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Wednesday, January 23, 2008
Pre Market Watch - Jan 23 2008
The Indian Market is likely to have a positive opening due to favoring cues from the Asian markets. Yesterday, the Indian market closed in red but considering the initial set back, it has managed to recover some ground during the final trading hours of the session. The market opened with circuit down on the back of negative cues from the global markets and was suspended for an hour. The BSE Sensex closed lower by 875.41 points at 16,729.94 and NSE Nifty fell by 309.5 points to close at 4,899.30. We expect that the market may remain volatile during the trading session. The Federal Open Market Committee has approved the 75 basis point inter meeting cut in the fed funds rate to 3.50%.
On Tuesday, the US market closed in red. The Dow Jones Industrial Average (DJIA) closed lower by 127.62 points at 11,971.68. S&P 500 index slipped by 14.69 points to close at 1,310.50 and NASDAQ dropped by 47.75 points to close at 2,292.27
Indian ADRS closed in mixed. In technology sector, Satyam grew by (3.46%) along with Wipro by (1.32%) and Infosys by (0.13%). In banking sector, HDFC bank and ICICI bank slipped by (4.61%) and (1.06%) respectively. MTNL and VSNL dropped by (17.22%) and (12.05%) respectively.
The major stock markets in Asia are trading firm. Hang Seng is trading higher by 1584.55 points at 23,342.18 along with Japan''s Nikkei trading up by 421.27 points at 12,994.32 and Singapore Starit Times is trading at 2,951.82 up by 85.27 points.
On Tuesday, the FIIs stood as net seller both in equity and debt. The gross equity purchased was Rs4,896.90 Crore and the gross debt purchased was Rs142.40 Crore while the gross equity sold stood at Rs7,322.50 Crore and gross debt sold stood at Rs236.40 Crore. Therefore, the net investment of equity reported was (Rs2,425.70 Crore) and net debt was (Rs93.90 Crore).
Today, Nifty has support at 4,789 and resistance at 5,043 and BSE Sensex has support at 16,372 and resistance at 17,681.
Grey Market - Bang Overseas, Reliance Power, Cords Cable
Future Capital Holding 765 380 to 400
Reliance Power 450 180 to 200 (Not bad, eh ? after all the panic)
Emaar MGF 610 to 690 250 to 275
J. Kumar Infraprojects 110 to 120 10 to 12
Cords Cable Ind. 125 to 135 12 to 15
Bang Overseas 200 to 207 30 to 35
Investment Picks
GMR Infrastructure
RPL
Sterlite Industries
Axis Bank
L&T
The recommendations are for long-term purpose and one should hold on to these scrips for at least six months to earn reasonable returns.
Via Indiainfoline
Wall of Worry…sit on the fence!
The greatest of worries can't pay the smallest of debts.
It’s cuts and bruises all around. The Federal Reserve has yet again attempted to rescue not just the US economy, but global markets. The unscheduled, yet expected rate cut was prompted by the global meltdown over the past couple of days and a weak start to the year for Wall Street. Though the Fed rate cuts may improve things across global markets for the time being, the worries are far from over. There could be more pain in the offing. Pain is bearable for a short time. But prolonged pain leads to torture so ensure that your positions are good enough to climb over any wall of worry. Else, sit on the fence till the situation stabilizes. We expect a gap-up opening and another highly volatile day of trading. Trend across Asia and later on in Europe will be key to watch out for.
There is a growing feeling that the US is speeding into a recession in the wake of the housing sector bust and the ensuing strain in the credit markets. There are fears that a slowing US economy could hurt 4-5 years of strong global expansion. Hence, the carnage across global markets. But, the Fed move has managed to stem the tide for the time being. There is talk of another 50-basis-point cut by the Fed at its Jan 29-30 meeting. Given the dire situation that the US and the global economy find themselves, that could turn out to be true. In that case, global markets should stage a strong comeback. Not only that, now there is also talk that even the generally conservative RBI Governor YV Reddy could relent and loosen his tight monetary policy. That will surely fire up the bulls. Even an indication of rates having peaked out will be suffice to shore up the gloomy sentiment. A good, market-friendly and reform-oriented budget will be the icing on the cake. However, there is also a chance that the rosy scenario may not work out the way we all wish it to.
