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Saturday, July 14, 2007
Telecom Numbers - Vodafone extends lead over BSNL
Vodafone Essar has widened its lead over PSU telco Bharat Sanchar Nigam Ltd (BSNL) in June, in terms of global system for mobile communications (GSM) subscriber numbers.
Vodafone Essar (earlier Hutch Essar) is 2.33 million subscribers ahead of BSNL in June, while the gap was just 1.3 million between the two in the previous month, according to figures released by the Cellular Operators’ Association of India (COAI).
BSNL used to be the No 2 GSM player in India, in terms of subscriber numbers, till two months ago. In May, Vodafone Essar toppled the hierarchy by occupying the No 2 slot, and now it appears to be strengthening its position. UK-based Vodafone, the world’s largest mobile operator, acquired a controlling stake in Hutch Essar earlier this year.
The gap in subscriber numbers between leader Bharti and Vodafone Essar is also increasing. While Bharti had 11.5 million more GSM subscribers than Vodafone Essar in May, the difference now is 11.95 million.
Bharti’s marketshare has increased to 31.4% in June from 31.2% in May. Other operators which have shown an increase in marketshare include Vodafone Essar with 22.61% (22.36% in May), Idea with 11.86% (11.69% in May), Aircel with 4.98% (4.91% in May) and Spice with 2.33% (2.30% in May).
Many GSM operators, such as BSNL, Reliance Telecom, Mahanagar Telephone Nigam Ltd (MTNL) and BPL Mumbai, have recorded a dip in marketshare.
BSNL’s share has dropped from 21.43% to 20.90%, Reliance Telecom’s from 3.3% to 3.2%, MTNL’s from 1.95% to 1.92%, and BPL’s from 0.83% to 0.80%.
The slip in BSNL’s GSM growth is being attributed to the delay in executing its mega tender. Although Ericsson emerged as the lowest bidder for the 45-million line tender of BSNL, communications minister A Raja wants a re-look at the whole exercise.
The minister has said that $107 per line cost quoted by Ericsson is far too steep.
There are 135.9 million GSM subscribers in the country, as on June 30, 2007, against 130.6 million in May. The total addition in GSM numbers was 5.4 million in June.
Interestingly, COAI director-general TV Ramachandran said recently that the monthly growth in subscriber numbers could touch 10 million by December.
According to him, the growth is being driven, primarily by aggressive network expansions by the operators coupled with decreasing tariffs and increasing affordability. The government’s target is to have 250 million phone users by the end of 2007, and 500 million by 2010.
Weekly Close: Market jingle 'Don't worry be happy'
It was a bulls week. Globally markets remained firm for the week except Wednesday when US market dipped on weak housing data. Sentiments were positive across the globe. Sensex gained 2% for the week while Nifty gained 2.7%. Infosys results disappointed as they they met expectations of not being upto mark. Rupee played spoilsport and was the reason for reduced guidance in rupee terms. The exporters Got some government sops but really that did not matter much for the stocks. Bajaj numbers also disappointed and pressure continues to be there in a high interest rate environment. The optimism of the management about the new bike is what kept that stock up. Infrastructure companies had a gala time and then real estate companies joined in as well.
Inflation came in marginally higher at 4.27% Vs 4.13% for week ended June 30th. It remains controlled but not comforting in terms of the direction yet again. However the numbers because of the base effect will remain benign till September end and that helped the banks with no negatives. Some banks lowered their lending rates reflecting the increased liquidity. RBI tried to keep the rupee from appreciating but really the flows remain strong and its only adding to the liquidity. July 31st is the RBI meeting and thats unlikely to losen strings if this surge continues.
Mutual funds saw 25 per cent growth in the first six months this year, with assets now worth over Rs 4 trillion as against Rs 3,21,trillion in December last year. Fund houses collectively added over Rs 79,000 crore to their kitty within first six months of 2007. Reliance MF was the largest fund house with AUMs of close to Rs 60,000 crore. ICICI Prudential ranked second with Rs 43,000 crore. This may seem impressive and shows that Indians are jumping to put their funds into the markets. Important to note that atleast 50% of the AUMS are debt funds. Secondly the jump of 25% in assets under management also includes the appreciation of roughly 10%. Having said this.. we continue to believe that the markets will find greater participation. Near term though the issue of PAN cards will slow the addition of new entrants into the system.
