IFCI deal cancellation impact….

IFCI Board called off the deal of 26% stake sell to Sterlite gr which had offered to buy the stake at Rs 111.

The issue under consideration is that why the deal is called off and what should be the impact on the stock…?

The deal is definitely called off by IFCI prima facie on the pretext of management control. Though Sterlite had bid for 26% stake in IFCI the same was for strategic investment and price of Rs 111 was just for the same.

The price of Rs 111 was fixed in view of the fact the debt was converted into equity at Rs 107 which by far is considered as the base price of the stock.

It seems Govt was reconciled to part with management control for much higher premium than at Rs 111 because of the intrinsic hidden value in IFCI. But for the fact the Sterlite could not have offered the much sought after price by Govt for management control and as result the deal was called off.

In fact, the decision was set to come out on 17^th Nov but for this kind of negotiation was delayed till 19^th Nov and when the talks failed the deal was called off.

The immediate impact could be that the stock price will crash by at least 20% to begin with because of the timing of the issue and the overbought condition in the stock. But our analysts believe that there could be huge buying from FII’s at lower levels because of the simple opportunity to make killing return of over 30% in such scenario.

The fresh talks will start very soon the fact will remain that Govt will not sell stake below Rs 111 come what it may. Rather they will now prepare for higher bidding which is a good sign for long term investors.

What investors should do in such cases…?

IFCI is a great investment story and investors should do well to hold on to the shares for long term though for immediate future the pull back may not happen. It is like Bajaj Auto announcing the de-merger stock crashing by 30% and then in 3months Bajaj comes back to square one leaving history behind.

Short term traders must book loss to begin with and long term investors must add more at Rs 75 to 80 levels because you are getting the same IFCI at 25% to the price at which LIC and others subscribed to the equity (Rs 107). Who is smarter investor will be known in due course of time.

IFCI deal at 111...

IFCI deal finalised at Rs.111/- per share although there is a chink in the armoury the deal will go at 111 without management control.

IFCI - Outcome of Board Meeting Wednesday, December 19, 2007

IFCI Ltd has informed that as the financial proposal submitted by the Sterlite Industries Ltd led consortium was conditional, the Board of Directors of the Company at its meeting held on December 19, 2007, has unanimously decided that the conditional offer is not accepted and therefore the same is rejected.

Major News Today

Domestic Funds net buyers Rs.659 crs (P)

Provisional figures for the day :

Gross buyers Rs.1318.90 crs

Gross sellers Rs.659.75 crs

Net buyers Rs.659.15 crs
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Domestic Funds net sellers Rs.199 crs

Gross buyers Rs.670.00 crs

Gross sellers Rs.869.00 crs

Net sellers Rs.199.00 crs

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European markets react...

Money market rates tumbled after the European Central Bank injected an unprecedented $500 billion into the banking system as part of a global effort to ease gridlock in the credit market.

The decline is the first sign attempts by policy makers to revive interbank lending are succeeding. Central banks, led by the Federal Reserve, are seeking to restore confidence to money markets after the collapse of the U.S. subprime-mortgage market. The ECB loaned a greater-than-anticipated 348.6 billion euros ($501.5 billion) for two weeks at 4.21 percent today.

This has kept the European markets higher........
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IFCI - Outcome of CoD Meeting

IFCI Ltd has informed that the Committee of Directors (CoD) [constituted for the purpose of conversion of Zero Coupons Optionally Convertible Debentures (ZCOCDs) held by Public Sector Banks and Financial Institutions into Equity shares] at its meeting held on December 17, 2007 has decided to issue 12,37,37,735 nos (Twelve crores, thirty seven lacs, thirty seven thousand, seven hundred and thirty five only) of Equity Shares to the Public Sector Banks and Financial Institutions @ of Rs 107/- per share (including premium of Rs 97/- per share) upon conversion of ZCOCDs of Rs 1323.99 crores.

Sterlite-MS not yet winner for IFCI stake sale: Srcs

Sterlite - Morgan Stanley is only the highest bidder.

