ICRA assigns `LBBB` & `A2` rating to bank limits of Hinduja Foundries

ICRA has assigned `LBBB` rating, indicating moderate-credit-quality, to the Rs 1,473.8 million term loan facility and Rs 276.5 million fund based limits of Hinduja Foundries (HFL). ICRA has also assigned `A2` rating, indicating above-average-credit-quality, to the Rs 232.7 million fund based limits and Rs 217.0 million non-fund based limits of HFL.

The rating factors in HFL`s long standing presence, strong customer profile in automotive specialty castings and favourable economies of scale. The rating also factors in the healthy long-term prospects in HFL`s customer industry (automobiles) and its plans to tap exports opportunities to diversify revenue base.

HFL`s promoters` have demonstrated their commitment to the Company`s operations through preference capital infusion. The rating is constrained by the weak financial profile, reflected in moderate profitability and stretched leverage. The rating factors in HFL`s high client concentration on group company.

The domestic castings industry is highly fragmented and characterized by high competitive pressure, resulting in weak pricing power. The industry remains vulnerable to cyclicality of the automobile industry and increase in raw material costs, which companies are compelled to partly absorb due to poor pricing power with automobile OEMs.

Shares of the company closed up Rs 14.35, or 10.25%, at Rs 154.35. The total volume of shares traded at the BSE was 3,575. (Friday)

DoT wants BlackBerry servers in India

DoT on Friday asked Canada’s Research In Motion (RIM)—the BlackBerry smartphone developer—to set up servers in India. This was conveyed at a meeting between DoT officials, security agencies, company executives, Canadian High Commission representatives and telecom operators.

Government sources told ET that operators like Bharti Airtel, Vodafone Essar, BPL and Reliance Communications, which offer BlackBerry services in India, supported the DoT’s demand. RIM has sought more time to respond to the DoT request, they added.

It’s also learnt that in the meeting, DoT officials had categorically pointed out to RIM that only emails between one BlackBerry device to another was under the scanner of Indian security agencies. A government source close to the development told ET: “RIM offers many services here. All of them are interceptable, except for emails sent between one BlackBerry device to another BlackBerry device. It is only this part we want to address.”

Friday’s meeting was the latest that DoT officials and security agency representatives have had with RIM executives to address security concerns associated with BlackBerry services. If RIM agrees to the DoT request, the company will have to migrate all data traffic originating from Indian mobile networks to servers located in India. At present, BlackBerry’s email traffic in India is hosted on RIM’s overseas servers (primarily in Canada), which cannot be lawfully intercepted by security agencies.

ET had reported that DoT was exploring the possibility of asking RIM to set up servers in India. Emails between BlackBerry owners in India bypass local networks and directly hit RIM’s servers in Canada. But a BlackBerry email accessed by an end user on a PC or handset passes through the internet network in India, which is being monitored by security agencies. “We are already compliant with emails sent from BlackBerry to other devices and email addresses accessed on computers. It is only BlackBerry to BlackBerry that needs to be monitored,” said a source.

On-road price tag for Jaguar & Land Rover runs to $3 bn

The final acquisition cost of the iconic Jaguar-Land Rover (JLR) brands by Tata Motors is likely to be about 30% more than the $2.3 billion announced on Wednesday. The $2.3 billion covers just the price of the brands, assets and technology know-how. A big part of the additional cost would go for engine and component supply. A Ford Motor spokesperson confirmed that a separate contractual pact has been signed for engines and components.

A Tata Motors spokesperson too confirmed that the purchase price does not include the engine supply cost. “JLR will be acquired with all the technology know-how and IPR required for the business. This is fully built into the purchase agreement of $2.3 billion. However, the supply of engines and components will be outside the purchase agreement,” the spokesman said.

“The total cost is likely to be about $3 billion,” a person close to the development told ET. Neither Ford nor Tata Motors officials were willing to divulge details on the cost per engine or the amount the Indian company will have to fork out, saying it is “commercially confidential information”. Tata Motors, incidentally, has struck a deal with banks to raise about $3 billion for the transaction. As per the deal, Ford will still supply JLR for differing periods with powertrains, stampings and other vehicle parts.

Ford has also committed to provide engineering support, including research and development, information technology, accounting and other services. For most of these arrangements, the Tatas will have to pay Ford separately. The engine supply agreement, for instance, has been signed initially for five years. In addition, Ford Motor Credit Company will provide financing for Jaguar and Land Rover dealers and customers during a transitional period—which can vary by market—of up to 12 months.

Incidentally, the Tatas had signed 20-odd separate agreements with Ford for the JLR takeover. Of these, around 10-12 pacts that involved engine, power trains, R&D etc would entail payment by Tata Motors to Ford over the next few years. The Tata-JLR pact is a unique M&A deal in that it is rare for the buyer and seller to have these sort of agreements. Meanwhile, Ford is likely to make a ‘significant contribution’ towards JLR’s pension funds. At closing of the deal, Ford is contributing up to around $600 million to the funds.

Four Soft, Take Solutions merger on cards

Hyderabad-based Four Soft Ltd and Chennai-headquartered Take Solutions Ltd, providers of IT products and solutions in the supply chain management (SCM) space, announced their intent to merge. The combination will create a global, comprehensive company with one of the largest product offerings in SCM. Both companies have received in-principle approval from their board of directors to consider the merger.

Both boards will appoint independent firms of chartered accountants and financial advisers to reach a fair valuation for the shareholders of both the companies. The boards of Four Soft and Take Solutions expect to meet within six to eight weeks to consider the reports of the advisers. The merger, if approved by the boards, will be subject to shareholders’ approval of both companies and other regulatory approvals.

“Four Soft has full service products and offerings. Take Solutions' product offerings complement this very well on the enterprise side. The combined range of intellectual property (IP) is unmatched globally and will enable both good customer traction and good shareholder value,” Palem Srikanth Reddy, chairman and chief executive officer of Four Soft, stated in a press release today.

Commenting on the proposed merger, Srinivasan HR, vice-chairman and vision holder, Take Solutions, said, “The coming together of two leading first-generation IT companies with similar philosophies and vision will create a significant IP company based out of India with worldwide operations. Four Soft is a perfect foil to Take Solutions. Our strong presence in the US and Asia Pacific complements Four Soft’s dominance in Europe and Japan. The proposed merger of the two companies will leverage Indian innovation and a strong partnering philosophy to become a truly global company in size and capability in the coming years.”

Four Soft, which has over 300 customers across 120 countries and 50,000 users in the supply chain domain, clocked revenues of Rs 150 cr during the last financial year. The company has been registering revenues of Rs 45 cr per quarter and expects to keep the current performance level to touch Rs 180-190 cr by this fiscal end. While 60% of Four Soft’s revenues flow in from Europe, the US and Asia markets account for 25 per cent and 15 per cent respectively.

Sebi begins review of public issue norms

Regulator revisits retail quota, pricing and refund rules.

Triggered by the recent market volatility and low floating stock of high-value shares in the market, the Securities and Exchange Board of India (Sebi) has kick-started an extensive review of various issues related to the primary equity market.

According to sources close to the development, the review is based on recommendations forwarded by the Parliamentary Standing Committee following the IPO demat scam and recommendations of the Securities Markets Infrastructure Leveraging Expert Task Force (SMILE) headed by Axis Bank Chairman P J Nayak.

The major issues under review are pricing of IPOs, quota reservation for the retail segment in IPOs, reducing the timeframe for listing IPOs, the refund system in case of unallotted IPO shares and the minimum public holding in a company.

There is a view that the quota system for the retail segment should be scrapped since the small investor base is not widespread.

Instead there could be a proportionate allotment for small investors, given that they comprise a minuscule portion of the total market participants.

Incidentally, in 2006, National Securities Depository (NSDL) had suggested the abolition of quota for retail investors in IPOs in its report to the market regulator on multiple dematerialised accounts.

Under the current practice, while 50 per cent of the allotment in an IPO is set aside for institutional investors, 15 per cent goes to high networth investors and the remaining 35 per cent is reserved for small investors.

NSDL had said quota for small investors should be done away with till the infrastructure for checking frauds involving multiple accounts were put in place.

The regulator is also revisiting the option of a fixed price mechanism for IPOs as against the book-building process, which is akin to auctioning bids.

Sources said in recent times, the book-building mechanism had been questioned as most of the promoters had failed to earn a good price for their public floats.

This is because shares get traded at a much higher price right on the first day of trading compared with the issue price. This has also led the regulator to ask for the circuit filter to be imposed by exchanges even on the first day of trading.

While the regulator has decided in principle to make it mandatory for all promoters to offload 25 per cent of their shares to the public for being listed on exchanges, it may give a timeframe of six months to a year from the date of the final notification for companies to comply with the new norms.

The other proposals under consideration are bringing down the timeframe for the IPO process, expediting the listing process and quickening the process of refund for unallotted IPO shares, provided payments have been made through the electronic fund transfer of banks.

