Domestic companies waiting to tap the offshore market for funding by issuing rupee bonds would now find it easier as the government has clarified that foreign portfolio investors will have to pay only 5% withholding tax on their investments in offshore Indian rupee bonds.

Further, the government also said that possible capital gains arising out of movement in exchange rate would be exempt from tax.

For instance, an FPI standing to gain simply from the appreciation of the rupee against the dollar will not have to bear a tax burden on such a profit.

“In so far as taxation of interest income from these INR off-shore bonds in the case of non-resident investors is concerned, it is clarified that withholding tax at the rate of 5%, which is in the nature of final tax, would be applicable in the same way as it is applicable for off-shore dollar denominated bonds,” the Central Board of Direct Tax said in a release.

However, the legislative amendment to enable these tax breaks will be proposed only next year through the Finance Bill, 2016.

“The market has been waiting for this clarity and now that it has come, we will see greater interest. Although the legislative amendments will remain, the notification is enough to elicit interest from foreign investors,” said Ajay Manglunia, executive vice-president of fixed income at Edelweiss Securities.

Following the Reserve Bank of India’s move to allow Indian companies to issue rupee bonds in the offshore market in September, many domestic firms have been eying to raise funds through such offshore issuance.

HDFC, the largest home loan lender has already got an in-principle board approval to raise funds through offshore rupee bond issuance. This move will attract FPIs to such bond issuance given the tax liability is reduced and thereby returns are higher.

As per the RBI guidelines, a company can raise up to $750 million per year under the automatic route through rupee denominated bonds, popularly known as masala bonds.

Dabur posted a below-expected Q2 with net sales/EBITDA/adj. PAT up 8.7%/ 15.9%/18.7% YoY as domestic volumes grew at a slower than expected pace (5% YoY vs. RCMLe 6-7%) due to supply disruptions. EBITDA margins however were largely in line on lower input and stable A&P costs. We slightly pare estimates to factor in weak consumer demand and supply issues, given Dabur’s ability to churn out high single-digit volume growth on a consistent basis.

Consol.net sales grew 8.7% YoY to R2,090 crore with domestic/international FMCG revenues up 8.8%/6.4% YoY. Domestic volume growth came in at 5% YoY (RCMLe 6-7%) on account of a festive season shift to Q3 and supply disruptions from Nepal as political disturbances hit the beverage segment. Excluding the beverage segment, volume growth was in line at 7% YoY. Consumer care business grew 9.6% YoY with segment EBIT margins also improving 185bps to 24.2%. Hair Care segment posted 9.4% YoY growth with double-digit volume-led growth in hair oils, whereas shampoos reported slower growth amid heightened competition.

We pare our FY16/FY17/FY18 earnings estimates by ~1.9%/2.9%/3.9% to build in the slower-than-expected recovery in consumer demand. We accordingly revise down our Sep’16 TP to Rs 310 (from Rs 325 earlier).

The initial public offering (IPO) of SH Kelkar & Company managed to get fully subscribed on the second day of the three-day offering. At 5 pm, the issue was subscribed 1.84 times, stock exchanges data showed. The company would now raise at least Rs 510 crore from the primary markets.

The QIBs portion was subscribed 4.68 times. A little over 2.75 crore shares were subscribed against 58.82 lakh shares reserved for this category. The retail investor book was subscribed 0.47 times.

Nearly 47 lakh shares were bid against 1 crore shares on offer. In the non-institutional investors (NII) category, 49.25 lakh shares were bid against 43 lakh shares reserved. The NII book was subscribed 1.14 times.

The company raised Rs 150 crore on Tuesday by allotting shares to anchor investors in a pre-IPO placement. The list of anchor investors includes T Rowe and Neuberger Berman, ICICI Prudential, L&T Mutual Fund and Small Cap World Fund.

