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THE ECONOMIC TIMES BANGALORE TUESDAY 9 NOVEMBER 2010

MARKETS

21

ET INDICES

Retail 1377.46 (

ET INDICES Retail 1377.46 ( 4.23 % ) Sugar 20503.45 ( 4.22 % ) Infotech 4959.70

4.23%)

Sugar 20503.45 (

4.22%)

Infotech 4959.70 (

1.50%)

Logistics 22442.52 (

INDICES Retail 1377.46 ( 4.23 % ) Sugar 20503.45 ( 4.22 % ) Infotech 4959.70 (

1.54%)

JAIN IRRIGATION Co has to strike a balancebetween growthanddebt Ramkrishna Kashelkar ET INTELLIGENCE GROUP THE

JAIN IRRIGATION

Co has to strike a balancebetween growthanddebt

Ramkrishna Kashelkar

ET INTELLIGENCE GROUP

THE results for the September 2010 quarter of Jain Irri- gation System (JISL) cheered investor sentiments on Monday as the scrip gained nearly 3% in an overall

weak market. The company reported a 46% jump in its net profit for the quarter, which is traditionally its lean- est quarter, and is now trading at more than 34 times its earnings for last 12 months. The company had revealed losses in its subsidiaries for FY10, which had dampened the scrip’s perform- ance over the past couple of months. The June quarter numbers, although operationally strong, was weak thanks to forex losses. Against this background, the September quarter’s performance provided a much- needed boost to the investor sentiments. Out of JISL’s outstanding loans of Rs 1,941 crore, loans worth Rs 750 crore are in foreign currencies. With currency rates fluctuating, the company has to book a mark-to-market loss or profit on these liabilities, which are notional in nature. These numbers influence the company’s quarterly earnings to a great extent. For example, in the

June quarter, it booked a forex loss of Rs 20 crore, which made its net profit drop below the year-ago level. On the contrary, the strong net profit growth for the Sep- tember quarter was helped by a Rs 21.6 crore forex gain

with the rupee appreciating. Removing the effect of these forex fluctuations, the company’s June quarter results were actually better than the September quarter’s. The company’s operat- ing profit had grown by 31% in the June quarter; in the September quarter it grew by just 15% y-o-y. Never- theless, the net profit at Rs 62 crore made the Septem- ber 2010 quarter the second-best quarter historically for the company after the March 2010 quarter, when it had posted a net profit of Rs 117 crore. The company’s agri-input business continued to do well with a 24% growth in sales and 45% growth in pre- interest-and-tax profits during the September quarter. It was mainly a volume-led growth particularly in the mi- cro-irrigation business, which contributes almost half of the company’s total turnover. As against this, the indus- trial inputs division registered a dip due to discontinua- tion of the polycarbonate sheet business last year. The company plans to achieve over 25% growth at the topline level for FY11. Considering the company is likely to generate two-thirds of its business in the second half of the year, it is expected to meet the target. The company is also spending nearly Rs 400 crore in FY11 to expand its micro-irrigation capacities. As it continues to grow, managing its debtors and the borrowing levels would remain the key challenges before it.

ramkrishna.kashelkar@timesgroup.com

challenges before it. ramkrishna.kashelkar@timesgroup.com GLENMARK PHARMA Betting big on drugforailment related to HIV

GLENMARK PHARMA

Betting big on drugforailment related to HIV

Kiran Kabtta Somvanshi

ET INTELLIGENCE GROUP

THE phase-III trials for Crofelemer for cure of HIV-as- sociated diarrhoea have been completed successfully. And that is good news for Glenmark Pharma, since the drug’s development and commercialisation rights in select markets have been in-licensed by the company. The drug, whose launch in India and the rest of the world is subject to regulatory approvals, is touted to be-

come the first novel drug launched by the company. The company’s announcement came at a time when its stock is trading at almost a two-year high, riding on the wave of a stellar financial performance during the second

quarterendedSeptember2010.Glenmark’sstockgained

4.4% during the day and closed 3.6% up for the day. Crofelemer is a first-in-class anti-diarrhoeal drug. Glenmark’s partners — US-based Napo Pharmaceuti- cals and Salix Pharmaceuticals —have announced the completion of phase-III trials for the drug in the US. Glenmark has in-licensed the developing and market- ing rights to the drug in 140 emerging markets, includ- ing India, for multiple diarrhoea indications. The com- pany also has the exclusive rights to supply the active pharmaceutical in-

gredient for thedrug globally, except Chi- na. Using the clinical studies conducted in the US, Glenmark is looking at seeking approvalforthedrug in India by 2012. It, typically, takes about two years post ap- proval to achieve peak sales of the drug. Glenmark is looking at a peak sales opportunity of about Rs 400 crore across all the 140 mar- kets by 2014-2015. The company, depending on how at- tractivetheresearchfindings are, canextendthelaunch of the drug for treating other kinds of diarrhoea indica- tions like adult diarrhoea, paediatric diarrhoea, etc. This is good news for the company, but investors should be cautioned against bearing too much enthu- siasm too early in the day. The monetary gains of this development will start trickling in only after two years from now. Moreover, achieving the peak sales oppor- tunity is two years away. Investors must keep in mind that benefits from innovative R&D are not low-hang- ing fruits. It involves long gestation and execution risks, too. Though after a series of setbacks and out-licensing deals, Glenmark has finally got a novel drug at the final stage, it is still not advisable to discount all the estimat- ed peak sales from its launch into the present valua- tions of the company – especially when it is the first-of- its-kind launch for the company.

kiran.somvanshi@timesgroup.com

of the company – especially when it is the first-of- its-kind launch for the company. kiran.somvanshi@timesgroup.com

SPECIAL FEATURE

EVERYDAY SCAMS

SPECIAL FEATURE EVERYDAY SCAMS TUE The Fixer WED The Trader THU The Banker FRI

TUE The Fixer WED The Trader THU The Banker FRI The Fund Manager SAT The Equity Seller

Banker FRI The Fund Manager SAT The Equity Seller The Fixer This is the first in

The Fixer

This is the first in a five-part series of tell-all accounts from the daily work of a bunch of diverse players in the stock market. They are hardy veterans of Dalal Street. They know the corners of the market as well as they know its centre. They know how to strike a deal, but not all deals they strike are above board.

a deal, but not all deals they strike are above board. F OR SOMEONE WHO MAKES

F OR SOMEONE WHO MAKES NO BONES about being part of Dalal Street’s dark underbelly, LM is surprisingly well read, English classics being his favourite. Lean and in his forties, he is more than a broker. He is a fixer — a willing conduit be- tween promoters of companies and fund houses, enabling them to do deals that are not on the right side of the law. He also bro- kers trades in the grey market for initial public offerings, and runs a thriving front- running operation on behalf of fund man- agers and dealers who execute trades for their institutional clients. For the uninitiated, front-running is the illegal practice of a broker using informa- tion about a large client’s upcoming trade to profit himself. For instance, the broker can buy shares for himself before executing a client’s buy order or sell shares ahead of his sell order. Sometimes, even the fund man- ager colludes with the broker, giving him advance information. The two share the

spoils. This practice has irked SEBI (Securi- ties and Exchange Board of India) no end. “Front running can never be eliminated, but the authorities can at least curb it if they try hard enough,” says a cocky LM, as he sips his sugarless tea. Over the years, he has figured out ways to fool sophisticated surveillance software and tapped phones in dealing rooms. He re- lies on a simple but elaborate system of cod- ed words. “I can call a dealer on his record- ed line and get a fairly good idea of what he

is up to, even if I don’t have the full details,”

boasts LM. But he won’t say any more on his code or on the people he colludes with, which is only natural given the illegal and clandes- tine nature of his operations. LM drops a hint to show just how preva- lent front running is. “Today, both stock ex- changes have a window for negotiated deals between institutional players. Yet, many institutions prefer to route their ne- gotiateddealsthroughthenormal channel, even though there is the risk of the buyer not getting the entire chunk he has bid for. Bypassing the block deal window helps

front running,” he says. “When a dealer or fund manager tips me about a large deal and the price, I will put in

a bid a few paise over the order (and few

paise below if it is a sell order), and corner a small portion for myself first. The stock

price reacts once the large order becomes public, and that is the time I square off my position for a profit,” LM says. The dealer/fund manager also gets his cut. But, in a block deal, both the buyer’s and the seller’s identities have to be dis- closed.

P romoters are no angels. LM claims to know many promoters who hold more shares (in the companies they

have promoted) than what they have dis- closed to the stock exchanges. These shares are held in benaami accounts. “Promoters are the biggest players in the stock market. Even respected names who often preach corporate governance do this,” he says. Strangely enough, this sin corrupted the system only when shares were demateri- alised way back in the late 90s. “In the days of physical shares, promoters would learn the identity of the buyer or seller only when the shares came to them for transfer. But, today, promoters can immediately find out which fund manager is buying or selling their stock,” he says. “They use this infor- mation to play along using benaami ac- counts.” LM specialises in fixing up such

UNIT TRUST Without trust, none of the Dalal Street’s many illegal trades will be possible
UNIT TRUST
Without trust, none of the
Dalal Street’s many illegal trades
will be possible

promoters withequallycompromisedfund managers. It is never too difficult, greed eas- es the way. Often, promoters sell parts of their undisclosed holdings to such “friendly” fund houses that are looking to buy large chunks of stock. “It is a win-win situation. Had the fund

manager bought the shares directly from the market, the impact of the purchases would have pushed up his average cost. The benefit for the promoter is that he has got the cash, but not lost all influence over the shares he has sold.” And when a “friendly” fund sells a large block of shares, the promoter buys those shares in small tranches through a clutch of investment firms, so that his identity is not

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revealed, says LM. This helps promoters flout the creeping acquisitionnorms, which restricts the quantum of shares they can legallybuythroughopenmarketpurchases. Such promoters have many uses for the shares held in benaami accounts – they can indulge in insider trading without the transactions being traced back to them. It also helps them avoid the disclosures that would otherwise have to be made to the stock exchanges, if they are selling shares in the open market.

L M pulls out his mobile, a worn-out

Nokia E50. He scrolls down the text

messages he has received, finds the

one he is looking for and flashes it. The mes- sage is simple enough – two eight digit fig-

ures, one with a plus sign before it and the other with a minus sign. “I am supposed to receive around Rs 2 crore and pay out

around Rs 1 crore,” he says in a matter-of- fact tone. This is the net result of the illegal grey market pre-IPO deals he had indulged

in last week.

He matches buyers and sellers even be- fore the company has officially allotted shares to the investors after an IPO. “Grey market prices can never be set without the participation of either the issue manager or the promoter,” says LM, who has been ac- tive in the grey market for the past three years. This is why grey market quotes are available even before a company has fi- nalised its IPO price-band, he says. The banker or a company insider calls up

a grey market broker and places a buy or-

der for a small chunk of shares at a rate above the likely issue price. This rate then becomes the benchmark for future trades in the grey market.

On the day of listing, the transaction is “legalised”, by entering the buy and sell or- ders in the trading terminal, and there is no way to prove that it was an off-market transaction to begin with. “All these trades are done purely in good faith, there is no documentary evidence. If somebody goes back on his word, I will have to make good the losses,” he says with

a wry smile. He recounts an incident some years back, when a cartel of buyers refused to ho- nour their commitments, after a high-pro- file IPO tanked on listing. “That disrupted the entire system. Of course, I wasnot theonlyoneaffected. And though the IPO market recovered the fol- lowing year, the grey market picked up only after some months later, as the trust among players was broken,” says LM. And that’s the irony of it – without trust, none of Dalal Street’s many illegal trades will be possible.

Rising cost may pinch JK Cement

Co Reports Rs 21-Cr Net Loss In Sept, But Increasing Demand Gives Room For Optimism

Amriteshwar Mathur

ET INTELLIGENCE GROUP

JK CEMENT, which is focused on northern India and Karnataka markets, has seen some investor interestoverthepastthreemonths,

despitearather lacklustreperform- ance in the September 2010 quar- ter. At Monday’s close of Rs 170.8, the stock has gained nearly 11% during the quarter compared with

a 14.9% rise in the

broader market. And that’s be- cause of expecta- tions of a pick-up in cement demand in the post-monsoon, given strong economic activity in the country and pick-up in housing

demand. In addition, media re- ports indicate that cement prices have risen sharply in several parts

of the country.