Reliance Energy buys back 6.5 lakh shares

The Anil Ambani promoted Reliance Energy has bought back 650,000 equity shares of the company since the start of the offer on Tuesday at nearly Rs 1,279.23 a share aggregating Rs 83.15 crore ($21 million).

The company's board had approved buy-back of equity shares up to Rs 800 crore ($200 million), amounting to 10 percent of the company`s equity and free reserves.

The remaining Rs 1200 crore was intended for sale in the second phase, subject to necessary approvals by the shareholders. JM Financial Consultants is the manager to the buyback offer.

At noon Friday, shares of the company were trading at Rs 1,310 up by Rs 28.20 from its previous close at the Bombay Stock Exchange.

BPCL-Oman Oil JV files DRHP with SEBI

Bharat Petroleum Corporation Ltd. (BPCL) said on Friday that Bharat Oman Refineries Ltd. (BORL), a Joint Venture between BPCL and Oman Oil Co. Ltd. has filed a Draft Red Herring Prospectus (DRHP) with capital market regulator SEBI today.

Bharat Oman Refineries plans to sell a total of about 48% through the public offer and a pre-IPO placement to raise up to Rs25bn, according to reports. Bharat Oman Refineries could sell a stake of more than 20% in a pre-IPO placement to financial investors, the report added.

Bharat Oman Refineries is building a 120,000 barrels per day (bpd) refinery at Bina in Madhya Pradesh at a cost of Rs104bn. It has secured term loans of Rs64bn. The refinery is expected to be commissioned by the end of 2009.

BPCL runs a 240,000 bpd refinery in Mumbai and another 150,000 bpd refinery in Kochi in Kerala. Its subsidiary Numaligarh Refinery Ltd. runs a 60,000 bpd refinery in the north east.

SBI Capital Markets, Citibank and ICICI Securities are among the lead managers to the Bharat Oman Refineries issue.

Inflation continues to be of concern: RBI

Reserve Bank today said inflation, which surged to a 13-month high of 6.68 per cent for the week ended March 15, continues to be a concern and stressed it aimed to keep it under five per cent and bring it still lower in the medium term.

"The objective currently is to contain the inflation rate within an upper bound of 5 per cent and attempt to reduce it further in the medium term," RBI Deputy Governor Rakesh Mohan said at the enterprenuership Development Institute of India at Ahmedabad, a speech copy released here stated.

"Inflation was an issue during much of 2007, and continues to be of concern now," Mohan said.

Speaking on the role of financial sector to promote innovation and growth, Mohan said monetary policy endeavour was to provide a financial environment of low inflation and stability.

"To keep the momentum of high growth, it is extremely important to recognise that the best contribution monetary policy can make is indeed to ensure that inflation and inflation expectations are well anchored," Mohan said.

He said that monetary policy can foster innovation through an environment of low inflation, low inflation expectations and maintaining financial stability.

The RBI Deputy Governor said price and financial stability were very crucial to sustain the growth at current levels without any disruptive forces coming into play.

"In view of the success in reducing inflation from the long-run average of 7-8 per cent to 4-5 per cent now, the society's tolerance rate of inflation has also come down," Mohan said.

MF buys on year-end sees indices add over 2%

Heavy buying by mutualfunds and insurance houses ahead of financial books closure on March 31 saw indices close higher Friday.

Bombay stock Exchange’s Sensex closed at 16,371.29, up 2.22 per cent or 355.73 points. It touched a high of 16,452.08 and low of 15,884.45.

National Stock Exchange’s Nifty ended 2.31 per cent or 111.75 points higher at 4942.00. The index swung between intra-day high of 4,970 and low of 4,796.35.

“There was buying from various quarters today. Insurance companies and domestic fund houses bought to perk up their NAVs for March 31. There’s talk that insurance companies and Government of Singapore bought into RIL,” said Anita Gandhi, head institutional business, Arihant Capital Markets.

Mutual funds bought securities worth Rs 729.50 crore while foreign institutional investors were sellers to the tune of Rs 401.95 crore, according to provisional data available on the BSE.

“We were in an oversold territory. A lot of funds were sitting on cash and have deployed cash to enter when valuations of most of these companies looked attractive,” she added.

Leading the rally were Tata Steel (up 9.46%), Larsen & Toubro (6.19%), Infosys Technologies (5.94%), Wipro (5.56%), and BHEL (5.37%)

HDFC Bank (down 2.36%), HDFC (1.81%), ONGC (1.65%), Tata Motors (1.41%) and Hindustan Unilever (0.74%) were the biggest index losers.

Tier II and III stocks also witnessed major buying. BSE Midcap Index closed at 6,522.79, up 3.93 per cent and BSE Smallcap Index ended at 7,901.98, up 4.98 per cent.

However, Arihant Capital’s Gandhi feels that Indian equities are not out of the woods yet as global markets are still vulnerable to any negative flows from financial institutions.

“Concern is that the market completely ignored the high inflation figures which otherwise would have had a negative impact on the sentiment. This rally will be seen till March 31 and we may witness some correction after that. Next month our market will take cues from quarterly corporate earnings reports. Taking cues from advance tax numbers, it can be said that not many companies are likely to disappoint” she added.

India's wholesale price index shot up 6.68 per cent in the week to March 15 from the previous week's rise of 5.92 per cent and a market estimate of 5.96 per cent.

FIIs give the thumbs down to SEBI’s margin call

They are referred to as deep-pocketed investors. And the raw money power of some of these institutional investors can make or mar the fortunes of a stock. Yet, when it comes to the SEBI proposal asking them to shell out margins for cash market trades from April 21, the fat cats of the stock market appear reluctant to reach for their wallets.
“No other market in Asia requires this of institutional traders; Korea and Taiwan do have margining, but selectively on high beta stocks,” said the head equity of a leading foreign brokerage, adding that it would put India at a disadvantage to other competing markets.

At present, all categories of non-institutional investors - retail, high net worth and corporate - have to pay an upfront margin of up to 50% on cash market trades. In most cases, the brokerages fund the margin requirements.
Last week, SEBI issued a circular saying that all institutional trades in the cash market would be margined on a T+1 basis (the day after the trade), with margin being collected from the custodian upon confirmation of the trade. Subsequently, with effect from June 16, the margins would be collected upfront.

At this stage, it is not clear if broking firms executing trades on behalf institutional investors can deposit the margin, or if it will be compulsory for the institutions themselves to fork out the money.

The main reason why institutional investors are opposed to the proposal is that it will reduce the pace at which they can churn their portfolios. This is because a certain portion of their funds would be locked up as margin, which otherwise could have been used to buy stocks.

Still, some of the concerns of foreign institutional investors appear to be legitimate. Paying margins is almost like giving an advance payment on the shares which will be received only two days after the trade has been executed. Some classes of international investors, like pension funds, charitable trusts do not allow for this as they do not want to take on the slightest risk irrespective of how well regulated that market is. There is a fear that these investors may turn their backs on India.

Both institutional broking firms (if they are allowed to fund their clients margins) as well as institutional investors resent the move, because it will mean more of their funds getting tied up in the short term. And that means higher transaction costs.

The other issue is related to the transfer of funds. An institution in the US would have to first inform its global custodian, which in turn would notify the local custodian (in India) to release the funds to the exchange or the broker, whichever the case. If margins are to be paid upfront, real-time transfer of funds could pose a problem due to differing time zones in both markets.

For long, domestic non-institutional investors have been demanding that their institutional counterparts too be charged margins so as to create a level-playing field. And even some of the local institutional players feel the SEBI proposal is in good spirit.

“It is a fair move,” says Abhay Aima, country head equities, private banking and third party products at HDFC Bank. “As markets grow and more players come in, risk will go up. If one has to safeguard the market from growing risks, this is required,” he adds.

Brokers say frequent churning of portfolios by institutional investors especially FIIs has been fuelling volatility on the bourses. “It is a positive move and will ensure more genuine trades (by institutions),” says Ved Prakash Chaturvedi, MD Tata AMC, “Currently, the amplitude of swings is huge. That needs to be dampened,” he added.

Tata's Jaguar Deal Worries Analysts

Tata Motors' acquisition of the two iconic brands—Jaguar and Land Rover—without doubt ranks among the high-profile global deals clinched by Indian firms so far. But if auto analysts are to be believed, this may not be the best time to buy Tata Motors shares. At the time of going to press, Tata Motors' ADRs were trading 2.30% lower on the NYSE Euronext at $16.96. It had hit a low of $14.71 on March 17, 2008. Meanwhile, Ford Motors was trading at $2.35, down 2.08%.

The overwhelming consensus is that the acquisition will strain the company's bottom line near term, thus putting pressure on the stock price. According to Enam Securities' auto analyst Sahil Kedia, "There is a likelihood that there will be pressure on the profit after tax in the short term" as it is still "slightly unclear how Tata will fund the acquisition". He feels that the Indian company might also use a "certain amount of loan receivables on its books" to fund the acquisition.

