Reliance to sign gas sale agreements by Feb-end

With the Bombay High Court lifting a ban on the sale of natural gas from the nation's largest field, Reliance Industries is likely to ink gas sale agreements with customers by end of next month. Reliance is expected to start gas production from eastern offshore KG-D6 fields by next month-end and first sale may happen by mid-March. "Once the stay has been lifted, we now have to ask Reliance to detail out the production plan as to how much will be produced and when," Oil Secretary RS Pandey said here. Production planning would enable allocation of the fuel within the sectors already prioritised by the Government, he said adding simultaneously Reliance will finalise model gas sale agreement and ink sale deals before production starts by end of February. Initial gas would be used for testing systems and output by the end of first month which is expected to be between 5-15 million standard cubic meters per day. It will ramp up to 40 mmscmd by July/August. The Bombay High Court allowed Reliance to sell gas from KG-D6 at USD 4.20 per million British thermal unit in accordance with the Government's gas utilisation policy that gives top priority to fertiliser units followed by existing power plants. India faces acute shortage of natural gas and current availability of 105 mmscmd meets only 55 per cent of the demand. But Reliance was previously restrained from selling KG-D6 gas to any company other than Anil Ambani Group firms and state-run NTPC because of a dispute over price to the two. Pandey said the government intervened in the dispute to get the ban lifted so that the fuel-started fertiliser and power companies get natural gas.

BHEL sees Rs 60K cr orders this fiscal

Bharat Heavy Electricals Ltd (BHEL), the engineering & power equipment major, expects to close financial year 2008-09 with an order backlog of Rs 1,20,000 crore. K Ravi Kumar, chairman and managing director, on Friday said the state-run company is expecting orders worth Rs 50,000-60,000 crore in the next financial year. This fiscal, too, it expects orders worth Rs 60,000 crore. In the fiscal nine months ended December 31, 2008, BHEL booked orders worth Rs 44,088 crore for equipment to generate 13,600 megawatt of electricity, Kumar said. On Thursday, the company received orders worth Rs 7,000 crore, which would reflect in the fourth quarter of the current fiscal, he added. The company had an order backlog of Rs 1,13,500 crore at the end of the December quarter. BHEL expects to grow its revenues by 30% to Rs 27,000-28,000 crore in FY09 from Rs 21,498 crore in FY08, Kumar said. "Our work-in-progress in the December quarter was quite high and will translate into higher production in the fourth quarter of FY09," he added. In the nine months ended December 31, 2008, BHEL's net profit grew 2.4% year-on-year to Rs 1,790.74 crore. Revenues grew 25.24% to Rs 16,955.12 crore. The low growth in net profit was attributed to higher provision for employee wages, which are in for a revision in line with the Centre's policy, and to higher raw material costs that are pressurising margins. The company has set aside Rs 1,313 crore for higher wages in FY09. C S Verma, director (finance), said, "We will reassess if this provision is enough but as per estimates we feel even this much won't be required." BHEL's raw material costs have gone up this fiscal due to the rise in commodity prices earlier. The recent crash in prices hasn't translated into savings for the company yet as it keeps an inventory of six months for imported raw material and of three-four months for indigenous. Raw material costs accounted for 62% of BHEL's revenues in the December quarter compared with 58% in the same quarter in FY08, Kumar said. He expects input costs to be 60% of revenues in FY09 against 58% last fiscal.