For instance, in New Delhi, ce- ment prices are currently at Rs 220 per bag levels, a rise of 15 % from three months earlier, as per esti- mates. Also, in key southern mar- kets, like Bengalaru, prices are at Rs 235 per bag, a rise of 27 % during this period. This in turn should help to bring a turnaround in the com- pany’s performance, going for- ward, and also help it overcome ris- ing input costs, like freight and power & fuel costs. However, ce- ment demand across the country in the first half of current financial year had grown barely 5% year –on – year, consid- erably slower than the growth re- ported during the earlier financial years. The country witnessed near record monsoon in different parts

of the country this year and it ad-

in different parts of the country this year and it ad- versely affected demand from user
in different parts of the country this year and it ad- versely affected demand from user

versely affected demand from user industries, like construction. Meanwhile, during the Septem- ber 10 quarter, JK Cement’s oper- ating profit margin fell by nearly four-fifth compared to a year earli- er to 4.7% in the quarter under re- view. Its net sales alsofell marginal- ly to Rs 434.9 crore in the second quarter. For JK Cement, its realisations

declined an estimated 2.2% year- on-year to Rs 2258 per tonne in the second quarter. Its dispatches had grown marginally year-on-year to 1.92 million tonnes in the quarter. For an all-India player ACC, its re- alisations also declined nearly 13.8% year-on-year on a per tonne basis in the September 10 quarter. Apart from weak realisations, JK Cement also grappled with higher costs, like power & fuel that in- creased nearly 23.4% y-o-y on a per tonne basis to Rs 574 in the sec- ond quarter. The company also re- ported a net loss of Rs 20.8 crore in the September 10 quarter com- pared to a net profit of Rs 65.4 crore a year earlier. Going forward, managing a ris- ing cost structure remains a chal- lenge for the company. At Rs 170.8 per share, JK Cement trades at 12 times on a trailing four-quarter ba- sis, and is rather expensive.

MID-TERM PICKS BROKING HOUSE: Unicon Securities MSP STEEL & POWER BUY MARKET PRICE: ` 68

MID-TERM PICKS

BROKING HOUSE: Unicon Securities

MSP STEEL & POWER

BUY
BUY

MARKET PRICE: ` 68 TARGET PRICE: ` 114

& POWER BUY MARKET PRICE: ` 68 TARGET PRICE: ` 114 MSP IS an integrated steel

MSP IS an integrated steel manufactur- er with a plant at Jamgaon, Raigarh in Chhattisgarh. The company has under- taken a massive phase wise expansion plan with a focus on backward integra- tion to increase its pellet, sponge iron and power capacity by FY12. The target price is Rs 114.MSP IS

SANGAM (INDIA)

BUY
BUY

MARKET PRICE: ` 49.5 TARGET PRICE: ` 62

(INDIA) BUY MARKET PRICE: ` 49.5 TARGET PRICE: ` 62 SIL IS a fully integrated textile

SIL IS a fully integrated textile player with 162,720 spindles of polyester- viscose dyed yarn, 31,200 spindles for cotton yarn, 257 weaving machines and a 31MW thermal power plant. Looking at its expansion plans, improving prod- uct mix and new forays, investors may buy the stock with a target of SIL IS ` 62. `62.

HSIL

BUY
BUY

MARKET PRICE: ` 141 TARGET PRICE: ` 171

` 62. HSIL BUY MARKET PRICE: ` 141 TARGET PRICE: ` 171 HSIL MAY benefit from

HSIL MAY benefit from expansion to capture growth opportunities in both the segments it operates in. Margins may expand on better realisations, sav- ings on fuel cost and higher capacity utilisation. Its wide distribution network, capex plans, among others, give sustainability to the business.HSIL MAY

ESCORTS

BUY
BUY

MARKET PRICE: ` 231 TARGET PRICE: ` 280

ESCORTS BUY MARKET PRICE: ` 231 TARGET PRICE: ` 280 WE BELIEVE new launches across the

WE BELIEVE new launches across the value chain will increase volumes, going forward. We expect overall margins to expand as the new products are in high- er margin segment, such as the railway segment which commands ~25% EBIT margin. At the CMP, the stock trades at 11x as per FY12 earnings estimate.WE BELIEVE

IDBI BANK

BUY
BUY

MARKET PRICE: ` 195 TARGET PRICE: ` 242

IDBI BANK BUY MARKET PRICE: ` 195 TARGET PRICE: ` 242 IDBI’S THRUST on improving NIMs,

IDBI’S THRUST on improving NIMs, CASA ratio, core operating income, return ratios will help IDBI emerge as one of the fastest growing Indian banks. IDBI delivered strong second quarter results. The stock is available at P/BV of 1x of FY12E, valuing IDBI’s business at 1.4x FY12E P/BV.IDBI’S THRUST

DISCLAIMER: The views expressed in these pages are from brokerages, analysts and fund managers. Readers should seek professional investment advice before acting on any recommendation. ET does not associate itself with the choices. Check out the ET Code of Ethics at www.economictimes.com

IN A NUTSHELL

Govt plans divestment in IOC, SAIL and ONGC in Q1 next year

MUMBAI: The government is likely to dilute its stake in Indian Oil Corporation (IOC), Steel Authority of India (SAIL) and ONGC in the January-March quarter of 2011, a top government official said here. “We are looking at divestment in Indian Oil Corporation, Steel Authority of India and ONGC in the first quarter of 2011,” disinvestment secretary Sumit Bose told reporters. He, however, declined to comment on

the amount that the government is likely to raise from the three issues. “We can’t do the valuation right now,” Bose said, when asked about the amount that could be mopped up from disinvestment in SAIL, IOC and ONGC. Bose also said that the divestment target of Rs 40,000 crore will be achieved this fiscal. “We are raising Rs 40,000 crore through divestment this fiscal. We are now planning to disinvest stake in Shipping Corporation of India (SCI), Manganese Ore (India) and Hindustan Copper in the current fiscal year,” Bose said. Aiming to raise Rs 40,000 crore through disinvestment in the current fiscal, the government has diluted its stake in Satluj Jal Vidyut Nigam, Coal India and Engineers India Ltd. Besides, PowerGrid Corporation’s follow-on offer to raise about Rs 8,000 crore opens on Tuesday, when the Centre would disinvest 10% of its 86.36% stake and the company would raise equal percentage of fresh equity. Last fiscal, it had raised Rs 25,000 crore through stake sale in Oil India, NMDC, REC and NTPC.

Power Grid Corporation’s follow-on public offer from today

NEW DELHI: State-run PowerGrid Corporation’s follow-on offer to raise about Rs 8,000 crore opens on Tuesday, when the Centre would disinvest 10% of its 86.36% stake and the company would raise equal percentage of fresh equity. This is part of the government’s disinvestment target of Rs 40,000 crore for the current financial year. PowerGrid would be the fourth company after Satluj Jal Vidyut Nigam, Coal India and Engineers India where the central government would disinvest part of its holding. The price band for the PowerGrid FPO was fixed between Rs 85 and Rs 90 on November 7 by a group of ministers. The capital raised from the FPO will be used for part funding the PSU’s Rs 55,000 crore capex plan, with investments worth Rs 30,900 crore lined up over the next two years. The offer comprises over 84 crore (84,17,68,246) equity shares of Rs 10 each, constituting 20% of the existing paid-up capital of the company. The Cabinet Committee on Economic Affairs gave the nod for PowerGrid’s follow-on public offer (FPO) on July 22. The PSU has already tied up for 86% of the funds required for its capex plan and the remaining amount will be raised through the follow-on public offer and bonds issues. The company aims to augment transmission capacity to 23,400 MW in the current fiscal from 19,800 MW at present. PowerGrid had hit the capital market with its maiden public offer in October 2007. Shares of the company closed at Rs 98.35, down 3.58%, on the BSE.

market with its maiden public offer in October 2007. Shares of the company closed at Rs
THE ECONOMIC TIMES BANGALORE WEDNESDAY 10 NOVEMBER 2010 MARKETS 13 ET INDICES FMCG 6362.00 (
THE ECONOMIC TIMES BANGALORE WEDNESDAY 10 NOVEMBER 2010 MARKETS 13 ET INDICES FMCG 6362.00 (

THE ECONOMIC TIMES BANGALORE WEDNESDAY 10 NOVEMBER 2010

MARKETS

13

ET INDICES

FMCG 6362.00 (

ET INDICES FMCG 6362.00 ( 2.19 % ) Realty 5993.53 ( 1.56 % ) Retail 1369.43

2.19%)

Realty 5993.53 (

1.56%)

Retail 1369.43 (

0.58%)

NBFC 27342.42 (

ET INDICES FMCG 6362.00 ( 2.19 % ) Realty 5993.53 ( 1.56 % ) Retail 1369.43

0.62%)

1369.43 ( 0.58 % ) NBFC 27342.42 ( 0.62 % ) EVERYDAY SCAMS TUE The Fixer

EVERYDAY SCAMS

0.58 % ) NBFC 27342.42 ( 0.62 % ) EVERYDAY SCAMS TUE The Fixer WED The

TUE The Fixer WED The Trader THU The Banker FRI The Fund Manager SAT The Equity Seller

Banker FRI The Fund Manager SAT The Equity Seller TheTrader This is the second in a

TheTrader

This is the second in a five-part series of tell-all accounts from the daily work of a bunch of diverse players in the stock market. They are hardy veterans of Dalal Street. They know the corners of the market as well as they know its centre. They know how to strike a deal, but not all deals they strike are above board, writes Santosh Nair

W

ITH his bespectacled, boyish appearance, SK could easily pass off as a junior investment

banker. Share prices and fitness are a passion with this stock and currency trader, who is in his late-30s. SK is no rookie. He keeps a low profile, but he has built up sizeable positions and honed

a razor-sharp instinct on which way the market

will move. ‘Market operator’ is what his peers call him; he would rather be known as a trader and an investor. He believes there is a clear difference in the two roles. “An operator is the engine of a trade; his action determines prices. He loads up on a

stock, then goes about talking up the price and convincing fund managers to buy some shares off him. I buy a stock if I think it is genuinely un- dervalued, and then wait for the market to assign

it the right value.” According to brokers, SK is

among the handful of big traders who managed to call the market crash in 2008 correctly. And if

his peers are to be believed, SK made an “ob- scene” profit as the market hurtled downhill.

I nformation is SK’s key ally. Comfortably en-

sconced in his plush suburban Mumbai office,

he carefully absorbs every byte that comes his

way. On one arm of an L-shaped glass-top table, two screens are mounted on two more, feeding him with financial and political news from key world markets. Adjacent to these are two termi- nals into which SK punches his trades. On the far side of the room is a massive plasma television screenbeamingabusinesschannel. “A golden lesson I learned as a young trader was: never be the engine of a trade, always be a bogie. That way the impact is much less in the event of a collision,” says SK. But so too are the profits. “That is fine,” he says. “But survival to me is more important. More traders are wiped out by over-confidence, rather thanbadmarkets.Opportunitiescomeknocking now and then; but you have to be around to seize them,” says SK, even as his eyes constantly scan thenewsandtradingterminals. SK knows what survival means — he’s built an empire from scratch, a source of inspiration to scores of day traders who hope to make it big. He started his career on Dalal Street in Decem- ber 1991 with a retail brokerage at a salary of `2,500 a month, pitching stock ideas to clients. SK moved on to a slightly bigger broking outfit four years later, and was in charge of servicing high net worth individuals and domestic institutions. “I recommended Visual Software to my clients when the stock was languishing at `30. It went on touch `10,000 a few years later,” says SK. He, too,boughtsomesharesandmadeaprofit.

S K’s stock ideas and his passion for work im- pressed one of his high net worth clients, who would later turn out to be his mentor.

This client persuaded SK to buy a membership on the BSE in 1998, when the market was going through a downturn. “I paid `1 crore for the BSE card, and invested nearly 90% of my savings. But in hindsight, it was a good investment,” he says. SK says he made a “decent” profit during the

ARINDAM
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technology bull-run in 1999-2000. “I got most of my calls right, and managed to retain most of my profits when the market crashed. But, I lost a

good chunk of it when I tried to deploy it in un- listed companies, which appeared to be blue chips in the making at that time,” says SK. The market has been on a tear for a few weeks, but SK says it has been more beneficial for in- vestors than traders. “Traders have not benefited to the extent that prices seem to suggest. The movements have been too

sudden for them to be able to profit. But those having a portfoliocontainingdecent mid-capstockshavehitthe jackpot,”saysSK. He’s clear about what

makesagoodtrader.“Disci-

pline, as much as skill. As a rule, I square off my out- standing positions if they show a loss of 1% at the end of the day,” he says. His principle is that if he is going long on a stock, it should not have fallen more than

1% that day, and if he has short sold, the stock price should not be 1% above his selling price that day. He says he has lost whenever he has strayed from this strategy. And true to his philosophy of being a bogie, SK waits for clear signs of a trend reversal before in- creasing the size of his positions. “I may think that the market is overvalued at 20,000, or that it is undervalued at 8,000, and my assumption may be right. But I do not want to be the first person to

call it. Unless the market actually reverses, I will not scale up my bets,” he says. But the fact that he made a killing when the market crashed in 2008 doesn’t quite fit in with the wait-and-watch theory. Clearly, the instinct — and his network — does come to his rescue at times. He explains how: “The market had already begun to reverse, but for some reason, even the best of players — be they operators or fund man- agers — chose to ignore them.” For SK, the trigger was

the Reliance Power IPO. He ran a check with lead- ing financiers and his friends at large retail bro- kerages. It emerged that many high net worth clients had borrowed heavily to invest in the IPO, and most retail in- vestors had liquidated their other holdings to subscribe to the share is- sue. Thus, a huge chunk

of retail money was locked up in the issue. “If institutional investors were to start selling, there was little retail liquidi- ty to hold the market up. I took a calculated bet and increased my short positions,” he says. Only four other large traders took a similar bearish view on the market, he says.