Yesterday, late evening the board decided to invite the highest bidder, which is Sterlite and Morgan Stanley consortium for negotiations for the strategic stake of 26%. Sources say that the negotiations went on till early morning 5 o’clock and is expected to resume by 12 0’clock post noon.

The bone of contention is the price at which Morgan Stanley and Sterlite have expressed the intention to buy that stake. We understand that the other two bidders, which are Cargill Finance and Shinsei, had bids of less than Rs 85 per share. It was only Sterlite and Morgan Stanley, which have a bid in the range of Rs 90-100. If you put that into perspective, the average price for last two weeks comes to nearly Rs 107-108 per share.

Technically, the board cannot offer the stake to the consortium because the financial institutions who are converting the debt into equity will be paying that amount or the debt will be converted at the rate of Rs 107-108 per share.

So, it is important that the consortium raises its bid or is given an opportunity to raise the bid to the level of Rs 107-108, so that it matches the base price as per SEBI pricing formula.

According to Mangat, the negotiations are still on between Sterlite Morgan Stanley consortium and IFCI board. It is expected that by post 4 o’clock, some kind of a decision is expected and there might be some announcement. But the formal announcement is likely to come tomorrow when everything happens. It is going on as per scheduled.

There was no cut off date at all in the entire process and IFCI made it very clear that the pricing would be based on SEBI formula, which is six months average or two weeks average whichever is higher. Towards the end of November, when IFCI invited financial bids, the stock has started rallying from around Rs 90-113-114. So, it means that the average price for the last two weeks have gone up to Rs 107-108 per share. That is the reason why the bids are little lower than the floor price because the average for the two weeks is higher than the bid that Sterlite has put.

But the relevant date for this would be December 17th, the day they are using to convert the debt of nearly 1,300 crore, which they owed to the banks and financial institutions, to equity. So that date will remain as December 17th and you have to calculate the average price going backwards for last two weeks to get the base price.

Dard Vs Darr.....

I am an optimist…DARD hai DARR nahie…

We are not bearish and in fact we were waiting for this day to raise the toast to cash more trading opportunities. We do not care what market talks and what others believe about the market because we know what we need to do in the given circumstances. We are not here to manage the funds but for sure we are here to manage your interest.

Had we been managing your funds we could have catched the bottom Nifty and entry of numerous stocks ….? Any way, this is not our focus at the moment as we are lined up for major activities never done before in India and hence we are not keen to enter broking business though we are flush with such proposals.

Our channel partner SIFY’s SMS server was out of order and hence members must have faced difficulties more so when the market was volatile. In fact, we had been advocating for long that one should not depend on SMS alone and always have combo packs. In future, please take not of it in order to avoid inconveniences.

Coming to market, the pain is only for rollover because FRIDAY and TUESDAY are holiday and we are left with just 5 more trading sessions to rollover close to Rs 1,08,000 crs OI. This was known to our team though the timing was circumspect as usual because if we can know the timing we would occupy the space of the dream gambling den. The owner of the DEN deserves for this volatility.

Why is this volatility created in the market….? Market has enlarged beyond anybody’s imagination and even upcountry traders are dragged in trading in a big way. Broking community for the fun of creating their reach are adding more and more trading members and for that they are offering any kind of services but only till the times they gets going. The moment market start falling their risk management starts acting and in some cases they blindly square off all the positions without even taking the client’s consent because they hold POA duly signed at the time of margin trading.

Above that 20 K and global factors are always hogging in the minds of investors and they can’t see anything beyond the screen in front of them. It had happened at 5K 8K 12 K 13 K 15 K 18K and now at 20 K. If your vision is restricted to 22 K then for sure you can’t tolerate this kind of market but if you are destined for 45 K then every market will give you some multi baggers which will be wealth creators.

Any way whether market will give an opportunity to buy tomorrow itself is a big question mark but for sure post 27th Dec nobody will talk about this pain come what it may…? Last month we had seen Bajaj Hindustan correcting from Rs 245 to Rs 176 and then in this vallan went on to Rs 310. Therefore traders must understand that this is market and things will happen only in this way.

