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Tuesday, July 10, 2007
Rumour Mill : IFCI turns down offer
IFCI has turned down UTI bank's offer at 85 bucks per share to Sellout.
IFCI could enjoy a longer run if the market continues with its bull run
Disclaimer: Rumours are trash - don't believe them :)
ICICI Bank - trillion rupee market cap
ICICI Bank, which turned into a trillion rupee (one lakh crore) bank following its follow-on issue, is a minnow in terms of its global ranking. The bank, which is the eighth most valuable Indian entity, ranks around 82 in terms of market capitalisation (M-cap) among banks worldwide.
Once all the shares are issued, the increased equity base would give ICICI Bank a M-cap of around $25 billion at current prices. While this is much bigger than State Bank of India, it is one-tenth the size of Citibank — the largest bank globally. China’s largest bank, ICBC, too, is worth nearly 10 times as much as ICICI Bank, with a M-cap of $225 billion.
Indian bankers are quick to point out that balance sheets of Indian banks are healthier than their Chinese counterparts and that Indian banks score over their Chinese rivals in adherence to prudential norms. However, China has five banks in the top-50 list while India has none.
The top Chinese banks in terms of M-cap include ICBC ($225 billion), China Construction Bank ($169 billion), Bank of China ($158 billion), China Merchant Bank ($49 billion) China Citic Bank ($41 billion). In India, there are only eight trillion-rupee companies. ICICI Bank has become the eighth company on the bourses to cross the Rs 1,00,000-crore mark on the back of recent listing of its fresh 5.81 crore equity shares on the bourses. Reliance Industries, Reliance Communications, ONGC, Bharti Airtel, NTPC, Infosys and TCS and have already crossed the milestone.
The bank’s M-cap was at Rs 1,03,003.37 crore, when its shares were trading at Rs 970.75, down 1.13% on the Bombay Stock Exchange in the afternoon trade. The scrip on Monday surged to an intra-day high of Rs 985 on the exchange and about 6.87 lakh shares of ICICI Bank were traded by the afternoon session.
ICICI Bank regained the eighth position in terms of M-cap, which it had lost briefly to realty major DLF after its recent listing on the bourses. DLF has slipped to the ninth rank with a M-cap of about Rs 97,359 crore. Its shares were traded at Rs 576 in the morning session on the BSE.
ICICI Bank had raised over Rs 5,400 crore from its follow-on public offer which had received a robust investor response, getting subscribed 11.50 times.
Although ICICI Bank is just over 15-year old, it has grown following a series of M&A moves, which included a reverse merger with its parent ICICI in 2001. Following the merger, when ICICI Bank became the second-most valuable bank in the country, it had a branch network of just over 400 branches as against the 9,000 plus branches of State Bank of India.
Reliance Cipla Life Sciences ?
Mukesh Ambani’s Reliance Group is understood to be interested in acquiring pharmaceutical firm Cipla as part of its expansion in the life sciences space.
Group company Reliance Life Sciences (RLS) is believed to be negotiating a deal but officials of both the companies have dubbed these reports as “speculation”.
“It is totally baseless,” Cipla Joint Managing Director Amar Lulla said when asked about the matter.
Yet, industry sources said negotiations between the two parties were in a fairly advanced stage and the possibility of making an announcement in the next few weeks could not be ruled out.
RLS had announced its intention to get into generics space and planned to invest about Rs 1,000 crore on expanding capacities and foray into contract manufacturing.
It had outlined inorganic as one of the paths for growth and earlier this year picked up 74 per cent stake in UK-based biotech firm GeneMedix. It had also formed a partnership with US-based fund MPM Capital.
On the other hand, Cipla has been one of leading Indian pharmaceutical companies with exports to over 160 countries. Last fiscal, the company recorded a turnover of Rs 3,667 crore with a new profit of Rs 661 crore. It has seven manufacturing at Baddi, Goa, Kurkumbh, Patalganga, Vikhroli, Bangalore and Mumbai.
Wild Picks - Maharastra Seamless, Elecon, Indotech, Oriental Bank
Buy Maharashtra Seamless only on declines with a stop loss of Rs 628 for a short term target of Rs 755.