In a similar context, HDFC Securities' executive director and head (institutional business) Sanju Verma says "The success of the deal rests on the Tatas' ability to effectively manage apparent brand positioning mismatches". She also expects "EPS dilution could be around 10% plus though earnings may be impacted by a sharper 40-45%, after taking into account the financing costs and losses attributed to both brands". She is assuming that the JLR deal is pegged at $2 billion and Tata Motors applies a funding mix of internal accruals, equity and debt.

Analysts also say much depends on how Tata Motors will be able to boost the flagging sales of both loss-making brands. According to reports, Jaguar sales dropped 33% in the US and Europe in the first two months of the current year. Land Rover sales fell 13% in the US and around 7.7% in Europe during the same period.

Auto analyst Piyush Parag of Religare Enterprise has a "buy recommendation pre-deal" as the "valuations seem extremely attractive at current levels". However, the brokerage will update its recommendation post Tata-Jaguar Land Rover deal as "presently, it will be too early to comment on the valuations, as the financial details of the deal are yet to come."

Interestingly, while analysts are expecting selling pressure on Tata Motors shares in the coming days, fund managers started reducing their exposures around six months ago. Data clearly shows that in the past six months, mutual funds have brought down their exposure by a little over 30%. In September 2007, MFs were holding nearly 4.50 crore shares of Tata Motors, which has come down to around three crore in February.

On Wednesday, the stock lost marginal ground to close at Rs 679.40. Since January 3, when news of the deal first became public, the stock has lost more than 14%. However, the benchmark Sensex, in the same period, has shed nearly 21%.

Meanwhile, ICICI Direct's senior analyst Pankaj Pandey feels that the "recent equity market turmoil has already taken a toll on the stock and so further downside from current levels should not be expected".

HOT STOCKS FOR 28 - 03 - 08

STATISTICS :

Asian markets are mixed in todays trading after Dow ends down 100+ points. Our markets will also tend to react to the same with Flat to positive opening. Nifty will have a volatile session with trading between levels 4752 - 4900 levels. and Sensex will trade between levels 15860 - 16292. Nifty has some support @ 4780 and resistance @ 4870.

FUTURES :

NDTV : sell above 375 for a tgt of 362, sl @ 380.5

RAJESH EXPORTS : buy for a tgt of 75+, sl @ 69.5

SAIL : buy for a tgt of 205+, sl @ 194

PUNJLYOD : buy for a tgt of 3211+, sl @ 309

RNRL : buy below 98 levels for a tgt of 105.5+, sl @ 95

RCAPITAL : buy for a tgt of 1350+, sl @ 1304

Nifty : sell above 4880 for a tgt of 4820, sl @ 4910

OPTIONS :

IFCI : buy call 40 for a tgt of 10+, sl @ 4

RPOWER : buy call 320 for a tgt of 45+, sl @ 20

INFOSYS : buy call 1500 for a tgt of 100+, sl @ 35

SAIL : buy call 200 for a tgt of 20+, sl @ 8

Investors concerned about Tata Motors deal

Investors in Tata Motors are bracing for India's thirdlargest passenger carmaker to begin selling down some of its investments and stakes in subsidiaries to help finance its $2.3bn takeover of the Ford-owned marques Jaguar and Land Rover.

Tata Motors' share price faced renewed pressure yesterday over the deal. Its stock initially fell about 7.3 per cent before recovering to end down 3.6 per cent at Rs655.20.

In a note on the deal, which was formally sealed on Wednesday, Credit Suisse said Tata Motors would probably first offload its holding inTata Steel, India's largest private steelmaker.

"The prime candidate for such a sale would be Tata Motors' stake in Tata Steel, which is worth about $450m at the current market price," said Govindarajan Chellappa, a Credit Suisse analyst.

Tata Motors has said its takeover of the luxury marques will help it develop capabilities in design, technology and distribution to compete with global brands in domestic and international markets.

But the deal has been unpopular with investors since rumours about it began circulating in the middle of last year.

Tata Motors' stock has fallen about 13 per cent since last July. The Sensex Index has gained nearly 5 per cent in the same period, and the benchmark dropped 0.4 per cent yesterday to 16,015.56.

Investors are concerned on three counts: Jaguar is lossmaking; the US market for luxury cars is heading into a downturn; and the brands do not fit the Indian group's stable of low-cost vehicles for the developing world.

They are also worried about Tata Motors' plan to raise $3bn in bridge loans for the acquisition.

Tata Motors has indicated that it will set up a special purpose vehicle to hold Jaguar and Land Rover, which some analysts believe will also assume the debt.

But investors are concerned that the deal will still be dilutive. Tata has announced that it plans to raise $1bn in new equity for the acquisition.

This could be mitigated by a potential plan to sell the company's 4.29 per cent stake in Tata Steel.

Piyush Parag, an analyst with brokerage Religare Enterprise, said Tata Motors might also sell down part of its holdings in some subsidiaries. These include its successful South Korean truck acquisition, Tata Daewoo, and its two large components makers, HV Transmissions and HV Axles.

"Is the deal value accretive?" Credit Suisse asked in its note. "There are too many questions left unanswered to give a definitive answer."

More details were needed on the intellectual property Tata Motors had acquired as part of the deal and on how it planned to turn Jaguar round, the note said.

Kiri Dyes IPO swims against the tide

Kiri Dyes and Chemicals Ltd is coming out with its initial public offer (IPO) when most of the other companies have put on hold their IPO plans. This Rs 200 crore dyes and chemicals company had planned to come out initially with an IPO at a price of Rs 250 per share a few months back when the Indian capital markets were at all-time highs. But, the market crash that took place in early January forced the company to put on hold its IPO plan as big issues like Emaar MGF and Wockhard Hospitals got washed out.

Now, the company is finally venturing out into the market at a much lower price band of Rs 125-150 for a Rs 10 face value share. In spite of the slump in the grey markets, Kiri Dyes IPO is trading at a premium of Rs 14-Rs 15 per share. While the small size of the issue and its attractive valuations will enable the company to get its issue subscribed, at what price it will get listed on the bourses has to be seen.

Rating agency CRISIL has given a poor rating of 2 out of 5 for this IPO which will be open for subscription from March 25 to April 2.

Issue Details:

Kiri Dyes is planning to raise Rs 56.25 crore at the upper price band of Rs 150 to fund the expansion, capex and working capital. Company will issue 37,50,000 equity share of face value Rs 10 each in the price band of Rs 125-150 per share. Post IPO promoter and promoter group holding will come down to 66.57%.

Company has also made a pre-IPO allotment of 12.50 lakh shares raising Rs 14.40 crore. It allotted 11,18,860 shares or around 10% of equity capital to Well Prospering Ltd a subsidiary of Lonsheng Group (Losen) at Rs 115 per share and another 1,31,140 equity shares to SMS Technology Ltd at Rs 120 per share.

Company business: Kiri Dyes is a manufacturer and supplier of reactive dyes and dyes intermediates of various forms. Company also proposes to venture further into backward integration to make sulphuric acid and its derivative. Existing installed capacity includes 10,800 MTPA of dyestuff and 7,200 MTPA combined capacity of intermediates, vinyl sulphone and H acid.

Company's dyestuff plant is located at Vatva in Ahmedabad and intermediates and chemicals plants located at Padra in Vadodara. Company has also ventured in to 60:40 JV with Lonsen- Chinese company to start with production capacity of 20,000 MTPA of reactive dyes which to further increase to 50,000 MTPA later on. Lonsen's dyestuffs production capacity is 2 lakh MTPA higher than entire India's 1.5 lakh MTPA. JV company target production to commence by 1st quarter of FY 2009.

Objects of the issue: Company to spend around Rs 42crore to fund capex for setting up a plant to manufacture sulphuric acid, oleum and chlorosulphonic acid with a combined capacity of 1.8 lakh MTPA enabling backward integration and economies of scale at Vadodara.

Stay invested in blue chips !!!

A sharp upswing in the stock market in the past four trading sessions, following a two-month-long downward spiral must have confounded many retail investors The investors have suddenly realised the importance of consistency over flamboyance. These are times when investors can look at stocks, which are market leaders and have track record of consistent revenue and profit growth.

To see if there is something like ‘consistency’ in a topsy-turvy market, we constructed a ‘Blue-Chip Index’ comprising forty-five market leaders across sectors beginning January 1993.

This index constitutes companies like Reliance Industries, Tata Steel, HDFC, Hindustan Unilever and Colgate-Palmolive from FMCG, Ambuja Cements and ACC from cement sector, auto majors like Mahindra & Mahindra and Tata Motors, engineering giants like ABB, L&T and Siemens, besides leading stocks from pharma, financial services, hospitality and information technology industries. This has been done to ensure that all sectors in the economy are duly represented. The returns are seen over the course of last 15 years so as to cover all phases of economic cycle.

It was given that the blue-chip index will beat the Sensex, but no one could have imagined the extent of outperformance. If one had invested Rs 100 in Sensex at the beginning of January 1993, it would have grown to Rs 700 by February 2008. In the same period, an investment of Rs 100 in the blue-chip index would have grown to Rs 1,700 outclassing the Sensex by a staggering 141%.

