Kalpataru plans $110 mn share sale

Indian power equipment maker Kalpataru Power Transmission plans to raise up to $110 million by selling shares to institutions, four sources with direct knowledge of the plan said on Thursday. The company plans to offer shares at Rs1,074.20 per shares, 1.2% lower than Thursday’s close of Rs1,086.70, said two of the sources, who did not wish to be named as they were not authorised to speak to the media. The company plans to raise $80 million, with potential upside for another $30 million. IDFC Capital, Morgan Stanley, Nomura and Collins Stewart Inga are arrangers for the sale, the sources said. Kalpataru, based in Gujarat, is one of the largest makers of transmission line towers in India, and competes for contracts in India as well as the west Asia and Africa with firms such as KEC International and Larsen & Toubro. Earlier this year, its board had approved raising up to $125 million through a sale of shares. The proceeds are to be used for long-term investment in projects and expansion of manufacturing capacity. India faces a peak hour power shortage of 12%, and firms operating in the sector have queued up to raise funds as Asia’s third-largest economy struggles to expand generation and transmission capacity to satisfy the rising demand of a high-growth economy. Since July last year, Adani Power, NHPC, Indiabulls Power and JSW Energy have together raised about $2.4 billion through public offers, capitalising on investor interest in the sector and a booming stock market. Earlier this month, Singapore state investor Temasek Holdings agreed to invest $200 million in the power business of GMR Infrastructure.

Biocon builds ground for growth in FY11

Biocon Ltd’s biopharmaceutical business did well during the March quarter, with sales rising by 46%, but contract research income grew by only 9%, pulling down overall growth to 41%. Contract research income growth is expected to improve in fiscal 2011, as a key contract is expected to see a ramp-up of operations. Though overall sales growth was still healthy, a 43% increase in material costs, and higher expenditure on power, employees and research contributed to lower profitability. Biocon’s operating profit margin declined by over a percentage point as a result. The company sees material costs being influenced by the rupee-dollar exchange rate and the product mix. In its insulin business while growth was at 11%, during fiscal 2011 the company will be expanding to newer markets. Sales of immunosuppressants grew by 28% and will continue to drive growth in the current year as well. In statins, Biocon expects atorvastatin sales to contribute to growth in the current fiscal. Its German acquisition AxiCorp GmbH is doing well. On the contract research front, licensing income has become a key component of profits, with the December and March quarters seeing credits of Rs18 crore and Rs21 crore, respectively. Biocon’s profit before tax and exceptional items rose by 35% to Rs99 crore in the March quarter. A good year of performance saw its net worth increase and debt-to-equity ratio fall to 30% from 35%. There has been a sharp improvement in its cash balance, to Rs140 crore from Rs12 crore. This will come handy as the company has outlined a sizeable capital expenditure of Rs250 crore for fiscal 2011, compared with Rs80 crore in the previous year. It also plans to spend around Rs200 crore on research and development (gross basis), compared with Rs125 crore. Part of its research expenses are shared with its partners. At the same time, Biocon’s licensing revenue is rising. A ramp-up of its contract research business, growing portfolio of products and widening geographical presence in emerging markets should contribute to higher growth too. Biocon is also seeking partnerships for its research programmes and if it succeeds, upfront payments will give a boost to its performance too. The outlook for 2011 looks good, contingent on its plans playing out as expected.

