Monday, January 12, 2009
 Stocks in Action
Interest in MMTC on currency futures foray
Market buzz on promoterís creeping acquisition, settlement of family dispute, unitís stake-sale denial, and order win


MMTC: MMTC spurted 114.02% to Rs 20,146.40 in a month to 2 January 2009 on entering into partnership to create a fourth entity for currency futures trading. On 25 December 2008, the country’s largest public sector trading agency proposed to pick up to 15% equity in the United Stock Exchange of India (STOX) for Rs 22.50 crore. MMTC expects Indian foreign exchange market to grow to a great extent with the proposed exchange likely to get membership from corporate, commercial and co-operative banks, asset management companies and money transfer agents gradually.

Volumes showed an uptick as the MMTC stock rallied. Average daily traded volumes jumped to 1,023 shares in the month to 2 January 2009 compared with 637 in the quarter. State-run MMTC has a tiny 0.67% floating stock, with 99.33% owned by government of India.

MMTC’s rise of 1.26% in three months to 2 January 2009 beat its gauge the BSE PSU index’s slide of 13.19%. Despite the recent rally, the MMTC stock is down 51.22% from its 52-week high of Rs 41,307.10 on 7 January 2008, but off 120.78% from its 52-week low of Rs 9,125 on 3 December 2008.

Currency futures will enable importers and exporters of commodities to hedge against bank rate fluctuations. MMTC is planning to hedge its own foreign currency exposure on the exchange. A currency future is a contract to exchange one currency for another at a specified date in the future at a price (exchange rate) that is fixed on the purchase date. The price can be different from that is quoted in the spot foreign exchange markets. Investors can use these futures contracts to hedge against foreign exchange risk.

STOX is a special purpose vehicle created by the New Delhi-based Jaypee Capital Services for setting up the currency futures exchange. Jaypee Capital, formed by Jaypee Commodities, will be the single-largest shareholder in the proposed exchange. Reportedly, the proposed exchange will be set up with a networth of Rs 150 crore and 49% equity in the bourse will be with the public sector. As per Sebi guidelines, the trading member for the currency derivatives exchange should have minimum networth of Rs 1 crore (on the balance-sheet), while the clearing member should have a networth of Rs 10 crore.

Apart from MMTC, other public sector firms that are likely to hold stake in the exchange include Bank of India, Bank of Baroda, Oriental Bank of Commerce, Indian Overseas Bank and Canara Bank. Among private companies to have stake in the new currency futures player include Federal Bank, TCS, STCI and Standard Chartered Bank. As per market regulator Sebi guidelines, the currency futures exchange has to have a minimum of 50 members.

Trading on the new exchange is tipped to begin end January 2009 or latest by the end of the current financial year and is expecting in-principle approval from Sebi soon. Currency futures were first launched by the National Stock Exchange (NSE) on 29 August 2008, followed by the Bombay Stock Exchange (BSE) on 1 October 2008 and the Multi Commodity Exchange (MCX) on 7 October 2008.

MMTC (formerly Minerals and Metals Trading Corporation of India), is a leading international trading company. It trades in diverse fields like minerals, engineering, agro, marine, textiles, leather and gems & jewellery.

GMR Infrastructure: GMR Infrastructure surged 62.98% to Rs 85.40 in a month to 2 January 2009 on sustained creeping acquisition by promoter. Promoter and holding company GMR Holdings bought 3.87 lakh equity shares of Rs 2 each in the Bangalore-based infrastructure firm through open market purchase on 24 December 2008, powering a 26.05% rally in a week to 2 January 2009. Consequent to the latest acquisition, GMR Holdings’ stake in GMR Infrastructure rose to 74.06%.

Earlier GMR Holdings collectively mopped up 92.07 lakh shares in GMR Infrastructure through open market purchases between 3 and 23 December 2008 respectively. GMR Infrastructure rebounded by a sharp 87.28% from its a 52-week low of Rs 45.60 on 27 October 2008 as a sustained hike in stake by promoters boosted sentiment at a time when investors appetite for risky investment including equities is waning. The stock is 67.26% off its 52-week high of Rs 260.90 on 4 January 2008.

Total promoter holding in GMR Infrastructure stood at 73.28%, of which a majority 73.25% was held by GMR Holdings end September 2008. Foreign and institutional holding in the stock stood at 8.83% and 7.89%, respectively.

The recent buying spree by promoters follows the Securities and Exchange Board of India (Sebi’s) relaxation in the takeover code in October 2008, extending creeping acquisition limit from 55% to upto 75%, by buying 5% equity every year, if done on the floor of the stock exchange.

