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Saturday, June 23, 2007

Kris takes charge as Infosys CEO

S Gopalakrishnan, one of the co-founders of Infosys Technologies, on Friday took over as the CEO of India’s second largest IT services company.

His appointment as the CEO was approved by the shareholders at the 26th Annual General Meeting (AGM) of the company here.

Gopalakrishnan, who is also known as Kris succeeds Nandan M Nilekani, another co-founder, who has been elevated as co-chairman after completing five years at the helm. The meeting also approved the appointment of another co-founder S D Shibulal as the COO.

Infosys Chairman and Chief Mentor N R Narayana Murthy had a word of advice to the team. “These transitions reinforce the efficacy of our long-term succession planning. Our success depends on our ability to manage rapid growth. We have the vital ingredients to manage growth. These, along with our strong value system, will continue to accelerate our growth.”

The company recorded a net profit of Rs 3,856 crore last fiscal, a growth of 56.9 per cent over the previous year. Its turnover stood at Rs 13,893 crore, a growth of 45.9 per cent over the previous fiscal.

“Our customer-centric approach and nurturing global client relationships strengthen our performance. Managing risk is an inherent part of our corporate strategy. Geographical diversification into Asia and Europe has been a cornerstone of this mitigation strategy,” Murthy added.

He pointed out that Infosys continues to an employer of choice. The company’s software operations received over 13 lakh applications and made approximately 36,700 offers of employment.

“We continue to invest in physical and technological infrastructure. Our Global Education Centre at Mysore is among the largest corporate training facilities. The phase 2 of this facility will be completed in December. On completion, it will have about 2 million square feet of space and provide residential and classroom capacity for 13,500 trainees,” he said.



Pre-IPO placements to FIIs in real estate projects to face a 3-yr lock-in period


Investments by foreign institutional investors (FII) in real estate projects ahead of initial public offers (IPO) may soon be directed by new guidelines, reports the ET. The Sebi board is expected to consider a proposal to amend the FII regulations on June 30.

The finance ministry wants all pre-IPO placements to FIIs by real estate companies to have a three-year lock-in as provided in the FDI regulations applicable in the sector. The proposal, which will require a change in Sebi’s FII regulations, is likely to be taken up at a meeting after a week, a government source said.

The government favours a lock-in as it would prevent building up of a possible real estate bubble, especially in the backdrop of the price rise witnessed by the sector in two years. It may be noted that nearly half of the over $ 4-billion foreign investment that was pumped in the real estate sector in 2006 was through private placements. In 2006, the Reserve Bank of India (RBI) had expressed concern to the government over large-scale flow of capital into the sector.

The real estate companies that had sought permission from the department of industrial policy and promotion (DIPP) for pre-IPO placements with FIIs had been asked to wait as guidelines had not been firmed up. Earlier, the DIPP and Sebi were of the view that pre-IPO placements must be treated as portfolio investment and should not face a lock-in, a view not supported by RBI.

Though a three-year lock-in is likely to come in, FIIs investing through pre-IPO placements will not have to face other conditions applicable on real estate FDI such as minimum capitalisation and area development.

The government allows up to 100% FDI in realty projects but with conditions like a three-year lock-in on investments, minimum capitalisation of $ 5 million and development of at least 10 hectares of land. The government may also have to amend the Foreign Exchange Management Act to put in place the lock-in.


Cement shares build on strong sales in May 2007

On Friday, 22 June 2007, ACC declined 0.5% to Rs 851, Ambuja Cements declined 2.64% to Rs 116.25, Ultratech cement declined 2% to Rs 819.95 and Birla Corp declined 4.44% to Rs 244.15. India Cements rose 0.83% to Rs 188.10.

ACC gained 6.58% from its recent low of Rs 798.45 on 13 June 2007 to Rs 851 on 22 June 2007. From a recent low of Rs 109.20 on 11 June 2007, Ambuja Cements gained 6.45% to Rs 116.25 on 22 June 2007. India Cements rose 12.8% from a recent low of Rs 166.75 on 11 June 2007 to Rs 188.10 on 22 June 2007. Ultratech cement rose from its recent low of Rs 790.50 on 13 June 2007 to Rs 819.95 on 22 June 2007. Birla Corp jumped 16.2% from a recent low of Rs 210.10 on 13 June 2007 to Rs 244.15 on 22 June 2007.

