Archive for 2011



CYRUS MISTRY TO SUCCEED TATA......

Written by HARIKRISHNAN.T
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The suspense is finally over. Mr. Cyrus P. Mistry will take over from Mr. Ratan Tata a chairman of the Tata Group when he retires in December 2012.


He was appointed Deputy Chairman of Tata Sons at the company's board meeting on Wednesday and will work with Mr. Tata over the next year.


The 43 year old son of Mr. Pallonji Mistry, the largest single share holder in Tata sons with an 18 percent stake, a civil engineering graduate from Imperial college, London. He also has a Master of Science in Management from the London Business School.


Mr. Mistry is currently Managing Director, Shapoorji Pallonji Group.


He takes over Tata group from a man who over the last 2 decades transformed the Tata Group into a global enterprise.


Tata Steel's acquisition of Corus, Tata motors buying JLR and TCS going public were some of the significant milestones after Mr. Ratan Tata took over from JRD as Chairman of the group.


The most important thing is that Mr. Cyrus Mistry would be taking over the mantle of a group in which the promoters have largely pledged shares over the past two and half years.


Mr. Ratan Tata has taken the group to great heights and I hope Mr. Mistry will take it to greater heights.


Regards Hari " लोका समस्ता सुखिनो भवन्तु " 



BSE GETS SEBI APPROVAL FOR SME EXCHANGE.

Written by HARIKRISHNAN.T
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Finally the Bombay Stock Exchange received approval from the Securities and Exchange Board of India for its proposed SME (Small and Medium Enterprise) Exchange.

The BSE applied for permission for an SME Exchange in July 2010, and the final approval from SEBI came after 1year after studying all the aspects of SME Exchange.

The SME Exchange will now start receiving the offer documents from the merchant bankers for companies wishing to list on the exchange platform.

The CEO, BSE SME Exchange Mr. Laxman Gugulothu said that many companies already approached them and among these about 30-40 percent were very serious about getting listed on the SME Exchange.

He added that " Of the 70-80 who have approached us on the web site, 15-20 are very serious. Apart from these, 50 other companies have shown an interest in our exchange. Of these 50, around 25 have filed a mandate with merchant bankers"

The National Stock Exchange also waiting for the final approval from the SEBI for its SME Exchange.

For any company to get listed on an exchange, the company has first to file a draft RHP prospectus with SEBI. It then needs in-principle approval from both SEBI and the exchanges. This is followed by a one-month notification to the public.

This has been done away with for companies proposing to list on SME Exchange. An SME needs to only submit the offer documents and on receiving the exchange's approval alone can enter the capital market.

The only criteria for the SMEs to qualify the listing is that the promoter share holding to be diluted has to amount to a minimum of Rs. 25 crore. That is at a face value of Rs. 10 per share, the total number of shares on offer should be 2.5 crore. (2.5 crore * 10 = 25 crore)

Regards Hari " लोका समस्ता सुखिनो भवन्तु "



OPERATION TWIST.

Written by HARIKRISHNAN.T
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Federal Reserve announced the recovery policy called 'Operation Twist' in order to solve the US Debt crisis.

The main objective of this policy is to decrease the interest rates. What will happen if interest rates became low..??? 

When interest rates became weak, more people will borrow money and thus more capital flow will be pumped into the economy. As a result of this the overall growth of the economy will take place, the corporate profits will be increased, more and more opportunities will flow into the system and thus the unemployment issue in the US will overcome.

When we consider the following figures of US, we will get a clear picture.

GDP:                   1.60 percent
Interest rates:    0.25 percent
Inflation rate:    3.60 percent
Jobless rate:       9.10 percent

Here the GDP rate of US is too low compared to EMEs like India and China. For India GDP on YoY basis is 7.80 percent and for China it is 9.70 percent. Also the jobless rate for US is also high.

But the positive note for US is their inflation rate. Their inflation rate is much lower compared to India and China.

In US, the interest rate for 10 year treasuries is 1.95 percent.  This figure seems pretty interesting. This is lower than the inflation rate.

So what they are trying to do with the Operation Twist..?? This can be explained like this.

The Fed already owns $1 trillion bonds. They purchased this in the fast few years in order to bring down the medium and long term interest rates.

Among these, a lot of bonds especially medium term bonds will become expire in the coming years.

When we observe the interest rates of these bonds, they are almost Zero.

So the Fed will sell some of these medium term bonds and they will buy longer term bonds, such as 10 year to 30 year treasuries.

This is the main idea behind the Operation Twist.