GMR Infrastructure is the holding company of the GMR group, engaged in the development of power and infrastructure projects.

Bajaj Hindusthan: Bajaj Hindusthan spurted 80.47% to Rs 72.55 in a month to 2 January 2009 on putting to an end a six-year-long family dispute. As a part of the family truce, Bajaj Group chairman Rahul Bajaj bought 3.99 crore shares, or 28.2%, of sugar producer in two block deals transacted on the BSE on 30 December 2008. Family investment firms Bachhraj Company and Jamanalal & Sons sold 3.47 crore shares at Rs 64 and 0.52 crore shares at Rs 66, respectively, as part of inter-se transfer among the promoters.

In a separate transaction, Rahul Bajaj bought 14 lakh shares of Bajaj Hindustan through a bulk deal on the BSE, taking his total purchases to 4.13 crore shares, or 29.2%, of the company’s equity.

The series of bulk deals resulted in a spike in average daily traded volumes to 1.04 crore shares in the week to 2 January 2009 from 18.36 lakh shares in three months.

On 22 December 2008, Bajaj Hindusthan told the stock exchanges, Rahul Bajaj will acquire around 29.2% of the company’s equity from group investment firms and other Bajaj family members at the market price as on 30 December 2008. As part of a family settlement, Rahul Bajaj would later transfer the stake along with his 0.4% stake to his brother Shishir Bajaj for zero consideration thus giving Shishir full control over the sugar firm. After the transfer, Shishir Bajaj’s stake will rise to 32.47% from 2.85% currently.

The next step will involve Shishir offloading his stake in Bajaj Auto and other group companies controlled by Rahul Bajaj and his cousins, Niraj, Shekhar and Madhur. This would be between the Bajaj family members through off-market block deals.

The Bajaj Hindusthan stock eroded a sharp 81.83% from its 52-week high of Rs 399.50 on 9 January 2008 as commodity prices headed south, only to rebound 89.67% from its 52-week low of Rs 38.25 on 21 November 2008.

The Bajaj family drama sprouted in June 2003, when Shishir Bajaj — who manages Bajaj Hindusthan and Bajaj Consumercare — expressed a desire to offload his equity holding in other group companies, including Bajaj Auto, and consolidate his holding in the two companies managed by him. Things got murkier after a dispute over the valuation of Shishir’s holding in Bajaj Auto.

Bajaj Hindusthan manufactures sugar and ethanol. The company has ten sugar plants, which are all located in the northern Indian state of Uttar Pradesh (UP).

Himachal Futuristic Communications: Himachal Futuristic Communications (HFCL) jumped 45.83% to Rs 12.60 in a week to 2 January 2009 on reports the Datacom partners are working on a solution to end their corporate battle. Datacom is among the nine companies securing pan-India telecom licences in early 2008 and was supposed to launch the mobile services service on 15 August 2008. The launch, however, was delayed by a clash between the shareholders. The Dhoots of Videocon Group have a 64% stake in Datacom, while the Nahatas of HFCL own 36%. The partners are fighting over some aspects of the joint venture agreement, investments being made by them, and the valuation of Datacom for a possible sale to strategic investors.

Riding on back of such reports the HFCL stock was frozen at the 20% upper circuit filter on 31 December 2008 and 1 January 2009. Even HFCL’s denial on 1 January 2009 about entering into any agreement with Videocon on Datacom Solutions failed to put a brake on the stock’s rally.

Hopes of an amicable solution soon over the promoter spat propelled an 87.50% and 15.28% surge in the HFCL stock over a month and three months respectively, to 2 January 2008, outperforming the BSE Small-Cap index’s 19% rise and 30.97% fall. The stock is off 79.87% from its 52-week high of Rs 62.60 on 8 January 2008 but 111.76% above its 52-week low of Rs 5.95 on 27 October 2008.

Volumes on the counter bulged as the stock soared. Average daily traded volumes jumped to 23.11 lakh shares in the fortnight to 2 January 2009 from 11.73 lakh shares in the quarter.

Reports said that a solution to this feud might solely depend on pricing. Nahata is open to exiting Datacom if the Dhoots pay him Rs 2,116 crore for his stake. Simulatenously Nahata is also exploring the possibility of buying out the Dhoots and was looking to raise funds for the same.

Another set of reports hinted that HFCL’s telecom business in the Punjab circle may be merged with Datacom even as the Dhoots are likely to agree to buy out Nahata’s 36% equity stake in Datacom. Datacom was initially owned by Nahata-promoted Jumbo Techno Services. But when Videocon failed to get a licence from the Government, it picked up 64% stake in Datacom.