FIIs pulled out Rs42.65bn (provisional) from the cash segment yesterday. Domestic institutions pumped in Rs27.79bn. In the F&O segment, they were net buyers of Rs76.7bn.
Results Today: Avaya Global, BILT, Bank of Maharashtra, Bank of Rajasthan, Bongaigaon Refinery, Canara Bank, Chennai Petroleum, D-Link, Dena Bank, Euro Ceramics, Fortis Healthcare, Foseco India, Graphite India, Hindustan Zinc, Ion Exchange, Mid-Day Multimedia, Mirc Electronics, Monsanto India, MRO-TEK, Polaris Labs, PVR, Renuka Sugar, SRF, Sun TV, Union Bank, Varun Shipping and Vivimed Labs.
Kinetic Engineering has decided to sell some of its surplus assets near Pune for Rs480mn. A buyer has been identified and MOU has been entered into. The formalities including obtaining various approvals is under process and expected to be completed by March 31.
Kinetic Engineering's Board has also approved the merger of the Auto Component Division of Jaya Hind Sciaky with the company
Asian stocks have rebounded after the Fed rate cut. The MSCI Asia Pacific Index added 2.6% to 135.47 as of 10:30 a.m. in Tokyo, headed for its biggest gain since Nov. 29. The regional benchmark tumbled 10% in the previous two sessions. It yesterday completed its worst two-day drop in almost 18 years.
The Nikkei in Tokyo was up 3.35% at 12,994 while the Hang Seng in Hong Kong gained 6.3% at 23,132. The Kospi in Seoul advanced 2.1% to 1643 while the Straits Times in Singapore rose 2.9% to 2949. The Shanghai Composite was up 1.15% at 4611 but the Taiex in Taiwan was flat at 7582.
US stocks closed well off their day's lows after the Fed announced a 75-basis-point cut in benchmark interest rates to ward of the looming threat of a recession. The global market selloff prompted the Fed to hold an emergency telephone conference Monday night, and slash the fed funds rate to 3.5%.
Treasury Secretary Henry Paulson says the Fed's emergency rate cut may boost investor confidence and has called on Congress to quickly enact legislation to buttress growth. His remarks came after a two-day rout across global equity markets fueled by mounting concerns that the US is headed into a recession.
The S&P 500 dropped 15 points, or 1.1%, to 1,310.5. The Dow Jones slid 128 points, or 1.1%, to 11,971.19, its first close below 12,000 since November 2006. The Nasdaq lost 48 points, or 2%, to 2,292.27.
Market breadth was negative. About five stocks declined for every four that rose on the New York Stock Exchange.
US stocks have had a miserable start to 2008. Year-to-date, the Dow is down 9.8%, the S&P 500 is down 10.8% and the Nasdaq has fallen 13.6%.
In a statement, the Fed said it was making the move due to the weakening economic outlook and increased risks to growth. This was the first emergency interest rate cut since the Sept. 2001 terrorist attacks in New York. It was also the biggest interest rate cut since 1984.
Treasury prices surged in a classic flight-to-quality, with the yield on the 10-year note falling to 3.45% from 3.65% late on Friday. The dollar fell versus the euro and gained against the yen.
US light crude oil for February delivery fell 72 cents to settle at $90.57 a barrel on the New York Mercantile Exchange. COMEX gold for February delivery rose $8.60 to settle at $890.30 an ounce.
After the close, Apple reported fiscal second-quarter earnings and revenue guidance that missed Wall Street forecasts. The company also reported higher fiscal first-quarter sales and earnings that topped estimates, but investors focused on the forecast, sending shares lower in extended-hours trade.
Texas Instruments reported higher fourth-quarter earnings and weaker revenue. The chipmaker also issued a mostly in-line first-quarter forecast. Shares gained about 1%.
The European Central Bank (ECB) and the Bank of England (BOE) may have to follow the Fed in cutting rates. The widening interest-rate differential between the US and Europe may spur gains in the euro, which is not good for EU. Bank of Canada, in a scheduled meeting, lowered its main rate by a quarter percentage point to 4% and signaled it will act again to shield Canada from the US slowdown.