In all these 15 years, seldom did it happen that the blue-chip index has underperformed the Sensex. The extent of outperformance also kept a secular upward trend and in the bull run, starting 2003, the outperformance grew leaps and bounds, indicating that blue chips are better placed to take advantage of emerging opportunities than their smaller rivals.

The returns are backed by an equally strong earnings growth by these blue-chip companies. Comparing the earnings growth and the value of blue-chip index, we found that if earnings in calendar year 2007 were 22 times that of 1993, the blue-chip index of December ’07 was only 19 times of its value in January ’93.

If one were to counter this argument, one easy criticism is that such blue-chip index will include stocks, which have actually become blue chips over the course of last 15 years. Infosys Technologies was not a blue chip in early ’90s, similarly Wipro, but number of such companies is insignificant in our blue-chip index. Rather, we have companies like HUL, Colgate, Tata Motors, ITC, M&M, Tata Steel, MRF, Raymond and Indian Hotels, which were top companies in their sectors even in early ’90s.

The paradox with stock market investing is that most often retail investors panic and sell-off in a falling market or they have short-term horizon. Only if they pay greater attention to blue chips rather than looking for goldmine in obscure ideas, they would beat best of the mutual fund managers.

HOT STOCKS FOR 27 - 03 - 08

STATISTICS :

Today is the expiry day for the market, can see a lot of volatility, Nifty will be range bound between levels 4740 - 4880, and sensex will also be rangebound between levels 15670 - 16421 levels, Nifty has some support @ 4780 and resistance @ 4875 levels.

FUTURES :

NIFTY : buy below 4770 for a tgt of 4850 levels

RELIANCE : buy for a tgt of 2350+, sl @ 2264

RCOM : buy for a tgt of 536+, sl @ 519

REL : sell for a tgt of 1260, sl @ 1310

BHEL : sell above 1975 levels, tgt is 1880 , sl @ 2010

OPTIONS :

Nifty : buy call 4800 for a tgt of 75+

ITC : buy call 190 for a tgt of 8.5+, sl @ 4

Tata Motors buys Jaguar, Land Rover from Ford for 2.3 bln usd

Indian automaker Tata Motors Ltd said it has agreed to buy the Jaguar and Land Rover brands from Ford Motor Co (NYSE:F PRS) (NYSE:F PRA) (NYSE:F) for 2.3 bln usd cash.

Tata Motors, which has been negotiating the deal since January, said it would support the growth of the two brands, which employ about 16,000 people at plants in the West Midlands and Merseyside in the UK.

It added the deal will be funded through a bridge finance facility along with the company's existing cash resources.

The company will raise 3 bln usd for a period of 15 months as bridge finance from a small syndicate of banks, which will be refinanced through long-term debt or equity or unlocking value from some of its investments in various units, a company spokesman said.

In a conference call, Tata Motors said Jaguar-Land Rover will operate as subsidiaries under holding company Tata Motors (UK) Holdings Ltd.

'We have enormous respect for the two brands and will endeavour to preserve and build on their heritage and competitiveness, keeping their identities intact,' Tata Motors chairman Ratan Tata said in a statement.

Under the deal, which is expected to close by the end of next quarter, Ford will continue to supply Jaguar and Land Rover with vehicle components and environmental and platform technologies and will also provide financing for dealers and customers through Ford Motor Credit Co.

The US-based company has also committed to provide engineering support, including research and development, as well as information technology, Tata Motors said.

Ford will also contribute about 600 mln usd to the Jaguar Land Rover pension plans.

Ford said the sale, which was first mooted last August, would allow it to focus on turning around its core Ford brand.

'Jaguar and Land Rover are terrific brands,' said Ford president and CEO Alan Mulally. 'We are confident that they are leaving our fold with the products, plan and team to continue to thrive under Tata's stewardship.'
Ford bought Jaguar for 2.5 bln usd in 1989 and Land Rover for 2.7 bln usd in 2000, and joined them with Aston Martin and Volvo to form its Premier Automotive Group.

But after posting losses of 12.6 bln usd in 2006 and 2.7 bln in 2007, it sold Aston Martin for 479 mln stg last March and put Jaguar and Land Rover on the block in the summer.

Jaguar is thought to have never made a profit for the company -- Ford does not separate results for its brands -- despite investment of about 10 bln usd since it was acquired.

Land Rover, which makes the top-end Range Rover as well as the Discovery and Freelander 4x4 ranges, however, is believed to have made profits of about 1.5 bln usd last year, and the two companies combined are thought to be profitable.

Industry analysts said the price paid was at the top end of expectations, although they said it is difficult to quantify the value of supply and engineering support agreements.

Eric Wallbank, automotive industry leader for Ernst & Young in the UK, said the deal would give Tata access to useful technologies, while Ford would get money to revive its North American operation.

'The deal also removes the uncertainty that has distracted the management, employees and customers of both companies,' he said. 'The companies can move forward with a high degree of certainty.'
Unions in the UK said selling to Tata was the best option for the brands.

'Today's deal is really good news for the UK automotive industry and the thousands of people who work for Land Rover Jaguar and its supply chain,' said Roger Maddison, Unite National Officer for the automotive industry.

'Unite has secured written guarantees for all five UK plants on staffing levels, employee terms and conditions, including pensions, and sourcing agreements,' he added. 'The sale ensures our members' futures and we look forward to working with Tata.'
Piyush Parag, an analyst with Religare Research, said the acquisition is positive for Tata Motors because the company will be able to enter into the luxury automobile segment with these brands.

Prior to this announcement, but amid media reports of the deal being inked today, Tata Motors closed down 0.08 pct at 679.40 rupees on the Bombay (OOTC:BBAO) Stock Exchange while the benchmark index ended 0.81 pct lower at 16,086.83.

Tata Motors is part of the salt-to-software Tata Group.

Religare to acquire UK broking co for $100 million

Domestic brokerage firm Religare Enterprises is close to acquiring London’s oldest broking firm; Hichens, Harrison & Co. The deal is expected to be announced by this weekend. The size of the acquisition is pegged over $100 million (about Rs 400 crore).

For the half-year ended June 2007, Hichens, Harrison & Co — listed on the Alternative Investment Market of the London Stock Exchange —had reported revenues of £10.6 million and operating profits of £2.9 million. If successful, this
would be first overseas acquisition by an Indian brokerage firm abroad.

When ET contacted, Religare CEO and MD Sunil Godhwani said, “We are constantly evaluating opportunities to strengthen our business model both through organic and inorganic routes, especially for our institutional business.” The proposed acquisition is expected to give Religare a foothold in the extremely competitive international capital markets. The company, which currently has one of the largest retail networks among Indian brokerage firms, is now eyeing a strong presence in the institutional space.

Hichens, Harrison, which has been in business for over 200 years, offers services like corporate broking, institutional broking and sales, private client broking contracts for difference apart from its proprietary book trades. It acts as corporate broker for small and medium sized listed companies and advises them on raising capital though new issues,
secondary fund raising and private placements.

Further, it has a long track record of dealing for institutional clients and investment advisory services to high net worth clients. The AIM listed firm has its presence in nearly a dozen countries the US, the UK, South Africa, Indonesia, Malaysia, Argentina, Dubai, Luxembourg, and Singapore being the major ones. Sources said that the acquisition would provide Religare access to international markets and the brokerage would be in a better position to help its local clients access international markets. Religare shares closed at Rs 365, up 5% over the previous close on BSE.

Also, the acquisition would immediately add to the top-line and bottomline of the firm. Also, the UK-based brokerage has a large client base of high net worth individuals, who are expected to become institutional investors in India.
Religare has also made forays in insurance and wealth management through JVs with Aegon and Macquarie, respectively. The Religare Macquarie wealth management JV is the first such venture in India.

Govt to dilute 5% stake in mini-ratna companies

The government plans to dilute its stake in about half-a-dozen listed mini-ratna companies including MMTC, STC, ConCOR and Shipping Corporation of India (SCI). It will divest 5% in these companies through follow-on public offers.

A stake sale in MMTC alone is expected to bring in about Rs 5,000 crore. MMTC is currently trading at around Rs 19,452 on the Bombay Stock Exchange (BSE). MMTC’s market capitalisation is hovering at around Rs 1 lakh crore, the maximum among all listed mini-ratnas.

The proposed stake sale in the mini-ratnas would fetch the government about Rs 7,000 crore. The money raised would be used to fund the government’s social sector programmes. Mini-ratnas have been identified for raising funds as allied Left parties are against dilution of the government’s stakes in navratnas.

“We are in talks with nodal ministries for selling government stake in listed profitable central public sector enterprises (CPSEs) other than the navratnas,” an official in the department of public enterprises said. The government would sell a maximum of 5% of its stake in the mini-ratnas, he added.

According to an official estimate, a 5% equity divestment in Bharat Electronics (BEL), Container Corporation (ConCOR) and Shipping Corporation of India (SCI) would fetch Rs 500 crore, Rs 500 crore and Rs 300 crore respectively. ConCOR is trading at Rs 1,636 per share, STC at around Rs 360, SCI at Rs 195 and BEL at around Rs 1,194 on the BSE.