The dispute between the two promoters began when Nahata accused the Dhoots for failing to adhere to the investment agreement of bringing equity capital of US$ 901 million into Datacom. Nahata also alleged that the Dhoots were trying to invest in the form of a loan and later recover the money by selling stake to foreign players. The promoter standoff has not only delayed the launch of Datacom’s cellular services by at least four months but also driven away prospective international investors from picking up a stake in the company. UAE’s Etisalat and Norway’s Telenor had earlier shown interest in Datacom.

Public holding in HFCL was a sizeable 68.16% end September 2008, rising from 54.31% end September 2007. During the same period, non-promoter corporate holding dipped to 27.20% from 31.19%. However, promoter holding remained unchanged at 2.10%.

HFCL provides global solutions for telecom networking, telecom solutions, optical transmission products, wireless transmission and wireless access.

ABG Infralogistics: ABG Infralogistics galloped a little under 20% in intra-day trade on 24 December 2008 only to slide the following day as reports of a French major eyeing a 49% stake in ABG’s bulk port handling business was denied.

After surging as much as 19.74% in intra-day trade to Rs 175 on 24 December 2008, the ABG Infralogistics settled with a 15.43% surge to Rs 168.70, buoyed by reports the shipping unit of diversified French conglomerate Groupe Louis Dreyfus SA is set to buy 49% in India’s biggest crane rental firm’s bulk port handling business for Rs 90 crore. Louis Dreyfus Armateurs SA builds and operates vessels able to load dry bulk cargoes.

Such reports propelled volumes on the counter, which surged to 9,884 shares on the counter on 24 December 2008, sharply higher than the average daily traded volumes of 3,937 shares in the three months to 2 January 2009.

However, the ABG Infralogistics stock corrected 1.24% to Rs 166.60 on 26 December 2008 after the company a clarified it was not contemplating bulk port handling business stake sale. The stock eased to Rs 163 on 2 January 2009 in subsequent days. The scrip is off 80.82% from its 52-week high of Rs 849.90 on 3 January 2008 but above 54.86% from its 52-week low of Rs 105.25 on 31 October 2008.

Declining 1.21% in a month to 2 January 2009, the ABG Shipyard scrip underperformed the BSE Small-Cap index’s 19% rise on concerns the ongoing global financial crises may impact the company’s profitability. Net profit plunged 57.80% to Rs 3.26 crore in Q2 September 2008 over Q2 September 2007, after seeing rise in the previous three quarters.

In 2008, ABG Infralogistics sold an 11.8% stake in the firm to PSA International Pte, the world’s second biggest container port operator owned by Temasek Holdings Pte, investment arm of the Singapore government. The Singapore firm also invested about Rs 350 crore for buying a 49% stake each in ABG Kandla Container Terminal and ABG Kolkata Container Terminal, the entities floated by ABG Infralogistics to run the two container handling facilities at Kandla and Kolkata ports, respectively.

Foreign holding in ABG Infralogistics rose to 16.15% end September 2008 from 13.83% end September 2007. During the same period, public holding slipped to 8.14% from 10.20%. However promoter ownership remained unchanged at 60.15%.

ABG Infralogistics provides services for execution of turnkey projects, including plant erection; hire of cranes, ports infrastructure development, heavy goods lifting and transportation.

Accentia Technologies: Accentia Technologies jumped 57.60% to Rs 156.65 in a month to 2 January 2009 on an order win in the healthcare receivables cycle management (HRCM) arena. The software and business process outsourcing service provider was frozen in the 5% upper circuit filter on 18 December 2008 after it bagged a $22-million order service a chain of hospitals in the US to be executed in 2009-10.

However, the rise in stock failed to lift volumes. Average daily traded volumes dipped to 10,949 shares in the month to 2 January 2009 from 14,517 in the quarter.

Despite spurting 109.71% from its 52-week low of Rs 74.70 on 27 October 2008, the Accentia Technologies stock is 41.65 away from its 52-week high of Rs 268.50 on 15 January 2008. The stock is, however, up 2.02% in three months to 2 January 2009, outperforming the BSE Small-Cap index’s 30.97% fall, after the company disclosed it is hunting for more acquisitions.

