rs 158.60 apiece as compared with its issue price of Rs 155. It opened at Rs 152 and touched a high and low of Rs 163.80 and Rs 152, respectively, in trade so far. Sensex was up over 300 points at 25,653.

The logistics company made its debut on the BSE and NSE on Wednesday. The company’s IPO closed on August 26, 2015 and was subscribed 2.85 times, with total bids for 8.14 crore shares, compared with 2.85 crore equity shares on offer.

Navkar Corporation is a CFS operator having three units – Ajivali CFS I and Ajivali CFS II at Ajivali, and Somathane CFS at Somathane. All of the three CFS units are located in close proximity to the Jawaharlal Nehru Port, India’s largest container port.

As of March 2015, the company’s aggregate installed handling capacity stood at 310,000 TEUs per annum. The company also offers services like cargo storage facilities at CFSs, packing, labeling/bar-coding, palletising, fumigation and other related activities. It also provides warehousing facilities, for which, it occupies an aggregate area of 500,000 sq ft. Further, the company owns and operates a private railway freight terminal equipped with 461 trailers for the transportation of cargo between CFSs and the Jawaharlal Nehru Port.

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HUL shares gain over 1% after it sells bread and bakery business to Everstone (09-09-2015)

BSE Sensex

At 9.30 am, HUL shares were trading 1.61 per cent higher at Rs 812. (Photo: PTI)

Hindustan Unilever (HUL) shares gained over 1 per cent in the early trade on Wednesday after the company said on Tuesday (post market hours) that it had signed an agreement for the sale and transfer of its bread and bakery business under the “Modern” brand to Nimman Foods, an investee company of the Everstone Group, for an undisclosed consideration.

At 9.30 am, HUL shares were trading 1.61 per cent higher at Rs 812. It opened at Rs 805 and had touched a high and low of Rs 812.45 and Rs 805, respectively, in trade so far. Sensex was up 1.53 per cent at 25,726.

In a BSE filing, the company said, “HUL’s decision is in line with its strategy to exit non-core businesses, while continuing to drive its growth agenda in the core packaged foods business.”

The transaction is subject to statutory approvals and requisite clearances. It includes sale and transfer of the ‘Modern’ brand and business on a going concern basis. HUL and Everstone will work together to secure the necessary approvals to complete the transaction over the next few months. HUL will continue to manage the operations until the completion of the transaction.

HUL’s bread and bakery business consists of a full range of white and sweet breads, health and wellness breads and value added bakery products such as cakes, muffins, buns, pavs, cream rolls under the “Modern” brand name. The business currently has six own operating manufacturing units and a network of franchisees across India.

The promoters holding in the company stood at 67.22 per cent while institutions and non-institutions held 18.74 per cent and 14.04 per cent, respectively.

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