RIGHT TRACK “Never be the engine of a trade,always be a bogie. That way,the impact
RIGHT TRACK “Never be the engine of a trade,always be a bogie. That way,the impact

RIGHT TRACK

“Never be the engine of a trade,always be a bogie. That way,the impact is much less in the event of a collision.”

way,the impact is much less in the event of a collision.” S taying two steps ahead

S taying two steps ahead of the pack always helps. But being an “insider” can give a trader the extra edge, too. On this, SK keeps

a safe margin. “When your positions grow to a

certain size, information comes looking for you.

A lot more players are willing to talk to you than

they would otherwise.” And then, he throws the question back: “What exactly do you define as inside information?” Well, there’s a little buzz doing the rounds of Dalal Street. On how operators and big traders have “friends” among dealers at foreign broking houses and among fund managers, who tip

them off on what they are buying or selling. SK steers clear of it all. “The days when one could profit by front running client orders at a large broking house are long gone. The market has become too big. Unless one knows all the large orders at all the foreign broking firms, an operator is more likely to lose money by front running, rather than make it. Even otherwise, it

is the promoters who are the biggest operators

today, and nobody can touch them,” says SK.

Front running is the illegal practice of a broker trading in a stock in his own account based on the information of what his client is going to do. For instance, the broker can buy shares for him- self before executing a client’s buy order or sell shares before a sell order. SK is known to be well connected with traders

at foreign broking houses. But, to him, it’s a sim-

ple deal, involving an exchange of information. “Market information always helps. I never ask them specifically what they are buying or selling. But I would like to know if they are broadly net buyers or net sellers. That helps me form my view on the market. Besides, if they want my views and my market information, they better give me some information as well,” he says.

MID-TERM PICKS BROKING HOUSE: SMC Global JMC PROJECTS (INDIA) BUY MARKET PRICE: ` 208 TARGET

MID-TERM PICKS

BROKING HOUSE: SMC Global

JMC PROJECTS (INDIA)

BUY
BUY

MARKET PRICE: ` 208 TARGET PRICE: ` 227

(INDIA) BUY MARKET PRICE: ` 208 TARGET PRICE: ` 227 JMC OPERATES in varied segments such

JMC OPERATES in varied segments such as roads, power, industrial and housing constructions. A healthy order- book, tie-ups with bigger companies for better projects, repeat orders from clients, kick-off into build-own-operate projects are other factors that boost the prospects of this company.JMC OPERATES

IL&FS TRANSPORTATION

BUY
BUY

MARKET PRICE: ` 322 TARGET PRICE: ` 340

BUY MARKET PRICE: ` 322 TARGET PRICE: ` 340 The company has a pan-India presence in

The company has a pan-India presence in the BOT road sector with interests in a diverse project portfolio consisting of 22 road projects of about 12,000-lane kilo- metres. It also has international presence through the acquisition of its subsidiary, Elsamex, which is into opera- tional and maintenance services.The company

GODREJ INDUSTRIES

BUY
BUY

MARKET PRICE: ` 229 TARGET PRICE: ` 250

INDUSTRIES BUY MARKET PRICE: ` 229 TARGET PRICE: ` 250 Company’s Q2 & H1 FY 2011

Company’s Q2 & H1 FY 2011 perform- ance has been encouraging. It intends to double the gourmet retail outlets, Nature’s Basket, to 20 by March 2011. The company’s products are exported to around 40 countries, and it leads the Indian market in the production of fatty acids, fatty alcohols and AOS.Company’s Q2

WELSPUN INDIA

BUY
BUY

MARKET PRICE: ` 73 TARGET PRICE: ` 81

WELSPUN INDIA BUY MARKET PRICE: ` 73 TARGET PRICE: ` 81 The company has strategically located

The company has strategically located integrated manufacturing facilities in Anjar and Vapi in Gujarat. WIL plans to spend The company ` 3 billion in FY11 to enhance ca- pacity in towels, bed linen and `3 billion in FY11 to enhance ca- pacity in towels, bed linen and bath rugs. It sell its products in 32 countries and is planning to tap new markets in Japan, Singapore and the Middle East.

NAHAR IND ENTERPRISES

BUY
BUY

MARKET PRICE: ` 96 TARGET PRICE: ` 105

ENTERPRISES BUY MARKET PRICE: ` 96 TARGET PRICE: ` 105 NIEL’s client base is extremely diverse

NIEL’s client base is extremely diverse with no one customer accounting for more than 5% of total revenues. NIEL’s strategic objective is to capitalise on the growth opportunities in the domestic and global textile industry. Company has planned expansions in spinning and weaving capacities.NIEL’s client

DISCLAIMER: The views expressed in these pages are from brokerages, analysts and fund managers. Readers should seek professional investment advice before acting on any recommendation. ET does not associate itself with the choices. Check out the ET Code of Ethics at www.economictimes.com

Auto volume growth to decide Motherson fate

Shikha Sharma

ET INTELLIGENCE GROUP

AUTO ancillary firm Motherson Sumi System (MSSL) posted a ro- bustconsolidatednetprofitgrowth for the quarter ended September 2010 backed by strong perform- ance of its domestic operations. However, its overseas subsidiary, which contributes more than half the consolidated revenue, has im- pacted the overall topline growth due to muted sales growth in the international market. MSSL is a leader in wire-har- nessing products, with 50% share in the domestic market. Its acquisi- tion of Visiocorp’s rear-view mirror business in 2009 catapulted it to the position of the largest global play- er in that segment. The company’s consolidated sales increased 20% to `1,916 crore for the three months to September 2010, mainly due to the over 77% growth in domestic sales, as auto- mobile demand zoomed. Howev- er, itsoverseasarm, whichsupplies rear-view mirror to carmakers, saw only a single-digit growth in revenues due to weak demand in Europe. The region contributes close to half of its sales followed by Asia and USA. The company con- tinued to improve its operating margin for the second straight quarter. Notwithstanding the ris- ing commodity prices, the margin improved by 500 basis points in the September quarter. It has so far been able to control its operating expenses efficiently. The firm also benefited from mod- eration in interest and deprecia- tion cost, which led to net earnings of `85 crore for the quarter ended

September 2010, about six times the net earnings during the same period last year. With October 2010 automobile sales figures showing higher growth due to the festive season, there is reasonable visibility for strong revenue in the coming quarters as well for MSSL. This is already visible in the sequential growth in its topline. It grew by 3% in the September 2010 quarter from the previous quarter’s levels. Going forward, MSSL has plans to invest `400 crore to `500 crore by the end of the current fiscal to expand production capacity for harnessing wire in passenger cars, which could provide an upside for revenue. Further, the company is fo- cusing on growth in capital employed as against main- taining operating margin in the long term. This can result in making every unit profitable, which will also add to the bottomline in the coming quarters. MSSL has matched the rise of ET Auto Ancillary index, with its scrip climbing 9% in the past three months. At the last traded market price of `185, the stock has a P/E of close to 17 on a consolidated basis for the trailing four quarters ended September 2010. This is lower than the industry average of 22 for the auto ancillary sector. The stock has gained over 70% in the past one year, but a similar surge again looks difficult. The earnings growth in the coming quarter will depend on how fast auto volumes pick up in the inter- national market and how well the firm manages the rising cost of pro- duction since commodity prices have once again begun hardening.

since commodity prices have once again begun hardening. WINDOW TO THE WORLD Closely-held firms with undisclosed

WINDOW TO

THE WORLD

Closely-held firms with undisclosed profits are beginning to act more like Wall St banks, looking to fend off tighter rules and appease lawmakers who say the firms put small investors at a disadvantage

High-frequency traders lobby to head off rules

Jesse Westbrook, Robert Schmidt & Frank Bass

WASHINGTON

THE high-frequency trading industry is stepping out of the shadows in Washington. Closely held companies with undisclosed profits and obscure names like Getco LLC, Hard Eight Futures LLC and Quantlab Financial LLC, are beginning to act more like Wall Street banks, cutting checks to politicians, forming trade groups and hiring lobbyists and ex-regulators. They’re looking to fend off tighter rules and ap- pease lawmakers who say the firms disadvan- tage small investors and contribute to wild swings in stock prices. While the companies, which use high-powered computers to execute thousands of trades in milliseconds, aren’t ap- proaching the big banks in Washington spend- ing, they have more than quadrupled their po- litical giving over the last four years, a Bloomberg News analysis shows. The top recip- ients include Eric Cantor, set to become House majority leader, and several incoming senators who won in last week’s Republican rout. “They are under attack as an industry and they are fighting back,” said James Angel, a pro- fessor at Georgetown University’s business school who is on the board of Direct Edge Hold- ings LLC, which operates stock exchanges. In just over a decade, high-frequency trading has evolved from a little-known investment strategy practised by mathematicians to a force that accounts for the majority of US stock trades. The companies, which prefer to be called auto- mated proprietary trading firms, say they bene- fit all investors by keeping markets liquid and transaction fees low. The Securities and Exchange Commission is less certain of the benefits. The agency is consid- eringarequirementthathigh-frequencytraders keep buying and selling shares during periods of stress, instead of just abandoning the market. The SEC is also evaluating whether it should slow down computers that submit and cancel thousands of orders in milliseconds by requiring bids to stand for a minimum amount of time. While regulators may need to address some issues, any rules shouldn’t get in the way of in- novation, said David Hirschmann, president of

the way of in- novation, said David Hirschmann, president of the US Chamber of Commerce’s Center

the US Chamber of Commerce’s Center for Cap-

ital Markets Competitiveness, whose trade group’s members include stock exchanges, fi- nancial firms and public companies. The SEC and members of Congress already were examining the business when the May 6 market plunge temporarily wiped out $862 bil- lion of share value in 20 minutes. Although an investigation by regulators didn’t put direct blame on high-frequency firms, the volatility of stock prices focused more attention in Washing- ton on their operations. “Those with powerful computers are able to use them to their own financial advantage,” Sen- ator Carl Levin, a Michigan Democrat, said on September 28 on the Senate floor. “Those who exploit our markets to the detriment of long- term investors and the real economy will not be able to do so without a battle from the Senate.” In addition to writing proposed rules, the SEC’s enforcement division is investigating whether computer-driven traders have manip- ulated prices. The scrutiny has spurred the in- dustry to seek friends in Washington. Managers

and employees of 21 of the largest computerised

trading firms, including Getco, Allston Trading LLC and Infinium Capital Management LLC gaveabout $490,000for this year’s congression- al elections, compared with just over $100,000 in 2006, according to federal election reports filed through October 15. SEC chairman Mary Schapiro in September 2009 began issuing proposals to curtail market developments that cater to the industry. After the May 6 stock plunge, she went even further by saying the SEC will examine whether it should

restrict a practice by high-frequency firms of can- celling most of the orders they submit. Last January, Representative Cantor of Vir- ginia, the second highest-ranking Republican in the House, sent Schapiro a letter saying her agency’s ideas for regulating fragmented, elec- tronic markets, including a proposal that would prohibit exchanges from giving high-frequency tradersandothermarket participantsasplit-sec- ond peek at stock orders, “appeared ad hoc in nature.”TheSECshould“collectall thefactsand develop coherent and rational policy objectives before adopting any potentially far-reaching rulemaking proposals,” Cantor wrote in the Jan- uary 27 note.

Cantor,whohelpedspearheadhisparty’ssuc-

cessful campaign to win the House back from Democrats, has been among the largest recipi- ents of contributions from the industry, with he and his political action committee taking in $23,000 since last year, records show. Another advocate for electronic trading has beenRepresentativeJebHensarling, aTexas Re- publican who sits on the House Financial Ser- vices Committee. Hensarling and Representa- tive Spencer Bachus, the Alabama Republican in line to become chairman of the financial serv- ices panel, advised Schapiro in an August 24 let- ter to get a better understanding of what caused the crash before “assigning blame to algorithmic or high-frequency trading firms”. Hensarling re- ceived $4,800 last month from Suhas Daftuar and Alexander Morcos, two managing directors of Hudson River Trading LLC, a New York high- frequency trading firm. Hudson River Trading didn’t respond to a request for comment. In June, about two dozen high-frequency trading firms formed a trade association to re-

spond to legislative and regulatory proposals.