Strength in the banking sector helped European markets to a higher. The pan-European Dow Jones Stoxx 600 index ended up 2.4% at 316.17. The UK's FTSE 100 finished up 2.9% at 5,740.10, while the French CAC 40 ended 2.1% higher at 4,842.54, and the German DAX 30 ended down 0.3% at 6,769.47.
In the emerging markets, the Bovespa in Brazil was up 4.45% at 56,097 while the IPC index in Mexico surged 6.4% to 26,892. The RTS index in Russia was down 1.6% at 1967 and the ISE National-30 index in Turkey fell 1.7% to 56,314.
Bulls hope for some stability!
Markets slumped second day in running as both the exchanges were halted after benchmark Sensex and Nifty hit the 10% lower circuit limit at open. The fall was attributed to margin pressure amid fears of US economic slow down. Markets extended the down fall to the seventh straight trading session marking a fall of more than 20% since reaching a record high of over 21,200 on January 10, 2008.
However, after wildly gyrating 2,200 points between its high and low, benchmark Sensex staged a swift recovery after crashing by more than 12% early Tuesday. The rebound could be attributed to a reassuring statement about the health of the Indian economy from Finance and the Prime Ministers. Finally, the 30-share Sensex closed at 16,729, plunging 875 points (4.9%). The NSE Nifty nose-dived 309 points or 6% to close at 4,899.
Satyam recovered lost 3.5% to Rs353. The company posted a consolidated profit after tax of Rs4.34bn for the quarter compared to Rs4.09bn in the previous quarter. This represents a sequential growth of 6%. The company also announced that corresponding revenue growth under Indian GAAP consolidated is expected to be between 29 % and 29.2 %. EPS for the full year is expected to be Rs25.50, implying a growth rate of 18.9 %.
The company on Monday announced that it entered into a definitive agreement to acquire Bridge Strategy Group, a Chicago-based management consulting firm. In making the US$35mn, all-cash purchase, Satyam said it significantly reinforces its strategy consulting and business transformation capabilities. The scrip touched an intra-day high of Rs379 and a low of Rs305 and recorded volumes of over 38,00,000 shares on NSE.
Bank of India was among the gainer, the scrip was up 2.5% to Rs390. The company announced that it posted a net profit of Rs5118.90mn for the quarter ended December 31, 2007 as compared to Rs2548.70mn for the quarter ended December 31, 2006. Total Income has increased from Rs25794.50mn for the quarter ended December 31, 2006 to Rs37052.10mn for the quarter ended December 31, 2007. The scrip touched an intra-day high of Rs399 and a low of Rs305 and recorded volumes of over 15,00,000 shares on NSE.
BHEL ended at Rs1993 down 5.2%. The company declared that the company won Rs8.66bn contract from Reliance Industries. The scrip touched an intra-day high of Rs2075 and a low of Rs1800 and recorded volumes of over 17,00,000 shares on NSE.
Grasim Industries slipped over 5% to Rs2862. The company posted a net profit (after minority share) of Rs7218.60mn for the quarter ended December 31, 2007 as compared to Rs5593.10mn for the quarter ended December 31, 2006. Total Income has increased from Rs37329.90mn for the quarter ended December 31, 2006 to Rs44488.30mn for the quarter ended December 31, 2007. The scrip touched an intra-day high of Rs3110 and a low of Rs2570 and recorded volumes of over 98,000 shares on NSE.
Corporation Bank dropped over 6% to Rs352. The company announced that it posted a net profit of Rs1909mn for the quarter ended December 31, 2007 as compared to Rs1464.20mn for the quarter ended December 31, 2006. Total Income has increased from Rs10276mn for the quarter ended December 31, 2006 to Rs12658.30mn for the quarter ended December 31, 2007. The scrip touched an intra-day high of Rs404 and a low of Rs270 and recorded volumes of over 2,00,000 shares on NSE.
Lupin declined by over 6.6% to Rs501. The company announced its Q3 results with net profit at Rs1.7bn Vs Rs560.3mn and net sales at Rs7.50bn Vs Rs5.11bn. The scrip has touched an intra-day high of Rs538d a low of Rs425d has recorded volumes of over 2,00,000 shares on NSE.
Provogue is down 5.3% to Rs1200. The company declared that it acquired majority stake in Sporting & Outdoor. The scrip touched an intra-day high of Rs538 and a low of Rs425 and recorded volumes of over 2,00,000 shares on NSE.