Cement Manufacturers Association (CMA) reported a rise in cement sales by 10.6% to 14.21 million tonnes in May 2007.

With the cement industry agreeing not to hike cement prices for one year, cement makers whose capacities will come on stream in the near term, are able to increase blending, take advantage of regional price differences and undertake cost cutting measures will be better placed than others in near term. About two months back, cement firms promised government that they wouldn’t hike price for one year, in government’s efforts to combat growth in inflation.

It is expected that 18-20 million tones of capacities will come on stream in FY 2008 and much more in FY 2009. On the positive side, booming real estate sector, capacity additions by major industries, and huge investments proposed in special economic zones (SEZs) can scale up demand. Also, with bumper cash flows, the holding power of the industry has improved.

After witnessing a concrete surge in profit in FY 2007, the industry is bracing itself for a softer growth in the current fiscal and softening of profitability in next fiscal.

ACC’s net profit rose 54.47% to Rs 363.75 crore in Q1 March 2007 as against Rs 235.48 crore in Q1 March 2006. Net sales rose 23.68% to Rs 1634.76 crore in Q1 March 2007 as against Rs 1321.80 crore in Q1 March 2006.

Ambuja Cements’ net profit rose 43.1% to Rs 590.74 crore in Q1 March 2007 as against Rs 412.77 crore in Q1 March 2006. Net sales rose 33.5% to Rs 1433.84 crore in Q1 March 2007 as against Rs 1074 crore in Q1 March 2006.

India Cement’s net profit rose 417.24% to Rs 139.81 crore in Q4 March 2007 as against Rs 27.03 crore in Q4 March 2006. Net sales rose 36.19% to Rs 575.75 crore in Q4 March 2007 as against Rs 422.76 crore in Q4 March 2006.

UltraTech Cement’s net profit rose 75.26% to Rs 231.54 crore in Q4 March 2007 as against Rs 132.11 crore in Q4 March 2006. Sales rose 38.21% to Rs 1465.52 crore in Q4 March 2007 as against Rs 1060.35 crore in Q4 March 2006.

Birla Corporation’s net profit rose 50.71% to Rs 101.19 crore in Q4 March 2007 as against Rs 67.14 crore in Q4 March 2006. Sales rose 12.69% to Rs 444.06 crore in Q4 March 2007 as against Rs 394.06 crore in Q4 March 2006.



Hindalco strengthens on hopes of promoters tightening grip

The stock had spurted on heavy volumes early this month and it has been on a sustained rise since then amid intermittent surge in daily trading volumes. The stock rose 18.38% to Rs 170 in the past one month to Friday, 22 June 2007, versus 1.75% rise in Sensex. The stock outperformed the market in the past three months period as well, rising 25.4% verses 8.89% rise in Sensex.

However, the scrip underperformerd the market over the past six months mainly due to a sharp fall in the stock in February 2007-March 2007 period after the company announced its $6-billion acquisition of Canadian sheetmaker Novelis in early February 2007.

The stock had hit 52-week high of Rs 192.75 on 1 November 2006. It had hit 52-week low of Rs 125.25 on 7 March 2007.

The average daily volume in the stock on BSE in the past one month was 16.19 lakh shares. The last three months’ average daily volume works out 10.5 lakh shares.

The low promoter holding in Hindalco and also recent rumours that Canadian aluminium major Alcan Inc could team up with Sterlite Industries to bid for Hindalco, are reasons why the market is betting that the A V Birla group, the promoters of Hindalco Industries, may raise its stake in the company to ward off a takeover.

Promoters now have 31.05% stake in Hindalco after the company made preferential allotment of 6.75 crore shares to promoters in April 2007 at Rs 172.87 a piece. Before the preferential allotment their holding was just a little over 27%. Their stake will go up further if and to the extent promoters exercise option of conversion of warrants into equity.

In addition to preferential issue of shares, Hindalco also allotted 8 crore warrants to promoters in April 2007. Each warrants can be converted into one equity share, in one or more tranches before the expiry of 18 months from the date of allotment. If promoters exercise the option to convert all the 8 crore warrants into equity shares, their holding will go up to a little over 35%.

