Archive for August 2011



TROUBLE AGAIN AT MARUTI'S MANESAR PLANT

Written by HARIKRISHNAN.T
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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...???

Written by HARIKRISHNAN.T
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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 "




MUTHOOT FINANCE ISSUES NCD

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India's largest gold loan NBFCs company Muthoot Finance is issuing NCD (Non -Convertible Debentures).

Muthoot Finance Ltd has reserved 60 percent of it's Rs.500 crore maiden NCD issue for retail investors.

The company has a greenshoe option of an additional Rs.500 crore. Greenshoe options gives the underwriter the right to sell investors more shares than originally planned by the issuer.

So company is planning to raise Rs.1, 000 crore through the issue of NCDs.

To attract retail investors, the company offers a higher coupon rate of 12.25 percent for tenors of three and five years and a 12 percent for tenor of two years.

For institutional investors, it offers a coupon rate of 12 percent for three and five years and 11.75 percent for two years.

Actually the company is raising money for 2-5 years and typically it is  long-term in nature.

"We are long-term players and we are not averse to taking long-term debt in our book", said Mr.George Alexander Muthoot, Managing Director, Muthoot Finance.

The face value of each NCD is Rs.1, 000 and the minimum application is for five NCDs (Rs.5, 000). The NCDs are proposed to be listed on the NSE and BSE.

Credit rating agency Crisil assigns 'A' rating to Muthoot Finance NCD programme.

Regards Hari "लोका समस्ता सुखिनो भवन्तु"



S&P DOWNGRADE IMPACT, 1,129 STOCKS HIT 52 WEEK LOWS

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Receding FII inflows, poor corporate performance, and uncertainty on the domestic macro-economic front have sent several stocks to their 52 week lows in the last 10 days.

According to the data from Bloomberg, the major global provider of 24 hour financial news and information including real time and historic data, around 40 percent of the BSE stocks hit their 52 week low since the markets crashed on August 5 following the downgrade of S&P.

Of the 2, 833 stocks listed in BSE, 1, 129 hit year lows in the last 10 days against about 80 that hit year high.

On Tuesday alone, 272 of the BSE stocks hit their 52-week lows, while 30 companies hit their 52 week high.

The major stocks which saw their 52 week low is given below.

What is the main reason for this drastic correction....????

When we observe the stocks listed in BSE, we can see that about 57 percent of the stake of the BSE companies is owned by promoters and Indian Government, who basically BUY and HOLD the securities.

The active trading of the securities is carried out by FIIs, there by controlling the flow of the market and stocks.

The next important thing is the rate hike of RBI. The increase in the interest rates by the RBI has also put company margins under pressure. In the last 16 months, the RBI increased the interest rate by 425 bps, which leads to weaker domestic earnings. Another 25bps interest hike is expecting from RBI soon.

Emerging markets such as India have started looking unattractive to foreign investors. I think this negative trend only lasts for short term point of view.

" We are probably very close to the lows of the year; the reason I don't emphatically say this is the buying moment is we have an inflation problem in the big emerging markets" Said Mr. Adrian Mowat, the chief Asia and emerging-markets strategist at JPMorgan, in an interview to Bloomberg.

Experts are divide on whether the current market situation is conductive for investments. Some fund managers say that the time may be right for investors to look out for companies with good growth prospects and buy into the shares for long term gains. However others feel that the markets will drift further. Which will be correct.....??? Lets see.... :-)

Regards Hari " लोका समस्ता सुखिनो भवन्तु "



HOW CAN WE MEASURE THE LIQUIDITY OF A COMPANY

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Yesterday I came across an interesting article in Business Line, written by P.Saravanan and N.Sivasankaran. The article was about how can we calculate the liquidity of companies. A short description of that article is given below.

Accountants in fact size up companies on three main parameters- Profitability, Liquidity and Solvency measures. From this three things we can say that Liquidity and Profitability are inter related and inter connected.

Lets discuss the ways in which one can measure the liquidity position of a company.

UNDERSTANDING LIQUIDITY

Before going to calculate the liquidity, we first know what is meant by liquidity. We can define liquidity as the ability of a company to meet it's immediate obligations without any trouble or strain.

The obligations may consist of items such as accounts payable for the suppliers of raw materials, taxes payable, utilities payable and other expenses. 

Normally how a company pay all these obligations...????? It is through CASH.

Where from an organisation gets the required cash for meeting all these obligations....???? It gets cash from the existing cash balance in hand, bank account balances and realization of cash by converting the current assets such as cash receivable, note receivable and inventories into cash.

WHAT IS THE IMPORTANCE OF THE ABOVE STATEMENT

From the above statement we can say that Liquidity contributes to Profitability. So what will happen if a company's liquidity position is poor...?? This means that the organisation is finding hard to meet it's payment obligations to outsiders such as suppliers of material.

If this situation continues, the suppliers will not supply the required materials for production. So the company can't achieve its marketing objectives.

TRADITIONAL MEASURES

There are mainly 2 traditional measures for measuring the liquidity of a company.

1) Current ratio
2) Liquidity or Quick Ratio (Acid-test ratio)

The current ratio is calculated by dividing the total of current assets by current liabilities. Here current assets can be of assets that are convertible into cash in one year or one operating cycle, which one is higher.

Similarly current liabilities are those obligations that are to be settled in one year or one operating cycle, which ever is longer.

A current ratio of 2:1 is considered to be good/satisfactory in theory. This indicate the company has Twice the amount of money invested in current assets than that of current liabilities.