Govt plans easier FDI rules for hotels, tourism projects

The government plans to do away with the minimum area and capital requirements for foreign investments in realty projects involving hotels, cineplexes, health clubs and other tourism-related activities to help the tourism industry meet investment needs. However, to avail the relaxation, the projects must use at least 50% of the total built-up area for hotels or facilities promoting tourism, food and culture, said an official with the commerce and industry ministry who asked not to be named. Builders can develop commercial and residential real estate in the remaining space, he said. The current norms stipulate a minimum developable area of 25 acres and a minimum capitalisation of $10 million for wholly-owned subsidiaries of multi-national companies and $5 million for joint ventures investing in real estate. However, foreign investors will not be allowed to exit such projects before three years of completion of the project. The tourism industry badly needs foreign direct investment to construct hotels. “The sector has recorded an FDI inflow of $853 million since January 2000 till March 2008. To give a fillip to the hotel and tourism sector, further policy initiatives are urgently required,” said the official. According to tourism ministry estimates, there are about 1.2 million hotel rooms in the country. The requirement for 2010 and 2020 is estimated to be 2.9 million and 6.6 million, respectively. The department of industrial policy and promotion feels mixed projects are required for promoting tourism. The move will result in price rationalisation in hotel sector, said Manav Thadani, MD of hotel consultant HVS International. Over the last few years, tariffs have reached unrealistic levels, especially in metros, owing to a demand-supply mismatch. “Smaller ticket size of mixed-use projects would be commercially more viable and attract increased foreign investment,” said Gaurav Karnik, associate director, tax & regulatory services, Ernst & Young. “There has been a huge interest among foreign investors to invest in mixed-use format but they have been hesitant because of the minimum size and capital commitments,” he said.

DLF may walk out of Delhi convention complex project

DLF, the country’s biggest real estate company, may drop the plan to develop India’s largest convention and exhibition complex in Delhi, sources say. The move comes 18 months after the cash-strapped developer was allotted 35 acres by the Delhi Development Authority (DDA) to build and maintain an international convention & exhibition centre, hotels and allied commercial facilities. The cost of the project is estimated at Rs 6,000 crore and was expected to be completed in three years. The realty major has already spent Rs 900 crore on land purchase. The continuing liquidity crunch and delay in sourcing funds internationally have led DLF to review its plans to invest further in the project. The company has spent over Rs 100 crore in finalising the project plan, identifying its technology partners and beginning the spadework for various projects. It has intimated its inability to complete the project unless the existing contractual obligations were renegotiated, according to DDA sources. DLF is in talks with DDA to see if changes can be made to the original terms in the lease agreement, sources said. The lease agreement stipulates a time-bound completion of the project and has penalty clauses for every missed deadline. However, the agreement allows DLF and DDA to extend the timeframe for completing the project after mutual negotiation. “DLF is looking at revising the contractual agreement that can even allow some equity participation from the government side,’’ sources said. The agreement stipulates that the entire financial burden from the conceptual stage to execution is on the developer. DLF declined to comment on the delay and status of the project though company insiders say the developer is not keen on the project. “The project has been killed,’’ a source said. The lease deed allows DDA to take back the land if the developer fails to executive the project beyond a certain time. The proposed convention centre is one of the most prestigious projects of DDA and was modeled on Suntec Convention Centre in Singapore and aimed at attracting tourists of the MICE (meetings, incentives, conferences and exhibitions) segment. The conference centre has been designed to accommodate 12,000 delegates. In addition, the complex will house 25 meeting rooms of varying sizes with a total seating capacity of over 2,000 delegates for breakout sessions. DLF, the country’s biggest real estate developer, had about Rs 1300 crore worth of debt papers, including pass through certificates downgraded by one notch by Crisil on slowing real estate sales which is contraining cash flows and will lead to problems on capital structure. The company has been forced to increasingly rely on refinancing of its debt, Crisil said in a statement. The rating agency on January 28 downgraded the company’s rating to A+ from AA- on slowing real estate sales and detoriorating external environment.