Proceeds from the stake sale in State Trading Corporation (STC) are expected to fetch not more than Rs 54 crore at the current market value. The government is also considering stake sale in the Neyvelli Lignite Corporation (NLC). The stake sale in these companies is expected to help the government fund the proposed Rs 60,000-crore farm loan-waiver, an official said.

A senior Finance ministry official said the government is not worried about bringing the public offer amidst weak market sentiments as these companies have strong fundamentals and are considered blue-chip by investors. The government may take six to eight months to complete the disinvestment process.

Both, the prime minister and finance minister had earlier expressed their intent to tap the capital market to fund the loan waiver announced in the Budget. The Centre also plans to take the Left into confidence before coming out with a formal announcement in this regard.

Blossoming telecom partnerships

With Virgin Mobile’s controversial entry into the Indian mobile market and the news on Temasek, Singapore, leading the race for picking up stake in Tata Communications (erstwhile VSNL), the Indian telecom industry is buzzing with M&As and partnerships. It is important to look at the strategic objectives behind these partnerships for a better understanding. High sunk costs, rapid technological advances, high obsolescence and intense competition are some of the reasons for some of the mega deals and consolidation in the industry. ‘Market access’ is one of the prime motives for such partnerships. By buying out Hutchison for $11.1 billion, Vodafone entered into the high growth Indian market and hedged it against the saturating European markets. This move has proved well for Sarin as the Indian arm is now contributing to about 40% of mobile usage volume of Vodafone. Same holds good for the Malaysian operator Maxis Communications which acquired stake in Aircel for $1 billion to enter into the Indian market. Virgin Mobile, the Mobile Virtual Network Operator in the UK, US, and other countries has plans to enter the Indian market through partnership with Tata Teleservices. Indian telcos are also expanding their footprint in other emerging markets by forging alliances and partnerships. Tata Communications entered South Africa by acquiring 26% in Neotel; RCOM recently acquired Yipes for $300 million to enter into the US data communication market; VSNL acquired Teleglobe for $239 million to get access to wholesale voice and data market in North America; Bharti will soon be launching 3G services in Sri Lanka with expertise from its partner Singtel; Botnia Hightech Oy in Finland was acquired by Bangalore-based Sasken Communication Technologies to be nearer to the European market. After getting market access, firms enter the second phase of building partnerships to achieve complimentary synergies and develop a more comprehensive product/service set. To achieve “economies of scale and scope”, firms acquire networks and customers from existing service providers for expanding their operations. By acquiring Skycell in Chennai, Hexacom in Rajasthan, JT Mobile in Karnataka among others, Bharti Airtel expanded its footprint across India. This enabled Bharti not only to have ready access to existing subscriber base of acquired operators but also to build synergy in its pan-India network operations. Same holds good for Idea Cellular and Vodafone Essar as well. The third major factor for the partnerships in telecom is for companies to have “control over emerging technologies”. Bharti’s mega deals of outsourcing of its entire network management and operations to Nokia Siemens and Ericsson is an example of this kind. By partnering with equipment vendors using a managed capacity model, Bharti Airtel is able to control the planning, deployment and management of leading edge technologies and services for its business. Vodafone Essar and Idea followed suit. Realising that apart from connectivity, customers also need security especially for data services, Bharti Airtel signed partnership with US-based Verisign for bundling information security products and services with its broadband services. Tech firms with niche specialisation such as Subex Systems, which specialises in advanced telecom fraud management products, Geodesic the developer of the famous Mundu Instant Messenger for mobiles, OnMobile incubated by Infosys specialising in mobile software products might well be likely targets for acquisitions by handset vendors and service providers to enable them to have control over various relevant technologies. While we have been witnessing the above partnerships, the fourth dimension to the partnerships is emerging. Technology-intensive companies are pursuing partnerships with “hedging” as the main value objective. Companies are getting stake in technologies unrelated to the core business that holds promise for the future. The search engine giant Google formed the Unity consortium with major telcos around the world to build US-Japan sub-sea cable system operating at multi-terabit speed, possibly to push searchable virtual reality snippets across the continents; Reliance Communications acquired stake in Adlabs the films production company, to possibly distribute digital films to theatres and to individuals across the country through its broadband networks. It is expected that broadcasters such as Zee, Star and Sun will soon be bidding for Mobile TV licence (for which Trai has released recommendations) in collaboration with mobile network operators to possibly broadcast their contents on to our mobile handsets. This euphoria over emerging technologies and associated businesses is similar to the ones witnessed during the dotcom era in mid-’90s. Some of the partnerships did not work too well. Notable ones being the disastrous MCI-WorldCom’s merger for $37 and the suicidal take over of AOL by Time Warner for $160 billion. We can only hope that some of the above recent partnerships blossom and bring in the intended benefit of providing advanced telecom services at lower prices

RBI lets 2 Singapore banks open account in India

The deadlock on the Comprehensive Economic Cooperation Agreement (CECA) signed between India and Singapore has finally lifted. The Reserve Bank of India (RBI) on Tuesday granted licences to two Singapore banks - DBS and United Overseas Bank (UOB). In turn, the Monetary Authority of Singapore (MAS) has approved a full bank licence to State Bank of India (SBI) with privileges to establish up to 25 outlets, including ATM's and offer full range of financial services. This makes SBI the first Indian bank to get a qualifying full bank (QFB) status in Singapore. The licence will enable the country’s largest bank to kick off retail operations in Singapore. DBS, Singapore’s largest bank, has received RBI clearance to open another eight branches in the country. UOB has received the RBI nod for opening its maiden branch in the country in Mumbai. According to the CECA which was signed in 2005 between India and Singapore, both countries are supposed to give QFB status to three banks from each country. Among other things, the agreement was aimed at tiding over the standoff between the two countries over entry into their respective financial services markets. Earlier, India had refused to acknowledge Temasek and GIC’s holdings in ICICI Bank as two separate entities since they were both controlled by the Singapore government. However, last year, RBI softened its stand on this issue last year allowing the two investors to hold higher stakes. Currently, SBI has only one branch in Singapore and does not have any access to retail deposits. The QFB status will also help the bank to raise retail deposits and also open 25 ATMs and point of sale terminals. Other banks like Bank of Baroda and Bank of India have also applied for a QFB licence while ICICI Bank is in advanced stages of applying for a licence.

Infosys Technologies to announce financial results

The board meeting of Infosys Technologies will be held on 15 April 2008 to consider the audited financial results of the company as per Indian GAAP for the quarter and year ending 31 March 2008.
To consider the audited consolidated financial results of the company and its subsidiaries as per Indian GAAP for the quarter and year ending 31 March 2008.
To consider the consolidated financial results of the company and its subsidiaries as per US GAAP for the quarter and year ending 31 March 2008.
To recommend a final dividend, if any, for the financial year ending 31 March 2008.
The company made this announcement during the trading hours today, 26 March 2008.

Reliance Industries to shut its retail petrol pumps

Reliance Industries, the country’s largest private sector company, has decided to shut down all the petroleum retail outlets owned by it directly as surging crude prices and the absence of government subsidies have made operations unviable. “We are kept out of the ambit of the government-sponsored survival package. We have decided to close all our company-owned retail outlets. It has become unviable to transport fuel from our depots to retail outlets as the throughput from our retail outlets has almost become zero. We are not going to re-fuel any of our retail outlets and this will eventually lead to clousure of such outlets till stocks last,” a source close to the development told ET. A Reliance spokesperson declined to respond to an ET questionnaire on the issue.

Overseas initiative generates interest in SBI

On BSE, 64308 shares were traded in the State Bank of India (SBI) counter. The scrip had an average daily volume of 3.77 lakh shares in the past one quarter.
The stock hit a high of Rs 1791 and a low of Rs 1741.10 so far during the day. The stock had a 52-week high of Rs 2396.54 on 14 January 2008 and a 52-week low of Rs 863.42 on 3 April 2007.
The large-cap scrip underperformed the market over the past one month till 25 March 2008, declining 18.21% compared to the Sensex’s fall of 8.12%. It had also underperformed the market in the past one quarter, declining 23.13% compared to Sensex’s decline of 19.69%.
India's biggest commercial bank in terms of market capitalisation has current equity of Rs 631.56 crore. Face value per share is Rs 10. Government of India holds 59.73% stake in the bank (as at end December 2007).
The current price of Rs 1762 discounts its Q3 December 2007 annualized EPS of Rs 137.46, by a PE multiple of 12.81.
Meanwhile, SBI has completed acquisition of 91% stake in Global Trade Finance, an Indian factoring services company for Rs 520.55 crore. The stake in Global Trade Finance was purchased from Export-Import Bank of India, IIFC, Washington (IFC) and FIM Bank, Malta (FIM).
State Bank of India (SBI)’s net profit rose 69.8% to Rs 1808.64 on 36.3% growth in operating income in Q3 December 2007 over Q3 December 2006.
SBI's principal activity is to provide banking, treasury and credit management services to individual and corporate clients.