The main objective of this strategy is to lower the interest rates further and thus boosting the economy by pumping more capital in to the system.

Regards Hari " लोका समस्ता सुखिनो भवन्तु "






RUPEE CRASHES.

Written by HARIKRISHNAN.T
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The rupee went into a free fall on Thursday, declining 2.5 percent (or Rs. 1.23) against the USD. This is one of the sharpest single day drops in recent times.

When we observe the stock market movement and the Rupee movement, we can see that both the things are inter connected with each other. This is mainly because the Foreign Institutional Investors (FIIs) are the major key players in the markets and their buying as well as selling has a great influence in domestic stock prices.

First of all lets look what are the main reasons for rupee depreciation. The main reason for the weakening of rupee is the flight of foreign funds from the Indian Market, also the demand for Indian rupee is getting low.

Lets see how rupee depreciation affect the economy.

First lets look the positive sides. The weakening of rupees is good when we are talking in terms of exports. Since we get more amount of money equivalent to USD, the exporters will get more profit. For example IT giants such as Infosys, TCS etc. About 60 percent of their revenue comes from US itself. So their profit will substantially increase.

But there are some negative sides also.

The cost for importing goods and services will definitely increase because of this.

For example India Inc. importing 70 percent of the required crude oil from the foreign countries. So they have to pay a higher amount for the crude oil. This will result in the price hike in petrol and diesel and that will negatively affect the Inflation rate. I think if rupee is weakening like this, inflation will touch 2 digits soon.

Also raw materials cost will increase. So the production cost will increase. When the production cost increases the companies have to raise their cost and this will decrease the demand and eventually the net profit will go down.

I think the rupee can correct to 50.30 per dollar in the short term. It will be in the range 48.50 - 50.30 in the coming weeks.

Regards Hari " लोका समस्ता सुखिनो भवन्तु " 



IS FACEBOOK IPO COMING......??????

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Founder of social networking site Facebook, Mr. Mark Zuckerberg, at the company's headquarters in Palo Alto, California.

Facebook Inc. has set the later part of 2012 as the time for its much-anticipated Initial Public Offering of stock, the Financial Times reported on Wednesday.

The IPO, expected to be one of the world's biggest with a possible valuation of up to $100 billion, had been expected by April 2012.

Some investors and analysts speculating that it could even come this year.

But reliable sources told Financial Times that the Chief Executive, Mr. Mark Zuckerburg, wants to wait until next September or later.

This is because the Facebook's employees will remain focused on product development rather than an IPO payout.

So the picture will be clear within a few months.

Regards Hari " लोका समस्ता सुखिनो भवन्तु "



DISAPPOINTING IIP DATA.

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Weak factory output numbers and negative global cues sent the equity market into a tailspin on Monday.

On August 12, when the June 2011 IIP was 8.8 percent, the Sensex was down 1.3 percent. At 3.3 percent, the Sensex has again seen a 2 percent drop today.

The IIP number for July 2011 at 3.3 percent was much lower than the market expectation of 6.2 percent.

The rupee fell to levels last seen 14 months ago on fears of the debt crisis in Euro zone.

The 3.3 percent YoY increase in the official IIP - the lowest since the 2.3 percent of October 2009 - has come mainly from capital goods. The output of capital goods dipped 15.2 percent.

The detailed IIP data is given below.

IIP YoY % GROWTH RATES (2004-05 base)




Regards Hari " लोका समस्ता सुखिनो भवन्तु "



TVS MOTORS - BUY

Written by HARIKRISHNAN.T
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Rising inflation, interest rates and fuel prices have moderated domestic auto industry growth in recent times.

However, given the lower dependence on financed purchases and improved rural incomes, two-wheelers have continued to grow at a brisk pace.

In the April-August 2011 period, two-wheeler sales outpaced the industry, growing 16 percent. The upcoming festival season, a favorable demographic profile and greater urbanisation would continue to drive two-wheeler sales.

In this scenario, an investment in the TVS MOTOR stock is recommended with a perspective of one or two years.

At Rs.60 range, the stock trades at a PE of about 11 times its estimated FY12 earnings.

Although the company faces stiff competition in the motor cycle segment, TVS has managed to improve its market share marginally, by 50 basis points to 7 percent in FY11.

In 2010-11, the company strengthened its line-up by launching the Apache RTR-180 ABS in the premium segment and the Max 4R and Jive in the executive segment.

Another favorable trend is the improving share of scooters in total two-wheeler industry sales.