Govt firms to get priority in KG gas allocation

The government plans to do away with the minimum area and capital requirements for foreign investments in realty projects involving hotels, cineplexes, health clubs and other tourism-related activities to help the tourism industry meet investment needs. However, to avail the relaxation, the projects must use at least 50% of the total built-up area for hotels or facilities promoting tourism, food and culture, said an official with the commerce and industry ministry who asked not to be named. Builders can develop commercial and residential real estate in the remaining space, he said. The current norms stipulate a minimum developable area of 25 acres and a minimum capitalisation of $10 million for wholly-owned subsidiaries of multi-national companies and $5 million for joint ventures investing in real estate. However, foreign investors will not be allowed to exit such projects before three years of completion of the project. The tourism industry badly needs foreign direct investment to construct hotels. “The sector has recorded an FDI inflow of $853 million since January 2000 till March 2008. To give a fillip to the hotel and tourism sector, further policy initiatives are urgently required,” said the official. According to tourism ministry estimates, there are about 1.2 million hotel rooms in the country. The requirement for 2010 and 2020 is estimated to be 2.9 million and 6.6 million, respectively. The department of industrial policy and promotion feels mixed projects are required for promoting tourism. The move will result in price rationalisation in hotel sector, said Manav Thadani, MD of hotel consultant HVS International. Over the last few years, tariffs have reached unrealistic levels, especially in metros, owing to a demand-supply mismatch. “Smaller ticket size of mixed-use projects would be commercially more viable and attract increased foreign investment,” said Gaurav Karnik, associate director, tax & regulatory services, Ernst & Young. “There has been a huge interest among foreign investors to invest in mixed-use format but they have been hesitant because of the minimum size and capital commitments,” he said.

ONGC approves Rs 7133.39 cr redevelopment project

Oil & Natural Gas Corp's (ONGC) board has approved the second phase of Mumbai High North (MHN) redevelopment project, which will yield an incremental crude oil production of 17.354 million metric tonne (MMT) and natural gas 2.987 billion cubic metres (BCM), aggregating to 20.34 million tonnes of oil equivalent, by March 2030. The total cost of this redevelopment project is Rs 7133.39 crore (considering an exchange rate of Rs. 49 per US dollar). The project is scheduled to be completed by September 2012, the company said in a statement. The decision to launch Phase II of Mumbai High North Redevelopment comes after the success of the first phase, which was launched in October 2000 (and completed in December 2006) and is likely to result in incremental gain of 23.25 MMT of crude oil and 6.10 BCM of gas by 2030, from 73 new wells and 10 side-track wells drilled in 1st phase. Till March 2008, the cumulative oil production from Phase I redevelopment wells has been 9.34 MMT against plan of 8.46 MMT and cumulative gas production has been 2.89 BCM against plan of 1.87 BCM. Mumbai High field was discovered in 1974 and was put on production in May 1976. The field is currently producing a little over 12 MMT a year (245,000 bopd) and has already produced 24 per cent of the Initial-Oil-In-Place (IOIP) cumulatively. The field has two hydrocarbon pools in North and South and for development purpose, these have been delineated as two projects – Mumbai High North (MHN) and Mumbai High South (MHS). Both MHN and MHS were developed separately and are currently (2007-08) producing 4.34 MMT and 7.69 MMT of crude oil respectively. MHNCumulative production envisaged (initial) till 2030161.82 MMTCumulative production till now (including effects of Ph-I till now)140.25 MMTRedevelopment Phase I23.25 MMTRedevelopment Phase II17.35 MMTTotal production envisaged till 2030202.42 MMT The phase II of Mumbai High North Redevelopment aims to further improve recovery from Mumbai High, with fresh inputs like drilling 73 new wells and side-tracking of 38 sick/poor producers. Development of small reservoirs (L-II and L-I) has been integrated with the main reservoir (L-III) to improve overall oil production and development economics. As in the case of Phase-I, new evolving technologies will be inducted in this phase of redevelopment also. After the Board approval, ONGC CMD Mr. R S Sharma said that this Redevelopment Plan will be done on fast-track and will improve overall production of ONGC.

L&T has not increased Satyam stake: CFO

Larsen & Toubro, India's top engineering and construction firm, has not increased its stake in Satyam Computer Services this week nor has it written to the government expressing interest about getting control of the fraud-hit outsourcer, a top official said. L&T last week trebled its stake in Satyam to 12 percent, making it the largest shareholder, a move it said was to protect its interests. "No, we have not written to the government," chief financial officer Y.M.Deosthalee told a news channel. On Tuesday L&T said it might further raise its stake in the scam-tainted Satyam Computers. "Overall, we are only trying to improve our situation," company chairman A.M. Naik told a news channel. "If nothing else, to really make L&T Infotech bigger by our stake in Satyam," Naik said. Incidentally, L&T Infotech's revenues are expected to touch $500 million (Rs.25 billion) this fiscal. Last week, L&T had raised its stake in Satyam to 12 percent from 4 percent. It also believes the stake hike would ensure a seat on the IT firm's board. There will be a number of challenges in front of L&T, one of them being convincing investors about enhancing its software business, which forms less than 10 percent of its revenue.