Alcan received a $28-billion hostile bid from Alcoa Inc. last month in a deal that could create the world's largest aluminium producer. Speculation is that Alcan jointly with Sterlite Industries may bid for Hindalco so as to make itself (Alcan) less of a takeover target.

However, Hindalco promoters can take solace from a substantial share holding of state-run insurance firms in Hindalco. State-run insurance companies own almost 11% stake, with Life Insurance Corporation of India holding 7.4%. In the past, state run insurance firms have never de-established existing management and historically never preferred hostile takeovers. These institutions, may, in fact, back promoters if Hindalco becomes a takeover target.

At the time of announcing its Q4 March 2007 results on 4 May 2007, Hindalco said it expects strong metal prices to continue. Its net profit rose 15% to Rs 721.30 crore in Q4 March 2007. Sales jumped 30% to Rs 4748.90 crore.

Net profit surged 55% to Rs 2564.30 crore in the year ended 31 March 2007. Sales soared 61% to Rs 18313 crore in FY 2007.

Hindalco completed the Novelis takeover in May 2007, paying $3.5-billion in cash for stock and assuming debt of $2.4 billion.

Hindalco’s current price of Rs 170 discounts its FY 2007 EPS of Rs 25 by a PE multiple of 6.80.



Government to acquire RBI’s 59.7% stake in SBI

The government will acquire Reserve Bank of India (RBI)’s 59.73% stake in State Bank of India (SBI) on 29 June 2007. The stake will be acquired for Rs 35531.33 crore. RBI had proposed transferring the stake as it felt it was inconsistent for it to be both bank owner and regulator.

The union cabinet on Friday, 15 June 2007, approved passing of an ordinance for transfer of the stake. The ordinance route was taken as the State Bank of India (SBI) Amendment Bill, which allows the government to take control of the RBI's 59.73% stake in SBI is still pending in Parliament.



FinMin urges PSUs to hit the stock market

Finance minister Palaniappan Chidambaram urged public sector undertakings (PSUs) to get themselves listed in the market and “unlock their value”. He was addressing a conference where three more PSUs (Bharat Electronics (BEL), Hindustan Aeronautics (HAL) and Power Finance Corp (PFC)) were conferred the navaratna status, wherein these PSUs will now be able to enter joint ventures both at home and abroad, up to a limit of 15% of their net worth or Rs 1,000 crore, whichever is lower, without the government’s permission.

The finance minister further suggested that PSUs should have autonomy to remunerate employees according to their potential. He also ecouraged them to think global and enhance their competetiveness and efficiency.



Sebi bars Karvy Broking for 3 months; Bans from opening new a/cs till Dec

The Securities and Exchange Board of India (Sebi) has held the Karvy group guilty of being party to the share allotment scam in initial public offerings. SEBI has barred Karvy Computershare — the share registry arm of the group — from acting as registrar to an issue for a period of nine months. But since Karvy Computershare has already undergone the prohibition for that period following the initial Sebi order dated April 27, 2006, there will be no further action against it.

Karvy Stock Broking has been suspended for a period of three months, the action being effective three weeks from today. The depository participant business of the Karvy group has been barred from opening fresh demat accounts till December 31,, with the order coming into effect immediately. A Sebi official said that adjudication proceedings (conducted by a Sebi enquiry officer) against the Karvy group was still underway.

Technically, the adjudication officer's findings can differ from those of Sebi. The officer will declare whether the Karvy group is guilty or not, and if guilty, impose monetary penalty. The Sebi order on Friday also said that other investigating agencies were probing the irregularities in the IPO share allotment process. Based on the findings of the agencies, Sebi was at liberty to take action against Karvy.

“It is fairly established that the Karvy group was actively involved in each and every part of the manipulation committed by the key operators by introducing the bank accounts of the key operators, opening the afferent accounts for the key operators, financing to key operators and further culminating in the sale of the IPO cornered shares on behalf of the key operators," the Sebi order said.

The regulator has refused to accept that Karvy was unware about its clients alleged illegal activities. “The manner in which certain sets of names have been used with change in surnames with systematic regularity for opening either bank account for financing or for opening fresh demat accounts for cornering the shares, which was fully in the knowledge of Karvy, should have definitely alerted them that there was something amiss or untoward about them.