Buy Elecon Engineering with stop loss Rs 495 for target of Rs 630
Buy Indotech Transformer with stop loss of Rs 395 for target of Rs 495
Buy Oriental Bank with a stop loss of Rs 223 for a short term target of Rs 300.
Technical Analysis
Sensex — After posting a triple bottom at around 12,316 (around 16 March 2007) the index rallied towards an all-time high at 14,723. After its recent low, the index is in a confirmed uptrend exhibiting a sequence of higher highs and higher lows (higher tops and higher bottoms).
Wave Count: SENSEX — Taking price extreme at 12,316 (16 March 2007), the index completed Wave (1) at 14576 (30 May 07). Wave (2) corrected the advance in Wave (1) towards 13,946 (low of 12 June 07). Currently we are into Wave (3) of the advance, which has a minimum price target of 16,206 (taking Wave (1) = Wave (3) in “Price Movement”. Wave (3) target of 16206 is derived as 2,260+ 13,946.The levels of 2,260 is derived as the distance between start of Wave (1) at 12,316 and end of Wave (1) at 14,576: [i.e. 14,576-12,316=2,260].The level of 13,946 is the assumed end of corrective Wave (2).
Wave Count: NIFTY — Taking price extreme at 3,574 (16 March 2007), the Nifty completed Wave (1) at 4,291 (23 May 2007). Wave (2) corrected the advance in Wave (1) towards 4,103 (13 June 2007). Currently we are in Wave (3) of the advance which has a minimum price target of 4,820 (Taking Wave (1) = Wave (3) in “Price Movement”. Wave (3) target of 4,820 is derived as 717+4,103. The level of 717 is derived as the distance between start of Wave (1) at 3,574 and the end of Wave (1) at 4,291: [i.e. 4,291-3,574]. The level of 4,103 is the assumed end of corrective Wave (2).
Moving Averages: SENSEX — The index is trading above the 50dma at 14,261 and 200dma at 13,547.The 10wma is at 14,317. The index has support around the 14,317-14,261 band. A weekly close below the 14,261 could see the index enter a short-term consolidation with decline towards 13,946 (low of 12 June 07).
Moving Averages: NIFTY — The index is trading above the 50dma at 4,205 and 200dma at 3,938.The 10wma is at 4,220.The index has support around 4,220- 4,205 band. A weekly close below the 4,205 level could see the index enter a short-term consolidation with decline towards 4,103 (low of 13 June 07).
Conclusion — Stay focused on upside towards (SENSEX – 16,206; NIFTY 4,820) in 3-6 months while price holds above (SENSEX – 14261; NIFTY – 4205) on a weekly closing basis.
Futures & Options Strategy
Nifty futures gains OI to the tune of 2.67% with index closing positive. Market was range bound during today's session and given a strong close near to the day's high. Market was moving in a range of 30 points during whole day. Today's closing has given a sign of strength in the market. At the end, Nifty closes positive and given a close above 4400 levels, which was very important levels for the market. Nifty futures close with a discount of 14 points, which indicates profit booking in the market. The FIIs bought index futures to the tune of Rs. 845 Crs and sold stock futures to the tune of Rs. 95 Crs. The PCR has come down from 1.51 to 1.54 levels, which indicate strength continuing in the market. The volatility has come down to 22.30 levels indicating volatility expected by market participants.
Among the Big guns ONGC loses OI to the tune of 0.26% with prices going up during the day, indicating short covering in the counter and strong buying at lower levels, at last counter has given strong support to the market to get sustain on higher levels. RELIANCE loses marginal OI to the tune of 0.10% with prices closing positive indicating strength in the counters however, counter also witnessed profit booking in the counter and counter witnessed liquidation by bulls in the counter on higher levels during today's session.
On the TECH front, INFOSYSTCH & SATYAMCOMP gains OI with rise in prices indicating strength in the counter. The counters have given a positive close. However, IT packs have also witnessed profit booking on higher levels. TCS and SATYAMCOMP loses OI with rise in price indicating short covering in the counter on higher levels. Counters are showing strength and which is a good sign for the market but one should take care of the results of the INFOSYS, which is coming on 11th. This can be a trigger for the market and can decide the movement of the entire IT sector.