HOT STOCKS FOR 26 - 03 - 08

STATISTICS :

Markets after yesterdays rally will tend to trade between 4750 - 4940 levels. Nifty will see a flat opening and volatility will continue, with pft booking in selected stocks. Nifty has some support @ 4791 levels and resistance @ 4920 levels.

INTRADAY :

INDIABULLS FINANCIALS : buy for a tgt of 432+, sl @ 405

WIPRO : sell for a tgt of 423 levels, sl @ 449

BHARTI : sell for a tgt of 820 levels, sl @ 848

FUTURES :

ADLABS : sell above 575 levels for a tgt of 548, sl @ 588

CORP BANK : sell above 288 levels for a tgt of 278, sl @ 293

ICICI BANK : sell above 883 levels for a tgt of 850 - 858, sl @ 890

REL : sell above 1302 levels for a tgt of 1270, sl @ 1318

WIPRO : sell for a tgt of 423, sl @ 446

Nifty : sell for a tgt of 4835 - 4852 levels, sl @ 4950

OPTIONS :

Nifty : buy call 4600 below 250 for a tgt of 340+, sl @ 208

ITC : buy call 190 for a tgt of 6+, sl @ 2

SAIL : buy call 200 april expiry for a tgt of 20+, sl @ 5

HEDGE CALLS :

1> Nifty : sell 1 lot call 4900 above 60

.... Nifty : buy 1 lot put 5000 below 135 levels

..... Nifty : buy 1 lot fut below 4810.
Nif

Infosys Shares Gain on Optimism Rupee's Appreciation May Slow

Infosys Technologies Ltd. rose the most in 21 months in Mumbai trading, leading gains among Indian computer services provider, amid optimism that the currency will slow its appreciation.

Infosys, India's second-largest provider of computer services, climbed 9.6 percent, its biggest gain since June 15, 2006, to 1,492.55 rupees at the close of trading on the Bombay Stock Exchange today. Larger rival Tata Consultancy Services Ltd. gained 6.4 percent. Wipro Ltd., ranked No. 3, rose 9 percent, its biggest climb since May 18, 2004.

The Indian currency has fallen 1.7 percent this year, after making its biggest gain in more than three decades in 2007. A stronger rupee reduces the value of the exporters' earnings from the U.S., the world's largest market for computer services.

``We don't expect the rupee to appreciate that sharply now,'' Mihir Vora, senior vice president at HSBC Asset Management (India) Pvt., said by telephone from Mumbai. HSBC manages $1 billion in equities in India. ``I think one of the concerns, which was the currency, has kind of been alleviated,''

Vora said technology stocks account for 5 percent to 10 percent of the portfolios that he oversees, compared with a ``negligible'' proportion in the previous quarter.

Bangalore-based Infosys and its local rivals manage computer networks and call centers for overseas clients including General Electric Co. and ABN Amro Holding NV.

Deutsche Bank top FII in India, Bear Stearns comes at 10th spot

Shares of Indian firms where Bear Stearns Asset Management Ltd (BSMA) has stakes took a big hit last week after the FII (foreign institutional investor) sold heavily as its parent Bear Stearns Companies Inc., the fifth largest US investment bank, agreed to a $2 (Rs81) a share takeover from JPMorgan Chase and Co.

The bulk deals data from bourses indicated more than Rs1,000 crore worth of sales by BSMA in just two trading days—14 March and 17 March.

Among a dozen big FIIs in India, BSMA’s portfolio ranks third from the bottom. The fund’s end-December portfolio, at Wednesday’s price, was worth Rs2,491 crore.

A Mint analysis of Indian portfolios of some of the global investment banks, brokerages and their subsidiaries shows that the biggest stock portfolio is owned by German group Deutsche Bank AG and its affiliates, valued at Rs33,579 crore.

The stock portfolio is based on the quarterly shareholdings data available with the Bombay Stock Exchange (BSE), which lists investors with more than 1% stakeholding as on 31 December. Since then, there could have been changes in their portfolios. Besides, the BSE data only refers to those firms in which these funds hold at least 1%. The valuation of their portfolios is based on the market price of the stocks as on 19 March.

New York-based Citigroup Inc. and London-based HSBC Holdings Plc. own the second and third largest portfolios.

“A large part of this portfolio is participatory notes (PNs) held on behalf of our clients,” said Ravi Kapoor, managing director and head of equity capital markets at Citigroup Global Markets India Pvt. Ltd. PNs are offshore derivatives of Indian stocks sold by registered FIIs in India to their foreign clients.

Two US investment banks, Morgan Stanley and Merrill Lynch and Co. follow the table toppers. Hong Kong-based brokerage CLSA Asia-Pacific Markets, majority owned by French banking group Credit Agricole SA, comes next.

Goldman Sachs Group Inc., the world’s most profitable investment bank, owns Indian stocks worth Rs7,307 crore, while US-based JPMorgan has a Rs6,835 crore kitty.

Swiss bank UBS AG with 5,848 crore worth of stockholding in India, held mostly under its subsidiary Swiss Finance Corp. (Mauritius) Ltd, is the ninth largest in this group followed by BSMA.

Interestingly, BSMA had begun selling stocks during the third quarter of financial year 2008, ending December .

While BSMA had 103 firms in its portfolio at the end of the second quarter in September, by end-December, it was down to 86. The big names among the stocks offloaded by it include CEAT Ltd, Dabur Pharma Ltd, Eveready Industries Ltd, Everest Kanto Cylinder Ltd, IVRCL Infrastructures and Projects Ltd, Shipping Corp. of India Ltd and SpiceJet Ltd.

Meanwhile, BSMA also bought a substantial stake, worth more than $150 million, in Jaiprakash Associates Ltd, the latest entrant in BSE’s benchmark Sensex.

Similarly, Lehman Brothers Holdings Inc., which wrote down $1.8 billion mark-to-market losses in its first quarter results, had sold some of its stakeholdings in Indian companies, even as it released a bullish report on the country titled India: Everything to Play For in October 2007.

While Lehman had more than 1% stake in 29 companies at end-September, it had cut down the portfolio to 14 companies by end-December.

Indian IT services market to grow at 18.6%

Indian information technology (IT) services market will remain the fastest growing in the Asia Pacific region, with a compounded annual growth rate of 18.6 per cent, according to the ‘Asia Pacific IT Services Market and Forecast, 2006-2011’ report by Springboard Research. The report projects the IT services market in the Asia Pacific region to grow to $55.9 billion by 2011.

China will, however, offer the largest market opportunity in dollar terms at the end of the forecast period, says the report. Phil Hassey, vice president-services Research at Springboard Research says, “Although in some quarters it could be expected that the Indian market would grow even more rapidly, it is still fragmented and a long way from maturity.”

“Most local services providers, aside from the worthy headline grabbers such as Tata, IBM and Wipro are based within a city or state with a narrow capability range. National coverage is limited, and typically the engagement cost and contract value pales in comparison on a 'per capita' basis when compared with Australia, Hong Kong or Singapore,” he adds.

The report further shows that application hosting will grow at 19.5 per cent a year between 2007 and 2011 to register the fastest growth during the forecast period. Meanwhile, enterprise application integration at $7.8 billion will continue to be the largest component of the market by 2011.

However, according to the study enterprise IT outsourcing, which was the largest market in 2007, will reduce its relative size and weighting in the market by 2011.

Gujarat plans mini-hydro power projectsn

The Gujarat state government is planning to set up mini-hydro power projects with a total capacity of 10mw along all major dams in central and south Gujarat.

The mini-hydro power plants are likely to come up at Karjan, Damanganga and Vanakbori projects in south Gujarat. “We intend to utilise the excess water during monsoon to generate electricity. At present, this water is being wasted,” said state water resource minister Nitin Patel in the on-going assembly session.

The government has planned two units of 1.5mw each on Karjan project by making an investment of Rs 16 crore. Similarly, the government will invest Rs 24.4 crore at the Damanganga project to generate 5.25mw apart from 1MW that will be generated at Vanakbori.

The minister informed the house that around five lakh hectare will be irrigated due to the various water harvesting programmes carried out during the past five years. According to him, around 20,000 million cubic feet water was being harvested as a result of one lakh check dams built in various parts of the state. He also claimed that the underground water table has risen by around 3 metre to 5 metre in the state.

Defending the state government’s ambitious but controversial Sujalam Sufalam project, the minister said that the Rs 6,500-crore project was very much on track. The opposition demanded a CBI probe in the alleged Rs 500 crore scam in project.

Govt says no to curb film piracy with policy

In what is viewed as a setback to the efforts of the film industry in curbing piracy, the government today said the recommendations of the draft optical disk policy on combating piracy would lead to the creation of a regime of inspectors that would go against the grain of the liberalisation policy. For the past few months, the Ministry of Information & Broadcasting was examining the draft Optical Disc Law to check piracy in the film sector. The draft law was prepared by the members of film sector at the initiative of government of India, and they were expecting a positive response. However, addressing the Ficci-Frames 2008 convention in Mumbai, Asha Swarup, Secretary, Union Ministry of Information & Broadcasting, made it clear that the government was not in favour of implementing the recommendations.