From about 14 percent in 2007-08, scooters now account for 17.5 percent of all two-wheelers sold.

This is good for TVS because it is the second largest player and has a wide variety of products from 60 cc to 110 cc.

Another supporting factor is TVS's diversification into three wheelers, which bring higher margins, and also have good export potential. The company is already exporting three-wheelers to Sri Lanka and Bangladesh and added Egypt to the list recently.

A withdrawal of the DEPB incentive for exports may impact earnings in the near term. But the company plans to pass it on gradually to customers.

For the quarter ended June 2011, net sales grew 25 percent YoY to Rs.1, 707 crore and net profits 45 percent to Rs.59 crore. Operating margins remained stable at 6.8 percent.

So in medium term I found a bullish forecast on the stock.

(This recommendation is based on fundamental analysis. There is a risk of loss in trading.)

Regards Hari " लोका समस्ता सुखिनो भवन्तु "



ONGC FPO

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ONGC's (Oil and Natural Gas Corporation) follow-on-offer (FPO) may open on September 20 or 27.
ONGC Logo

The Red herring prospectus (RHP) for the FPO could be filed on September 5. The Government is offloading five percent of its stake in ONGC and plans to raise Rs.12, 000 crore through the issue.

With the FPO, the government's stake in the company will come down to 69.14 percent from the current 74.14 percent.

The road show for the issue is likely to start from September 6 from New York.

ONGC chairman and Managing director Mr. A.K.Haziraka said " our board approved the RHP on August 29, which will be filed as per the instructions of the government. We are ready to file in 24 hours time. "

" Keeping the strong fundamentals of ONGC in view, we are confident that the response from the investors will be overwhelming" He added.

The FPO was originally planned in the 2010-11 fiscal, but was deferred as the company did not have an adequate number of independent directors on its board to meet SEBI's listing norms. Further it delayed due to adverse market conditions.

In January, Citigroup, Nomura Holdings, Bank of America Corp, HSBC Holdings, JM Financial services and Morgan Stanley were appointed to manage ONGC's share sale.

Regards Hari " लोका समस्ता सुखिनो भवन्तु "



TROUBLE AGAIN AT MARUTI'S MANESAR PLANT

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Maruti Suzuki India stopped production at its Manesar facility on Monday.

The company asked workers to sign a "Good conduct Bond" before entering the factory premises following alleged quality issues.

" The management wants us to sign an undertaking that we will not indulge in any union related activities. Our application for union formation, too, has been rejected by the Haryana Government. The company does not want us to submit a fresh application." A Maruti Suzuki worker told. 
Sourced from company. (Courtesy Business Line) 

There was heavy security around the plant, after the premises were sealed, with the company suspending 10 workers and dismissing five others. Services of six trainees have also been discontinued.

A company official said Workers had been indulging in sabotage. There was a go-slow, causing quality problems last week. This was directly harming customers interest and trust, he said.

The Manesar plant makes 600 cars in two eight-hour shifts every day.  The revenue loss per day would amount to roughly Rs.40 crore. The factory produces new Swift, A-star and SX4.

The strike also affected the share price of Maruti. Today price closed at Rs.1091.55 on the NSE.

In June, workers at the Manesar plant struck work for 13 days demanding recognition of a new union. The company reported a production loss of 13, 400 cars valued at Rs.460 crore.

Regards Hari " लोका समस्ता सुखिनो भवन्तु " 



COAL INDIA TO ENTER NIFTY

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State-run Coal India will replace Anil Ambani's Reliance Capital in the National Stock Exchange's Nifty 50 index from October 10.
Coal India Logo

Earlier this month, Coal India had replaced another Anil Ambani group firm Reliance Infra from BSE's blue chip index Sensitive index (Sensex)

Shares of Coal India have been performing well since the company was listed in November last year and it overtook Mukesh Ambani's Reliance Industries (RIL) last week in terms of Market capitalization.

Coal India is one among the top three companies in terms of Market cap. There is a tough competition between RIL, Coal India and ONGC.

Apart from S&p CNX Nifty Index, there would be changes in Nifty Junior, CNX 100 index, S&P CNX 500 index and sectorial indices among others.

The changes were announced by India Index Services and Products Ltd. (IISL), a joint venture between National Stock Exchange and Crisil for managing Nifty.

Also, 4 other companies Bosch Ltd., Dabur India, Idea Cellular, and Reliance capital would be making their entry to Nifty Junior Index from October 10.

Entities that would move out this index include Coal India Ltd., Patni Computer Systems, Punj Lloyd and Syndicate Bank.