On the Metal front, TATASTEEL, SAIL, HINDALCO & NATIONALUM gains OI with rise in price indicating strength in the counters. At the end of the all the counters closed positive. Counters have shown buying on current levels indicating further strength in the counters. However, counters have also witnessed profit booking during today's session
In the BANKING arena, SBIN, HDFCBANK & BANKBARODA gains OI with increase in prices, indicating strength in the counters. Counters have fresh long positions during today's session. ICICIBANK gains OI with decline in price indicating weakness in the counter.
During today's session Nifty futures has seen strong buying on lower levels near 4400 levels and given a strong close above the important level of 4400. Overall nifty has strong support around levels. If nifty given a close below 4350 than we can see fresh short position in the market. One should take hedged positions in the market to minimize the risk.
News Tidbits
Dishman Pharmaceuticals & Chemicals will acquire the fine chemicals, vitamin D and analogues business from the Netherlands-based Solvay Pharmaceuticals BV.
Wockhardt Ltd has received the US FDA approval for marketing Fosphenytoin injections containing 50mg Phenytoin equivalents / ml.
Ahluwalia Contracts India Ltd has bagged 4 new civil construction projects, worth Rs 130 crores in June 2007.
Tata Motors will invest Rs 12,000 crore in the next three years to roll out a slew of models in cars and commercial vehicles segments.
Outlook remains positive
The market is likely to display positive trend as fund inflows into the domestic equities continues to remain robust and players are maintaining their high bets on almost all the sectors. However, the market is likely to witness cautious trend as the major Asian indices are exhibiting subdued trend in the ongoing trades.
Us indices posted modest gains on Monday, just missing new record highs, as investors remained cautious eyeing the upcoming earnings reports, which may call for a big slowdown. While the Dow Jones moved up by 38 points to close at 13650, the Nasdaq ended four points higher at 2670.
Indian floats also registered modest gains on the US bourses. Barring VSNL all closed in positive territory. Satyam led the upmove and surged 4%, Rediff added 3.48% and Infosys gained 3.15% . While HDFC Bank, MTNL, Dr Reddy's Lab, Wipro, Tata motors and ICICI BanK gained around 1% each. Global crude oil prices slipped marginally, with the Nymex light crude oil for August series fell by 62 cents at $72.19 per barrel. In the commodity space, the Comex gold for August delivery flared up $7.70 to settle at $662.50 a troy ounce.
Profit taking may emerge in the second half of the trading session
The market may consolidate in the second half, as some profit booking may emerge at all time high level. The BSE Sensex gained 81.61 points, or 0.55%, to 15,045.73, an all-time closing high, on Monday 9 July 2007. It struck a record high of 15,085.22, on that day.
As per provisional data, foreign institutional investors (FIIs) bought shares worth a net Rs 841.64 crore, while domestic institutional investors (DIIs) were net sellers of shares worth Rs 236.85 crore on Monday, 9 July 2007.
The Q1 June 2007 result of Infosys on Wednesday, 11 July 2007 will dictate near term trend on the bourses.
Asian indices were trading mixed today, 10 July 2007 with Japan's Nikkei 225 declining on banking stocks such as Mitsubishi UFJ Financial Group, while South Korea's Kospi and Singapore's Straits Times Index touched intra-day record highs. Nikkei slipped 0.22% at 18,221.36 while Taiwan's Taiwan Weighted slipped 0.10% at 9,360.68.
However, Hong Kong's Hang Seng (up 0.26% at 22,876.17), Singapore's Straits Times (up 0.30% or at 3,637.60) and South Korea's Seoul Composite (up 0.13% at 1,885.99), edged higher.
Wall Street edged higher in an erratic session on Monday, 10 July 2007, as investors were reassured by a drop in treasury bond yields. The Dow Jones industrials rose 38.29 points, or 0.28%, to 13,649.97. Broader market indexes also moved higher. The Standard & Poor's 500 index rose 1.41 points, or 0.09%, to 1,531.85, and the Nasdaq Composite index added 3.51 points, or 0.13%, to 2,670.02.
Brent crude oil eased on Tuesday, 10 July 2007 after a seven-day rally lifted prices to their highest in 11 months. London Brent crude fell 31 cents to $75.47 a barrel. US crude inched down 7 cents to $72.12 a barrel.