Acknowledging, though, that the menace of piracy in the entertainment and media industry was huge, she added that the problem had to be tackled by closing the supply side gaps. "A possible way", she said, "is to release films in ‘C’ and ‘D’ class towns in digital formats". Swarup expressed satisfaction on Pakistani films were being released in India and Indian films like Taare Zameen Par were getting an entry into Pakistan. She hoped that with a new democratic government in place in Pakistan, the situation would further improve and more Indian films would be screened in that country. The secretary also emphasised the need for development of content for TV viewers, especially for children.

Meanwhile, the FICCI-PricewaterhouseCoopers 2008 report estimates the industry at Rs 51,300 crore in 2007 -- a growth of 17 per cent from Rs 43,800 crore in 2006. The Indian entertainment and media industry is projected to clock Rs 115,000 crore by 2011.

In his address, Yash Chopra, chairman, FICCI Entertainment Committee & Yash Raj Films noted that Indian cinema has transcended boundaries. However, he added: "Piracy, IP protection in the animation segment and censorship are hurdles that the Indian media and entertainment industry have to overcome."

Rajeev Chandrasekhar, MP and President, Ficci, pointed out that the industry today had reached a point of critical mass from the early goals of nine years ago. “I believe this industry is poised to achieve the scale and size required to be global in terms of its value and presence,” he said. The challenge for the industry over the next few years, he said, was to scale up and becoming globally relevant to the capital markets and investors; relevant to consumers of entertainment all over the world and to producers of entertainment all over the world.

Kunal Dasgupta, co-chairman, FICCI Entertainment Committee & CEO Sony Entertainment Television, said: "We are in talks with the Academy of Television Arts and Sceince in the US, which represents the popular Emmy Awards, and hopefully we will able to present an Indian version of the popular Emmy Awards by next year." Amit Khanna, chairman, Reliance Entertainment & FICCI Convergence Committee said that new digital techology will reshape the distribution and exhibition business. On-demand entertainment will become the standard industry norm.

Jyoti Structures bags 2 orders worth Rs 253cr

Jyoti Structures today said it has bagged two orders worth Rs 253 crore from Uganda Electricity Transmission Company Ltd and Eskom Enterprises (Pty) for construction of transmission lines.

The company has bagged Rs 160 crore order from Uganda Electricity Transmission Company for construction of transmission lines and substations.

Besides, the company's joint venture company Jyoti Structures Africa (Pty) has bagged a contract for Eskom Enterprises (Pty), the electricity utility of South Africa for construction of transmission line.

The scope of the order from Uganda Electricity Transmission Company includes the supply and erection of Bujagali Interconnection Project, the manufacturer of transmission line towers informed the Bombay Stock Exchange.

The contract valued at around $39.64 million (Rs 160 crore) is to be executed in 24 months, the company said, adding the company would construct 220 KV and 132 KV transmission lines and substations.

Meanwhile, Jyoti Structures Africa would execute 114 Km of 765 KV single circuit transmission line construction from Majuba to Umfolozi. The contract valued at about 184 million rands (around Rs 93 crore) is expected to be executed in 13 months.

Nortel bags Rs 400 cr contract from BSNL

Nortel has bagged a contract from BSNL (Bharat Sanchar Nigam), valued at over $100 million (approx Rs 400 crore), to put mobile connectivity in the hands of millions of new subscribers in the southern area of the country. Nortel's deployment of the BSNL network expansion is already underway and is expected to be completed towards the end of 2008.

BSNL, India's largest telecoms service provider with over 20 million cellular subscribers, is actively growing its network reach and capacity to meet increased demand for mobile telephony services across the country.

The company chose Nortel to support this southern GSM network expansion with a very aggressive roll-out schedule, based on Nortel’s previous track record in helping BSNL establish the widest reach of any wireless network provider in India. With this selection, BSNL can build on, and maximize its existing network investment and rapidly extend mobile services to new subscribers.

"Since 2004, Nortel has worked closely with BSNL in rolling out mobile service to some seven million customers in the southern and eastern parts of India while ensuring the network is cost-effective and implemented according to BSNL's aggressive timelines," said Hitesh Lokhandwala, managing director, Nortel India.

"This new contract award reflects BSNL's confidence in Nortel to achieve these targets, and is further proof that in one of the most competitive, dynamic and fastest-growing markets in the world, Nortel's solutions meet our customers' requirements."

Corporation Bank to raise Rs 500cr

Corporation Bank, a medium size public sector bank, will raise Rs 500 crore through Tier-II bonds.

According to a release issued by the bank to the BSE today, the board of directors today approved the proposal to raise additional Rs 500 crore. The bank said that the proposal is in addition to already raised Tier II Bonds of Rs 500 crore.

Brokerages exit low-rung stocks

Top equity brokerage houses are either selling ‘high-risk’ small- and mid-cap stocks or asking clients to square off their derivatives positions built on them before the end of the financial year.

The brokers’ move comes in the wake of avoiding a possible loss arising from these stocks, which they have taken as collateral from clients to extend margin funding.

Sources said non-banking financial companies (NBFCs) of brokerage outfits had extended loans to clients by availing of bank credit. They could face serious trouble if auditors ‘qualify’ their books for extending loans on small- and mid-cap stocks as ‘highly risky’.

With just over a week to go before the end of the current financial year, most of the NBFCs are cleaning up their books before the audit to avoid being caught on the wrong foot and are only accepting frontline stocks for margin funding, for now.

As a consequence, both small- and mid-cap indices on the Bombay Stock Exchange (BSE) witnessed a free fall on Monday.

While the BSE Mid-Cap Index was down 2.66 per cent, the BSE Small-Cap Index fell 3.77 per cent, even as the Sensex rose over 1 per cent. Since January, both the indices crashed by 52 and 45 per cent respectively, while the benchmark Sensex fell by 26 per cent.

Margin funding is a loan that allows investors to take positions in the futures and options (F&O) segment by initially putting down only 30-50 per cent value of the contract, while the rest is financed by the broker.

The loans were extended to clients at an interest rate as high as 18-25 per cent through brokerages’ NBFCs. These NBFCs, however, availed of loans from top banks and financial institutions at a much lower rate.

Most of the brokers also accepted stocks as collateral and every broking unit had its own list of exclusive stocks that would be accepted as collateral for margin funding.

This practice by brokerage firms pushed margin funding business to unparalleled levels and created a bubble-like situation in the market before the late-January crash by inducing investors to pay more for a stock than its fundamental value. It also opened up an avenue for stock price manipulation.

Since investors preferred to pledge cheap small- and mid-cap stocks as collateral to dabble in the risky F&O segment, promoters of some companies could get in touch with the broker to include their company’s stock in the NBFCs’ ‘exclusive list of securities’ accepted as collateral.

Consequently, huge buying would come on the particular counter, which was included into the NBFCs’ collateral list, resulting in a sharp rise in the stock price.

Over the past one year, prices of some small- and mid-cap stocks, common in most brokerage houses-promoted NBFCs’ list, shot up between 100 and 500 per cent in line with the margin funding business, estimated to be over Rs 10,000 crore before the crash.

Big names in margin funding include Motilal Oswal Securities, Kotak Securities, Indiabulls, Religare and Edelweiss Securities, among others. But it could not be verified whether all these firms were offloading small- and mid-cap stocks in a big way.

The market fall of over 6,000 points in this calendar year took a toll on the funding business and it declined by over 60 per cent, leaving a huge pile of bad debts for brokers.

Meanwhile, small- and mid-cap stocks continued to bear the burnt in the recent mayhem. Recently, BSE, as a damage-control exercise, lowered the circuit filters to 5 per cent from the existing 10-20 per cent for nearly 15 per cent or 235 stocks of the 1,900 actively traded ‘B’ group small- and mid-cap stocks to avoid a further steep fall.

HOT STOCKS FOR 25 - 03 - 08

STATISTICS :

Market today will tend to follow global ques can see a gap up opening of 100+ points in Nifty, Nifty has some support @ 4592 levels, and resistance @ 4725 levels. once Nifty closes above this level, then can see 4800+ levels before expiry. Can see some volatility in mkt till expiry.