DLF, Unitech lack in transparency, key disclosures: Report

With Satyam scam making investors more concerned about corporate governance issues, a global investment banking major has said that the country's top real estate firms, including DLF and Unitech, are found lacking in terms of transparency and key disclosures in their businesses. Noting that related-party transactions account for a significant portion of their revenues, Credit Suisse said in a report that their network of key related parties run into hundreds of entities and include a number of un-listed JVs, subsidiaries, partnership firms and companies under control of key management personnel. "It is clear after the Satyam incident that investors should focus on corporate governance issues, particularly because of losses incurred in the past 12 months that have failed to rise to the fore," Credit Suisse said in its report on Corporate India. Some "concerns" might not be wrong from a legal viewpoint, but "flags for investors what they should know." On DLF Ltd, the report said the company has had significant intangible asset/goodwill on its balance sheet, there are significant departures from conservative accounting practises, there have been material related-party transactions and the company does not disclose detailed accounts of key subsidiaries on a regular basis. Besides, there is "no transparency in the land acquisition process. Promoters have privately controlled entities from which DLF buys land. Also, its landbank disclosure in annual reports is inadequate." DLF, where key related parties included 245 subsidiaries, 12 partnership firms, 12 JVs and 124 entities under control of key management personnel, had outstanding receivable from promoter entities of Rs 1,940 crore as of March 2008. Credit Suisse further noted that "DLF's dealings with the promoter entity have been questioned by investors. In FY'08, DLF sold assets/real estate projects amounting to Rs 5,560 crore to a promoter-controlled entity, DLF Assets. It also cancelled an earlier sale of assets worth Rs 1,890 crore." Previously, DLF has settled with minority shareholders who complained that they were denied participation in the company's rights issue in September 2005. The report further noted that while DLF does not actively deal with derivatives, it "does use forward contracts and swaps to hedge its risks associated with fluctuations in foreign currency and interest rates." Unitech also does not actively deal with derivatives and other financial market instruments, the report said on the country's second largest real estate firm. However, both DLF and Unitech have departed from conservative accounting practices, it said. The two companies recognise revenues on a percentage of completion method even where the cash receipt is yet to become due and they also capitalise on interest expense during construction of project. Incidentally, auditors of both firms have not made any observation in their last annual or limited review reports. On related-party transactions at Unitech, the report said that loans taken from key management personnel and controlled entities amounted to Rs 350 crore in FY'08. The key related parties at Unitech include a listed entity Unitech Corporate Parks and un-listed parties are Unitech Wireless, 316 subsidiaries, 21 JVs and associates and four entities under the control of key management personnel. Unitech also does not disclose detailed accounts of all subsidiaries and has invested in an unrelated business of telecom at a time when real estate business needed funds. Besides, there was no transparency in land acquisition process and promoters have privately controlled entities from which Unitech buys land, the report noted, adding that disclosures on land bank and projects under execution were inadequate. About another real estate firm Sobha Developers, the report said it also lacks on the front of transparency in land acquisition process and promoters have privately controlled entities from which the company buys land. "Also, land bank disclosure in annual reports is inadequate," the report said on Sobha, whose key related parties include un-listed firm Sobha City and 47 entities under control of key management personnel. In a significant departure from conservative accounting method, Sobha also recognises revenue on a percentage completion method even where the cash receipt is yet due and capitalises interest expenses during a project's construction. On material related party transactions for Sobha, the report said that significant advances were given in FY'08 to Technobuild Developers, a promoter controlled unlisted entity, for purchasing land on behalf of Sobha Developers, amounting to Rs 540 crore. Sobha also does not disclose detailed accounts of all subsidiaries and it changed accounting policy in the first quarter of the current fiscal, which effectively accelerates revenue. "Previously, the company recognised revenue on land agreements only on the 20 per cent completion of construction. Now, the policy has been changed to recognise revenue on land agreements when 20 per cent of the booking amount has been collected and sale agreements entered into." The report further said that the company has made part payments for land in many cases where the land title still has to be transferred into its name and "its annual report carries very little detail regarding this."