Fund managers plan to buy more stocks: poll

Domestic money managers plan to further increase their exposure to equities in the next three months, with financials and capital goods topping their list of sector picks, a Reuters poll showed.All nine respondents to the Reuters Asset Allocation Poll conducted between 20 April and 29 April said Indian equities are fairly valued at current levels, while five said they would buy stocks and reduce their cash holdings“The liquidity situation is pretty good and the FII flow continues to remain robust,” said Jayesh Shroff, fund manager at SBI Mutual Fund.“The second call I’m taking is that monsoon will be normal. With normal monsoon, economy can see a significant pick-up.”The benchmark index climbed above 18,000 points earlier this month, for first time since Feb 2008, largely on foreign fund buying, although recent global worries on Greece and fear of a contagion have eaten into some of the gains.Foreign funds have invested a net of $6.3 billion in Indian stocks in 2010, after pumping in a record $17.5 billion in 2009.Global factors have “more of a sentimental impact on India rather than fundamental,” said Sanjay Sinha, chief executive at L&T Mutual Fund. Five of the nine fund managers see the stock market rising further in the next three months, with two of them predicting gains in excess of 5%. However, two respondents see the Indian market falling more than 5%.None of the respondents plan to increase their exposure to small-cap stocks, but five managers said they would increase mid-cap holdings while four favour raising their bets on large-caps in their portfolios.Financials, capital goods favourite .Financial services, the top bet of fund managers since August 2008, will continue to be on the radar, with seven out of nine managers looking at increasing their investments as two of the top three banks have announced forecast-beating earnings. “The results that have come out from especially private sector banks so far have shown that the concern on asset quality is not as much translating into actual NPAs as it was feared to be,” Shroff said.Bank credit in India grew an annual 17.05% in early April, according to the Reserve Bank’s provisional data, and analysts expect loan demand to pick up further in the first half of 2010-11.Indian banks trade at 12 times their one year-forward price to earnings ratio, according to data from Thomson Reuters StarMine which accords a higher weightage to analysts with a better track record of predicting earnings.That compares with 14.7 times for local shares. Engineering and construction stocks will also be favoured by managers, as the 11th five-year plan backlog would accelerate spending in these sectors, experts said.Six fund managers said they would increase their bets in engineering and five said they will look at investing more in construction companies.Money managers may also eye technology stocks in the next three months, the poll showed, with five of the nine respondents looking at increasing their exposure to the sector.Leading IT firms like Tata Consultancy Services beat profit estimates, whereas Infosys met profit forecasts when they declared their quarterly earnings earlier this month.Some bond funds may increase their portfolio maturity in the next three months, while balanced funds would look at reducing their cash exposure, the poll showed.

Steel prices may fall sharply: Official Friday, April 30, 2010

Steel prices are likely to decline in the coming months due to a reversal of the same factors that led to a sharp surge in recent months, the head of the Ministry of Steel's Economic Research Unit has said. Chief Economist, Joint Plant Committee, A S Firoz said, "Steel prices have perhaps reached their peak. I see potential weakening of the same, especially for long products, from now on." "I expect prices of HR coils to fall from the current level of $750 per tonne to about $600 to $650 per tonne by November or December, 2010," he said yesterday. Explaining the rationale for his forecast, Firoz said, "What one observes currently is a reversal of the factors that led to a surge in steel prices. For example, inventory liquidation over the coming period will replace rebuilding of stocks so far. "There are new concerns in the global investment scenario also, which may cause a disruption in the capital market, especially in the emerging economies, thereby reducing investment confidence," he said. "There has already been some fall in long products prices in the world market, although the prices of flat products have remained unchanged overall for the time being. The prices of steel scrap and sponge iron have also slipped considerably. These are indications of a weakened steel market," Firoz said. However, there are some experts who predict that the direction of steel prices could move even further upward in the coming months. Industry expert and OreTeam.Com director Sachin Sehgal, who has a long association with the steel and iron ore industry, said, "If you look at infrastructure demand from India and China, there are still projects worth $5-10 billion in the pipeline. All these projects will require steel and cement and both will do well." "Prices will continue at a high level and even touch peaks as demand from India and China is very strong. Infrastructure projects will drive demand for steel and if demand is strong, there is no way they (steel prices) will come down," he said. With respect to iron ore prices, Sehgal said they were expected to remain firm in 2010 and would be determined by the actions of the three big players, namely BHP Billiton, Rio Tinto and Vale.