Yes there are lot of brokers generating sell calls too for which we have no answer and traders are free to follow them if they like their calls. JET and DLF will be the bullet calls for this vallan as well as next vallan whereas we are extremely positive on IFCI and IDBI for that matters and every dip is a buying opportunity. Media has tossed up a price of Rs 90 to 100 first then Rs 111 but yet there is no authentic statement from the management. We know only one thing Govt has taken equity at Rs 107 through bond conversion route that too after slogging for 4 long years and if they sell at Rs 111 then it could have been wiser to take refund of BONDS than get the same converted into equity. GOVT can’t be wrong and hence I would bet on IFCI. In fact, I have picked up IFCI personally for delivery for next 3 years as in my opinion it will move the way SAIL stock has moved. Those FII who have occupied 26% of IFCI shares from open market have not sold a single share till date. This clearly suggests the value of IFCI is far in excess of Rs 270 per share. ISPAT had one residential property at PEDDAR road mumbai and they have used their development route for realty gains and to my surprise they are booking residential houses at Rs 80000 per sq ft. IFCI is owning 3 premises in Delhi which will go for re development and the unrealized gains could be far in excess of Rs 20000 crs going by cmr in Delhi and hence IFCI stock will not go so cheap come what it may and even after the sell of 26% stake the stock will become a re rating story.

Coming back to cash segment, we have spotted Stelco a C R co with lot of great potential and grossly undervalued stock where we have taken stake in the co. As per our traditions we have initiated a simultaneous buy call on the stock. With top line of Rs 200 crs the cmc of Rs 50 crs is just below anybody’s imagination. We know certain FII are looking to take stake in this co but their problem is low market cap which means very soon it could cross Rs 100 crs market cap where FII could enter in this stock. We are also covering this stock in our INST research. However whether to invest overboard or not is your call since we have vested interest in the stock.

Keep close watch on the volumes which will rise every day and also keep watch on delivery marked which will give an indication of accumulation.

"It is the formidable character of the species to routinely seek the improbable, the difficult, even the impossible, as a source of pleasure and self-justification. Who would try to write poems, or novels, or paint pictures unless he is an optimist?"

Nifty falls below 6,000; Sensex below 20,000

The market slumped in early trade with barometer index BSE Sensex falling below 20,000 mark on weak global markets. The S&P CNX Nifty fell below 6,000. Capital goods and power stocks declined. FMCG stocks edged higher. Reliance Industries declined. Market breadth was strong. Asian markets which opens before Indian markets were trading lower today. US stocks slumped on Friday, 14 December 2007, on concerns that surging inflation may prevent the Federal Reserve from lowering interest rates.

At 10:24 IST, the 30-share BSE Sensex was down 230.49 points or 1.15% to 19,808.52. It hit a low of 19,774.12 so far during the day. At day’s low Sensex lost 256.71 points.

The S&P CNX Nifty declined 103.1 points or 1.7% to 5,944.60.

Market breadth was strong. On BSE, 1,811 stocks advanced, 806 stocks declined and 45 stocks remained unchanged. 26 out of 30 stocks from the Sensex pack declined.

BSE Mid-Cap index rose 0.18% to 9,488.73. It hit all time high of 9,541.03 today. BSE Small-Cap index rose 1.29% to 12,353.42 . It hit a all time high of 12,402.86 today.

India’s largest private sector firm by market capitalization & oil refiner Reliance Industries declined 0.87% to Rs 2,864.

Capital goods stocks declined. Larsen & Toubro (L&T) (down 0.7% to Rs 4,144.85), Bharat Heavy Electricals (down 1.34% to Rs 2,527) and Suzlon Energy (down 3.25% to Rs 1,895) edged lower.

Power stocks declined. Reliance Energy (down 0.65% to Rs 1,896), NTPC (down 1.58% to Rs 242.70) and Power Grid corporation (down 1.82% to Rs 1,43) edged lower.

FMCG majors rose. ITC (up 1.5% to Rs 203.60) and Hindustan Unilever (down 0.25% to 218) edged higher.