But the fact that such operations were carried out with unquestioning ease clearly demonstrates Karvy’s complicity in the whole matter,” the order added.



Institutional investors lap up ICICI Bk issue, retail portion scrapes through; Mukesh Ambani, Rahul Bajaj, Azim Premji put in bids worth Rs 1,000 crore each

The domestic portion of ICICI Bank public offer, which closed Friday, was subscribed over 11.5 times, thus generating a demand of around Rs 1 lakh crore (about $ 25 billion). A number of large institutions — domestic and international — putting in large-size bids, the institutional part of the offer was subscribed 21.61 times. The retail portion though was subscribed only 1.03 times. The bank is expected to fix the issue price at the higher end of the Rs 885-950 per share price band.

While Temasek, the Singapore government investment arm was talked to have put in a bid worth $ 2 billion, private equity giant Warburg Pincus put in a bid worth $ 1 billion, market sources said. GIC, another Singapore government arm is also believed to have put in a large bid. Recently, the two Singapore government investment arms were allowed by the Reserve Bank of India to buy upto 10% each in ICICI Bank's Rs 8,750 crore offer. Currently, the two together hold nearly 10% in the bank. Citi & ML P-Notes and LIC also have put in $ 2 billion worth of bid each, sources say.

Interestingly, the ET reports that Azim Premji, Mukesh Ambani and Rahul Bajaj have put in bids worth Rs 1,000 crore each either directly or through entities controlled by them. Bajaj Auto has a 4.06% holding in the bank.

The other large investors believed to have put huge bids were Reliance Mutual Fund, Goldman Sachs, and State Bank of India. SBI has put in a $ 1.3 billion bid, market sources add. Commenting on the SBI bid, ICICI Bank's Chairman K V Kamath said that they welcome the SBI investment into the the issue. He said that ICICI Bank has grown with the Indian story.

Other than the domestic offering, ICICI Bank is also running a parallel offering in the US market where the its American Depositary Shares (ADSs) are listed on the New York Stock Exchange. The bank is planning to raise another Rs 10,000 crore (including the green shoe option) from the US market.



Govt clears 36 SEZs; Includes 18 hectare IT SEZ of Reliance Infoccom at DAKC in Maharashtra

A total of 36 special economic zones (SEZs) were given a formal go-ahead by the government on Friday, including three in Navi Mumbai promoted by Reliance Industries chairman Mukesh Ambani and an 18-hectare IT SEZ at Dhirubhai Ambani Knowledge City in Maharashtra promoted by Anil Ambani group’s Reliance Infocomm.

The board of approvals (BoA) also accorded in-principle approvals to nine SEZ proposals which are yet to acquire land. BoA chairman GK Pillai informed all members that the state governments have been informed that that they could undertake acquisition of land for SEZs only when “100% of owners” give their consent. If any proposal for compulsorily acquired land comes up, the same would not be notified as SEZ.

The board has approved an electronic hardware SEZ promoted by Taiwanese company Foxconn in Sriperumbudur, Tamil Nadu. Foxconn, which already has an operational SEZ in the state, is a hardware supplier for companies like Nokia and Motorola. The SEZ approved on Friday, spread over 11 hectares, will eventually be expanded to 136 hectares taking Foxconn's total investment in India up to $ 1.4 billion.

While the fate of the 1,250-hectare multi-product SEZ in Navi Mumbai promoted by Mukesh Ambani remains uncertain due to contiguity factors, formal approval was given to three adjoining sector-specific SEZs covering an area of 345 hectares. These include a bio-technology SEZ spread over 63.74 hectares, a light-engineering SEZ spread over 179 hectares and a pharmaceutical SEZ covering 103.25 hectares.

The three sector-specific SEZs were originally part of the multi-product SEZ. Sources said that since contiguity norms were being breached, the promoters were advised by the commerce ministry to carve out three sector-specific SEZs from the multi-product SEZ.

The proposal for the Navi Mumbai multi-product SEZ, which had seen objections from the revenue department on a number of issues including disruption of human settlements falling within the zone, will be taken up at the next meeting of the BoA on July 12.