The IPO consists of a fresh issue of R210 crore and an offer for sale (OFS) worth Rs 298 crore by existing shareholders, including Blackstone Capital Partners and SH Kelkar’s non-executive director Prabha Ramesh Vaze. In 2010, Blackstone had bought a 33% stake in the company for Rs 243 crore.

The company plans to use the proceeds of the issue for repayment of existing corporate debt, to infuse fresh funds into subsidiary company KV Arochem, and for general corporate purposes.

SH Kelkar manufacturers fragrance products and ingredients used in the pharmaceutical and fast-moving consumer goods sectors. Kotak Investment Banking and JM Financial are the financial advisors to the issue.

So far this calender, 16 companies have tapped the primary markets through IPOs and  raised close to Rs 11,000 crore — the highest since 2010, PrimeDatabase showed.

Indigo IPO received bids for 10,94,61,435 shares against the total issue size of 3,01,22,088 shares, data available with the NSE showed.

IndiGo’s parent InterGlobe Aviation’s Rs 3,018-crore initial public offer, the biggest in nearly three years, was over-subscribed by 3.63 times till 2 pm on the third day of the issue on Thursday.

The IPO received bids for 10,94,61,435 shares against the total issue size of 3,01,22,088 shares, data available with the NSE showed.

The quota reserved for qualified institutional buyers (QIBs) saw tremendous response with over-subscription of 11.92 times, according to PTI.

The portion reserved for retail investors witnessed 51 per cent subscription and non-institutional investors category was subscribed 14 per cent.

The IPO closes on Thursday.

Brokerage houses have been continuously reviewing Q2 earnings of India Inc and revising target prices accordingly. (Reuters)

Most of the companies till now have announced their results for the quarter ended September 30, 2015. Companies like Reliance Industries, Sun TV, Infosys, Dish TV and Wipro beat market estimates while Q2 results of companies like Just Dial, Hindustan Unilever and Asian Paints remained below expectations.

Brokerage houses have been continuously reviewing Q2 earnings of India Inc and revising target prices accordingly.

Below are five stocks that have witnessed cut in their target price post Q2 numbers by the analysts.

Dabur India
FMCG major Dabur posted 18.7 per cent rise in consolidated net profit to Rs 341.1 crore for the second quarter ended September 30, on account of robust growth in key consumer categories like toothpastes,hair oils and home care.The company had posted net profit of Rs 287.5 crore during the same period of the previous fiscal, 2014-15. Net sales of the company rose to Rs 2,092.1 crore for the second quarter, 2015-16, up 8.7 per cent, as compared to Rs 1,924.1 crore in the year-ago period, Dabur Ltd said in a statement. Religare in a research note said, “We pare our FY16, FY17 and FY18 earnings estimates by around 1.9 per cent, 2.9 per cent and 3.9 per cent, respectively, to build in the slower-than-expected recovery in consumer demand. We accordingly revise down our September 2016 target price to Rs 310 (from Rs 325 earlier) and maintain ‘Buy’ on the stock.” On October 28, the share price of Dabur India was at Rs 271.50.

Thermax
Thermax reported 24.6 per cent drop in standalone net profit at Rs 64.83 crore for the quarter ended September 30, 2015. The company’s net profit in the year-ago period was Rs 86.01 crore. Total income of the company during the period decreased to Rs 1,069.62 crore from Rs 1,180.31 crore in the year-ago period. “As on September 30, Thermax has an order backlog of Rs 4,006 crore against Rs 5,016 crore in September, 2014,” the company had said in a statement. Thermax Ltd, a leading energy and environment solutions provider, has manufacturing facilities in India, China and Europe.

Sharekhan in a research note said, “The management commentary regarding order inflow visibility is not encouraging during the post-result conference call. As reflected in the Q2 result, based on a slower-than-expected order inflow outlook and weak revenue traction, we are revising down our revenue as well as earnings estimates by 12-14 per cent for FY2016 and FY2017. However, improvement in bottom-line performance of subsidiaries was a positive surprise, which is expected to be sustained in future. In line with the revision in earnings estimates, we have cut our price target to Rs 955 and retained ‘Hold’ rating on the stock due to its rich valuation and flattish earnings outlook.”

