Stocks in news: JB Chem, Bharat Forge, IOL Chem

Stocks in news:

• Board meetings:
  JB Chemicals to consider buy back
  Prism Cement, Vakrangee Software results
  Vyapar Industries on issue of convertible warrants
• Global update: Alcoa net profit falls 45% on higher input costs, falling dollar; Nalco, Hindlaco in focus
• Bharat Forge buys Sifcor of France - ET
• RIL strikes oil in Yemen - ET
• IOL Chem in talks with PE players to sell 5% stake, plans to mope Rs 80 cr - DNA
• Natco Pharma planning another patent fight against Pfizer's new anti-HIV drug Celzentry - Mint
• Indian ADRs:
  ICICI Bank up 6.8%, HDFC Bank up 6%, Sterlite up 5%
• S Kumars
  Ex-date for demerger of retail biz on Apr 24
  All existing F&O contracts will expire on Apr 23
• NMDC has sought hike in iron ore prices by 60% - FE
• Vishal Retail to step into cash & carry segment, plans Rs 700 cr expansion- DNA
• Few takers for exotic forex derivatives now - BL
• 3 groups infra fund exceeds $1bn target, PE show faith in India growth
• Auto cos may hike prices as they feel the heat of costlier steel prices
• CACP – Commission For Agricultural Costs & Prices which fixes SMP, says
  Difference between SMP & SAP has to be borne by the govet and not sugar mills: Sources
• Solrex Pharma Hikes Stake In Orchid~Chem To 11.39% From 8.06%
  CNBC-TV18 Reported Solrex Picking~Up Stake In Orchid Chem Yesterday
  Orchid Chem Was Up 16% Yesterday~On CNBC-TV18 Report
  Solrex Pharma Is A Partnership Firm~Floated By Ranbaxy Promoters: Srcs

Solrex Pharma ups stake in Orchid Chem to 11.4%

Ranbaxy has been making moves on Orchid Chemicals. It has quietly picked up 11.4% stake in Orchid through Solrex Pharma a group company.

It has been a rollercoaster ride for Orchid Chemicals. In the last one month, Orchid has been a takeover target for the country's largest pharmaceutical group Ranbaxy.

In March, Orchid's promoters liquidated over 7% stake in the market due to margin calls that took the promoter stake down to just 17%. This made Orchid very vulnerable for a take-over. And that's when Solrex Pharmaceuticals, a Ranbaxy promoter group company, entered the scene.

It has been quietly consolidating its stake in Orchid since the last week of March. Solrex has, in the past week, acquired 8.06% in Orchid Chemicals through open market transactions. The accumulation by Solrex started when the stock of Orchid Chemicals ranged between Rs 161 and Rs 175.

The Orchid Chemicals management holding is down to 17% from the earlier 24% after the margin calls were triggered. Orchid has a USD 200 million FCCB issue, which could lead to 35% increase in fully diluted shares. The company’s business growth prospects look good and its balance sheet stretched. The total debt of the company is Rs 1573 crore in FY08 estimates. Its operating cash flow was negative in FY07. The debt to equity is at 2.6 times versus the industry average of 1.5 times.

Solrex has bought the first tranch of 8% at Rs 161-175, which is just about 10 times FY08 estimates and at seven7 times FY09 estimates. Yesterday's additional 3.3% stake at Rs 197 is 12-times FY08 estimates and 8 times FY09 estimates.

Just a month ago, the stock was at Rs 230 and traded at 15 times FY08 estimates and 10 times FY09 estimates. The acquisition has come at very cheap valuations to Solrex. The company is showing a strong presence in the US generic market, in cephalosporin space.

The closing price as on Monday was Rs 207.

Ranbaxy's senior management and promoters were not reachable for comments. Orchid said they have been intrigued at the stake consolidation.
It is not clear whether this stake in Orchid is just an investment by Ranbaxy's treasury or whether it will eventually want a majority stake, as it did in the case of Zenotech.

Market sources say Ranbaxy promoters may possibly pick up more stake in Orchid through Solrex and finally take it to around 15%. Whatever the speculation, it is certain that Orchid has swallowed the right pill to grab more attention.