Known as the Principal Traders Group, the asso- ciation said it plans to reach out to the media to improve its understanding of electronic trading. The Principal Traders Group is a part of the Futures Industry Association, which advocates on behalf of financial companies in Washington. The unit doesn’t lobby, said Overdahl, a former chief economist at the SEC and Commodity Fu- tures Trading Commission. Still, a number of high-frequency firms, in- cluding members of the Principal Traders Group, have retained former aides to lawmakers to push their interests in Washington. Getco in April 2008 hired the Rich Feuer Group, which represents financial titans such as Goldman Sachs Group Inc and Credit Suisse Group AG. Getco has paid Rich Feuer at least $730,000 in the past two years to lobby Con- gress and the SEC on rules affecting electronic trading and US market structure, according to federal disclosure records. RGM Trading LLC, a high-frequency trader based in Austin, Texas, hired Patton Boggs LLP’s Micah Green this year. Green, who was head of the Bond Market Association, also lobbies on be- half of Quantlab, a computerised trading firm based in Houston. RGM and Quantlab didn’t re- spond to requests for comment. Some companies have also employed former regulators. Getco hired SEC lawyer Elizabeth King in June, adding to a roster of agency alum- ni that includes John McCarthy, the company’s general counsel, and former SEC Chairman Arthur Levitt, who’s a consultant. Cameron Smith, Quantlab’s general counsel, worked at the SEC in the 1990s. Levitt is a board member of Bloomberg LP, the parent company of Bloomberg News. Thehigh-frequencytradingfirms’Washington education is following a well-worn path, travelled by such companies as Microsoft and Google that avoided the political process until they grew too big to escape notice. “Like so many other cutting edge technologies that have run into the media andregulatorywhipsaw, high-frequencytrading firms would be smart to engage in the Washing- ton public policy discussion,” said Israel Klein, a lobbyist at the Podesta Group who represents fi- nancial companies. —Bloomberg

discussion,” said Israel Klein, a lobbyist at the Podesta Group who represents fi- nancial companies. —Bloomberg
THE ECONOMIC TIMES BANGALORE THURSDAY 11 NOVEMBER 2010 MARKETS 13 ET INDICES Shipping 12419 (
THE ECONOMIC TIMES BANGALORE THURSDAY 11 NOVEMBER 2010 MARKETS 13 ET INDICES Shipping 12419 (

THE ECONOMIC TIMES BANGALORE THURSDAY 11 NOVEMBER 2010

MARKETS

13

ET INDICES

Shipping 12419 (

ET INDICES Shipping 12419 ( 3.76 % ) Consumer Dur 14477 ( 3.04 % ) Cement

3.76%)

Consumer Dur 14477 (

3.04%)

Cement 10618 (

1.20%)

Teleserv 1524 (

ET INDICES Shipping 12419 ( 3.76 % ) Consumer Dur 14477 ( 3.04 % ) Cement

1.32%)

TATA MOTORS Smoothdrive abroad,hurdles in home run Amriteshwar Mathur ET INTELLIGENCE GROUP THE stock of

TATA MOTORS

Smoothdrive abroad,hurdles in home run

Amriteshwar Mathur

ET INTELLIGENCE GROUP

THE stock of Tata Motors hit its all-time high of `1,350 during the intra-day trading on Wednesday, in re- sponse to the company’s robust second-quarter per- formance. This, once again, highlights the strong per- formance of the company’s overseas operations, in- cluding those of Jaguar and Land Rover (JLR). A major highlight of its performance was the fact that with business growth, profitability also improved. The company’s consolidated operating margin rose by 770 basis points (bps) to 9.5% (excluding amount cap- italised and other non-core items) compared with a year earlier. Net sales grew by 36.5% to `28,782 crore in the quarter under review. JLR accounts for nearly 56.2% of its consolidated quarterly turnover. The growth momentumfor JLR operations came not

only from a 21% rise in volumes for its models during the quarter, but also fromthe improved realisation per vehi- cle and a better product mix. In addition, a weaker pound against the dollar helped realisations and operating mar- gins. This enabled the company to deal effectively with the gruelling prob- lem of rising metal and allied costs. With this, Tata Motor’s consolidated net profit has reached a normalised propor- tion to sales. It surged nearly 100 times to `2,223 crore in the quarter, given a low- base effect of the pre- viousyear. However, the picture is not that promising on the home front. Tata Motors’ India business is facing cost

pressureamidsttherisinginterestrateregime.Thecom-

pany had hiked prices during the first half of the finan- cialyear,butthatcouldnotprotectitsdomesticmargins, which shrank by 310 bps to 7.7%. The company hiked prices again in October. In addition, the domestic auto fi- nance rates are firming up and that may impact sales vol- ume growth over the next few quarters. Currency fluc- tuations would also play an important role given the in- creasing proportion of the company’s overseas activities. This, in turn, could cause fluctuations in its consolidated margins. On a positive note, demand conditions in the key markets of JLR, like Russia, China and North Ameri- ca, are expected to continue in the short term, given the pick-up in economic activities in these countries. The stock of Tata Motors trades at a P/E of nearly 10.7times its trailing 12-monthconsolidatedearnings. This seems to fully reflect the market’s expectations about the company’s future growth.

market’s expectations about the company’s future growth. BHARTI AIRTEL Co rings in more customers,but notbettervalue

BHARTI AIRTEL

Co rings in more customers,but notbettervalue

Ranjit Shinde and Parul Bhatnagar

ET INTELLIGENCE GROUP

BHARTI Airtel’s September 2010 quarter numbers raise doubts over its ability to add new subscribers to the mobile network. The country’s largest telecom op- erator continued to report decent user additions during the quarter but failed to show any meaningful addition to the minutes of usage on its mobile network. Telecom penetration in India has increased at a phe-

nomenalpaceoverthepastfewquarters.Justfrom49%

a year ago, it now stands at close to 66%, largely fuelled by the entry of new players and the conscious attempt by existing operators to cover remote areas. But minutes of usage have either remained stagnant or fallen in some cases. This may cause some concern since minutes of use reflect how efficiently the network is utilised. For Bharti, minutes of usage remained more or less stagnant at 190.8 billion minutes during the September quarter from the previous quarter though it added 6.7 million new subscribers. According to Bharti’s manage- ment, the second quarter is traditionally a weak quarter giventhetorrentialrainsandotherseasonalfactors.But historicaldatashowsthatthecompany’ssequentialrate of growth in network minutes during the September 2010 quarter was the lowest compared with figures in the corresponding period of the previous two years. This means that additional users may no more bring additional minutes to the network. It needs to be seen whether the trend continues in the coming quarters. Bharti’s second- quarternumbersare not strictly compa- rable with its per- formance in the pre- vious quarter since it has consolidated the full quarter results of its African venture. While this has boosted its topline significantly, its margin profile has eroded given the lower profitability of the African busi- ness. At 23.9%, the African business’s operating mar- gin before depreciation is way below the 35.2% margin of its mobile business in India and South Asia. Bharti has two operational levers to improve the profitability of its African operations. First is network utilisation. Currently, the number of customers per cell site is lower. Bharti has taken initiatives to improve the situation. The second is to improve operational effi- ciency by employing its famous outsourcing model. The company has entered into partnership with IT players, including IBM, Pinnacle and Tech Mahindra, to initiate outsourcing. This may help in offsetting the impact of high labour costs going ahead. So far, Bharti’s stock has not participated in the broader stock market rally. It gained a meagre 2% in the past three months compared with the 14% gains in the benchmark Sensex. The benefits from the 3G launch expected in the next two quarters and a gradual turnaround in its African business are long term in na- ture. In the near term, however, the stock’s movement may be restricted given the lack of any fresh triggers.

in na- ture. In the near term, however, the stock’s movement may be restricted given the
may be restricted given the lack of any fresh triggers. EVERYDAY SCAMS TUE The Fixer WED

EVERYDAY SCAMS

given the lack of any fresh triggers. EVERYDAY SCAMS TUE The Fixer WED The Trader THU

TUE The Fixer WED The Trader THU The Banker FRI The Equity Seller SAT The Fund Manager

Banker FRI The Equity Seller SAT The Fund Manager The Banker This is the third in

The Banker

This is the third in a five-part series of tell-all accounts from the daily work of a bunch of diverse players in the stock market. They are hardy veterans of Dalal Street. They know the corners of the market as well as they know its centre. They know how to strike a deal, but not all deals they strike are above board, writes Santosh Nair

all deals they strike are above board, writes Santosh Nair S J HAS been an investment

S

J HAS been an investment banker for near-

ly 12 years. He started as an analyst at a leading domestic investment-banking house, and after a few job changes, heads

the ECM (equity capital market) division at

a relatively well-known firm. The ECM

team of an investment bank helps compa- nies raise money from the stock market through initial public offerings, follow-on public offerings and private placements. “My job is more about balancing the inter- ests of my colleagues and the client,” says SJ. Here’s how it works. The coverage banker responsible for a particular sector in the firm gets the mandate from a company looking to raise money, and passes on the lead to SJ. “My boys work out the best price at which

the issue can be sold,” says SJ. “The price can- not be too low because the coverage banker has promised the moon to his client. It cannot

be too high because my colleagues in the sales

division will have trouble selling the issue to fund managers. If they push an overpriced is- sue and it bombs, it spoils their relations with thosefundmanagers,”explainsSJ. It is a fiercely competitive business. SJ says there is little to distinguish between the serv- ices offered by the top-10 investment banks when it comes to raising money. “Every in- vestment bank may know a few clients that their rivals don’t, but then a lot depends on market conditions as well,” he says. “No matter how good the bankers, if the market

is unfavourable, a company will have to set-

tle for the price decided by the buyers.”

S J has been working nearly 16 hours

everyday for the past few months as

the stock market is in the throes of a

bull run, and companies are rushing to raise money when the going is good.

Before making a pitch to a prospective client, the ECM head has to tap someone within the line-up of decision makers. It could be the promoter, or some other key

investor on that company’s board. “It helps

if one of them reveals what other bankers

have quoted. We can then rework our deal accordingly,” SJ says. The standard opening gambit of a sales pitch is a bout of rah-rah. “You always say you are number one,” chuckles SJ. “It is an- other matter you use a parameter of your choice. So, you could be the number one capital arranger for a particular sector, or over a certain period, or in a specific role, but you are number one.” Once you get a foot in the door, says SJ, you have to promise the best possible valua- tion to the promoter. But isn’t it risky to promise a price that is hard to deliver on? “Not really,” says SJ. After getting the man- date, it takes two months to prepare the offer document, and 30-45 days for Sebi clear- ance. Then, there are road shows to gauge investor appetite, which takes a fewweeks. That’s enough time to cite a change in mar- ket conditions — and lower the issue price on that pretext. Even companies, exhausted by the efforts of the past few months, are less de- manding. “For them, to appoint a new set of bankers would mean going through the en- tire process all over again,” says SJ. “Most of them are reluctant to do that.”

ARINDAM

As along as the price is not way below

their expectations, promoters usually go along with the revised price. But promoters are a savvy bunch, he adds. “Most promoters

understandthemarketmuchbetterthanin- of it. It just took him a few phone calls.”

vestment banks or broking houses,” says SJ. Theirs is first-hand knowledge, he adds, and

drops a bomb: “You can count the number of mid-cap companies whose promoters don’t dabble in the market on your fingertips.”

vising that company. Everybody thought

the best strategy would be to retreat and re- launch the issue when market conditions improved. The promoter would have none

A large domestic institution and the

treasury of one of the most aggressive pri- vate banks together subscribed nearly the whole issue, he recalls. There was not a sin- gle foreign investor in the qualified institu- tional buyer portion. “The promoter gave his word to the two big buyers that he would hold the price for at least the first few weeks after listing, which he again man- aged, thanks to another set of phone calls. That was something,” he says.

T he biggest bone of contention among

the syndicate members is the distribu-

tion of clients. Every bank tries to

keep the best clients for itself. “When it is

time to decide on the client list, and who will approach whom, a brawl invariably breaks out,” he laughs. “The argument sometimes drags on for an hour or two and it can be amusing to see suave bankers al- most coming to blows.”