The state government, which was asked to respond to queries raised by the revenue department, has given a no-objection certificate to the project. The BoA approved a 235-hectare SEZ in the textiles sector promoted by Sri Lanka-based multinational MAS Fabric Park in Andhra Pradesh. The company has plans of investing $ 700 million in the zone and create a total of 30,000 jobs.



US firm Sanofi-Aventis LLC files suit against Dabur Pharma

US-based Sanofi-Aventis LLC has filed a lawsuit against Dabur Pharma and its UK arm - Dabur Oncology Pte, over a USFDA filing seeking approval for marketing generic Eloxatin, reports the PTI. Sanofi-Aventis holds a patent on Eloxatin, which contains active Oxaliptin, as injectable that is used for treating bowel cancer, the company informed the Bombay Stock Exchange.

Sanofi-Aventis and Debiopharm S A have filed a lawsuit in the US district court alleging that the filing of the applications has infringed. The proposed products would infringe the US Patent No 5,338,874 and US Patent No 5,716,988, it said. In response to the challenge made by the US firm Dabur Pharma has decided to contest the allegations. "The company and Dabur Oncology plc dispute the charges of infringement and intend to vigorously challenge these allegations," Dabur Pharma said in the filing. Generic versions of Eloxatin (Oxaliplatin) are available in several European markets.


FIPB no to FDI in ICICI holding co...

The Foreign Investment Promotion Board (FIPB) of the finance ministry today rejected ICICI Bank’s proposal to sell 24 per cent in ICICI Financial Services, the holding company for its insurance and asset management ventures, to foreign investors.

FIPB rejected the proposal on the grounds that it did not comply with the 26 per cent cap on foreign direct investment (FDI) in insurance ventures, government sources said.

ICICI Bank’s life and non-life insurance companies, market leaders among private companies, have 26 per cent equity from Prudential and Lombard, respectively.

Firms like Goldman Sachs, General Atlantic, Government of Singapore Investment Corporation (GIC), Temasek and Crown Capital have expressed an interest in buying 5.9 per cent in ICICI Financial Services for Rs 2,650 crore, valuing the company at Rs 44,600 crore.

FIPB’s rejection contradicts the view of the finance ministry’s insurance division and the Insurance Regulatory and Development Authority (IRDA) that FDI in ICICI Bank’s proposed holding company would not violate norms.

The insurance division and IRDA had said the proposal would not violate current FDI norms because the foreign partner of the holding company was not the same as the foreign partner in the insurance ventures.

The decision on ICICI Bank’s proposal is of significance for other insurance companies looking to expand foreign equity participation to raise much-needed capital for business expansion.

Most insurance companies are waiting for the passage of the amended Insurance Act, 1938, by Parliament, which is expected to raise the foreign equity limit to 49 per cent.


Another shot at reviving WTO talks in July end

A last-ditch attempt to rescue the Doha round of world trade talks is likely to be made towards the end of July at a Geneva meeting of 30 trade ministers from among the 150-member countries of the World Trade Organisation (WTO).

Doha round talks collapsed in Potsdam, Germany, yesterday after trade ministers of the United States, India, Brazil and the European Union (or the G-4), failed to agree on several key issues.

A senior commerce ministry official today said the meeting would be convened between July 20 and 30. “One last ministerial meeting is likely among all the groupings like the G-10, G-20, African states and the EU,” he said.

Meanwhile in Geneva, agencies quoted WTO Director General Pascal Lamy as saying that a global free trade deal was still possible. However, Commerce Minister Kamal Nath reiterated at a press conference in New Delhi that India would not compromise the interests of its subsistence farmers.

Indian officials expect little move forward, especially since the US and India are headed for elections in 2008 and 2009, respectively.

Both countries have powerful farm lobbies and any concessions, key to concluding the latest round of trade talks that started in 2001, could prove disastrous for the administration in these countries.

“The Uruguay round of talks took nine years to complete. By that standard, the Doha round still has some years left,” officials added.

The Doha round negotiations were slated to be complete by December this year. Nath said the United States had offered to cap its overall spending on trade-distorting farm subsidies at $17 billion, down from an earlier offer of $22.5 billion made nearly two years ago.