Bombay HC lifts interim stay on KG D6 gas sale

In the RIL-RNRL case, the Bombay High Court has lifted the interim order on sale of KG D6 gas till the final judgment is passed. RIL will be allowed to sell gas in the interim period at USD 4.2 per million British thermal unit (mmBtu). The judgement is expected by mid March. Mohan Parasaran-Government Lawyer said, “Now that the court has heard arguments of both the private parties that is Reliance and RNRL and has reserved judgment in both their appeals. As a purely intermediate measure the court has modified its earlier interim order which will enable gas which is to be produced from the end of February to be sold in accordance with the Government of India’s utilization policy. At the rate determined by the government namely USD 4.2 per MMBTU and any sale which has to take place will be without prejudice to the rights and contentions of both the parties in the present appeals as well as in the pending suit of NTPC. While entering into contracts Reliance will also be mentioning that those contracts will also be subject to the pending proceedings.”

GTL offers cheap power to cell sites

GTL, a network services provider, has forayed into energy outsourcing contracts and has bagged deals from Bharti Airtel, Idea Cellular and GTL Infrastructure (GIL) to manage their power requirements of over 8,000 cell sites. “Telecom service providers and tower companies are looking at outsourcing power management services to independent firms so as to enable themselves to concentrate on their core competencies. Even though energy management is a part of the bigger operational and maintenance (O&M) deals, it has a huge potential in the country,” GTL Director and Chief Operating Officer Charudutta Naik told Business Standard. Energy costs are high and at present companies spend around Rs 18,000-42,000 (differing from location and terrain) for powering a cell site per month. GTL intends to reduce the costs by at least 15 per cent, he added. Under the contracts, GTL intends to put to use an array of its recently-launched products that will help in reducing energy consumption, Naik said. The company, which has already bagged contracts from Bharti Airtel and Idea Cellular and GTL Infrastructure (an independent tower company and a sister concern), is in talks with leading GSM and CDMA companies. It expects these contracts to rise on rollout of 3G services and entry of new players. He, however, did not disclose the financial details of the contracts that were bagged by the company. GTL is also experimenting on using of palm oil for cell sites. Many tower companies in the country are using bio-diesel, fish-fry oil and wind energy among others to power towers in the country. If successful, this would be the first time a company will be using palm oil to power cell sites and it would be a cheaper option compared to the existing methods of using electricity or diesel (for gensets).

L&T seeks management control of Satyam

It’s official now. Engineering giant Larsen & Toubro (L&T) has sought management control of Satyam. In the first official acknowledgment of L&T’s interest in taking over Satyam, the Department of Corporate Affairs (DCA) has said in a note, written in the last week of January, to the finance ministry that L&T Chairman A M Naik has expressed interest in acquiring a sufficient stake in Satyam to take management control. The note quotes Naik as saying that L&T eventually wants to run the company, for which it is in the process of getting internal approvals. L&T executives said they had no comment to offer. Naik, according to the communication, met the DCA secretary on January 20 in Delhi to convey his willingness to acquire Satyam. The communication also details the action taken by the DCA on the Satyam scam. The DCA communication is significant as L&T has never officially acknowledged that it would like to acquire and control Satyam. The company, which increased its stake in Satyam from 4.48 per cent to 12 per cent on January 23 through open market operations merely said it did so to protect its investments by bringing down the average cost of acquisition. There was speculation that L&T may increase its stake to 15 per cent and go in for an open offer. However, the company has been silent on the issue. L&T has been seen by the market as one of the possible bidders to take over Satyam. The others which have shown interest include iGate, Tech Mahindra and HCL Technologies. Although L&T did not want to comment, sources familiar with the developments said the sharp increase in Satyam’s share price would not have taken place if L&T did not emerge as a serious interested buyer and a potential saviour of the company. The sources also said it is difficult to quantify the value of Satyam net of non-existent reserves, non-availability of a reconstructed balance sheet, un-quantified liabilities in the form of class action suits and other claims such as employee benefit provisions, lost key clients and employees and loss of a top management team. On reports of L&T seeking a waiver of open offer pricing norms, the sources said the normal Sebi guidelines for the valuation of an open offer price based on the average price of the preceding six months cannot be logically applied to a company whose promoters perpetuated the biggest corporate fraud in Indian history, and the balance sheet of which included significant assets/margins that are non-existent. The sources said the disintegration of Satyam would benefit some overseas firms who are already soliciting their key client accounts. Indian IT firms have been avoiding doing so till clarity emerges on the government’s and the interim board’s decisions on the way forward.