It’s settled in an old-fashioned way. Chits

are drawn to decide which bank gets to choose first. The stronger banks usually cor- nerthebestclients,andthesmallerbanksare left with the dregs. At times, there are fights over trivial matters as well. For instance, who gets to speak first at the IPO press brief-

ing. Or, who sits where on the dais. “Yes, that is also a matter of pride,” says SJ. There is no shortage of upmanship among bankers and daggers are always ready.

SJ recalls the issue of a prominent real es-

tate firm in 2008, a few months after the stock market crash. The company had ap- pointed half-a-dozen bankers to sell the is- sue. But two of the investment banks, who had been designated as ‘global book run-

ning lead managers’, insisted they get the top 70% of the clients on the list. “The com- pany should have refused this outrageous demand, but it chose to go with the two banks,” says SJ. “The rest of us were miffed, but there was little we could do. The mo- ment we began sounding out the handful of clients allocated to us, we knew the issue was headed for trouble. There was just no demand because of the expensive valuation and the fragile market sentiment,” he says.

Eventhetwo‘bigboys’hadasimilarexpe-

rience, continues SJ, but they would not ad- mit it. The other four banks decided to take things easy, as they were not managing the show. Also, an issue by a hospital chain had

bombed a few weeks ago. “So we would not be the first to fail.” In the evening conference call to assess demand for the issue, the big boys asked the other four banks on the re- sponse they were getting from clients. “We

knewthebigboyswerenotfindinganybuy-

ers and were afraid to admit that. So, we cor- neredthem,”saysSJ.“Wetoldthemthatour clients are willing to invest, but they would like to know the bids by some of the bigger in- vestors. The big boys had no answer to that. As hard as they tried, we refused to reveal our cards.” The issue fell through. Sometimes friends, sometimes foes, it’s all in a day’s work.

O nce the mandate is bagged, an invest- ment bank tries to convince the pro- moter that it be made the sole lead

manager to the issue, says SJ. Almost all the top investment banks service the same set of institutional clients, with some minor varia- tions. The retail portion of the book is out- sourced to a syndicate of brokers anyway. But the promoter rarely agrees to this con-

dition. After all, he enjoys good relations with other banks as well and may need their support at some time. Then, there are banks that will come asking for a role in the syndi- cate, however small, to improve their posi- tion in the league table. “Usually, the pro- moter obliges, even if he knows it won’t make much of a difference to the issue,” says SJ. “Often, it is due to good relations between the company and that investment bank, or

BANK ACCOUNT “There are promoters who are so well connected that they can be more
BANK ACCOUNT “There are promoters who are so well connected that they can be more
BANK ACCOUNT “There are promoters who are so well connected that they can be more

BANK ACCOUNT

“There are promoters who are so well connected that they can be more effective than five top investment banks put together.”

are promoters who are so well connected that they can be more effective than five top
effective than five top investment banks put together.” the banker himself.” The coveted position in the

the banker himself.” The coveted position in the syndicate is that of the left lead — the name that ap- pears first among the list of bankers. Techni- cally, the left lead has a greater say in the way the issue is managed, though its fee might not be significantly higher than what other banks in the syndicate get. The left lead is responsible for interacting with Sebi till the offer document is cleared. It is the face of the issue till approvals come. For this effort, it is paid an additional fee. SJ says a greater number of merchant banks don’t necessarily improve an issue’s prospects. “Companies have this misconception. They think if one bank can’t get the client, another will. But that is not always true,” he says. “In fact, the responsibility gets diffused if there are toomany(merchant)banks.” There are promoters who are so well connected that they can be more effective than five top investment banks put togeth- er, says SJ. He recalls an infrastructure firm whose IPO was about to flop because of a bad market. “I was part of the syndicate ad-

Swap failure costs US taxpayers $4 b

Michael McDonald

BOSTON

THE subprime mortgage crisis isn’t the only calamity Wall Street creat- ed that’s upending the finances of US states and cities. For more than a decade, banks and insurance companies con- vinced governments and nonprof- itsthatfinancialengineeringwould lower interest rates on bonds sold for public projects such as roads, bridges and schools. That failed promise has cost more than $4 bil- lion, according to data compiled by Bloomberg, as hundreds of bor- rowers from the Bay Area Toll Au- thority in Oakland, California, to Cornell University in Ithaca, New York, quietly paid Wall Street to

end agreements since 2008. California’s water resources de- partment this year spent $305 mil- lion unwinding interest-rate bets thatbackfired,handing over the money to banks led by New York-based Morgan Stanley. North Caroli- na paid $59.8 million in August, enough to cover the annual salaries of about 1,400 full-time state employ- ees. Reading, Pennsylvania, which sought protection in the state’s fiscal- ly distressed communities pro- gramme, got caught on the wrong end of the deals, costing it $21 mil- lion, equal to more than a year’s worth of real-estate taxes.

The termination payments to Wall Street firms come at the worst possible time. The longest recession

since the Great Depressionleft states facing budget gaps of $72 billion next fiscal year, according to the National Conference of State Legislatures. US cities saw their general fund revenue fall the most since at least 1986 in the budget year that

endedJune30,accord-

ing to the National League of Cities.

Wall Street banks and insurers peddled financial derivatives known as interest-rate swaps to governments and nonprofits that bet they could lower the cost of borrowing. There were as much as

could lower the cost of borrowing. There were as much as $500 billion of the deals

$500 billion of the deals done in the $2.8-trillion municipal bond mar- ket before the credit crisis, accord- ing to a report by Randall Dodd, a senior researcher on the Financial Crisis Inquiry Commission, pub- lished by the International Mone- tary Fund in June. Borrowers from New York to Cal- ifornia are now paying to get out of agreements. Altogether, they have made more than $4 billion of termi- nation payments to firms including NewYork-basedCitigroupInc,New York-based JPMorgan Chase & Co and Charlotte, North Carolina- based Bank of America Corp since the beginning of 2008, according to a review of hundreds of bond docu- ments and credit-rating reports by Bloomberg News. —Bloomberg

MID-TERM PICKS BROKING HOUSE: Eastern Financiers VARDHMAN TEXTILES BUY MARKET PRICE: ` 353.20 TARGET PRICE:

MID-TERM PICKS

BROKING HOUSE: Eastern Financiers

VARDHMAN TEXTILES

BUY
BUY

MARKET PRICE: ` 353.20 TARGET PRICE: ` 520

TEXTILES BUY MARKET PRICE: ` 353.20 TARGET PRICE: ` 520 VARDHMAN’S PRODUCT portfolio includes yarn, processed

VARDHMAN’S PRODUCT portfolio includes yarn, processed fabric, sewing thread, acrylic fibre and alloy steel. The numbers for the first two quarters have been encouraging. It has lined up huge expansion plans and is considering restructuring its steel division. Expected FY11 EPS is 65.VARDHMAN’S PRODUCT

BAJAJ HOLDINGS & INVESTMENT

BUY
BUY

MARKET PRICE: ` 929.80 TARGET PRICE: ` 1,200

BUY MARKET PRICE: ` 929.80 TARGET PRICE: ` 1,200 BHIL has unquoted investments in debentures, bonds,
BUY MARKET PRICE: ` 929.80 TARGET PRICE: ` 1,200 BHIL has unquoted investments in debentures, bonds,

BHIL has unquoted investments in debentures, bonds, government secu-

rities and mutual funds. The current NAV taking all investments except list- ed equities at book value is around

1650. BHIL gives handsome

dividends; the current dividend yield

works out to 3.25%.

CENTURY PLYBOARDS

BUY
BUY

MARKET PRICE: ` 66.10 TARGET PRICE: ` 90

PLYBOARDS BUY MARKET PRICE: ` 66.10 TARGET PRICE: ` 90 CPIL may come out with an

CPIL may come out with an IPO of its cement unit. This will unlock value for shareholders in future. Volume led growth in cement and full scale opera- tions of the CFS business in FY12 will lead to a significant jump in bottomline and margins. The target price is CPIL may ` 90. `90.

DHUNSERI PETROCHEM & TEA

BUY
BUY

MARKET PRICE: ` 229.20 TARGET PRICE: ` 315

TEA BUY MARKET PRICE: ` 229.20 TARGET PRICE: ` 315 DHUNSERI PETROCHEM & Tea reported a
TEA BUY MARKET PRICE: ` 229.20 TARGET PRICE: ` 315 DHUNSERI PETROCHEM & Tea reported a

DHUNSERI PETROCHEM & Tea reported a jump of 183.8% in its

bottomline for the quarter ended Sep

2010. We expect the company to

report a strong jump in both topline

and bottomline once the new capacities are on stream. The target price for the stock is `315.

DECCAN CHRONICLE HOLDINGS

BUY
BUY

MARKET PRICE: ` 141.30 TARGET PRICE: ` 198

HOLDINGS BUY MARKET PRICE: ` 141.30 TARGET PRICE: ` 198 DCHL PUBLISHES Deccan Chronicle and owns

DCHL PUBLISHES Deccan Chronicle and owns IPL team Deccan Chargers. It operates the retail chain Odyssey. The expected EPS for FY11 and FY12 is 14 and 18. The scrip is available at a stand- alone discounting of 9 and 7 times, respectively. The numbers do not include Deccan Chargers’ valuation.DCHL PUBLISHES

DISCLAIMER: The views expressed in these pages are from brokerages, analysts and fund managers. Readers should seek professional investment advice before acting on any recommendation. ET does not associate itself with the choices. Check out the ET Code of Ethics at www.economictimes.com

IN A NUTSHELL

Power Grid FPO subscribed almost twice on day two

MUMBAI: The follow-on public offer (FPO) of the state-run transmission firm Power Grid Corporation of India was subscribed by more than 1.8 times on the second day on Wednesday. The institutional portion of the book was subscribed by over seven times on day two as against over two times on day one. The FPO is part of the government's plan to raise `40,000 crore in the fiscal year ending March 2011 by disinvesting some of its stakes in state-run firms. Power Grid will use the funds raised from the FPO for part- funding its capex plan. The company's shares closed at `102 on the BSE on Wednesday.

Sebi imposes `3-lakh fine on Religare

MUMBAI: The Securities and Exchange Board of India, or Sebi, has slapped a `3-lakh fine on Religare Securities, which was accused of violating norms related to client accounts. In a circular released on Wednesday, the markets regulator said, “It has failed to be prompt and diligent in processing and handling account-opening forms, account information modification requests and demand requests.” Religare has also failed to ensure satisfactory internal control procedures and adequate mechanism for reviewing and monitoring its internal control and system at its branches, the circular said.

Bharti may list tower subsidiary

NEW DELHI: Bharti Airtel on Wednesday said it may look at listing its telecom tower subsidiary — Bharti Infratel. Announcing the second-quarter results of the company, group CFO Manik Jhangiani said the company may look at an initial public offer (IPO) for its tower unit, although there was no definite time plan. Bharti Infratel, a wholly-owned subsidiary of Bharti, provides passive infrastructure services to telecom operators. It deploys, owns and manages passive infrastructure in 11 circles of India. Infratel also holds 42% share in Indus towers (a joint venture between Bharti Infratel, Vodafone and Airtel).

S’pore Exchange nod for India Infoline

MUMBAI: India Infoline has got Singapore Exchange’s approval to become a trading and clearing member there. The move will allow the Mumbai-based brokerage to start broking services in Singapore, where it set up office in early 2008, an India Infoline release said here on Wednesday.

Parsvnath to raise `100 cr via pvt equity

NEW DELHI: Realty firm Parsvnath Developers is likely to raise about `100 crore this month by selling stake in a housing project to a private equity firm. According to sources, talks are in an advanced stage with a couple of private equity (PE) firms and the deal is likely to be finalised this month. Parsvnath Developers spokesperson could not be reached for comments.

and the deal is likely to be finalised this month. Parsvnath Developers spokesperson could not be
THE ECONOMIC TIMES BANGALORE FRIDAY 12 NOVEMBER 2010 MARKETS 13 ET INDICES Logistics 22750.34 (
THE ECONOMIC TIMES BANGALORE FRIDAY 12 NOVEMBER 2010 MARKETS 13 ET INDICES Logistics 22750.34 (

THE ECONOMIC TIMES BANGALORE FRIDAY 12 NOVEMBER 2010

MARKETS

13

ET INDICES

Logistics 22750.34 (

ET INDICES Logistics 22750.34 ( 0.15 % ) Metal 20647.22 ( 0.23 % ) Sugar 20622.08

0.15%)

Metal 20647.22 (

ET INDICES Logistics 22750.34 ( 0.15 % ) Metal 20647.22 ( 0.23 % ) Sugar 20622.08

0.23%)

Sugar 20622.08 (

2.57%)

Realty 5778.68 (

ET INDICES Logistics 22750.34 ( 0.15 % ) Metal 20647.22 ( 0.23 % ) Sugar 20622.08

3.13%)

HINDALCO Overseasgrowth helpsmitigate domesticslump Abhineet Singh ET INTELLIGENCE GROUP THE robust performance of the

HINDALCO

Overseasgrowth

helpsmitigate

domesticslump

Abhineet Singh

ET INTELLIGENCE GROUP

THE robust performance of the overseas subsidiary may offer some solace to investors of Hindalco Indus- tries at a time when its domestic operations have suf- fered from lower aluminium production and falling copper refining charges. The gloom on the domestic front, though, may not last long given an expected trend reversal in refining charges and new capacities going on-stream in the coming quarters. Hindalco’s operating profitability continued to remain under pressure during the September 2010 quarter de- spite the easing raw material prices. This was due to higher staff cost and rising finished goods expenses. But

the company still reported a robust 25% growth in its net profit due to lower interest cost. Given the fact that it has repaid `2,000 crore of debt in FY 10, interest charges are expected to remain low in the coming quarters as well. This should offer some support to the bottomline. The production volume of aluminium was lower during the September quarter on account of power outage at the Hirakhud aluminium smelter. The com- pany is expected to report lower pro- duction even in the December quarter since full start-up and stabilisation of the smelter is ex- pected only in the

March2011quarter.