United Phosphorus surges on strong net profit growth in FY10

United Phosphorus is trading 11% higher at Rs 165, after consolidated net profit rose 10% to Rs 530 crore in Q4 FY10, against Rs 483 crore a year ago. Net sales increased by 10% to Rs 5,290 crore (Rs 4,802 crore) during the fiscal. The company had posted marginal 0.4% decline in net profit, despite of 44% jumped in net profit during FY09. On a standalone basis, net profit rose 23% to Rs 181 crore (Rs 148 crore) and net sales by 5% to Rs 2,453 crore (Rs 2,327 crore) during 2009-10. The board has recommended 100% dividend (Rs 2 per share of face value Rs 2 each) for FY10, against 75% (Rs 1.50 per share) total dividend paid for FY09. The stock opened at Rs 149 and touched high of Rs 165. It has seen almost fivefold rise in trading volume with as many as 1.67 million equity shares changing hands in the counter so far on the BSE, as compared to an average 373,000 shares that were traded in last two weeks.

March industrial output seen up around 15% y/y: secy

India's industrial output in March is expected to maintain around 15 percent year-on-year growth, industry secretary R.P. Singh said on Friday. In February, the industrial output grew an annual 15.1 percent.

March industrial output seen up around 15% y/y: secy

India's industrial output in March is expected to maintain around 15 percent year-on-year growth, industry secretary R.P. Singh said on Friday. In February, the industrial output grew an annual 15.1 percent.

The government today said that it plans to come out with the new inflation series, which will give a better reflection of price movements in the count

The government today said that it plans to come out with the new inflation series, which will give a better reflection of price movements in the country, by July. "We plan to bring out the new WPI series in June or July. It will have over 600 items from the current 435 items," R P Singh, Secretary with the Department of Industrial Policy and Promotion (DIPP), told reporters on the sidelines of a function here . He said the whole basket of items would be adjusted, depending on the turnover of commodities and "the trial is on." The wholesale price-based inflation stands at 9.9 per cent in March, but many analysts criticise the compilation of data, saying it includes several items that are no longer in vogue. Earlier, officials had said that items such as type writers and VCRs would be moving out making way for mobile phones and LCD TVs in the new inflation series. The new index, with 2004-05 as the base year, will have 250 new items and is expected to provide a more realistic picture of price rise and its impact on people, officials had said. At present, the base year for wholesale price-based inflation is 1993-94. Most of the new additions would be in the manufacturing products category while primary items, that includes foodgrain and milk, would remain unchanged, officials had said. There could also be minor changes in fuel, power light and lubricant categories, they had added.

Yes Bank shows signs of strong momentum

That Yes Bank Ltd was expected to show excellent results for the March quarter was well known. That’s the reason the Yes Bank scrip went up 12.9% between 19 April and 26 April, far more than the rise in the BSE Bankex over the period. That’s also why, in spite of the good results, the stock came in for a bout of profit-taking on Tuesday, falling 2.1%. In the March quarter, Yes Bank’s profit was up 74.8%, propelled by growth in net interest income of 62.9%, which in turn was a function of a huge 78.9% year-on-year (y-o-y) growth in advances. Nor is it just y-o-y growth—compared with end-December, outstanding advances were up a blistering 18.6%. Deposits were up 21.6% at end-March compared with end-December Margins too were maintained, with the net interest margin edging up a bit from 3.1% in the December quarter to 3.2% in the March quarter, shored up by the capital raised. The cost-to-income ratio was maintained at 36%. And non-interest income growth provided the icing on the cake, growing 68% y-o-y and 25% over the December quarter. Current and savings account (Casa) deposits constitute 10.5% of total deposits, up from 10.1% at end-December. Net non-performing assets were a minuscule 0.06% of net advances. Gross non-performing assets have increased from Rs50 crore at the end of September to Rs54.2 crore at end-December to Rs60.2 crore at end-March, but it’s a mere 0.27% of gross advances. What’s more, restructured advances are now Rs80 crore, compared with Rs134 crore at the end of December. Yes Bank initiated a move away from its dependence on advances to the corporate and institutional banking sector, with the share of this segment shrinking from 72.6% of total advances at end-December to 69.1% by end-March. In the current fiscal, loan growth won’t be quite so high, with a target of 40-45%. The bank has already said it will raise more capital. Costs too are bound to rise as the bank opens new branches and rolls out its retail strategy. At its current price, the bank trades at a price-to-book value of 3 based on its March 2010 book value and 2.3 on the basis of estimates for FY11. While the bank’s Casa needs to improve rapidly, its high return on assets, significant expansion plans and strategy to pursue the next phase of growth should enable it to get even higher valuations.