Trading Calls
Stocks with +ve Bias: Nagarjuna const, Zee TV, Bharti, Bank of India
Stocks for short term delivery: Crompton
Stocks for investment: Aditya Birla Nuvo, WS Industries, Balaji Telefilms
Indiainfoline - Intraday Stock Ideas
NIFTY (4419) Supp 4392 Res 4440
BUY Bank Baroda (278) SL 274
Target 286, 288
BUY Bank India (230) SL 226
Target 237, 340
BUY Bharti Airtel (883) SL 877 Target 893, 897
SELL Wockhardt (380) SL 385
Target 372, 370
SELL IOC (435) SL 440
Target 426, 423
US market closes higher ahead of earnings
Falling bond yield and lower crude prices boost investor sentiment as traders gear up for earnings season
The US market finished higher today after investors expected that the earnings season, beginning today, 9 July 2007, with Alcoa, will top the lowered expectations. Falling bond yields and slipping crude prices also cheered investors. The absence of tech's leadership today, 9 July 2007, alongside declines in financial and health care prevented a more convincing performance for the indices.
The Dow Jones Industrials ended the session with a gain of 38.29 points to close at 13,649.97. The tech-heavy Nasdaq gained 3.51 points to close at 2,670.02 and S&P 500 closed higher by 1.41 points at 1,531.85.
Nineteen out of 30 Dow stocks closed in the green today. Alcoa, Caterpillar, Boeing, Exxon Mobil, Intel and Johnson & Johnson were the main Dow winners today. Mc Donalds, H-P, AT&T and Honeywell were the main Dow laggards.
J&J shares today gained 1% after announcing a share repurchase program of up to $10 billion. Boeing gained 1% and reached an all-time high after the company unveiled its 787 Dreamliner and announced new orders for the plane.
Alcoa disappoints investors and shares slip in after hours trading
Stocks opened slightly higher in the morning as investors anxiously waited for the Q2 earnings. The absence of upside leadership from influential areas like health care, tech and consumer discretionary stalled follow-through efforts.
During mid-day stocks were trading in a split mode. The most noteworthy factor was the energy sector ignoring the slipping crude prices.
The yield on the 10-year Treasury note closed at 5.159%, down from 5.195% on last Friday.
After the close, Alcoa today reported that said it earned 81 cents a share from continuing operations in the second quarter, compared with 77 cents a year ago. Earnings per share were 81 cents, down slightly from analyst expectations of 83 cents.Revenue was 8.1 billion, in line with Wall Street estimates, and up from $7.9 billion.
Infosys Technologies to report after closing bell tomorrow
Crude oil futures fell today but once again stayed above $72/barrel today on speculation that demand will decline as US refineries shut units. Crude-oil futures for light sweet crude for August delivery closed at $72.19/barrel (lower by $0.62/barrel or 0.85%) on the New York Mercantile Exchange. It was the first decline in eight sessions but prices reached $73 during intraday sessions.
Today, the International Energy Agency revised its world oil demand forecast and said that it would rise faster than expected over the next five years. Global oil demand is forecast to expand by 1.9 million barrels a day (2.2%) a year on average, reaching 95.8 million barrels a day by 2012. The previous medium-term forecast estimated growth of 2%.
Trading volumes showed 1.3 billion shares trading on the New York Stock Exchange and 1.9 billion trading on the Nasdaq stock market. Gaining issues topped decliners by 17 to 15 on the NYSE, while decliners topped gainers by 15 to 14 on Nasdaq.
For tomorrow, market will continue to focus on quarterly earnings reports. Pepsi Bottling Group will report its quarterly results before the market open, while Infosys Technologies will report after the closing bell. On the economic front, wholesale inventories for May will be out at 10:30 ET.
Wild Picks - Bhagiradh Chemicals, Thirumalai, Diamines, XCL and Dujodwala
Wild Picks observes, one of the popular operators, has interest in Bhagiradh Chemicals, Thirumalai, Diamines, XCL, Dujodwala. These stocks might move - should be strictly used for trading purposes.
Disclaimer: Don't blame us if the operator goes Kaput or gets probed by SEBI!