Shipyard business seems set to take off. Bharti Shipyard bagged a $43.4 million order recently. L&T is set to invest between Rs 1,500 cr and Rs 2,000 cr in a new greenfield shipbuilding venture. Presently it has a shipbuilding yard at Hazira in Gujarat. The company recently bagged a Rs 440 cr order from Rotterdam-based Zadeko Ship Management CV to build four ships for special purpose cargo movement. ABG and Bharati are also expanding their capacity to meet the growing demand. Interesting to note that only about 4 weeks days are due for subsidy to get over which began in the mid-1990s. Indian companies want this to be extended by the finance ministry. Under this Scheme shipbuilders get a hefty 30% extra on every ship they build of a certain size or for the export market or domestic market. This scheme has already been extended twice. The current five-year subsidy, introduced on Independence Day in 2002, is set to expire on 14 August. In 2002, when the subsidy was last extended, Indian yards had orders worth Rs1,500 crore. Today, Indian yards have about 220 ships on order, at an estimated worth of Rs 15,000 crore. Because of the attractive subsidy, shipbuilders, both existing and new ones, have lined up investments of about Rs10,000-15,000 crore to upgrade and modernize existing yards and set up new facilities to boost capacity. It is expected that the subsidy will get reduced to 20% in the next plan and 10% in the plan after that. Wonder whether this has been discounted in the valuations of ABG shipyard and Bharti. The stocks continue to perform.
Gillette cut prices of its twin blade razor under brand Vector Plus. The price of razor has been slashed from Rs.49 to Rs.29 and a set of two cartridges from Rs.35 to Rs.20. Gillette is the market leader in premium shaving products. The market for shaving products in the country was around Rs.600 crore. Of this, 80 per cent would be conventional blades and only 20 per cent would be twin blades and premium shaving systems like Gillette's Mach 3. Gillette was acquired by P&G whose basic strategy has been cut prices to gain market share. This would be a smart move to increase volumes. We believe that the Vector will do better that the Presto! Presto is a use and throw twin blade. With vector cartridge priced below that, certainly that would be an aspirational brand. Competition would be really under pressure now. The key would be to spruce up its distribution. Valuations appear expensive.. but given the increasing marketsize, valuations are unlikely to slip. We like this company but it has been an under performer. However its time is nearing we believe. What we are not comfortable though is that P&G is now the owner and their treatment of the minority shareholders does not have a good track record. The Indian P&G hosted the home wash business till as much time as was being grown. When it was time to bring in profits, it was transferred to a 100% subsidiary. Keep watch on Gillette.
Zodiac is another brand company. The company derives over a third of its revenues from Branded sales in domestic markets. Interesting to note that the organised sector retailing of menswear is seeing strong growth and Zodiac provides a play on that. Manufacturing capacity in Dubai and deigner offices in 3 out of the 5 in the world fashion capitals are his selling point. Clearly the products are good and there is an aspirational level. Valuations make this attractive as well. Rupee strength is what seems to be worrying investors.. but given the segment where Zodiac operates, we think it should be a non issue. Do read our research note on this one.
Technically Speaking: Sensex is in a new range and continues in Mmentum. The bias is upwards as mentioned last week. Last week we mentioned that Sensex support in case of pull back was 14730. This week that is raised to 13870. Negatives would continue if this level is broken on the downside. 15090 is another support and thats the Gap support created on the way up by the Sensex. The fact that the gains of close to 200 points made on Friday was with advance decline volume of 2 advancing stocks for every 3 declining.
Fundamentally Speaking: There is little reason on internal fundamentals to justify the current rally. This time too its liquidity driven. More cash inflows into the Indian Markets continue to drive them up. Global risks seemed to have waned and thats the reason for the same. However on valuation parameters we would believe that the upsides carry a risk. Merril has given its reasons and anticipates a 10% drop in Emerging markets. We believe that its no point trying to predict the top though. Enjoy while it lasts. The results season however could negatively surprise and if this comes from an Infrastructure company, that could be really bad.