The Hirakhud smelter expansion project, to increase capacity from 1,55,000 tonnes per annum to 1,61,000 tonnes per an- num, is nearing completion. Further expansion to 2,13,000 tonnes per annum will be completed by 4QFY12. The expansion of Utkal and Mahan plants is also on track with improving visibility. Hindalco’s copper business continues to face head- winds on account of low TcRc (treatment and refining charges) margins. The company, however, is trying to mitigate the impact with the help of higher realisation on byproducts. It was also able to increase byproduct vol- umes by 41% during the quarter. The spot TcRc has seen

a sharp jump in the last two months following smelter

disruptions and maintenance shutdowns in global mar-

kets. Given the recent trend in spot TcRc, there could be some upside for the company when it renegotiates the annual benchmark TcRc during the fourth quarter. Hindalco’s overseas subsidiary Novelis reported a 16% jump in its revenue due to higher LME prices and higher conversion premiums. The company is focusing more on profitability by selling higher-margin products. This seems to be working for the company as its adjust- ed EBITDA increased 45% y-o-y. Going ahead, Novelis

adjust- ed EBITDA increased 45% y-o-y. Going ahead, Novelis is likely to sustain its strong operating

is

likely to sustain its strong operating performance, as it

is

a dominant player in the metal cans business. The seg-

ment accounts for 60% of Novelis’ product mix. Novelis’ finished products also find application in the automobile sector. As the sector is poised to do well in the coming quarters, the company may expect higher revenue share from this sector. The Street seems to have priced in the future expected growth since Hindalco’s stock has surged 40% in the past three months. As a pure commodity play, the company’s future performance will be linked to the international metal prices and timely commissioning of new projects.

RANBAXY

Morevisibility

neededfor

freshentry

Jwalit Vyas & Kiran Kabtta Somvanshi

ET INTELLIGENCE GROUP

RANBAXYLaboratories’netprofitgrewmorethantwo-

and-a-half times in its third quarter ended September 30, 2010. The initial euphoria took the stock up by 3.5%

duringtheday,but,afterthemarketdigestedthefullim-

plications of the numbers, the stock closed 3% lower. The company’s consolidated revenues surged by 10% for the quarter. A major part of the net profit was from one-time non-recurring items. The company made `260.5 crore in forex gains from foreign curren- cy loans and on foreign currency option derivatives. It also gained from the transfer of a part of its assets of in- novative R&D centre to Daichi Sankyo. The company’s performance at the operating level was not encourag- ing as the consolidated EBITDA fell by 35% y-o-y. Good performance in the North American market was the major growth driver. The company’s revenues from North America increased by 70% compared with the corresponding quar- ter last year, thanks to the good sales of its first to file product Valacyclovir. Even post the exclusivity period,thecompany is benefiting from its sales and claims to hold around 36% of the market share. Going ahead, the company is likely to benefit from the launch of first to file Donepezil Hy- drochloride — its generic version of Aircept — for which it has received tentative approval from the US FDA. The drug clocked sales of $3 billion in 2009. In the domestic market, the company posted a growth of 18%, in line with the industry’s average growth rate. The consumer healthcare (over-the-counter) business is witnessing traction. However, the company struggled to achieve growth in the Europe, CIS and Africa markets. Ranbaxy has undertaken organisational restructur- ing and various cost-rationalisation measures to spruce up its bottomline. The key trigger in the coming quar- ters would be its ability to resolve the US FDA issues. Its forexmanagement skills will alsoplayavital role, given the volatility in the currency markets. Though the stock looks attractive vis-à-vis its peers, it may be prudent for investors to wait for more visibility on the critical issues.

looks attractive vis-à-vis its peers, it may be prudent for investors to wait for more visibility
to wait for more visibility on the critical issues. EVERYDAY SCAMS TUE The Fixer WED The

EVERYDAY SCAMS

for more visibility on the critical issues. EVERYDAY SCAMS TUE The Fixer WED The Trader THU

TUE The Fixer WED The Trader THU The Banker FRI The Equity Seller SAT The Fund Manager

Banker FRI The Equity Seller SAT The Fund Manager EquitySeller This is the fourth in a

EquitySeller

This is the fourth in a five-part series of tell-all accounts from the daily work of a bunch of diverse players in the stock market. They are hardy veterans of Dalal Street. They know the corners of the market as well as they know its centre. They know how to strike a deal, but not all deals they strike are above board, writes Santosh Nair

all deals they strike are above board, writes Santosh Nair I consider myself to be something

I

consider myself to be something of a story- teller,” says NJ, who handles equity sales at

a mid-sized institutional broking house. The research analysts of the firm come up with a stock idea, which NJ then has to pitch to his clients — fund managers at local and foreign institutions. “I have to tell an engag- ing story to fund managers for them to buy that stock through me,” he says. The plot is mostly similar, only the characters vary. It usually revolves around the vision of the

promoter, the competitive advantage of the company, and the potential of the sector. In the process of telling the story, NJ sizes up his listeners, and draws quick mental maps.

“I meet all kinds of money managers,”

says NJ. “There are some really intelligent people whom you dare not approach un- less you have a really good stock to pitch. Then, there are those who can’t think on their own, and make you wonder how they got into that chair in the first place. Oc- casionally, you run into fund managers who have been having a bad day or are plain ill-tempered, and they choose to let off steam at you.”

N J has been in the stock market for

nearly 15 years in different roles, the

latest being that of an equity sales-

person.“Theequitysalesprofessionmirrors

the feast or fast nature of the stock market,” says NJ. “In a bull market, we earn fat bonuses. But when the cycle turns, it is our jobs that are first on the line. When there are no takers for ideas, who needs people to sell them.”

A mechanical engineer, NJ started as a

sales representative at an engineering firm. An interest in stock investments led him to try his hand at sub-broking for a while. That venture failed. Rather than return to his previous world of nuts and bolts, NJ landed

a job as a dealer at a domestic broking

house, and then graduated to equity sales over the next few years. Over the years, his job has become more demanding. Most mutual fundstodayhave

a decent in-house team of analysts. So, it is

not as if they are dependant only on broking firms for stock ideas. “Things were not too complicated till a decade ago,” says NJ. The best of broking houses did not cov- er more than 20 to 30 stocks at any time. “Today, even a small broking firm covers twice that.” Equity sales persons also need a global perspective on many of these companies, as they may already be present in foreign mar- kets, or are affected by the swings in global

commodity prices. “You need to read up a lot on what is happening around the globe,

and at the same time, be clued into local de- velopments,” says NJ. “Most fund man- agers would hate to admit it, but they are curious to know what their peers are buy- ing and selling.” Unlike equity analysts, who specialise in a few sectors, the trick to succeeding as an equity salesperson is to be a jack of all trades and master of none, he says. “I need to be conversant with patent laws in the US as well as the price of coking coal, because I have to sell whatever idea my research team comes up with,” he says.

N J finds it amusing that clients are far

more tolerant when they lose mon-

ey on a “buy” recommendation,

than when the stock goes up after you con- vinced them to sell it. “They forgive real

TRUMP CARD “Unlike equity analysts,who specialise in a few sectors,the trick to succeeding as an
TRUMP CARD
“Unlike equity analysts,who
specialise in a few sectors,the trick
to succeeding as an equity
salesperson is to be a jack of all
trades and master of none

losses, but are often unreasonable if you were to cause them an opportunity loss,”

he says, with a grin. NJ is nearing 40, and wants to call it a day within the next five years. Unlike, his fa- ther. “My father was a clerk in the Indian Railways, and worked for 37 years in the same office,” he says. “When he was leav- ing for work on the day of his retirement, I said to him, ‘you must be a relieved man to- day, after enduring the drudgery of those files for so many years.’ His reply took me aback. ‘No, my son. I still haven’t had enough of it. Given a chance, I would love

ARINDAM

to put in a few more years.’ I certainly can’t say that for my profession. Give me a de- cent sum of money for the rest of my life, and I shall gladly quit this evening.” NJ says, though the money is good, it is a “high-pressure game”. It is all about rela- tionships. Equity salespersons have one or two fund managers they can turn to in a cri-

sis. It takes years to develop a relationship, but these can be lost overnight. The fund manager may move to another asset management company, which deals only with a certain set of broking firms. Or, the fund manager might give it all up, and become a restaurateur or an environmen- tal activist. “With him goes your bonus for that year,” says NJ. “After spending some years in this profession, you are on good

terms with most fund managers

at

least

they will give you a patient hearing

but

getting business out of them on a regular basis is a struggle. No wonder, the burnout ratio in the broking industry is so high,” says NJ. He has not decided on his new vo- cation after he quits. NJ has had some interesting experiences during his 15-year stint in the stock market. After a good deal of prodding, he agreed to share one incident. In the late 1990s, he quit a job in a huff, and briefly worked for a market operator, who asked him to find a buyer for a large block of physical shares of a mid-cap pharma company. “It was not a difficult task, since the company had a fair- ly good track-record and the stock was available cheap. I managed to get commit- ments from a few fund managers, with whom I had dealt in the past and was on good terms with,” he remembers. Then, one of the fund managers asked NJ if the block belonged to the promoter, since he had heard rumours of the promot- er wanting to reduce his stake. Fund man- agers usually shun a stock if a promoter is looking to sell it cheap. “I went back to my boss to ask him if the rumour was true,” says NJ. “He gave me his word that the shares did not belong to the promoter. In turn, I assured the buyers, who took my word for it.” But after a few weeks, when the shares were delivered to the fund houses, it turned out the block did belong to the promoter. “The fund managers did not hold this against me; I had always been fair in my dealings with them, and the odd lemon is forgiven,” he says. “But I could no longer trust my benefactor.” NJ quit the following day and became a “storyteller” for another broking house.