RIL resorted to breach of trust, RNRL counsel

Reliance Natural Resources (RNRL) counsel Ram Jethmalanai concluded his argument before the division bench of the Bombay High Court on Thursday by pleading for justice. “We are victims of fraud and please do us justice,” said the former law minister as the long pending legal tussle between the warring Ambani brothers over the supply of gas from Reliance Industries (RIL) to RNRL inched towards a conclusion. The final arguments in the case will take place on Friday. The case is being heard by a division bench comprising Justice JN Patel and Justice KK Tated. Whoever loses will almost certainly approach the Supreme Court. “RIL cannot be allowed to take advantage of its own misdeeds and order for restitution is imperative in this case as RIL resorted to criminal breach of trust through signing unilaterally the gas sales agreement while in control of RNRL,” Jethmalani told the court. RIL counsel Harish Salve and government counsel and additional solicitor general (ASG) Mohan Parasaran is expected to conclude their final submissions before the court on Friday. Mokul Rohatgi, another counsel representing RNRL, argued that the gas sale purchase agreement (GSPA) between RIL and RNRL was invalid because when the pact was signed, Mukesh Ambani Group’s directors were on both sides and even though RNRL had objected to the terms, they had not been considered. GSPA was not in line with the scheme of demerger. It has to be corrected on a few broad issues and must be properly negotiated and include the price at which gas will be supplied, and the term for which gas will be supplied and be in conformity with the MoU and the scheme of demerger,” Mr Rohatgi said. When Justice Patel said that the court could not pass directions that were in contravention of government decisions, Mr Rohatgi said, “the government had the right to fix the valuation of the gas to calculate the production cost of petroleum. Whereas RIL can sell it at any price.” “The government fixing the valuation of the gas and the sale price of the gas were part of different clauses of the production sharing contract between the government and RIL. These two clauses were in harmony and operated in different spheres,” Rohatgi argued. Mr Jethmalani also focused on the pricing of gas, which has been at the core of the long drawn-out proceedings. While the controversial gas supply agreement between RNRL and RIL says the price of gas should be $2.34, the government has fixed the price of gas at $4.20, though that decision explicitly excluded the RIL-RNRL case. If the gas from the KG-Basin is sold at $4.20, the government will have to subsidise it for users, Mr Jethmalani said. As such, the government will not be making a profit of Rs 16,000 crore, which was suggested by RIL, he said. Meanwhile, if the price is raised from $2.34 to $4.20, RIL will make a profit of Rs 30,000 crore, Mr Jethmalani said in his submissions before the court.