Realty stocks declined. Ansal Properties & Infrastructure (down 1.82% to Rs 376.90), Peninsula Land (down 4.44% to Rs 141.05) , DLF (down 0.9% to Rs 1,012), Indiabulls Real Estate (down 2.42% to Rs 722.50) edged lower.

Asian markets were trading lower today, 14 December 2007. Hong Kong's Hang Seng (down 2.6% at 26,846.25), Taiwan's Taiwan Weighted (down 2.28% at 7,932.78), Singapore's Straits Times (down 1.76% at 3,405.43), Shanghai Composite (down 1.79% to 4,918.50), Japan's Nikkei (down 0.97% to 15,363.25), South Korea's Seoul Composite (down 1.67% at 1,863.96) declined.

US stocks swooned on Friday, 14 December 2007, on concerns that surging inflation may prevent the Federal Reserve from lowering interest rates enough to pull the economy out of the grip of a housing and credit crisis. The three major indexes tumbled more than 1% each, and posted their worst week since 11 November 2007, after a report showing a jump in the consumer price index in November 2007.

Meanwhile, the advance tax figures, which will available this week, would trigger expectations regarding corporate performance of India Inc. in Q3 December 2007.

Bharatiya Janata Party (BJP) is poised to retain power in Gujarat but with a reduced majority losing some ground in Sunday (16 December 2007)'s second and final phase of polls in northern and central parts which was worst hit by 2002 communal riots, according to exit polls by four TV channels.

As per provisional data, FIIs sold shares worth a net Rs 647.10 crore on Friday, 14 December 2007. Domestic institutional investors bought shares worth a net Rs 105.18 crore on that day.

FIIs were net sellers of index futures worth Rs 1359.88 crore on Friday. They were net sellers to the tune of Rs 50.63 crore in index options on that day. FIIs net sold stock futures to the tune of Rs 785.05 crore. They net sold individual stock options to the tune of Rs 10.71 crore.

The 30-share BSE Sensex declined 73.56 points or 0.37% to 20,030.83 on Friday. The S&P CNX Nifty declined 10.4 points or 0.17% to 6,047.70 on that day.

SBI, UTI Mutual Funds to manage post office insurance funds

http://www.livemint.com/2007/12/13162756/SBI-UTI-MFs-to-manage-post-of.html

New Delhi: Government has appointed PSU mutual funds UTI MF and SBI MF as managers of the corpus lying with postal and rural life insurance entities, a move that could lead to investment of the sum into the booming capital market.

The decision to appoint the fund managers for Post Office Life Insurance Fund (POLIF) and Rural Post Office Life Insurance Fund (RPOLIF) was taken by the Union Cabinet at its meeting here.

P Chidambaram, finance minister, said that the PSU fund managers are expected “to follow safe and conservative investment policies” for the money raised largely from rural areas. When asked if the postal money would find its way to the stock market, Chidambaram said it was up to the fund managers to decide.

POLIF has a corpus of Rs8,934 crore, while in case of RPOLIF the sum stands at Rs1,625 crore as on March 2006.

“Much of this money has already been invested, but the MFs will manage the accumulated funds,” he added.

Chidambaram said the scheme has been formulated on the lines of the National Investment Fund -- a disinvestment corpus, which has been entrusted to three PSU managers.

Key News

SBI craving for prospective partners in general insurance
The State Bank of India (SBI) is craving for prospective partners for its general insurance foray to pay Rs 3 billion to Rs 3.5 billion as entry premium.

If a foreign partner pays more premium in the lucrative life insurance business of Rs 2.2 billion, then the premium is considered to be extremely high.

Moreover, entry premiums have been high due to the distribution strength of Indian partners. For every Rs 10 a share, the foreign promoter has paid a (entry) premium of Rs 22.

It is learnt that SBI seeks to claim more premium, as it has the capability to provide the kind of reach it can offer that no other entity can offer.

The growing pace of insurance sector has increased the expectations of getting higher entry premium. This is the result of rising valuations of insurance businesses. The total annual premium of general insurance companies has doubled to Rs 250 billion in 2006-07, from Rs 100 billion in 2000-01.