Vijaya Bank declined by over 12% to Rs56. The company declared its Q3 result with net profit at Rs1.27bn Vs Rs927.3mn and interest income at Rs10.2bn Vs Rs7.3bn. The scrip touched an intra-day high of Rs65 and a low of Rs45 and recorded volumes of over 29,00,000 shares on NSE.
News Snippets:
SBI group's consolidation is likely to be delayed. (BL)
L&T may form a JV with US arms major Lockheed Martin to develop Mark 41 Vertical Launching Systems in India. (ET)
NTPC and Gail might have to pump in more money into the Dabhol power project. (ET)
Tata Motors has signed a development contract with Chrysler’s electric vehicle unit to develop and market an electric version of the Ace in the US. (BL)
Tata Power, GMR Energy and GVK Power are eyeing New Delhi's ’s Rs1.75bn first waste-to-energy project. (BS)
An Empowered Committee of Secretaries has allowed ONGC Videsh to acquire stake in Venezuela’s San Cristobal oilfield. (BL)
NTPC is looking to invest Rs17bn in a Jharkhand coal mine. (FE)
GAIL and Engineers India have jointly submitted an EoI to Oman Gas Company for setting up a gas processing plant in Oman. (FE)
United Spirits has launched Dalmore and Jura from its Whyte & Mackay portfolio along with W&M blended scotches. (ET)
Piaggio is planning to increase production and launch new scooters in India. (ET)
Sobha Developers is planning to develop a 156-unit luxury residential project in North Bangalore. (ET)
Infosys and Wipro may bid for specific verticals of Capgemini. (ET)
Supreme Court has rejected a petition seeking stay on construction of DLF Cyber city in Gurgaon. (ET)
Arvind Mills is planning to invest Rs4bn to expand its retail business in four years. (ET)
GHCL is planning to demerge its business into three listed entities. (ET)
Jet Airways is to set up a Maintenance Repair and Overhaul facility and a flight catering facility. (BL)
Aegis Logistics intends to set up 70 outlets of Auto Gas LPG in Andhra Pradesh. (BL)
Delay on the part of Essar Oilfield Services in deploying a semi-submersible rig has affected GSPC’s exploration plan in its deepwater K-G Basin block. (BL)
IOC is setting up an LPG import facility at the land allotted to it by Cochin Port Trust at an investment of Rs1.7bn. (BL)
SIDBI has reduced its prime lending rate by 0.5% and its deposit rates by 0.25%. (BL)
Tanishq, the jewellery division of Titan Industries is embarking on a retail expansion with an aim to increase sales by 50% to Rs30bn in FY09. (BL)
A consortium comprising Reliance Energy and Spanish firm CAF has bagged the project to operate and manage a 22.7 km metro rail link between New Delhi city centre and international airport for 30 years. (BL)
Huawei Tech, Telefon AB LM Ericsson and Nokia Siemens Networks are pursuing a supply contract worth ~US$4.8bn with Tata Tele. (Mint)
Apollo Tyres expects revenues of US$350mn from Hungarian unit in the second year of operations. (DNA)
HDFC Bank is looking to foray into investment banking in the next 3-4 months. (DNA)
PNB may quit JVs with Principal Financial Group in the asset management and insurance broking businesses. (BS)
India added 8.17mn new telecom subscribers in December, taking overall telecom density to 23.89%. (ET)
The RBI has temporarily allowed banks to increase their ceilings on capital market exposures. (ET)
The Government is planning a Rs70bn package to revive the irrigation sector. (ET)
The Government is planning to relax few ECB norms for Ultra Mega Power projects. (ET)
Freight rates for bulk commodities like coal and iron ore could go down by 3-5% in the forthcoming railway budget. (ET)
Indian Railways has managed to negotiate a discount of Rs150 per kilolitre of HSD from oil marketing firms for 2008. (BL)
The EGoM on SEZs will discuss a finance ministry proposal on February 4, to impose export obligation in excess of 50% on such zones. (BS)
Crude drops despite fed cut
Prices recover from intra day lows but ends lower as traders fail to overcome recession fears
Crude prices once again fell today, Tuesday, 22 January, 2008. Price recovered from intra day lows but traders could not get outs of the recessionary fears despite Federal Reserve slicing benchmark interest rates by 75 basis points to 3.5%. Global stocks markets worldwide plunged in the last couple of days on fears that US economy would be hitting a recession soon. There was no floor trading in New York yesterday because of the Martin Luther King Day holiday.