Oil cos may need Rs 11000 cr more in bonds by March

The government may have to issue additional oil bonds worth Rs 11,000 crore to state-run oil marketing companies - Indian Oil Corp (IOC), Bharat Petroleum Corp (BPCL) and Hindustan Petroleum Corp (HPCL) - in the fourth quarter of 2008-09. The bonds will compensate oil companies for keeping retail prices of petrol, diesel, kerosene and cooking gas below the cost during the year. The combined loss (under-recovery) of the three companies is estimated at Rs 101,445 crore for 2008-09. “Against an estimated under-recovery of Rs 101,445 crore for the entire fiscal, the government has already agreed to issue oil bonds worth Rs 60,967 crore. Public sector upstream oil companies such as Oil & Natural Gas Corp and Oil India have already contributed Rs 32,000 crore in the current fiscal. Balance under-recoveries will be met through additional oil bonds,” an oil ministry official said. At the end of the fiscal, the three oil companies - IOC, BPCL and HPCL - will not take any hit on their balance sheet. “A loss-making company can’t share the subsidy burden. They have already reported a loss of over 14,000 crore in the first half of 2008-09. Even upstream companies have done their bit by contributing Rs 32,000 crore. Balance under-recoveries would be met through oil bonds,” he said.

Govt cuts petrol, diesel and LPG prices

The government on Wednesday, 28 January 2009, midnight slashed petrol prices by Rs 5 per litre, diesel by Rs 2 per litre, and LPG by Rs 25 per cylinder, in an attempt to pass on the benefit of weakening international oil prices to consumers. Earlier, on 6 December 2008, the government had reduced the petrol price by Rs 5 a litre and diesel price by Rs 2 a litre.

Investors dump share-pledging cos

After the Satyam fiasco, investors seem to be paying more attention to whether promoters have pledged holdings a la Rajus, rather than concentrate on fundamentals. After Satyam announced that lenders had sold 2.45 crore shares pledged by the promoter, the market have shown a negative reaction to similar instances. Signalling their aversion at promoters being financially weak, investors sold shares in companies where market got a wind of pledged shares by promoters. That is evident from the stock prices falling between 20 to 40% in the last 15 trading days. From January 6 (the day when Raju disclosed his pledged shares), most stocks such as Nagarjuna Construction (-43 %), United Spirits (-42 %), Rolta (-37 %), XL Telecom (-33 %), Bombay Rayon (-32 %), KEI Industries (-28 %) and Bharati Shipyard (-26 %) have been the worst hit in terms of price correction. Even the likes of Peninsula Land (-20 %) and Indage Vinters (-20 %) have also not been spared. The synchronised fall of ‘pledged counters’ - as they are now being referred to as in the broking circles - should be seen along side sensex fall which lost 10% during the same period. “Investors will naturally treat these pledged stocks with disdain, fearing the worst. It will take more time for investors to get accustomed to share pledging. So, companies which come out with disclosures on their own may be seen in better light,’’ B Madhuprasad, vice-chairman of investment bank Keynote Corporate Services, said. Pledged counters such as Gayatri Projects (-7%), Great Offshore (-7%), Shree Renuka Sugar (-7%) and Godrej Consumer (-7%) have fallen less than sensex. IT consulting MindTree said its promoters have pledged 0.78% of their holding in the company to ICICI Bank and HDFC. Godrej Consumer, in fact, told shareholders that Godrej Industries, one of its promoters , has taken a loan from JP Morgan Security India by way of a share pledge. “Promoters of most of these companies, with the exception of United Spirits (acquisition) and KEI Industries (term-loan ) and Godrej Consumer to some extent, have not stated why they leveraged themselves. But revelations could come sooner than later as SEBI has said that it would make it mandatory for founders of companies to disclose their pledged shares,’’ a Mumbai-based broker said. Promoters pledge a part or substantial portion of their holdings in the company for a fixed term (up to 2 years) at rates of interest varying from 15 to 25%. This could have led to promoters in companies such as XL Telecom pledging 20% stake and United Spirits (18%), Nagarjuna Construction (12%), Great Offshore (14.88%) as well as Shree Renuka Sugar (10%) taking the same route, according to a survey done by brokerage Prabhudas Lilladher. The percentage of stake pledged could not be ascertained for the likes of Indage Vinters (formerly Champagne Indage) and Gayatri Projects. On the other hand, Akruti City, which has managed to release pledged shares with Indiabulls Financial, has seen its stock gain 23% in just five days after news of the release 2.32% stake came out (while sensex gained only 5%).