Credit offtake in 2008 to be slower than 2007: IDBI
CMD, IDBI, in an interview, said that credit offtake in 2008 will be slower than in 2007. He added that CASA is currently at 27% and CAR is at 14.01%. According to him, IDBI will continue to hold investments and not sell any.
REL gets board nod for FCCB issue
Reliance Energy Ltd has said that pursuant to conversion of the earlier series of outstanding FCCBs.
The board of Reliance Energy Ltd passed an enabling resolution approving in principle the issuance of Foreign Currency Convertible Bonds (FCCBs) in the international market, for an amount not exceeding Rs 5,000 crore, in such tranches and at such times, as may be decided by the board from time to time, subject to relevant guidelines and approvals.

Networth placement

Networth Stock Broking Ltd has informed that an Extra Ordinary General Meeting (EGM) of the members of the Company will be held on January 04, 2008, inter alia, to transact the following business:

1. To increase the Authorized Share Capital of the Company from Rs 12,50,00,000 (Rupees Twelve Crores Fifty Lakh) divided into 1,00,00,000 (One Crore) Equity shares of Rs 10/- (Rupees Ten) each and 2,50,000 (Two Lac Fifty Thousand) Cumulative Redeemable 6% Preference shares of Rs 100/- (Rupees One Hundred) to Rs 17,50,00,000/- (Rupees Seventeen Crores Fifty Lakhs) divided into 1,50,00,000 (One Crore Fifty Lakhs) Equity shares of Rs 10/- (Rupees Ten) each and 2,50,000 (Two Lac Fifty Thousand) Cumulative Redeemable 6% Preference shares of Rs 100/- (Rupees One Hundred) by creating additional 50,00,000 Equity shares of Rs 10/- (Rupees Ten) each ranking pari passu with the existing equity shares in all respects, such as, voting rights, dividend rights etc & consequential amendments in the Memorandum & Articles of Association of the Company.

2. To offer, issue and allot In one or more lot(s) on preferential basis, not exceeding 26,35,140 (Twenty Six Lakhs Thirty Five Thousand one hundred and forty) Equity Shares of the face value of Rs 10/- each for cash at a price to be determined in accordance with the SEBI Guidelines on Preferential Issues, at a price of Rs 131.40/- (Rupees One Hundred and Thirty one and forty paise only) per share to the following person acting individually:

a. Mavi Investment Fund Ltd (FII - MM Warburg (Schweiz) AG): 5,27,000 no of shares
b. Peninsular South Asia Investment Company Ltd - South Asia Access Fund: 5,27,000 no of shares
c. DSP HMK Holdings Pvt Ltd: 5,27,000 no of shares
d. Stewart Investment & Financial Pvt Ltd: 2,63,535 no of shares
e. Mackertich Consultancy Services Pvt Ltd: 2,63,535 no of shares
f. Pinnacle Trades & Investments Ltd: 2,63,535 no of shares
g. Geeta Holdings & Consultants Pvt Ltd: 2,63,535 no of shares

3. To create offer, issue and allot on a preferential basis in one or more tranches up to 11,54,000 Share Warrants carrying an entitlement to subscribe to an equivalent number of Equity Shares of Rs 10/- each for cash at a price to be determined in accordance with the SEBI Guidelines on Preferential Issues, at a price of Rs 131.40 (Rupees One Hundred and Thirty one and forty paise only) per share to the following persons:
a. Mavi Investment Fund Ltd (FII - MM Warburg (Schweiz) AG): 5,75,000 no of warrants
b. Vincent Commercial Company Ltd: 4,00,000 no of warrants
c. Sudha Commercial Company Ltd: 1,00,000 no of warrants
d. Kishor Shah: 54,000 no of warrants
e. Santosh Dadeech: 25,000 no of warrants

4. To revise the remuneration payable to Mr. Girish Dev, Executive Director & CEO of the Company w.e.f. April 01, 2007, on terms & conditions.