The difference between current ratio and Quick ratio is that Quick ratio divides the Liquid assets by the current liabilities of a company.

Here Liquid assets include all the current assets except inventories and pre-paid expenses.

Regards Hari " लोका समस्ता सुखिनो भवन्तु "



SHORT-SELLING BAN BY 4 EUROPEAN NATIONS

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France, Italy, Spain and Belgium temporarily banned short-selling of Financial Stocks.

The main reason for this is after speculators forced European bank stocks to their lowest level since the credit crisis began.

This decision made by the government are facing criticism from various parts of the economic zone.

The 15-day ban in each country begin on Friday, and follows a failed attempt at a wider regional ban. Britain has confirmed it is not considering such a measure.

Market analysts said that the move could have negative impact in the economy. "I haven't seen such a preposterous decision in my life", says Mr. David Buik of BGC partners in London, who argues it does nothing but introduce uncertainty into the market.

"If investors conclude governments are trying to fix the market, they will still sell bank stocks. You can ban short-selling but not Selling." -tweeted Mr.Hugo Dixon of Reuters Breaking views.

Short selling occur in 2 steps. This can be represented like this.
Steps in Short selling

First the short seller borrows shares and immediately sells them.

After that he waits for the stock price to decrease. 

When the stock price decreases then the short seller can make profit by purchasing the shares return to lender without ever owning any shares.

Regards Hari " लोका समस्ता सुखिनो भवन्तु "



S&P IMPACT; INDIAN EQUITIES DOWN STILL

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Indian equities closed in red on Friday although most of the Asian markets and markets in Europe and US were in positive side trading in green.

The market experts says that the main reason for this bearish trend is the increase in the inflation numbers and RBI's statement that this could mean further interest rate hikes, sentiment has been negative throughout the week leading to inactivity and indifference among investors.

Mr. Alex Mathew, Head of Research, Geojit BNP Paribas said that " The rate hikes will negatively impact the FII participation as well as corporate performance as the cost of borrowing money will now go up "

The Indian markets along with the global markets, have been declining from August 5 on wards since the credit rating agency S&P downgraded the US Credit rating from AAA to AA+.

FIIs are withdrawing funds from the markets, while Domestic institutions are on the buying side. Retail investors are also on the buying side.

For the period between August 5 and August 12, FIIs were net sellers for Rs.5, 657.31 crore whereas Domestic institutions were net buyers for Rs.4, 671.03 crore. Retail investors are also on the buying side. They purchased for Rs.287.94 crore on BSE.

Actually the market maintains an average level because of the buying of DIIs and retail investors.

When we observe the graph we can show some interesting information.

Dow Jones Industrial average down by 2.6 percent. Sensex also down by 2.7 percent because of the negative news from around the globe. 

The high selling pressure from the Indian markets affected all major blue chips companies especially Tata motors and Infosys. The reason why Tata motor's price is down by 9.9 percent is that their monthly sales in the month of July decreased by about 38 percent. 

Infosys and other major IT companies like TCS, Wipro , HCL Tech also facing the same problem because their biggest markets are US and Europe.

NSE volatility Index (VIX) was at 8.5 percent. This is a very important point to be take care of. Since Volatility index represents 'the rate and magnitude of changes in price.'

People are watching how the situation in Europe and US unfolds. The market can expect a bullish trend only after the negative news are solved. Lets hope for the best.

Regards Hari " लोका समस्ता सुखिनो भवन्तु "



TATA MOTORS, MARUTI SUZUKI FOR THE BIG DEAL

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World's cheapest car Tata motor's Nano and the company's most popular Light Commercial Vehicle(LCV) Ace are set to roll out from new factories around the world, as early as in the coming year.
Tata Motors

In order to increase the global penetration, the company is planning to set up assembly operations in Indonesia and Brazil apart from Eastern Europe, Ratan Tata, the chairman of Tata motors told shareholders at the automaker's annual general meeting (AGM) on Friday.

" We are looking at assembly facility for passenger vehicles in South-East Asia(Indonesia) and some parts of Eastern Europe. We are looking at how to maximize penetration for the Nano and the Ace" He said.

To counter the erratic domestic monthly sales performance of Nano (Between 3000-7000 units on average and peak of 10, 012 units in April), the company has started exports, starting with Sri Lanka and Nepal.

Company also starting solo Nano centers in smaller towns. Total domestic sales of  Nano has crossed one lakh units since the 2009 launch, but the company's 2.5 lakh unit per annual capacity plant at Sanand is currently lying under-utilized.

On global new product plans, he said that both Tata Motors and Jaguar Land Rover are working on hybrid and electric cars.

Tata Motors will be launching an electric car in UK and Norway soon, a small city car based on Pixel concept.

At the same time Maruti Suzuki cuts production, increase discounts. They announced Friday that they are reducing their production and increase discounts due to market slow down. The sale of Maruti decreased more than 15 percent this month because of the hiking interest rates and crude oil price.

They reduced production of all models except the Swift and DZire. Alto production is already down 5 percent from the last month's 24, 970 cars.

Discounts offered by the company were 22 percent higher this year. The highest discount of Rs.35, 000 was on SX4, petrol version. Company offering discounts of Rs.18, 000-20, 000 in all variants.

The company is planning to start a new plant by the month of October and the location will be announced later.

The initial investment will be about Rs.6, 000 crore and the annual production capacity will be between 750, 000-10,00,000 units.

The precautionary measures taken by the 2 major Auto mobile companies in India will attract more customers. But to what extend......????? That's a tricky question......

Regards Hari " लोका समस्ता सुखिनो भवन्तु "