Laggard Usha Martin ready to gallop

Reduced Debt Burden, New Capacities Make Company’s Outlook Promising

Abhineet Singh

ET INTELLIGENCE GROUP

THE stock of steel manufacturer Usha Martin has not beaten the re- turn of the benchmark indices in the past three months. Its return over the one-year period has also lagged behind the gains in the ma- jor indices. The stock’s perform- ance is mainly marred by the delay in commissioning new capacities andconcernsurroundingitshighly leveraged balance sheet. The stock is likely to see renewed investor interest given the fact that the company has repaid over one- third of its loans and it expects to com- plete capacity ex- pansion by the end of FY 11. Further, steps taken for backward integra- tion will boost its performance go- ing forward. The Kolkata-based Usha Martin is a leading producer of specialty steel and is one of the largest wire

rope manufacturers globally. It re- ported an 18% increase in its con- solidated sales during the Septem- ber 2010 quarter; the net profit surged 40% on a year-on-year ba- sis. The company’s operating mar- gin expanded by 410 basis points following a strong volume growth and due to the benefits from pro- duction of 42,000 tonnes of ther- mal coal from its captives mines. The company saw an 86% in- crease in y-o-y production on ac- count of new DRI (direct reduced iron) plant and hot metal capacity added by the company. Volumes could have been even better but for the shutdown at its DRI plant, due to which the compa- ny lost about 20,000 tonnes of production. The company is ex- pected to report higher production numbers in the coming quarter as its newly commissioned blast fur- nace stabilises and due to the avail- ability of feed from the recently

and due to the avail- ability of feed from the recently commissioned sinter plant. Over the
and due to the avail- ability of feed from the recently commissioned sinter plant. Over the

commissioned sinter plant. Over the past three years, the company has managed to increase both its steel-making and iron ore capacity. Its massive `2,100-crore capex ends this year, which will in- crease its crude steel and ore capac- ity three-fold. The company re- cently commissioned its second blast furnace of 4 lakh tonnes, tak-

ing the total metallic capacity to nine lakh tonnes. This is sufficient to meet a significant share of the company’s iron ore requirement to produce one million tonnes of steel. Usha Martin also met its iron ore and coal requirement in FY10 through captive operations. These overall integration steps should support its profitability in future. Further, with debt of `600 crore re- paid, the company’s debt-equity ratio has reduced from 1.4 a year ago to just about one. This offers fi- nancial flexibility for further capex opportunities. The scrip is trading about 20 times its trailing 12-month earn- ings per share. The scrip is trading at apremiumcomparedwithitspeers such as Surya Roshni and Apl Apollo due to Usha Martin’s better margins. With the addition of new capac- ities and backward integration ini- tiatives, the company’s outlook looks promising.

abhineet.singh@timesgroup.com

MID-TERM PICKS BROKING HOUSE: Microsec Capital MAX INDIA BUY MARKET PRICE: ` 169.55 TARGET PRICE:

MID-TERM PICKS

BROKING HOUSE: Microsec Capital

MAX INDIA

BUY
BUY

MARKET PRICE: ` 169.55 TARGET PRICE: ` 210

INDIA BUY MARKET PRICE: ` 169.55 TARGET PRICE: ` 210 MAX INDIA, through its subsidiary MYNL,

MAX INDIA, through its subsidiary MYNL, is one of the best operationally managed private insurance player with low dependence on Ulip, lower expense ratio. The recent tie-up with Axis Bank in the bancassurance space may benefit Max India in the long run.MAX INDIA,

ANDHRA BANK

BUY
BUY

MARKET PRICE: ` 179.45 TARGET PRICE: ` 231

BANK BUY MARKET PRICE: ` 179.45 TARGET PRICE: ` 231 ANDHRA BANK is migrating to a
BANK BUY MARKET PRICE: ` 179.45 TARGET PRICE: ` 231 ANDHRA BANK is migrating to a

ANDHRA BANK is migrating to a centralised core banking solution. Con- sidering its expansion plan, for Andhra Bank, we assign a P/B multiple of 1.71x on its FY12E BVPS of `135 and arrive at

a target price of `231. One may buy the stock.

JAY BHARAT MARUTI

BUY
BUY

MARKET PRICE: ` 110 TARGET PRICE: ` 139

MARUTI BUY MARKET PRICE: ` 110 TARGET PRICE: ` 139 JAY BHARAT Maruti is in the

JAY BHARAT Maruti is in the business of making body-in-white (BIW) parts and assemblies, rear axles, fuel neck fillers, mufflers and other auto components. It’s Q2 PAT jumped by 133% to JAY BHARAT ` 10.3 crore. We assign a P/E of 8x to its FY12E EPS of `10.3 crore. We assign a P/E of 8x to its FY12E EPS of `17.3.

TUBE INVESTMENT OF INDIA

BUY
BUY

MARKET PRICE: ` 150 TARGET PRICE: ` 201

OF INDIA BUY MARKET PRICE: ` 150 TARGET PRICE: ` 201 TUBE INVESTMENT manufactures bicycles, precision

TUBE INVESTMENT manufactures bicycles, precision steel tubes, and car door frames, automotive and industrial chains. Considering its strong Q2 FY11 re- sults and strong brands — Hercules and BSA Cycles — new branding strategy may further elevate the company’s performance. The target price is TUBE INVESTMENT ` 201. `201.

WHIRLPOOL INDIA

BUY
BUY

MARKET PRICE: ` 319.75 TARGET PRICE: ` 350

INDIA BUY MARKET PRICE: ` 319.75 TARGET PRICE: ` 350 WHIRLPOOL INDIA is likely to report
INDIA BUY MARKET PRICE: ` 319.75 TARGET PRICE: ` 350 WHIRLPOOL INDIA is likely to report

WHIRLPOOL INDIA is likely to report

a spectacular growth in topline and bot-

tomline with new product launches that are directly linked to India’s economic growth and consumer spending. With

increased sales during the festive season, strong RoE of above 45%, the stock may evince further interest.

DISCLAIMER: The views expressed in these pages are from brokerages, analysts and fund managers. Readers should seek professional investment advice before acting on any recommendation. ET does not associate itself with the choices. Check out the ET Code of Ethics at www.economictimes.com

IN A NUTSHELL

Nimbus Communications plans to raise around `900 cr via IPO

MUMBAI: Nimbus Communications, known for its Neo Cricket and Neo Sports channels, plans to raise around `900 crore through its initial public offer (IPO) in January. “The company proposes to issue 22,050,000 equity shares, which comprises fresh issue of 14,040,000 equity shares and offer for sale of 8,010,000 equity shares in January,” Nimbus Communications chairman Harish Thawani told reporters here. Americorp Ventures Limited, CSI BD (Mauritius) and Funderburk Enterprises Limited — Nimbus’ investors — are partially divesting their stake, while the core promoters and another investor, 3i Sports, are not selling any stake in the IPO, Thawani said. “Following the last placement that happened at the rate of `446 per share, the IPO of 22,050,000 equity shares will be sized at over `900 crore,” banking sources said. The company has drawn up a `350-crore capital expenditure plan, which will be met through the IPO proceeds.

Pramerica launches 2 equity funds

MUMBAI: Pramerica Asset Managers (PAMPL), the Indian asset management venture of US-based Prudential Financial, on Thursday launched two equity funds and has two more fixed income products in the pipeline. The funds — Pramerica Equity Fund and Pramerica Dynamic Fund — will be open for subscription from November 19 till December 9. “These funds are designed to capture India’s growth story by investing primarily in large caps using sector rotation (identifying right sectors) and special situations (identifying value-unlocking potential), which will benefit investors in the long run,” PAMPL executive director chief investment officer (equity) Ravi Gopalakrishnan said here. The company, which entered India this year, already has two funds in its portfolio — ultra short term Bond (debt fund) and Pramerica liquid fund.

Embassy Prop to raise `2,400 cr via IPO

AHMEDABAD: Bangalore-based real estate developer Embassy Property Developments (EPD) on Thursday said it will raise `2,400 crore through an initial public offer. “The company filed the draft red herring prospectus with the market regulator, SEBI, in July this year, and is now awaiting a nod,” Embassy Property Development (EPD) managing director Jitu Virwani told reporters. “We expect the IPO to hit the capital markets by this month end,” he said.

CSB to enter capital market

THRISSUR: Kerala-based private sector Catholic Syrian Bank (CSB) here will enter the capital market in the next fiscal, bank’s chairman S Santhanakrishnan said here on Thursday. The RBI had asked the bank to enter the capital market with an initial public issue, he said. The 90-year-old bank had decided to widen the capital base by mobilising funds this fiscal itself. But the mode of mobilisation of funds would be finalised later, he said.

base by mobilising funds this fiscal itself. But the mode of mobilisation of funds would be
THE ECONOMIC TIMES ON SATURDAY BANGALORE 13 NOVEMBER 2010 MARKETS 11 Sensex 20156.89 ( 2.10
THE ECONOMIC TIMES ON SATURDAY BANGALORE 13 NOVEMBER 2010 MARKETS 11 Sensex 20156.89 ( 2.10

THE ECONOMIC TIMES ON SATURDAY BANGALORE 13 NOVEMBER 2010

MARKETS

11

Sensex 20156.89 (

BANGALORE 13 NOVEMBER 2010 MARKETS 11 Sensex 20156.89 ( 2.10 % ) Nifty 6071.65 ( 1.98

2.10%)

Nifty 6071.65 (

1.98%)

Nikkei 9724.81 (

1.39%)

Hang Seng 24222.58 (

% ) Nikkei 9724.81 ( 1.39 % ) Hang Seng 24222.58 ( 1.93 % ) YES

1.93%)

YES Bank declines 5% in 3 sessions on profit booking YES Bank shares fell 2.5%

YES Bank declines 5% in 3 sessions on profit booking

YES Bank shares fell 2.5% on Friday to close at `347.8, as institutional investors offloaded the shares in large quantities. With this, the stock has fallen around 5% in the past three sessions on volumes higher than the daily average over the past couple of weeks. According to dealers tracking the stock, foreign institutional investor “Kala Patthar” has been booking profits in the stock, having accumulated it at lower levels. A report by broking house Enam says that the bank’s asset quality is among the best in the industry, with gross and net non- performing assets of 0.22% and 0.06%, respectively. The bank’s net profit grew over 12.5% in the second quarter to `176.3 crore and revenues grew 29% to `954 crore, according to BSE data.

second quarter to ` 176.3 crore and revenues grew 29% to ` 954 crore, according to

Contributed by Harish Rao

Forex reserves rise over $2 b to touch $300-b mark

Our Bureau

MUMBAI

INDIA’S foreign exchange reserves once again crossed the $300-billion mark on November 5, as the central bank started mopping up capital inflows. This is the first time since the global fi- nancial crisis deepened in September 2008 that the central bank’s stock of reserves crossed the $300-billion mark. The country’s forex reserves rose $2.26 bil- lion in the week ended November 5. The re- serves are at $300.2 billion. Foreign currency assets—comprisingdollars,Britishpoundsand euro, among others — rose $2,193 million in the week. The value of gold in reserves, how- ever, did not change. Special drawing rights (SDRs) — the reserve currency with the International Monetary Fund — and the reserve capital with the IMF rose $43 million and $22 million, respectively. The last time the reserves were above the $300-billion mark was in 2008. However, for- eign investors started pulling out their invest- ments after the global financial crisis deepened in September 2008. Foreign currency dealers said that the central bank has started buying dollars from the market to prevent excessive appreciation of the rupee. The central bank makes public its forex in- tervention figures after more than a month’s lag. At current levels, India is the fourth-largest holder of foreign currency reserves in South Asia; behind China, Japan and Taiwan. While China and Japan have over a trillion billion in reserves, Taiwan has close to $400 billion. In other developments, the Centre has re- duced its surplus revenues parked with the central bank by `23,791 crore to about `12,768 crore. While at the same time, it didn’t resort to any short-term borrowings from the central bank. Such borrowings are resorted to by the government to meet its daily revenue mis- matches. These borrowings are known as ways and means advances (WMAs) — a facility un- der which governments borrow from RBI to meet their daily revenue mismatches. State governments, on the other hand, hiked their WMA by `252 crore in the week ended No- vember 5, to `1,691 crore.

IN A NUTSHELL

Power Grid’s FPO subscribed 14.5 times

MUMBAI: Power Grid received at least $23 billion of bids on the final day of its secondary share offer in a record year for asset sales. Investors bid for 12.2 billion shares, or 14.5 times the 841.8 million shares on offer, as of 5 p.m. local time, according to NSE data. Power Grid’s stock was offered at `85-90 apiece. Institutional investors bid for 18.5 times the shares offered to them. Rising demand for power to fuel homes and factories attracted investors to Power Grid after a record IPO in state-owned Coal India.

to Power Grid after a record IPO in state-owned Coal India. EVERYDAY SCAMS TUE The Fixer

EVERYDAY SCAMS

after a record IPO in state-owned Coal India. EVERYDAY SCAMS TUE The Fixer WED The Trader

TUE The Fixer WED The Trader THU The Banker FRI The Equity Seller SAT The Fund Manager

Banker FRI The Equity Seller SAT The Fund Manager FundManager This is the last of the

FundManager

This is the last of the five-part series of tell-all accounts from the daily work of a bunch of diverse players in the stock market. They are hardy veterans of Dalal Street. They know the corners of the market as well as they know its centre. They know how to strike a deal, but not all deals they strike are above board, writes Santosh Nair

all deals they strike are above board, writes Santosh Nair V BEGAN his career in the

V BEGAN his career in the treasury depart-

ment of a non-banking finance company (NBFC), then moved to a broking firm as

equity analyst, and is now a fund man-

M

an

ager with one of the top five mutual funds, overseeing equity schemes since 2003. He looks older than his 39 years, and is con-

scious of the greying around his temples. “The pressure to perform on a daily basis is taking the fun out of this profession,” says

VM,wistfullyrunninghisfingersdownhisre-

ceding hairline. “I have more grey for my age, and I fear I may lose all my hair at this rate.” VM is just back from a week-long tour of the South, where he was visiting some re- gional garment players to get a feel of the textile industry. He has many more lined

up for the month. With shares of blue-chip

companies struggling for direction, mid- sized and small companies are the rage as fund managers scramble to figure out the

next set of multi-baggers. There’s plenty of muck floating there. “Good business model and cash flow,” he

says, of a textile company he just visited. “But dubiouspromoters. Acursoryreading

of the balance sheet indicates they could be

siphoning off money.” However, business comes first. VM will buy the stock if the management can con- vince him on a few points. “One can’t not buy a stock just because the promoters are dipping into the till. By that yardstick, there would be very few companies you can in- vest in,” he says, pragmatically. “There is a cost of doing business in India, and the pro- moter will use the company’s money to fund that. As long as shareholders are not being short-changed, it’s fair.” To him, the relationship between the promoter and the minority shareholders is like one between a lion and a fox. “You can hunt with the lion, but you get your share only after he has had his fill.”