UPL
UPL posted a revenue of Rs 2,801 crore, a growth of 5 per cent YoY. However, the negative effect of currency limits the growth for the quarter. Growth in revenue was largely driven by a healthy volume growth of 13 per cent and price increase of 2 per cent, however the effect of the positive price and volume was largely negated by unfavourable currency (-11% YoY). The reported net profit improved by 12 per cent YoY to Rs 185 crore which included extraordinary expenses of Rs 44 crore (Rs 5 crore for restructuring of Latin American and European businesses and Rs 36 crore forex loss in other income), adjusting to that PAT stood at Rs 229 crore, a growth of 3 per cent YoY (high tax rate YoY). The revenue from domestic and Latin American markets grew by 5 per cent and 8 per cent respectively, however revenue from Europe declined by 10 per cent YoY. The company was able to marginally improve its OPM on account of change in product mix and better cost management.

Sharekhan said, “We have tweaked our earnings estimates for FY2016 and FY2017 in view of high volatility in currency especially in Latin America and ROW markets. Considering the above, we have revised downwards the revenues from Latin America and ROW. Hence, we have revised our price target downwards to Rs 550. However, we continue to prefer UPL in the agro-chemical space on account of a recent decline in price, wide presence geographically and continuous introduction of new products across different geographies. We continue to maintain our ‘Buy’ rating on the stock.”

JSW Steel
For the second quarter ended September 30, 2015, JSW posted net profit of Rs 116.95 crore, down 84.38 per cent, against Rs 748.76 crore in the corresponding quarter a year ago. Religare in a research note said, “JSW’s Q2 results outperformed expectations, with a net profit of Rs 110 crore as against losses estimated for the quarter. Our preference for JSW stemmed from its lower raw material prices sources particularly iron ore, which we now believe have limited legs to go beyond Q4FY16. On assuming Rs 6,700 as EBITDA/t for full-year FY17, our September 2016 target price works out to Rs 975 (Rs 1,050 earlier). Downgrade to ‘HOLD’ (from BUY).” On October 28, JSW Steel share was at Rs 911.75.

Somany Ceramics
Net profit of Somany Ceramics jumped 1.43 per cent year-on-year at Rs 10.65 crore for the quarter ended September 30, 2015. The company posted net profit of Rs 10.50 crore in the corresponding quarter a year ago. Gross sales jumped 7.85 per cent YoY at Rs 419.48 crore. Management of Somany Ceramics expects growth to pick up in the second half of 2015-16 and has guided for FY16 revenue growth of around 15-16 per cent (as against 18-19 per cent earlier) amid improving demand from government projects, corporates and exports. Religare cuts FY16/FY17/FY18 revenue/PAT estimates by around 2 per cent for Somany Ceramics on account of the revised guidance but maintained positive outlook on the stock. The brokerage house revised its September 2016 target price to Rs 455 from Rs 465 earlier. On October 28, Somany Ceramics share was at Rs 336.

Federal Bank
According to Prabhudas Lilladher, Federal Bank reported weak Q2FY16 as lumpy slippages in corporate and SME segments resulted in 15 per cent/39 per cent rise in GNPL/NNPLs. NII growth remains suppressed affected by sluggish loan growth, while fee income remains tepid. The bank sold loans worth Rs 360m to ARC during Q2FY16 and another Rs 140 crore during the current quarter and guided for potential stressed assets of Rs100‐150 crore. Management guided for better asset quality trends in H2FY16 and aims to bring down net NPL ratio to less than 1 per cent (1.33% currently). The brokerage house cuts its estimates to factor in higher opex & provisions and lower Federal Bank target price to Rs 72 (from Rs 80) and retain our ‘BUY’ rating. On October 28, the share price of Federal Bank was at Rs 56.30.