Morning Call - July 10 2007
Market Grape Wine :
In House :
Nifty at a support of 4290 ( positional stop loss of Nifty ) , 4382 and 4351 levels with resistance at 4445 & 4472
Buy : intraday : Adlabs above 573 target 590 s/l of 565
Buy : intraday in F&O : ZEE above 324 target 338 s/l of 319
Buy : intraday in F&O : BOB above 283 target 292 s/l of 279
Buy : Nicolaspiramal in Intraday above 299.5 target 310 s/l of 294.5
Out House :
Markets at a support of 14909 & 14786 levels with resistance at 15095 & 15115 levels .
Buy : IciciBank & SBIN
Buy : Century & JPAsso
Buy : Bhel , & ABB
Buy : Kesoram & ACC
Buy : IDBI & IFCI
Buy : Apil & IndiaInfoline bullet
Buy : Sail & JSW
Buy : IBulls & IBReal & DLF
Dark Horse : WelspunGuj , ACC , BajajHind ,APIL , IDBI , SBIN , IbullReal & Century
Bullet : IOlBroad , Bhel & AsianElec with strict stop loss
Joyride over! choppy waters ahead
We're in the middle of some very choppy waters here, and we wanted everybody to grab an oar.
After an enjoyable ride so far, the markets are turning choppy. Put on your lifejackets (trade with stop loss) and be adventurous only if you have the ability for high risks. Renewed interest from FIIs has kept the momentum intact. After climbing atop mount 15k on Friday, the Sensex finished above that level yesterday, reinforcing a view that the undertone remains positive. Lower inflation and strong response to the recent public issues added to the positive sentiment. A generally healthy trend across global markets has also helped the local bulls' cause. As a result, both the key indices and other smaller indices are now trading at lifetime highs. This, despite the spike in crude oil prices, which have crossed the $76 per barrel mark in London. If oil prices continue to rise there could be an impact on equity markets amid nagging concern about inflation and interest rates.
The mega event - Infosys results - will be unraveled tomorrow. IT stocks have already taken a severe beating in the past 3-4 months because of the appreciation in the rupee vis-a-vis the dollar. But, any further bad news from the industry heavyweights will have a short-term impact on the sector and the market. Keep a close watch on what Infosys management has to say on the outlook going forward. A fresh round of selling in software shares will make them attractive from a long-term perspective. The broader market could also cool off a little bit after the recent advance. We see a cautious to positive start and a choppy day ahead.
Shares of Ankit Metal & Power will get listed today. Suzlon could come under pressure amid reports that the government is probing the accounts of its subsidiaries as part of a wider exercise to look into the use of IPO money since 2004. ONGC and SICAL Logistics might be in the limelight after an offshore supply vessel of the state-run oil & gas major, operated by the latter on contract sank off the Mumbai coast yesterday. TVS Motor could attract some buying after the company launched a new version of its premium bike, the Apache. The company also plans to launch two more bikes during the rest of the fiscal year.
Sun Pharma is planning to acquire 14% more stake in Israel's Taro Pharma by buying out the promoters. The move is aimed at thwarting any attempt by other shareholders of Taro Pharma to block the deal. GTL is another to keep an eye on, as it has sold its enterprise and managed services business to France Telecom for Rs2.5bn. HTMT Global is likely to be in action as the ITES arm of the Hinduja Group is looking to get into consulting through the inorganic route. Public sector aluminium major NALCO is planning to diversify into cement by using the fly ash generated at its captive power plant at Angul, Orissa.
RCF, the public sector fertilizer giant is planning to make alternative building materials from gypsum that could substitute the conventional bricks. Pharma major Wockhardt has received a tentative approval from USFDA to market a generic version of Pfizer's anti-convulsive drug Cerebyx (50 ml injection). Tata Motors could attract attention as chairman Ratan Tata said at the AGM that the company plans to launch a slew of new vehicles in the next few months to beat off competition. Development Credit Bank's (DCB) Board will meet today to consider raising an amount up to Rs3.1bn by way of a preferential issue.
US stocks posted modest gains, just missing new record highs, as jittery traders eyed the upcoming earnings, which began after the closing bell with Alcoa. Buyback plans by Johnson & Johnson and ConocoPhillips also boosted the sentiment.