Crude-oil futures for light sweet crude for February delivery today closed at $89.85/barrel (lower by $0.72/barrel or 0.8%) on the New York Mercantile Exchange. Futures touched $85.42 before the Fed announcement. Prices are 76% higher than a year ago.
Crude had ended FY 2007 substantially higher by $35 or 57%. It was crude’s biggest yearly gain in five years.
The Federal Reserve today slashed its benchmark interest rate 0.75% to 3.5% after global equity markets tumbled on concern the slumping U.S. economy will drag down the growth rates of other nations.
Brent crude oil for March settlement today rose $0.94 (1.1%) to $88.45 on the London-based ICE Futures Europe exchange. The London benchmark rose 54% in FY 2007, the most since 1999 when prices more than doubled.
Natural gas and crude oil drop by 1.4% at MCX
Natural gas fell for a fifth day amid speculation an emergency interest rate cut by the Federal Reserve won't be enough to prevent the U.S. economy from sliding into recession, paring demand for gas. Gas for February delivery fell 32.3 cents (4%) to settle at $7.67 per million British thermal units.
Against this backdrop, February reformulated gasoline dropped 2.28 cents to $2.2806 a gallon and February heating oil fell 3.48 cents to $2.4726 a gallon.
In the currency markets, the dollar fell against its major counterparts today pressured by expectations of further rate cuts from the Fed. The dollar index, which tracks the performance of the greenback against other major currencies, was down about 0.7% at 76.311, after earlier dropping as low as 76.251.
Members of the OPEC left production targets unchanged at the 5 December meeting in Abu Dhabi. The group, which produces 40% of the world's oil, will review output at a 1 February, 2008 meeting in Vienna.
At the MCX, crude oil for February delivery closed at Rs 3,489/barrel, lower by Rs 50 (1.4%) against previous day’s close. Natural gas for January delivery closed at Rs 308.2/mmtbu, lower by Rs 4.3/mmtbu (1.3%).
Gold ends higher on fed cut
Gold and silver prices erase earlier loss and close moderately higher
Bullion metals ended higher today, Tuesday, 22 January, 2008 after the greenback slipped after Federal Reserve declared an emergency interest rate cut to save the Us economy from plunging into a recession. Since the past couple of days, stocks markets worldwide, mainly in Asian region, plunged on fear that U economy would be hitting a recession soon. Silver also gained after dropping earlier in the day.
Gold generally moves in the opposite direction of the U.S. currency. Gold, as a dollar-denominated commodity, suffers from dollar strength.
Comex Gold for February delivery rose $8.6 (1%) to close at $890.3 an ounce on the New York Mercantile Exchange. Earlier in the day it slipped by more than 3.5%. This year, prices have gained 6% till date. Last week, gold suffered a loss of 1.8%.
Comex Silver futures for March delivery fell 11 cents (0.7%) to $16.105 an ounce. Silver has gained 9.2% in 2008. Earlier in the day it slipped by more than 3.5%. The metal had climbed 16% in FY 2007. The metal also has gained for seven straight years.
The Federal Reserve today slashed its benchmark interest rate 0.75% to 3.5% after global equity markets tumbled on concern the slumping U.S. economy will drag down the growth rates of other nations.
Gold has traditionally been used as a safe-haven asset against rising inflation. Investor sentiments are boosted by the fact that gold and silver are alternate sources of good investment in the face of declining dollar and rising energy prices. Rising crude increases inflationary pressures and vice versa. On the other hand strong dollar reduces the appeal of the metal as alternate source of investment.
Gold prices had closed above the $900 mark for the first time on Monday, 14 January, 2008. Since then it has dropped by more than $12.
Gold witnessed the greatest annual gain in twenty eight years by gaining $200/ounce (31%) in FY 2007. In 2006, silver had jumped 46% while gold gained 23%.