On 23 August 2008, Accentia Technologies completed the purchase of an outsourcing services provider Thunga Software in an all-cash deal. On 1 April 2008, the Mumbai-based company acquired a 51% stake in Oak Technologies Inc (OTI), US, in an all cash deal. OTI is an integrated services provider in of healthcare receivables management, operating from the US and several locations in India. The company also has strategic alliance with Bangalore-based Asscent Infoserve for using their infrastructure facilities of 7,000 square feet for BPO services.

Accentia Technologies provides business process management solutions for the healthcare, financial, and insurance sectors. It offers various business process outsource management solutions, which primarily include professional transcription to medical providers and non-medical companies globally.

ABM Knowledgeware: ABM Knowledgeware galloped 66.98% to Rs 19.82 in the week to 2 January 2009 buoyed by a large order win for supplying software solutions to the Mumbai civic body.

The stock galloped 20% each on 1 and 2 January 2009 on securing an e-government contract worth Rs 116 crore from the largest municipal corporation in Asia: Municipal Corporation of Greater Mumbai. The company announced the contract win after trading hours on 31 December 2008. Interestingly the stock spiraled 23.27% to Rs 13.77 in two trading sessions to 31 December 2008 as marketmen might have got a whiff of the mega order.

The Mumbai-headquartered e-governance and systems integration solutions provider would supply and implement software solutions for payroll of the municipal corporation’s employees till year 2011.

Spurting 83.52% in the month to 2 January 2009, aided by the mega order win, the ABM Knowledgeware stock outperformed the BSE Small-Cap index’s 19% rise. The stock is off 71.50% from its 52-week high of Rs 69.55 on 8 January 2008 but 113.12% above its 52-week low of Rs 9.30 on 2 December 2008.

Average daily traded volumes on the counter jumped to 2,362 shares in the week to 2 January 2009 compared with 2,799 shares in the past one quarter.

Promoter holding in ABM Knowledgement stood at 60.03% end September 2008 with foreign and public holding pegged at 13.40% and 13.81% respectively.

Cholamandalam DBS Finance: Cholamandalam DBS Finance jumped 29.66% to Rs 40 in a month to 2 January 2009 after the company said promoters would subscribe to its convertible preference shares. The stock was locked at the 10% upper circuit filter to Rs 40.95 on 26 December 2008 after promoters EID Parry (India), Coromandel Fertiliser, Tube Investments of India, DBS Bank and Carborundum Universal said they would subscribe to one crore zero coupon fully convertible preference shares to raise Rs 300 crore.

Cholamandalam DBS Finance will issue 10 lakh preference shares to EID Parry (India), 10 lakh shares Coromandel Fertilisers, 26.67 lakh shares to Tube Investments of India, 5 lakh shares to DBS Bank and 3.33 lakh shares to Carborundum Universal. The preference shares of Rs 100 each at a premium of Rs 200 shall be convertible into equity shares within 18 months. The price at which the convertible preference share would be issued is at a hefty 7.5-time premium to its ruling market price. However, the conversion ratio was not disclosed. Promoters held 74.96% stake end September 2008.

The Chalomandalam DBS stock’s rise was complemented by rise in average daily traded volumes as well which vaulted to 8,738 shares in the month to 2 January 2009 from 7,670 shares in three months.

Shares of the small-cap financial services provider had crashed 89.70% from its 52-week high of Rs 389.50 on 2 January 2008 on concerns the global financial crises will impact profitability. However, the stock recovered 48.18% thereafter from its 52-week low of Rs 27 on 25 November 2008.

Cholamandalam DBS Finance, a non-banking financial company, is a joint venture between Murugappa Group and DBS Bank of Singapore. It offers personal loans, vehicle finance, corporate finance, capital market finance and home equity loans.

 

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Volume No23 Issue No 23
A new order
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Markets
(Cover Story)
Taxation
(Apna Money)
Investment Strategy
(Apna Money)
Scoreboard
(Apna Money)
Commodity Watch
(Apna Money )
Tax Matters
(Apna Money)
Bulletin
(Bulletin)
Colgate Palmolive (India)
(Capitaline Corner)
Consolidated Scoreboard
(Consolidated Scoreboard)
As credit market softens, stocks harden
(Global Markets)
Creeping acquisition
(In Focus)
Family truce turns Bajaj Hindustan sweet
(Market Blockbuster)
Market Snapshot - Part I
(Market Snapshot)
Market Snapshot - Part II
(Market Snapshot)
Market Snapshot - Part III
(Market Snapshot)
Movers and shakers - I
(Market Snapshot )
Movers and shakers - II
(Market watch)
Interest in MMTC on currency futures foray
(Stocks in Action)
On a recovery trail
(Market Report)
Watch list
(Stock Watch)
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