Since the US currently spends only $10.8 billion on trade distorting farm subsidies, Nath said, “There is no equity in this, no logic and no fairness”.

DOHA: WHAT THE FUSS IS ALL ABOUT

FARM SUBSIDIES Developing countries like India and Brazil want the developed countries to implement deep cuts in the subsidies they pay their farmers. This demand has been refuted by countries like the United States, which has offered to spend $17 billion a year on this head. India says this is far too high

FARM TARIFFS The European Union has offered a 50 per cent overall cut. The US wants more. Indian officials say the EU and US have probably arrived at an understanding to restrict the cuts to some items, while leaving out “sensitive” products. India, while willing to open up to farm imports, also wants the right to restrict many products to protect the interests of its near 300 million farmers.

INDUSTRIAL GOODS The developed world will cut industrial tariffs to 10 per cent and wants developing countries to accept a 15 per cent ceiling for industrial tariffs. This is a sore point with India and others; they feel this is an unfair arrangement and want a 30 per cent ceiling, while EU and US say they can accept 18 per cent for poorer states.



Apex drug body wants ban on 1,105 brands

The drug control administration has recommended that state drug controllers cancel the manufacturing and sale licences for 1,105 drug brands.
These brands belong to about 320 drugs of leading Indian pharmaceutical companies. The Drug Controller General of India’s (DCGI’s) office feels that these have been launched without its approval.
The list, circulated to the states by the Central Drug Standard Control Organisation (CDSCO), includes drug brands of Cipla and Alkem Laboratories (37 each), Nicholas Piramal (36), Emcure Pharma (30), Ind-Swift (40), Zydus Cadila (30), Mankind Pharma (45), Lupin (21), Intas Pharma (30), Sun Pharma (12), Wockhardt (12), Ranbaxy Laboratories (15), Blue Cross Laboratories (15), Elder Pharmaceuticals (15) and Cadila Pharmaceuticals (28).
Sources close to the developments said that if state drug controllers take action as directed by a recent drug consultative committee (DCC) meeting and the DCGI, drugs worth Rs 3,000-Rs 4,000 crore would disappear from the market, causing a big blow to these companies.
The identified drugs are “irrational” or fixed dose combinations (FDC) — combining one drug with one or more of approved drugs — and have been marketed with licences obtained from state drug controllers in the last few years.
M Venkateswarulu, DCGI (in-charge) was not available for comment.
Industry experts said companies use fixed dose combinations for two reasons, the most important being to override the drug price control order, through which the National Pharmaceutical Pricing Authority (NPPA), the government’s drug regulator, fixes a price ceiling for 74 drugs.



Sebi to refer suspect cases to I-T dept

The Securities and Exchange Board of India (SEBI) has decided to refer the recently unearthed manipulation cases in the derivatives market to the income-tax department.

It has also decided to initiate adjudication proceedings against all the identified brokers. By passing on the information to income tax department, the regulator wants to send a clear signal that manipulation could prove to be costly.

According to sources close to development, the market regulator will be seeking a probe into the fictitious gains and losses booked under the F&O segment for tax evasion purposes.

The suspect deals will be closely scrutinised. Most of the brokers chose to trade in those derivatives where the underlying securities were illiquid for a considerable period of time.

The market players had resorted to tax evasion last year as well. The income tax department tracked down transactions in the penny stocks which were grossly manipulated to help individuals bring in their unaccounted funds to the mainstream financial system.

According to a rough estimates by the department, revenues worth Rs 200-300 crores is lost every year as no tax is levied on long-term capital gains and short-term gains tax is pegged at only 10 per cent, official sources said.

On Tuesday, the Securities and Exchange Board of India (Sebi) had identified 24 market players, including 14 brokers and 10 clients, which were involved in manipulating the derivatives segment on the National Stock Exchange (NSE).

The players against whom “cease and desist” orders have been issued included Indiabulls Securities, Angel Capital, SMC Global Capital and Khandwala Financial Services. Indiabulls later claimed that some clients had executed such trades online.

This is the first time that such an order has been passed in the derivatives trading segment, which has been attracting huge volumes in recent months, as the average daily turnover is around Rs 40,000 crore.

Posted by FR at 9:09 PM  

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Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective.The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it.& take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations given in this blog.