Also BSE announced to launch Future and Options trading in Coal India with effect from August 26.

Regards Hari " लोका समस्ता सुखिनो भवन्तु "



A RESIGNATION THAT ERASED $52 BILLION FROM S&P 500

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The decision of Mr. Steve Jobs to step down as Apple Inc's Chief Executive Officer erased as much as $52 billion from the benchmark gauge for US stocks, futures trading shows.
Inventive Genius- Steve Jobs

On last Wednesday, Mr.Steve Jobs, who had turned exactly 56-and-half, submitted his resignation by saying, " I have always said if there ever came a day when I could no longer meet my duties and expectations as Apple's CEO, I would be the first to let you know. Unfortunately the day has come."

Apple Milestones

Steve Jobs was really an inventive Genius. After Jobs returns as CEO in 1997, the shares grew in value to $348.7 billion from $2.08 billion. That 9,020 percent surge in the stock price since July 29, 1997 shows his brilliant managerial ability.

He is also perhaps, the biggest comeback man the tech world ha ever seen. He was kicked out by Apple in 1985 by the man he hired, ex-Pepsi Chief Executive, Mr. John Scully. But returning in 1997, Mr.Jobs turned Apple around to make it the world's most valuable company.

Lets pray for his health.

Regards Hari " लोका समस्ता सुखिनो भवन्तु "  



TD POWER SYSTEMS LIMITED IPO

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T D Power Systems Ltd. (TDPS), one of the leading manufacturers of AC generators with output capacity in the range of 1MW to 52MW for prime movers such as steam turbine generators, vertical hydro generators etc.

They Tuesday(23/08/2011) announced plans to raise Rs.227 crore through it's Initial Public Offering.

The IPO will open on August 24 (Wednesday) and close on August 26 (Friday).

The price band has been fixed at Rs.256 to Rs.261

Face value will be Rs.10 and the tick size will be Re.1

Minimum order quantity is 25 equity shares. 

IPO market timings will be from 10.00 am to 05.00pm

It has an IPO grading of Grade 4.

Rating agency is CARE and the maximum subscription amount for retail investors will be Rs.200000.

The book running lead manager for this IPO will be Antique capital markets pvt. Ltd., Equirus capital pvt. Ltd.

Around Rs.100 crore from this IPO will be used to fund the expansion activities of their manufacturing plant in Dabaspet, Bangalore. 

The remaining is to be used for the construction of a project office in Bangalore city and repayment of debt, said the company in a press conference.

For details and RHP log on to www.nseindia.com

Regards Hari " लोका समस्ता सुखिनो भवन्तु "



IS INDIA INC. IN TROUBLE...???

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When we observe the Q1 results of the companies included in CNX 500, we can see a lot of terrible facts.

40 percent of the CNX 500 companies report profit drop in the first Quarter of this fiscal (April-June 2011) from a year ago.

The important point which has to be noted is that in 2010-11, the percentage of companies who suffered profit decline was 30 percent. So a 10 percent increase in this quarter.

The detail diagram is shown below.

Based on 490 of CNX 500 companies which have announced results.

Let us discuss the reasons for profit loss of some companies.

State Bank of India's (SBI) profits declined by 46 percent in this quarter and the main reasons for this dip was triggered by a spike in bad loan provisions and losses on it's investments.

India's leading construction company IVRCL's 85 percent profit plunge was attributable to higher project costs that were not covered by escalation clauses.

In traditional point of view, the sectors such as pharma and consumer durables were considered as Defensive sectors. But they produced some nasty surprises.

Blue star, whirlpool India, Crompton and Greaves - all reported a decline in their net profit. The main reasons for the decline was poor summer sales and rising cost of materials.

The main reasons for the profit dip of pharma companies was the soaring raw material costs. Companies told that the raw material costs expand at twice the rate as their sales.

The final villain was the rising interest rates. Overall interest costs for the CNX 500 companies shot up by 42 percent year-on-year. But the sales growth was just 29 percent.

Telecom companies such as Bharti Airtel also faced profit declines. The main reasons for that was due to rising interest costs after borrowing to fund 3G roll-outs.

So the major question that everyone asked is "whether India Inc. can still manage to deliver the 12-13 percent growth in the year as expected....??? " At the same time the PM said that the target of 12 percent growth is a tough job.

Lets wait and see.

Regards Hari " लोका समस्ता सुखिनो भवन्तु "





INFOSYS OR COGNIZANT....????