INTRADAY :

GMRINFRA : buy for a tgt of 135+, sl @ 126

SIEMENS : buy for a tgt of 672+, sl @ 645

UTVSOFTWARE : buy for a tgt of 765

FUTURES :

SBI : buy for a tgt of 1672+, sl @ 1640

ITC : buy for a tgt of 196.5+, sl @ 190

INFOSYS : buy for a tgt of 1400+, sl @ 1355

CORP BANK : buy for a tgt of 265+, sl @ 241

SAIL : buy for a tgt of 192+, sl @ 184

RCOM : buy for a tgt of 523+, sl @ 502

OPTIONS :

Nifty : buy call 4600 for a tgt of 160+, sl @ 70

ITC : buy call 190 for a tgt of 7+, sl @ 3.2

INFOSYS : buy call 1410 for a tgt of 20+, sl @ 8

RELIANCE : buy call 2220 for a tgt of 50+, sl @ 25

RPOWER : buy call 320 april expiry for a tgt of 35+, sl @ 10

HEDGE CALLS :

1> Nifty : buy 1 lot futures for a tgt of 4800+, sl @ 4600

.....Nifty : sell 1 lot put 4600 above 40

RISK : if nifty closes below 4560 by expiry maximum loss is 4000 rs

PROFIT : if nifty closes above 4600 by expiry minimum pft is 2000 - 12000rs

2> Nifty : sell 1 lot put 4600 @ 40 levels

......Nifty : sell 1 lot 4700 call @ 80+ levels

......Nifty : buy 1 lot put 4800 @ 90 - 100 levels

RISK : if nifty closes below 4560 and above 4800 by expiry maximum loss is 1000 rs

PROFIT : if nifty closes around 4700 levels minimum pft is 5000 - 8000 rs

Welspun Gujarat wins Rs 1,075cr order

Welspun-Gujarat Stahl Rohren has bagged an order worth Rs 1,075 crore for the supply of spiral pipes in Northern Africa.

According to a release issued by Welspun to the BSE today, this contract was won against competition from players in Europe and the new order has taken the company's order book position to above Rs 5,900 crore.

"Welspun's strong demonstration of engineering excellence and accreditations from top oil and gas companies across the world results in new orders and reinstates our position as one of the largest and premium line pipe company in the world. " said B K Goenka - Vice Chairman & Managing Director of the Welspun Group.

Mayani Quits Citigroup India, Adding to Departures

Citigroup Inc.'s director of institutional equity sales in India, Rajesh Mayani, said he resigned to join Anand Rathi Financial Services Ltd., the third member of the team to join the Indian brokerage.

Narayan Mulchandani, director of India sales at Citigroup, based in Hong Kong, has also joined Mumbai-based Anand Rathi, Mayani said in an interview today. Citigroup's India research head Ratnesh Kumar quit the New York-based company last month to head Anand Rathi's equities business.

Indian brokerages are luring executives from HSBC, CLSA Ltd. and JPMorgan Chase & Co. with signing bonuses and equity stakes, allowing them to directly profit from India's record stock market rally and advisory fees.

Wall Street banks, hit by mortgage losses and writedowns have cut more than 34,000 jobs in the past nine months, the most since the dot-com boom fizzled in 2001. Citigroup, Lehman Brothers Holdings Inc. and Morgan Stanley are among the firms that have disclosed headcount reductions so far.

Mayani, who has 14 years of experience in Indian institutional equities, quit Citigroup this month and will join Anand Rathi in April to run equity sales. He worked for four years at Morgan Stanley as a senior analyst after completing a six-year stint as an analyst at HSBC Holdings Plc's Indian securities unit.

Citigroup's spokesman James Griffiths said he would answer questions about the resignations tomorrow.

India's stock market last year posted its sixth straight year of gains and companies in the world's second-fastest- growing major economy raised funds at a record pace.

Citigroup's private equity fund Citigroup Venture Capital owns 20 percent of Anand Rathi's stock, the Indian brokerage said in an e-mailed statement.

6th Pay Commission to see pay hikes by 40%

The Sixth pay commision's report has been submitted to the Finance Minister. The expected outgo to the exchequer is around Rs 13,000-15,000 crore.

We understand from sources that there will be no internal relief. The average increase in basic fair pay for all government employees will be in the region of 40-45%. This is a very rough average because for senior level officers, like the Cabinet Secretary or officials at the secretary level, the payback could increase by more than 50%.

We understand that secretaries to the Government of India could draw anything between Rs 75,000-80,000 per month. The Cabinet Secretary could draw something like Rs 85,000-90,000 per month. Even junior level officers could start of at Rs 15,000-20,000 per month.

So, this is obviously a huge bonanza which translates to roughly Rs 13,000-15,000 crore. However, the report is yet to be made public. The Finance Minister might release a summary of the report or brief the media later in the day.

The objective of the Sixth Pay Commission is really two-fold. One, it wants to showcase what the UPA has achieved in Election Year. Off late, we have seen a brain drain from the government sector to the private sector, a recent high profile example being that of the ex-Finance Secretary who is now the Head of an Indian auto company. The second reason for this release could be to stem the reverse brain drain, so that it doesn’t happen because of low salaries in the government sector.

The Pay Panel has recommended a new pay scale from January 1, 2006. The existing HRA would be retained for A1 cities; while there would be a 10-20% hike for other cities. The maximum government salary would be at Rs 80,000 per month, while the minimum would be at Rs 6,660 per month. The recommendations would cost the Government Rs 12,561 crore in FY09, the Panel has noted. It has said that there would be a one-time burden of Rs 18,060 crore on arrears. Pensioners would get 50% of the last pay drawn, the Panel estimates. It favours 2.5% annual increment in salary.

Promoters of small & mid cap firms take advantage of market meltdown

It’s not just the portfolio investors who were bottom-fishing in the market. Promoters of a bunch of mid and small-cap firms have taken advantage of the market meltdown to buy shares of their own companies from the open market through the creeping acquisition route.

Some companies whose promoter groups have bought shares in the last fortnight when the market crashed include NIIT, Maharashtra Seamless, Gujarat NRE Coke, Uflex, KRBL, Hitech Gear, Birla VXL and Jyoti Structures, among others.

Promoters raise their equity stake for various reasons. Typically for shoring up equity holding or infusing funds into the company, the owners go for preferential allotment of shares or convertible instruments such as warrants.

The creeping acquisition route of buying shares, for which there is a mandatory ceiling in a particular year, entails buying shares from the secondary market is typically done when promoters feel the price in the market is low enough to justify such a purchase. Some firms with healthy cash reserves even go for equity buybacks which in turn tends to increase promoter holding while repricing undervalued stock.

According to stock market disclosures the firms have bought shares of varying proportions in the open market. For instance, one of the promoter group entity of NIIT bought 0.27% stake from the market. The transaction was done at a price 15-20% cheaper than its recent highs.

While the quantum of purchase was not too significant, it comes at a time when promoter holding in the IT solutions firm had been coming down over time. Promoter group holdings slipped from more than 40% in December 2005 to just about 30.14% on December 31, 2007. Nor was this one off case. Promoters of Gujarat NRE Coke also inched up their holdings by a similar proportion(0.25%). In their case also the promoters holding had come down over the last one year from 46% in December 2006 to 41% in December 2007. For others its been a mixed picture. For instance, in case of basmati rice company KRBL, one of the promoter group entities has been buying and selling shares of KRBL at the fag end of 2007. However, the firm started buying shares consistently since January 30 and, as of today, has added 0.7% stake over 10 days. Maharashtra Seamless promoters have added 1.42% stake last week through open market purchases. The transactions come at a time when the company is mulling a preferential allotment of warrants to the promoters. Incidentally, the proposal for the stock split which was mooted last year and was to be implemented soon, has been postponed as is the EGM for approving the allotment of warrants to the promoters. This is not surprising, given that the scrip has dropped about 50% in value over the last one month. Among others KS Oils promoter Ramesh Chand Garg increased his stake in the edible oil company by 1.71% since January 21, the day the market took the first big hit. Another company where the promoter bought 0.33% stake is Uflex (formerly Flex Industries).

How to pick dividend stocks in a troubled market

Even if stocks go nowhere this year—a distinct possibility as US recession looms—investors can get returns by hunting for companies that pay health dividents.You receive the company’s quarterly payouts even if its stock, and the entire market, heads south.

While this is a popular and often successful strategy during bear markets, it also entails some dangers. Watch out for stocks that offer an especially high dividend yield. That could signal that a company might not pay its dividend.

For example, since the credit crisis began in July, financial firms have been disappointing investors by slashing dividends.

At the other end of the spectrum, profitable companies with airtight balance sheets often offer pitifully low dividend yields. The other traditional dividend play is the safe, boring utility sector. Heavily regulated, utilities offer slow growth but high, consistent divi-dends.

However, most managers warned of problems ahead for this sector. Utilities have already had a good run and many market observers think the stocks are overvalued. A good place to find healthy dividend yields is the consumer staples sector, where products like food and tobacco provide steady cash even in recessions.

Another necessary product that often sells well even during recessions is health care and pharmaceuticals. However, big pharma faces chal-lenges. It’s a tough political environment, with increased regulation of the health-care system.

Telecom service providers also offer healthy dividends. These companies pay significant dividends and have strong balance sheets. Energy firms tend to have lower dividends than some sectors, but they’re generating huge profits.

Because high dividends are often concentrated in particular sectors, fund managers say it’s important to diversify. Many dividend-focused investors got burned by too much financial exposure in 2007.

Dividend-paying stocks should continue to be popular in the next decade because of demographic shifts. As baby boomers retire, they’ll seek out more stable investments with steady payouts.

One fact should hearten dividend-focused investors: Company boards will only cut dividends as a last resort.
While there’s no such thing as an entirely safe dividend, stocks with healthy yields are a good place to park money in turbulent times.