Tech Mahindra slips 4.3% as AT&T sells 7% stake

The shares of Pune-based Tech Mahindra Ltd slipped 4.34% on the Bombay Stock Exchange on Wednesday as one of its largest clients, AT&T Inc., sold its 7% stake to exit from the software services firm. US telecom company AT&T is believed to have earned about $170 million (Rs758.2 crore) by selling its entire 8.07% holding in the firm, which it acquired in March. About 1% was sold earlier in bits, according to an investment banker with knowledge of the deal, who did not want to be identified. AT&T is Tech Mahindra’s second largest client—after British telecom firm BT Group Plc. Tech Mahindra’s vice-chairman and managing director Vineet Nayyar said the stake sale won’t impact the business from the US firm. The vendor is scheduled to declare its quarterly results on Friday. AT&T also published a statement on its website saying it plans “to continue to work with Tech Mahindra”. In March, AT&T had exercised options to pick up 9.9 million shares, or an 8.07% holding, in Tech Mahindra. The options were offered to SBC Communications Inc.—as AT&T was earlier known—in 2005 as part of a technology outsourcing contract that SBC had given to Tech Mahindra. AT&T sold 4.3 million shares at Rs762.39 a piece on BSE and the same number of shares at Rs762.44 per share on the National Stock Exchange (NSE), according to bulk deals data available on the websites of the two exchanges. Life Insurance Corp. of India picked up 3.76 million shares on the BSE and another 3.6 million shares on NSE at Rs762 each. “With AT&T exiting from Tech Mahindra, AT&T is now free to consider the Indian IT services vendor at par with any other competing vendor,” said Ankur Rudra, IT research analyst at Execution Noble, the UK-based investment bank. “While it is definitely not a positive development, it is yet unclear if the sale has any strategic motives,” said another analyst with a foreign brokerage on condition of anonymity. Tech Mahindra’s promoters, at the end of December, included Mahindra and Mahindra Ltd, which held a 43.99% stake, and British telecom company BT Group, which had a 30.86% stake. Tech Mahindra shares lost 4.34% to closed at Rs770 on BSE. The exchange’s sectoral index for IT stocks fell 1.55% to close at 5,326 points. The benchmark Sensex index closed at 17,380, shedding 1.76%.

Bharti Airtel volumes up, but margins drop

Bharti Airtel Ltd’s results for the March quarter were a mixed bag, with high volume growth being largely offset by a sharp fall in tariffs. The company reported a strong growth in traffic carried on its mobile network. Traffic, measured in minutes of usage, rose 12.8% to 172.8 billion minutes. The incremental usage of 19.6 billion minutes is a record and is more than double the addition of 9.6 billion minutes in the December quarter. On the flip side, however, average revenue per minute of traffic carried fell 9.1% to 47 paise. This is higher than the 7.8% drop in revenue per minute in the December quarter and more than what analysts had estimated. So although the traffic growth came as a pleasant surprise, this was largely offset by the sharper-than-expected drop in tariffs. Revenues of the mobile segment grew 3% after two successive quarters of decline, but margins continued to be under pressure, leading to a 1% drop in operating profit. The net result was that reported profit was almost exactly in line with Street estimates. Bharti’s shares, too, reflected that the results were a neutral event, falling by 1.5%, more or less in line with the broad market. Average revenue per minute has fallen at an average rate of 7% in the past four quarters due to intense competition. There haven’t been any major cuts in tariffs in recent months and it seems like revenue per minute may not fall at such sharp rates in the coming quarters. At the same time, if traffic growth continues to be buoyant, the company may soon return to operating profit growth. It’s now been three successive quarters that operating profit has fallen on a sequential basis. But even assuming that the current mobile business on the 2G platform is stabilizing, the current high bids for 3G (third generation) spectrum are a worry for the company and the sector. The cost for pan-India 3G spectrum is increasing every passing day. At current levels of over $2 billion (Rs8,920 crore), a pan-India bid (which the company is most likely to go for) will hurt its earnings in the near term. Bharti shares have fallen 10% from their highs just prior to the start of the 3G auction process, reflecting the market concerns about the high bids. As far as the Zain Africa acquisition goes, the company told analysts on the earnings call that it plans to give updates once the acquisition formalities are completed. Further clarity on the company’s valuations and its plans to improve profitability of this business would have a role to play in valuations going forward.