On the currency markets, the dollar fell against its major counterparts today pressured by expectations of further rate cuts from the Fed. The dollar index, which tracks the performance of the greenback against other major currencies, was down about 0.7% at 76.311, after earlier dropping as low as 76.251.
In the energy market today, crude oil fell to a six-week low on recession concerns and oil closed lower by 72 cents today at $89.85 barrel.
Gold had climbed 31% in FY 2007 as lower interest rates had sent the dollar tumbling, and crude-oil prices rose to a record. The Fed reduced federal funds rate three times in FY 2007.
At the MCX, gold prices for February delivery closed lower by Rs 166 (1.5%) at Rs 11,025 per 10 grams. Prices rose to a high of Rs 11,194 per 10 grams and fell to a low of Rs 10,991 per 10 grams during the day’s trading.
At the MCX, silver prices for March delivery closed Rs 530 (2.5%) higher at Rs 20,368/Kg. Prices opened at Rs 20,911/kg and fell to a low of Rs 20,296/Kg during the day’s trading.
RCL, REL, ONGC January 2008 futures at premium
Turnover in F&O segment slumps
Nifty January 2008 futures were at 4920, at premium of 20.70 points as compared to spot closing of 4899.30.
The NSE's futures & options (F&O) segment turnover was Rs 44,307.58 crore, which was lower than Rs 82,241.65 crore on Monday, 21 January 2008.
Reliance Capital (RCL) January 2008 futures were at premium, at 2375, compared to the spot closing of 2357.45.
Reliance Energy (REL) January 2008 futures were at premium, at 1711, compared to the spot closing of 1648.60.
Oil & Natural Gas Corporation (ONGC) January 2008 futures were at premium, at 975, compared to the spot closing of 959.25.
In the cash market, the S&P CNX Nifty lost 309.5 points or 5.94% at 4899.30.
Satyam, Ranbaxy, Bharat Forge, Bombay Dyeing
Satyam computer
CMP: Rs 354.65
Target price: Rs 500
Merrill Lynch has maintained its buy rating on Satyam Computer, while downgrading its price Target to Rs 500 from Rs 550, after the company suggested bullish outlook next quarter.
“Next quarter could see a 180 basis point margin expansion as wage hike gets further absorbed and RSU (restricted stock unit) charge decreases, implying 11.6% qoq (quarter on quarter) EPS growth,” the investment bank said.
“However, due to higher SG&A (selling general & administration expenses) than earlier envisaged and acquisition related costs (acquired a consulting firm for $35m this quarter), Satyam has guided to a 175bps to 200bps margin decline, up from 175bps earlier,” Merrill added.
Ranbaxy
CMP: Rs 340.60
Target price: Rs 505
Citigroup has maintained its buy rating on Ranbaxy, with a price Target of Rs 505, citing strong earnings guidance for calendar year 2008.
“A strong FTF (file-to-file) pipeline, tie-ups to augment its product pipeline and leverage its strong front end and efforts to move to a more capital efficient model make us positive on Ranbaxy’s short as well as long-term prospects,” the investment bank said. “We believe the stock price now factors in most negatives like difficult global market dynamics, manufacturing related issues with the FDA, slowdown in product approvals, and loss of the Pravastatin 80mg opportunity,” it added.
Bharat Forge
CMP: Rs 284
Target price: NA
ICICI Securities has reiterated its buy rating on Bharat Forge citing accelerated earnings growth over the next couple of years. “Post a muted FY08E (estimate), we expect accelerated revenue and net profit CAGR (compounded annual growth rate) of 14.1% and 28.4%, respectively over FY08E-11E (net profit CAGR of 21.5% over FY07-11E),” the brokerage said.
Such expectations are based on improved outlook for business from India and the US, new long-term contracts moving into commercial production stage, initiatives in the non-automotive space, and margin improvement, it said.
Bombay Dyeing
CMP: Rs 734.20
Target price: Rs 1,500
Motilal Oswal Securities has reiterated its buy rating on Bombay Dyeing, with a price Target of Rs1,500, while valuing the real estate business at Rs1,400 per share and textile business at Rs1,00 per share. “The capital value of Bombay Dyeing’s erstwhile textile plants in Mumbai, located at Dadar and Worli, has witnessed an unprecedented jump over past two years due to sharp appreciation of rentals in Mumbai and drop in capitalisation rates for commercial properties in India,” the brokerage said. Motilal Oswal expects the company’s textile business to turnaround in 2008-09, enabled by its ongoing restructuring exercise.