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Economic people are interestingly watching the software war between the globally recognized multinational companies, Infosys and Cognizant(CTS).

As Mr. N.R Narayana Murthy's Infosys innings came to an end, he referred to Infosys in his latest AGM will stay in the number two position for some more years.

When we observe the revenues of Infosys and CTS, we get a clear idea.


The revenues of Infosys in FY 2011 increased 25.80 percent to $6.0 billion, at the same time the revenues of CTS increased 40% to $4.6 billion.

If the 2 companies grow at the same pace, there is a possibility that- mathematically at least- Cognizant will overtake Infosys in FY 2013. (See the graph for more details)


If we assume the rate of growth of Infosys be 25.8 percent for the next three years, then by 2013 the revenues will be $11.8 billion.

At the same time if we assume the rate of growth of CTS be 40 percent for the next three years, then by 2013 the revenues will be $12.5 billion.

But I think this will not pan out in reality. It will be really a tough task for CTS to maintain compound annual growth rate of 40 percent. So to beat Infosys, CTS would have to diversify into other verticals and enter new geographies.

At the same time Infosys wants to get more from transformational projects and consulting. If they succeed, they may be able to step up the momentum. Infosys has strategic plans and it will not easily concede the No. 2 spot to cognizant.

Regards Hari " लोका समस्ता सुखिनो भवन्तु "



ITS JUST LIKE A WORLDWIDE BUYERS STRIKE

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It was a horrible month for the Indian bounces so far. The replica of 2008 seems to have returned to attack Indian investors with the stock market showing no signs of bouncing back.

The negative signs coming from within the country such as inflation, rate hike by RBI and the slow down in economic growth and from the global markets such as Europe and US debt crisis, affected Indian equities and Sensex fell 2 percent on Friday to 16, 141.67. 

It dipped below the 16K mark on intraday, but returned back at close. Similar pathetic situation at Nifty also.

Nifty was holding the crucial 5000 support level for the past 2 weeks. But it cant maintain that level on Friday because of the huge selling pressure from the FIIs.

When we observe the graph of Sensex and Nifty of the past 4 trading sessions, we can see the selling pressure from FIIs



The most important negative signal is that FIIs are still on the selling side. In the month of August the pulled out about Rs.8956.6 crore so far.

The selling of FIIs in the last 4 trading sessions is as follows.

Domestic investors bought about Rs.6719 crore in August so far. But they failed to arrest the market slide.

BSE Midcap, BSE 500 indices fallen about 13 percent in the last one month while BSE small cap slumped 17 percent.

Our Finance minister Mr. Pranab Mukharjee said that Indian equities have weathered contagion effect. He added that the present crisis on advanced economics could encourage foreign pension funds and other long-term institutional investors to take higher equity exposures here and India was well positioned to capture this flow.

At the same time $779 billion assets owned, global financial service 'Morgan Stanley' cut it's year-end target for the BSE sensitive index by 15 percent to 18,850 saying that the country's economic growth and corporate earnings will slow.

This situation is really pathetic for day traders. Whatever stop-loss they put, it got triggered.

Regards Hari " लोका समस्ता सुखिनो भवन्तु "



COAL INDIA BECAME THE LARGEST-LISTED ENTITY

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The most interesting data is out....

Finally the competition between the two natural resources giants, State-owned Coal India Ltd. (CIL), Wednesday overtook Mukesh Ambani's Reliance Industries Ltd. (RIL) and became the largest listed entity in terms of Market Capitalization. (Market cap is obtained by multiplying the current share price and the number of shares the company issued.)

The graphical representation of market cap of 10 major companies is given below (On 18/08/2011- Thursday in Rs Cr.)

Until recently CIL was neck-and-neck with ONGC, another government controlled company in the field of oil and natural resources, for the second spot.

It displayed ONGC for the first time from second position in May 2011.

CIL gained 64 percent or added about Rs.96, 000 crore to its market cap since its public issue in November 2010. Its issue price was Rs.245. During the same time RIL lost about 29 percent value.

But the most interesting fact is that BSE PSU index, which includes CIL, lost 23 percent during the period since November 2010 despite Coal India providing 62 percent returns.

Coal India reported consolidated net sales of Rs.59,560 crore and net profit of Rs.10,867 crore for the year ended March 2011. RIL, on the other hand reported Rs.2,76,371 crore of revenues and Rs.19,271 crore net profit.

Fall in natural gas output cited as the main reason for RIL's slip from top.

Regards Hari " लोका समस्ता सुखिनो भवन्तु "