Balrampur Chini 2009-10 output up 10%: CFO

Balrampur Chini Mills' 2009/10 sugar output from cane rose 10 per cent but falling prices will put pressure on profitability in coming quarters, a senior company official said on Thursday. The company has produced 487,000 tonnes of sugar for the sugar year-ending in September, compared with 441,000 tonnes a year ago, Chief Financial Officer Kishor Shah told Reuters in a telephonic interview. All mills of Balrampur Chini, which has nine sugar factories in Uttar Pradesh, has stopped crushing due to low availability of cane, he added. "Margins will definitely be under pressure. Cost of production is very high, sugar price is very volatile," he said. Realisation in coming quarters will drop to Rs 30 a kg from Rs 35.86 in Jan-March quarter, he said.

$60 bln Greek debt vanish..

Swiss banks' exposure to Greece dropped to $3.6 billion from $64 billion in the three months to December, and this time it's not wayward Greek statisticians' fault. The whopping, yet mystifying drop in foreign claims on Greek borrowers shows up in the Bank for International Settlements' quarterly banking statistics, 104 pages of endless number columns that chart global banks' international exposures. The most recent data, which are up to date as of December 2009, were published last week. When analysts turned to the file to assess the possible damage of a Greek debt restructuring after Tuesday's S&P ratings downgrade, some were puzzled by the massive change. None of the parties involved in compiling the statistics agreed to go on the record, but several officials confirmed that the change in the Swiss exposure was due to a reclassification of Greek bank EFG Eurobank. The BIS statistics show claims based on the nationality of the lender's "ultimate owner". EFG, Greece's No. 3 bank by assets, is controlled by Greek billionaire Spiros Latsis via a holding company, which until last year was based in Geneva and has since moved to Luxembourg. So it came that EFG's Greek loans were, in the eyes of the BIS statistics, an exposure of a Swiss bank, thus inflating by a factor of 15 a number that at the new level of $3.6 billion reflect better what "real" Swiss banks hold in Greek debt. In Luxembourg, however, EFG's holding company.

Global VC investments into Indian cos double in Q1

Investments by global venture capitalists in Indian companies more than doubled to $259 million during the first quarter of 2010, with business and financial services firms accounting for a major chunk. According to the data by Dow Jones VentureSource, global venture investment in companies across the world rose 13 per cent in January-March period this year. "In India, venture capitalists invested $259 million in 21 deals during the first quarter in 2010, more than double the $113-million put into 13 deals during the same period last year," the report stated. The Indian services industries garnered the most capital, as $108 million was put in business and financial services firms and $102 million was invested in Consumer Services companies, it said. Overall, venture capitalists across the world invested $seven billion in 919 deals for companies based in the US, Europe, Canada, Israel, Mainland China and India in the reviewed quarter. "It appears that the rebound in venture capital investment took hold in 2009. After bottoming out in the first quarter of 2009, most regions around the world are seeing investment gradually picking up," Dow Jones VentureSource global research director Jessica Canning said. Companies based in the US accounted for the majority of deals (65 per cent) and dollars invested (67 per cent) worldwide. Venture investors put $4.7 billion in US firms through 597 deals in the first quarter. In Mainland China, VC investments rose 35 per cent over the same period last year as $579 million went into 45 venture deals during the period. Moreover, the size of venture deals increased in all markets except the US. The median size of a venture capital deal in the US was $4.5 million, down from $five million in the first quarter of 2009. In India, the median deal size spiked from $3.2 million in 2009 to $10.4 million in the reviewed quarter.