Nagarjuna Cons
CMP: Rs 396
Target price: Rs 257.20
Prabhudas Lilladher has upgraded rating for Nagarjuna to buy (from outperformer), while raising price Target to Rs396 per share, after a recent meeting with the company. “Given the strong order book and potential, both growth in order book and its composition as well as margin expansion, we have valued the core construction business at 26 times FY09E (estimated) earnings (against 17x previously), which is a 25% premium to its peers.
The premium is on account of faster diversification into newer value accretive segments,” the brokerage said. “Our one-year forward discounted cash flow value works out to Rs 360/share for the core business. We have a value of Rs17/share for the build, operate, transfer portfolio and a value of Rs 28/share for real estate ventures by NCC Urban Infra and Rs 37/share for the Telapur Township project,” it added.
Power off, cheque de!!
The public issue of Reliance Power closed for subscription last week. However, the buzz around it is far from over. According to bankers who are associated with the deal, there have been quite a few withdrawals in the non-institutional segment, which is also popularly known as the HNI (for high net worth individual) category.
Market players said the withdrawals have been on account of two factors: the huge oversubscription and a steady decline in the grey market premium. The massive fall in the secondary market has also played a major role, they said.
“There are enough reasons to believe that many HNIs have issued stop-payment instructions,” said a banker on conditions of anonymity. “It happened in the case of Cairn and now it is happening in R-Power.
The huge oversubscription (in the HNI category) will lead to small allotments, which will make life difficult for people who have leverage to invest in the issue,” he added. The number of people issuing such instructions could not be ascertained.
Nor could the value be obtained. An official who works with one of banks involved in collection of escrow amounts said there have been stop-payment instructions for bids worth around Rs 4 crore. An R-Power official declined to comment on an email questionnaire on this issue.
HNIs typically borrow money at 17-20% to invest in public issues. So, the number of shares allotted and the listing gains play an important role. If both go down, it becomes a loss-making proposition, as the cost of borrowing money or leveraging becomes more than the listing gains.
R-Power’s public issue closed on Friday last week and the HNI category was subscribed more than 190 times. This means an investor bidding for 10 lakh shares would get a little over 5,200 shares. The low allotment is a big blow to HNIs who have borrowed money for one lakh shares.
Such investors could still manage high gains if the stock lists at a massive premium to the issue price, which in this case is Rs 450. If the grey market premium is anything to go by, then the stock is likely to list at a premium of around Rs 200. This is much below the earlier projections of more than Rs 500.
A section of market players are of the view that the recent massive fall could also have triggered a lot of withdrawals, as investors would have preferred to buy stocks at lower levels. In the last one week, the Sensex has lost more than 3,500 points, or 17.4%. Most large-cap stocks have lost anything between 10% and 20%, which provides an excellent buying opportunity with much less risks involved.
Investors looking for a share of R-Power can now may look at Reliance Energy, say dealers. “The stock has fallen by nearly 30% in the last one week and provides excellent buying opportunity,” said a dealer.
Some banks in Ahmedabad are believed to have received calls asking for stop-payment on Reliance Power. Tentative estimates peg the amount of stop- payment cheques at over Rs 100 crore. The final figure would be available by January 23. A few co-operative and public sector banks in Gujarat said that that their branches received instructions for stop-payment for cheques issued in favour of Reliance Power.
The list of public sector banks included Central Bank of India, Dena Bank, Bank of Baroda and Punjab National Bank, while many co-operative banks like Kalupur Bank and Nutan Nagrik Bank also received stop-payment instructions.
An official at Kalupur Bank, which has 33 branches spread across the state, said its Ashram Road branch has received 25 applications. A Nutan Nagrik Bank official confirmed that each of its 18 branches have received three to 15 applications with similar instructions.
Nikunj Patel, a bank employee, said as he was suffering from financial stringency, he preferred to stop payment on the cheque issued in favour of the Futures group.
via Economic Times
Reliance Power "investors" panic - try to stop cheques
Investors queued up outside several banks to issue stop cheque instructions in an effort to retrieve their money put into the Reliance Power IPO.
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