The Dow Jones industrial average rose 38.29 points, or 0.28%, to end at 13,649.97. The Standard & Poor's 500 Index was up 1.41 points, or 0.09%, at 1,531.85. The Nasdaq Composite Index was up 3.51 points, or 0.13%, at 2,670.02.
Treasury prices rose, lowering the yield on the 10-year note to 5.14%, down from the 5.18% level reached late on Friday. The dollar fell slightly versus the euro and yen. US light crude down 76 cents to settle at $72.05 a barrel on the New York Mercantile Exchange.
European shares rallied, led by resource companies, while shares of Numico shot up more than 10% after Groupe Danone said it will pays $16.7 billion to acquire the Dutch baby-food group. The pan-European Dow Jones Stoxx 600 index increased 0.3% to 398.52. The German DAX Xetra 30 closed up 0.4% at 8,077.39, the UK's FTSE 100 added 0.3% to 6,712.70 and the French CAC-40 finished virtually flat at 6,104.66.
In the emerging markets, the Bovespa in Brazil gained 0.9% at 56,443 while the IPC index in Mexico was down 1% at 32,088 and the RTS index in Russia climbed 1.3% to 1999.
Asian markets were mixed this morning. The Nikkei in Tokyo was down 44 points at 18,217 while the Straits Times in Singapore gained 11 points to 3637 and the Kospi in Seoul was flat at 1883. The Hang Seng in Hong Kong was down 61 points at 22,756.
Markets are witnessing historical trading session almost everyday as bulls settle on new peaks. The benchmark Sensex closed above the 15kmark and Nifty closed above the 4400 mark for the first time ever. Yet again the index heavy weights like ONGC, L&T, Infosys and Bharti Airtel lifted the key indices to new highs. BSE IT, Metal, PSU and Banking index were among the major gainers. However, BSE Auto and FMCG index lost ground. Finally, the 30-share Sensex gained 81 points to close at 15,050 and NSE-50 Nifty added 34 points to close at 4419.
ICSA India jumped by over 7.5% to Rs1309 after the company announced that they have secured orders worth Rs300mn. The scrip touched intra-day high of Rs13620 and a low of Rs1184 and recorded volumes of over 52,000 shares on NSE.
Sadbhav Engineering gained by 0.6% to Rs598 after the company announced that they would raise FII limit to 49% from 24%. The scrip touched intra-day high of Rs617 and a low of Rs598 and recorded volumes of over 65,000 shares on NSE.
SAIL gained by 1.6% to Rs1133 after the company announced that their hot metal out put rises 6% to Rs3.8mn ton. The scrip touched intra-day high of Rs133 and a low of Rs130 and recorded volumes of over 30,00,000 shares on NSE.
Hikal surged by over 13% to Rs536 after the company announced that they have signed a mutually exclusive long-term agreement with Alpharma Inc., a US based global specialty pharmaceutical Company for manufacture and supply of an Active Pharmaceutical Ingredient (API) for the Veterinary sector. The scrip touched intra-day high of Rs544 and a low of Rs480 and recorded volumes of over 20,000 shares on BSE.
Lanco Infratech spurred by over 8% to Rs227 as the 500 MW Teesta VI Hydro Power Project being developed by Lanco Energy, a subsidiary of the company, in Sikkim has achieved Financial Closure. The scrip touched intra-day high of Rs229 and a low of Rs213 and recorded volumes of over 13,00,000 shares on NSE.
FMCG stocks were on the receiving end led by fall in the heavy weight HLL as the scrip slipped by 2.3% to Rs195, Colgate was down by 0.3% to Rs385 and Dabur declined by 1.9% to Rs101.
The Auto stocks also pared their intra-day gains as profit booking dragged the auto stocks lower. Bajaj Auto slipped by 0.3% to Rs2105, Maruti was down by 0.3% to Rs794, M&M declined by 1.2% to Rs779 and TVS Motors dropped 1.2% to Rs61.
Technology stocks also ended with firm gains. Infosys advanced by 1.2% to Rs1993, Wipro gained by 1.3% to Rs526 and Satyam Computer gained by 0.5% to Rs491. NIIT Ltd spurred by over 4% to Rs1167 and Rolta added 2.1% to Rs465.