Govt for excise duty cut to curb steel crisis: Steel Secy

After cement last year, steel is in the eye of the inflation storm. Last week, inflation touched a 3-year high triggered by a sharp rise in metal prices. The price of steel is sizzling hot. Last week, the metals wholesale price index jumped 42.8% due to high raw material costs and demand supply imbalance. There were global factors also at play. Iron ore contracts were being negotiated at a 65% premium internationally. And this rubbed off on prices back home.
“Prices have gone up 55% globally and 25-30% in India in the last 3 months,” said RS pandey Steel Secretary.

So far, the government has stepped in with a slew of measures to rein in prices-rollback of price hikes in galvanized products and withdrawal of export benefits. Analysts expect further duty cuts and possible price control by the government. However, the Steel Secretary says regulation is not on the cards.

“We are not in a regulatory regime yet and don’t think the government will dictate prices. We will ensure that domestic availability of steel improves and further measures to disincentivise exports is under contemplation,” stated RS Pandey.

Despite this assurance, there is buzz that steel may be made an essential commodity. It remains to be seen as to how far the government is willing to go to control escalating prices, that too in a possible election year.

Reliance Ind to spend $1.3bn in milk business

India's biggest listed firm, Reliance Industries Ltd, could spend 50 billion rupees ($1.3 billion) by 2010 in distribution and retail sale of milk, the Times of India said on Monday, quoting unidentified sources.

The investments may rise to 70 billion rupees later, it said.

The paper said Reliance Dairy Foods planned to handle milk procurement, collection and distribution across the country.

A company spokesman declined comment on the report.

The paper said Reliance aimed to compete with existing local dairy product makers Amul and Mother Dairy and would buy milk from 70,000 villages across India, including the states of Punjab and Haryana in the north and Andhra Pradesh in the south.

Reliance, India's top private refiner and petrochemicals maker, is spending more than $5.5 billion on retail operations.

It runs Reliance Fresh convenience stores and other speciality formats for electronics and apparel across India.

What's pushing the inflation rate up?

Inflation is a measure of rise in general price levels of goods and services. Inflation is measured by taking a set of goods and services, and then the prices of the items in the set are compared to prices one time period ago.

In India, inflation is measured based on the wholesale price index (WPI) which measures the change in prices of a selection of goods at wholesale prices. Inflation is primarily of two types - inflation due to cost push and inflation due to demand pull (supply side). Cost push inflation is due to rise in costs of input materials or labour, whereas demand pull inflation is due to increase in demand beyond installed capacity.

Controlled inflation is good for the economy as it increases motivation levels of people. The government, in consultation with the Reserve Bank of India, decides the inflation threshold in the country (current inflation threshold range in India is 4-5 per cent). The inflation target is one of the key parameters that go into determining fiscal and monetary policies.

Inflation went up quite a bit in the beginning of last year (around seven percent) on the back of high liquidity in the markets (huge funds inflows in the form of FII and FDI). The RBI controlled inflation by tightening the monetary policy (raising cash reserve ratio and interest rates) and letting the rupee appreciate against foreign currencies. Inflation came well within the control limits in the second half of last year. However, inflation is going up again this year from the last few weeks. Last week, it has gone above 6.5 percent. The reasons of rising inflation this time are quite different from those last year.

Here are some of the main reasons behind rising inflation:

Price rise of essential commodities

The prices of the basic commodities - milk, vegetables, cereals, dairy products, cement, steel, edible oil etc - have gone up quite significantly, especially in the last few weeks. This is due to supply concerns. There is fear in the market that the supply of basic commodities is not increasing in proportion to population growth. This has triggered a wave of speculation in commodities and hence the prices are going up rapidly.

Commodity prices rise at global level

Rise in commodity prices at the global level is another factor that contributes to higher inflation in the country. The correction in global stock market resulted in a rise of commodity prices all over the world as investors are using commodities, especially precious metals, to hedge their risk.

Rising oil prices

Crude oil prices have gone up significantly in the last few weeks. Although the government is controlling fuel prices in the country, rising crude oil prices plays a crucial role in general price rise.

Increasing demand

India's economy is growing at around 7-8 per cent per annum over the last few years. The per capita income levels have gone up and as a result, the demand for many commodities has increased significantly.

Basically, inflation does not have any direct relation to a fall or rise in the stock markets in the short term. However, when inflation goes up beyond the comfortable limit of the RBI and government, they take some strong policy measures such as tightening of monetary policies, regulatory controls, subsidy etc.