$140m QIP to fund non-auto foray: Bharat Forge

Speaking today, the company's Chairman and Managing Director Baba Kalyani said that the investors included a mix of Foreign Institutional Investors and domestic funds. The total equity dilution as a result of this issue will be to the extent of 7%, including warrants, Kalyani said. The company will invest the proceeds for a foray into non-automotive segment and capital goods initiatives. The QIP book, which was subscribed over 5 times, closed on April 22. The issue was a combination of equity, non-convertible debentures, and warrants. Citi, Kotak and Axis Bank were the bankers to the issue.

Govt signs 140 lk tns fertiliser import deals in FY11 so far

The fertiliser companies have contracted to import nearly 140 lakh tonnes of fertiliser since April 1, to meet the domestic demand, the government today informed Lok Sabha. "During the year 2010-11, 68.35 lakh tonnes of DAP, 61.07 lakh tonnes of MOP and 10.23 lakh tonnes of NPK fertilisers have already been contracted," Minister of State for Chemicals and Fertilisers Srikant Kumar Jena told the Lok Sabha in a written reply. As on April 1, the country had an opening stock of 2.21 lakh tonnes of urea, 1.97 lakh tonnes of DAP, 0.97 lakh tonnes of MOP and 1.24 lakh tonnes of complex fertilisers, it added. In a separate reply, the minister said the government has fixed nutrient-based subsidy (NBS) policy, effective April 1, 2010, in such a manner that the maximum retail price fixed by the companies is near to earlier levels. "A marginal increase of Rs 30 per bag only has taken place. In case of MOP, no increase has taken place and in case of SSP there is a reduction of Rs 70 per bag," it added. Under the NBS scheme, the government provides subsidy to manufacturers of potassic and phosphatic fertilisers on the basis of the amount of nutrients contained in them.

Yes Bank shows signs of strong momentum

That Yes Bank Ltd was expected to show excellent results for the March quarter was well known. That’s the reason the Yes Bank scrip went up 12.9% between 19 April and 26 April, far more than the rise in the BSE Bankex over the period. That’s also why, in spite of the good results, the stock came in for a bout of profit-taking on Tuesday, falling 2.1%. In the March quarter, Yes Bank’s profit was up 74.8%, propelled by growth in net interest income of 62.9%, which in turn was a function of a huge 78.9% year-on-year (y-o-y) growth in advances. Nor is it just y-o-y growth—compared with end-December, outstanding advances were up a blistering 18.6%. Deposits were up 21.6% at end-March compared with end-December. Margins too were maintained, with the net interest margin edging up a bit from 3.1% in the December quarter to 3.2% in the March quarter, shored up by the capital raised. The cost-to-income ratio was maintained at 36%. And non-interest income growth provided the icing on the cake, growing 68% y-o-y and 25% over the December quarter. Current and savings account (Casa) deposits constitute 10.5% of total deposits, up from 10.1% at end-December. Net non-performing assets were a minuscule 0.06% of net advances. Gross non-performing assets have increased from Rs50 crore at the end of September to Rs54.2 crore at end-December to Rs60.2 crore at end-March, but it’s a mere 0.27% of gross advances. What’s more, restructured advances are now Rs80 crore, compared with Rs134 crore at the end of December. Yes Bank initiated a move away from its dependence on advances to the corporate and institutional banking sector, with the share of this segment shrinking from 72.6% of total advances at end-December to 69.1% by end-March. In the current fiscal, loan growth won’t be quite so high, with a target of 40-45%. The bank has already said it will raise more capital. Costs too are bound to rise as the bank opens new branches and rolls out its retail strategy. At its current price, the bank trades at a price-to-book value of 3 based on its March 2010 book value and 2.3 on the basis of estimates for FY11. While the bank’s Casa needs to improve rapidly, its high return on assets, significant expansion plans and strategy to pursue the next phase of growth should enable it to get even higher valuations.