Capital Good stocks ended with smart gains. L&T advanced by 2.1% to Rs2415, BHEL was up by 1.2% to Rs1575, Siemens gained by 1.2% to Rs1422 and BEL gained by 0.5% to Rs1866. However, ABB slipped 2% to Rs1114.
Results Today:
Eastern Silk, HDFC Bank, Radha Madhav, Sintex Industries, South Indian Bank and Zenith Birla.
Fund Activity:
FIIs were net buyers of Rs8.42bn (provisional) in the cash segment on Monday. On the other hand, local institutions were net sellers at Rs2.37bn. In the F&O segment, FIIs pumped in Rs10.07bn on the same day.
On Friday, FIIs poured in Rs31.79bn. However, a major chunk of this is towards the ICICI Bank follow-on public offering. Mutual Funds were net buyers of Rs258mn.
Major bulk Deals:
BNP Paribas Arbitrage has sold GV Films; Religare Securities has sold Madhav Marbles and Emerging Markets has sold Vimta Labs.
Insider Trades:
Ion Exchange: USB Securities Asia Ltd - A/C Swiss Finance Corporation (Mauritius) Ltd has purchased from open market 0.16% of the company on 28th June, 2007.
Lower Circuit:
Aviva Industries, Anant Raj industries and Swan Mills.
Upper Circuit:
Hindustan Oil Exploration, Hindustan Organic, prime Focus, Marksans, Aarti Industries, Deep Industries, Asian Electronics, Tanla, Radha Madhav, Tripex Overseas, Prime Securities, DS Kulkarni, Yashraj Containers, Vyapar Industries, Bilcare and Kothari products, Ruby Mills, Diamond Cables and Bank of Rajasthan.
Major News & Announcements:
ICSA India secures orders worth Rs300mn
Sadbhav Engineering to raise FII limit to 49% from 24%
IFC invests $67.2mn in Max Healthcare
SAIL hot metal output rises 6% to Rs3.8mn ton
Tata Motors to launch Rs1lakh car in Mid-2008 – Reports
EXCLUSIVE - Equibrain Report - July 10 2007
EXCLUSIVE - Equibrain Report - July 10 2007
Grey Market Premiums - HDIL, Allied Digital, Everonn, Celestial Labs, Spice Communications
HD Infra | 500 | 30 to 35 |
| Allied Digital | 170 to 190 | 135 to 140 |
| Everon Sys. | 125 to 140 | 420 to 430 |
| Celestial Labs | 60 | 8 to 10 |
| Ankit Metal & Power | 36 | 3 to 4 |
| Spice Comm. | 46 | 7 to 8 |
| Surychakra Power | 20 | 2.5 to 3 |
| Alpa Labo | 62 to 68 | 8 to 9 |
| Simplex Projects | 170 to 185 | 125 to 130 |
| Omaxe Ltd. | 260 to 310 | 55 to 60 |
Indian Rupee hits IT Companies
Ramesh Mahendroo is a worried man these days. CEO of a small software company in Noida, he billed his US client $700,000 (Rs 3.09 crore) in March, 2007. But at the end of the 60 day payment cycle, the US client sent only Rs 2.8 crore. Mr Mahendroo had lost almost Rs 29 lakh and he could not utter a word.
Mr Mahendroo is not alone. By the time, the payment arrives, its short by several lakhs or even a few crores leaving the IT and BPO companies cash strapped to pay employees and manage overheads. To avert it most BPOs and IT firms, are renegotiating contracts and putting in clauses according to which the billing rate per hour will go up by some basis points if the rupee falls below a certain threshold and vice versa. Some are also negotiating shorter payment cycles.
And the story is not limited to small IT companies and BPOs. Even large ones are facing the heat. According to Credit Suisse, Infosys Technologies may miss its rupee sales guidance this time due to a hit from the rising rupee. According to Merill Lynch there will be a decline of about 330 basis points (3.3%) in operating margins of IT companies, this quarter due to the rise in rupee and wage hikes this quarter.
“We have asked our sales people to go back to all dollar denominated contracts and look for ways of renegotiation. We expect the rupee to fall a bit in winter months when the demand for oil goes up especially as OPEC has refused to increase production. Nevertheless, we are not taking any chances,” said KS Ananthanarayanan, CFO of Birlasoft, a mid sized IT firm.