Grey Market Premiums
Read - Issue Price , Premium
Everon Sys. 125 to 140 425 to 430
Simplex Projects 170 to 185 150 to 155
Alpa Labs. 62 to 68 Discount
Allied Digital 190 135 to 140
Spice Communication 46 10 to 12
Surychakra Power 20 2 to 3
H.D. Infra 500 32 to 35
Celestial Labs 60 8 to 10
Omaxe Ltd. 265 to 310 50 to 60
Simplex Projects - IPO Subscription Details
Qualified Institutional Buyers (QIBs) - 90.4452 times
Non Institutional Investors - 153.7979 times
Retail Individual Investors (RIIs) - 49.2625 times
OVERALL - 85.53 times
Labels:
Allotment,
IPO,
Oversubscription,
Simplex Projects,
Subscription
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Everonn IPO Subscription Details
Qualified Institutional Buyers (QIBs) - 92.9454 times
Non Institutional Investors - 277.8083 times
Retail Individual Investors (RIIs) - 123.8025 times
OVERALL - 131.47 times
You need some freakin luck to get allotment in this...!
Even if you apply for maximum, the chances of you getting allotment would be around 13%
Central Bank IPO band at Rs 85-102
Central Bank of India, the 96-year-old government-owned lender, has fixed a price band of Rs 85-Rs 102 per share for its initial public offering of 8 crore equity shares, which will open for subscription on July 24 and close on July 27.
The bank will raise Rs 680 crore to Rs 816 crore through the issue. After the issue, government holding would come down to 80.2 per cent.
Qualified institutional buyers (QIBs) will be allotted at least 60 per cent of the issue. Of this, 20 per cent will be reserved for overseas investors and 5 per cent for mutual funds.
The retail portion has been fixed at 30 per cent of the net issue. Non-institutional investors can bid up to 10 per cent of the net issue. The bank will complete the allotments by August 11. Proceeds from the issue will be used to meet the additional capital requirements under the Basel II norms and to grow the bank’s assets.
“We should be in place to adopt the Basel II norms by March 31, 2008, though we are required to adopt the norms by March 31, 2009. Our capital adequacy ratio will fall by 1.25 per cent on account of operational risk under Basel II,” said H A Daruwalla, CMD of the bank.
The bank’s capital adequacy stood at 10.4 per cent at the end of March 2007.
The bank’s net worth was Rs 3,303.9 crore on March 31, 2007.
“Our capital adequacy will go up by 1 per cent after the issue to 11.81 per cent. Tier I capital will go up from 6.32 to 7 per cent,’ said Daruwalla.
The shares will be listed on the Bombay and the National exchanges.
ICICI Securities Primary Dealership, Citigroup Global Markets India, Enam Financial Consultants, IDBI Capital Market Services and Kotak Mahindra Capital Company, are the lead managers to the issue.
Rising open interest in F&O a worry
The BSE Sensex and the S&P CNX Nifty opened with a big gap and remained at higher levels taking the cue from the rising markets across the globe. Auto, banking, cement and metal sector shares contributed the most to today’s rally.
The worry now is the mushrooming open interest positions, which have shot up to an all time high level of Rs 83,000 crore (Rs 60,000 crore in futures and Rs 23,000 crore in option). Thus, the open interest has increased by whopping 46 per cent or by Rs 26,000 crore since the beginning of the July expiry series.
The market has seen a one-sided movement from 3555 on March 3 to today’s level of 4504.55. A correction is expected and this will bring overextended stocks out of their overbought zone. The correction will act as an opportunity for traders to take positions again.
The Nifty 4400 - Thursday's resistance — is now becoming the support level. Operators now have shifted their resistance level to 4,500 as open interest in 4,500 Call options increased by 98 per cent to 13.87 lakh shares.
While doing so, they have started covering their positions in 4200-4400 Call options, as the open interest in these levels declined today.
The support has been built at 4,400 levels as the open interest at 4,400 put options increased by 7.64 lakh shares to 28.72 lakh shares today. With Nifty crossing the 4,500 levels today, new support is building at that levels. The 8.21 lakh shares added at 4,500 put options, took the OI to 11.70 lakh shares.
Strong support continued to be around 4,300 levels with the put open interest of 46.83 lakh shares built at that levels.
Markets displayed enormous strength as buying was evident throughout the session backed by gains in global indices.
The turnover increased by over Rs 5,000 crore to Rs 48,900 crore on the NSE. The put/call ratio rose to 1.63 from 1.54 as 24 lakh shares were added in put options, while 6 lakh shares were added in call options.
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