BPOs are also trying to minimise the loss. “Most BPOs are putting together clauses according to which the billing rate per hour will go up a certain basis points if the rupee falls below a certain threshold. Vice versa, the billing rate will go down if the rupee falls, though it’s an unlikely scenario,” says Manoj Malhotra, CEO of Thapar Group owned Salient BPO in Gurgaon.
“Nobody is working at older billing rates especially in this scenario of rupee rise. In most of our contracts, we are having the renegotiation clause built in,” says Zenta BPO country manager Jaswinder Ghumman. According to analysts, another way to negate the rupee rise is to spread to other geographies. “The Filipino peso has also appreciated against the dollar but not as much as the rupee. So, BPOs and IT firms having a play there can swiftly shift capacities and negate their forex impact,” says Gartner research director TJ Singh.
Most small IT and BPO companies with 100-200 seat operations don’t have a separate treasury department. Many, however, do hedge. Still, the rapid rise of the rupee against the greenback has left their finances in the disarray.
“A Re 1 change in the dollar, impacts our margins by about 0.3% but we have some natural hedges in terms of revenues and costs in dollars and pounds,” says Firstsource CEO Ananda Mukerji.
The rupee neared its nine year peak last week when it hit a peak of 40.39 on Thursday before closing at 40.52. The rupee has risen from 44.2 since January 1 this year to a 40.40 as of Monday. The rupee was trading at 46.06 in July of 2006. The hit due to rupee rise will be evident in the first quarter results to be announced this month by IT majors.
According to a study done by a BPO focused portal, 60% of small BPOs in India shut down within months of starting operations.
According to an analysis, the profit margins of about 22-25% in IT companies is almost being negated. The rupee has gained about 17%. MAT has been levied at 11.33%. FBT on ESOPs is being levied at 33.33%. Salaries are rising at a rate of 15%. And service tax on leases has been levied at 12.5%. Add to that the impending end of tax sops in 2009 and the woes of IT industry become even worse. Meanwhile, people like Mr Mahendroo have no recourse but to optimise processes and renegotiate contracts with clients to prevent foreclosure.
Sequoia Capital - too much money in the market
Bangalore-based Sequoia Capital India has always been ahead of the curve in the Indian venture capital market. In its earlier incarnation as WestBridge Capital Partners, it raised a $150 million (Rs600 crore) early-stage fund to back Indian technology start-ups in 2001 at a time when early-stage funding had all but deserted India. Last year, it raised its third India fund—the $400 million Sequoia India Growth Fund I—and became the first to focus on consumer-driven Indian companies. Around this time WestBridge also merged with Sequoia—another first in India. Today, the firm manages $750 million in India-dedicated capital. Sequoia India managing director and co-founder K.P. Balaraj spoke to Mint about the road ahead:
Has Sequoia India made a formal transition to private equity investing in India?
Early-stage is still very much a focus, and we continue to be the most active in this segment in India. Later-stage, IPO and PE deals are a growing focus for us and we have invested in a number of companies like Idea, Paras and KMC constructions. We like to position ourselves as a long-term VC investor focused on growth situations alongside strong management teams.
But in the US, isn’t sequoia primarily an early-stage investor?
Well, Sequoia in the US also plays in both segments. So, the India strategy is not different.
What’s the portfolio looking like in Funds II and III so far?
We’ve made about 20 investments from Fund II. More than half has gone into consumer and media companies. From Fund III, about six investments have been in the growth stage. The focus is clearly on consumer-driven opportunities in the domestic market. We are sector agnostic.
Post-merger with Sequoia, do you continue to pursue investments independently?
We tend to manage both businesses separately. It is not one pool of capital.
Any concerns about the current VC environment in India?
The main concern is about the quantum of money that’s already in the market. There are many new teams in the market but only a few are able to raise funds, given that limited partners (LPs) generally feel there is too much money in the Indian market. LPs have turned cautious. There’s likely to be a slowdown in fund raising both, on the VC and PE fronts.
So, you’re saying a bubble is not unlikely.
It is a valid concern. A lot of people will get funded in this phase, so while capital is easily available, the flip side is that most markets will get over-funded. How many will fetch a good return is a call investors have to take before they commit. It is not easy, but then risk is the essence of the VC business.
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