V M, typically, visits three to four com-

panies a month. As a fund manager,

he is in great demand: representa-

tives of another 10-12 companies land up

at his doorstep with PowerPoint presenta-

tions. Sometimes more. Onecompanygift-

ed him an expensive bottle of vintage wine.

On another occasion, during a visit to a company’s subsidiary in the US, VM was taken to an expensive steakhouse, except thathe’savegetarianandateetotaller. “The only vegetarian food available was bread and butter,” he laughs.

VM likes to stay alert, 24x7. He constant-

ly scrolls his Blackberry during our conver-

sation, checking for “stock ideas and com- pany updates from broking firms”. “It’s all about long-term investing, but we have to react quickly, if a company springs a nasty

surprise,” he says. He recounts the example

egy. After returning from the meeting, I dumped the shares, which were showing a small profit then.” The job has its own share of pinpricks. VM, like many of his peers, is miffed at what he feels is over-regulation of the mu- tual fundindustry, particularlytheremoval of incentives for distributors. “More people buy houses than they buy mutual fund units, so why is the government not regu- lating builders for a change? It’s an outright scam over there.” Money is just not coming into equity schemes, says VM. “To make matters worse, existing investors are pulling out, preferring to book profits than wait for greater gains.” VM’s anguish is understand- able, considering his company’s profits de- termine the bonus he and his team will re- ceive at the end of the year.

B ut don’t fund managers enrich them- selvesthroughothermeans?Market gossip has stories of real estate com-

panies giving fund managers flats at throw-

FINE LINE VM believes there is a fine line between insider info and research info.
FINE LINE VM believes there is a fine line between insider info and research info.
FINE LINE VM believes there is a fine line between insider info and research info.
FINE LINE VM believes there is a fine line between insider info and research info.

FINE LINE

VM believes there is a fine line between insider info and research info. Top brokers have better access to big firms,and that means exclusive access to information

insider info and research info. Top brokers have better access to big firms,and that means exclusive
to big firms,and that means exclusive access to information away prices in return for subscribing to

away prices in return for subscribing to their initialpublicoffers(IPOs).Marketoperators

and promoters are also known to pay cash to fund managers to buy stocks off them using the fund house’s money. For VM, these are aberrations. “You mean fund managers take money to invest in certain stocks in return for suitcases full of money? That seems a bit far-fetched,” he says. “There could be wrong investment

calls, but I wouldn’t call them cases of wilful corruption. Besides, if at all, the scale of cor- ruption would be a fraction of what hap- pens at foreign fund houses,” says VM. He cited a case in the late 90s of a fund manag- er at a leading US investment firm who was

of

an engineering company he was invest-

fired for allegedly taking sexual favours

ed

in and which was doing well. The com-

from some brokers.

pany suddenly wanted to diversify into the power sector. “I met the management and realised it was not a well-thought out strat-

In the same breath, VM mentions a fund manager who made quick money during the dot-com boom of 1999-2000. The fund

ARINDAM

manager used to buy illiquid technology

stocks to boost the net asset value (NAV) of his scheme, so he could earn a higher bonus. The NAV swelled from `10 to `40, and he got

a fat bonus that year. But whenthe technol-

ogy bubble burst, the scheme’s NAV slid to `5. “Other fund managers, including me, were delighted that he had received his just desserts,” says VM. “But a market bounce took the NAV to `10. His contract ensured a certain bonus if he doubled the NAV. That year, the scheme’s unitholders got nothing, but the fund manager again made a tidy packet for himself.” VM denies ever having been approached for favours. “Brokers and companies have an idea about which fund managers are pli- able,” he says. “It usually starts innocuous- ly: small Diwali gifts, free passes for a fash- ion show, music concert, movie premieres. But if you rebuff them, they leave you alone,” he says.

W hat does it take to be a good fund

manager? “I call it the rule of

100,” says VM. “At any time, a

good fund manager should be on top of at least 100 companies. He should know their balance sheets and what’s happening in them.” There are companies and there are com- panies.“I’mabitwaryaboutcompaniesthat go out of their way to woo institutional in- vestors. And I don’t like managements that

are tight-lipped; it usually means they prefer to run the company like a fiefdom,” he says. “I think a fund manager can be forgiven for going wrong on valuations occasionally, but not for going wrong on a business.” VM believes there is a fine line between insider information and research informa- tion put out by broking firms. Top broking firms have better access to the big compa- nies, and that sometimes means exclusive access to information. “Brokers are selec- tive about sharing such information. They may issue a standard research report to all their clients, but ring up the larger fund houses and pass on details not mentioned in the report,” he says. VM says that he doesn’t chase inside in- formation. Instead, he prefers to rely on ‘market intelligence’: his sources are bro- kers, vendors, friends or relatives of pro- moters, employees and ex-employees. For instance, there was an auto-component firm that VM was bullish on, and was look- ing to increase his stake in. “One day, a bro- ker offered me a cut to buy a large block of shares of that company. I was going to buy

it anyway,” he says. “But after the broker

tried to bribe me, I made some discreet en- quiries about the company and learnt the seller was desperate to unload his holdings

because he had some inside information that the company was headed for trouble.” With a little help from friends and his gut feel, VM knows how to keep the

engine going. nair.santosh@timesgroup.com

Difference with RBI over bad loans resolved: Bhatt

SBI Wants To Tap Retail Market With A Bond Issue Every Quarter; Plans Its Maiden Euro Bond Sale

Our Bureau

MUMBAI

S TATE Bank of India (SBI) has

resolved differences with the

central bank over

classification of bad loans, accord- ing to bank’s chairman OP Bhatt. He said the bank has addressed

the differences by increasing provisioning in some cases and, in other cases, convincing the Reserve Bank of India (RBI) that its provisions are adequate. “The bank has 15 auditors on its panel and all of them have been appointed by the RBI. So, there is no case that the bank mis- stated its financial performance,” said Mr Bhatt, responding to media queries on RBI’s inspection report for March 2009, which said

that SBI has not classified a substantial portion of its loan as bad loans, which in turn helped them show higher profit. Mr Bhatt was speaking on the sidelines of a function organised by Indian Institute of Banking and Finance (IIBF). “There have been some genuine interpretation differences. The issue has now been resolved. So, either they have accepted our argument or we have provided for the loan,” he added. The bank had set aside `7,076 crore in the first half of this fiscal year, up 91% over the corre- sponding quarter. On retail bond issue, Mr Bhatt pointed out that the bank would like to tap the retail market with a bond issuance every quarter. “We will do one more in the fourth

issuance every quarter. “We will do one more in the fourth quarter, probably of the same

quarter, probably of the same size or bigger. We want to build up long-term liquidity for financing long-term assets.” On the rights issue which the bank plans to launch by the end of this fiscal year, Mr Bhatt said that bank has received a verbal

approval for the rights issue, although the bank has to yet receive a written approval. The government would need to invest close to `12,000 crore to retain its share in the bank. “We would be meeting government officials either on Tuesday or Wednesday to discuss the details of the rights issue.” He added that the government would either choose to invest in rights issue or keep its cash neutral. In the past rights issue, the government had issued `10,000-crore bonds and the bonds were subscribed by the bank, so that they there is no immediate pressure on fisc. Meanwhile, he said that SBI is in advance stage of planning its maiden euro bond issue which will have a tenure of five years.

IIFB course for bank staff

MUMBAI: The Indian Institute of Banking and Finance (IIFB) has launched a course in cus- tomer services and standards for frontline bank employees. Speaking to ET, IIFB director DR Bhaskar said, “We brought this course in the face of deteriorating standards in banking serv- ices. Banking Codes and Standards of India has laid down certain norms. Bankers will be intro- duced to how they can increase the efficiency of these services. There would be a half-yearly exam.” RBI deputy governor KC Chakrabarty, who also handles the customer service portfo- lio, said that banks should also put in place a system to measure the level of customer serv- ice to verify improvement after employees attend the course. — Our Bureau

Share registrar Karvy won’t have it easy anymore

Coal India IPO share registrar Link Intime seen set to break into Karvy’s monopoly

Apurv Gupta & Nesil Staney

MUMBAI

COAL India listing changed many things in the capital market, from in- vestment banking league tables to

record-speedentryintoglobal indices, including Morgan Stanley Capital In- ternational. It is also set to shake up the leadership position in the back-office industry such

as share registrars. Link Intime, the share registrar for Coal India’s `15,200-crore share sale is snapping at Karvy Com- putershare’s heels. Karvy’s more-than-a- decade-old leadership po- sition is under threat as the joint venture between Australia’s Link Group and India’s Intime raised its IPO market share to 43.7% from just about 1.3% a year earlier. Karvy’s share plunged to 53% from 93% a year ago, according to statistics from Prime Database.

“It was only after Octo- ber 2009 that the situation improved and companies got their plans to raise funds back on track,” said MV Ram- narayan, director, Link Intime India. “So, most of the mandates of 2009 were deferred to 2010.” KarvyComputersharechief execu- tive V Ganesh declined to comment on the market share positions. Al- though there are more than 80 share

registrars, hardly a dozen are active; with Karvy keeping the lion’s share and the rest on the fringes. Link’s as- cent is the biggest event in the indus-

try in more than 15 years that was once dominated by Datamatics. The proliferation of fake UTI Mastergain certificates dented Datamatics’ repu- tation that left the field open for Karvy. Since most of the business is done by unlisted companies and that too very few of them, industry statis-

tics, apart from primary issuances, are

not available. Despite the

market-

share gains, companies may not improve their profitability as they get business mandates by quoting low prices. While investment banks do the same to get mandates, their trading activities help them compensate for lack of fees. The bids for business have been at a fraction of `5-6 per application in IPOs needed to make profits. Fi- nancial squeeze may lead to a fresh round of mergers and acquisitions in the in- dustry, some believe. There were about 300

registrars in 1997, which has fallen to about twenty active now. But others are sceptical about the consolidation since there’s not much value in buying those small companies. “Not many of them have more than `2-crore turnover per annum and no one has added any significant clients,’’ says an industry official who did not want to be identified. “One would be better off wooing the client base and any acquisition will not provide enough edge.”

apurv.gupta@timesgroup.com

will not provide enough edge.” apurv.gupta@timesgroup.com TOUGH GOING Karvy’s leadership position is under threat

TOUGH

GOING

Karvy’s leadership position is under threat as the JV raised its IPO market share to 43.7% from 1.3% a year earlier

its IPO market share to 43.7% from 1.3% a year earlier Re posts biggest fall in

Re posts biggest fall in 5-½ months as stocks decline

THE rupee posted its biggest one-day fall in 5-½ months on Friday, as sharp losses in local shares and bunched-up dollar demand after the US Veteran’s Day holiday weighed. The partially convertible rupee closed 44.80/81 per dollar, af- ter hitting 44.85, its weakest since September 29 and below Thursday’s close of 44.31/32. The lo- cal unit ended down 1.1% on the day, its worst daily fall since June 1. On the week, the rupee dropped 1.35%, its worst weekly fall in nearly six months. The index of the dollar against six majors was down 0.2% when the rupee market closed but it had been up as much as 0.33% earlier in the day. The euro bounced from six-week lows against the dollar on Friday as EU leaders sought to reassure nervous bond- holders and on speculation, which was quickly denied, that a rescue package for Ireland was being hammered out.

that a rescue package for Ireland was being hammered out. Bond yields off highs as weak

Bond yields off highs as weak growth data lift rate pause hopes

GOVERNMENT bond yields ended off the day’s highs on Friday after weaker- than-expected factory data strengthened expectations for a rate pause, while Monday’s inflation data was being eyed to cement this view. The 4.4% an- nual growth in the volatile industrial output figure was well below the me- dian forecast of 7% in a Reuters poll and lagged the previous month’s up- wardly revised 6.92% growth. The benchmark 10-year bond yield ended at 8.08%, steady with Thursday’s close and off the day’s high of 8.11%, its high- est since November 2. It fell to 8.07% after the industrial data. The bond yield is up 9 basis points this week.

CROSS CURRENCY RATES

RATES AS OF 6 PM IST Friday 12 November 2010

COUNTRY

INR

USD

AUD

GBP

CAD

JPY

SGD

CHF

AED

EUR

India

-

0.02231

2.2547

0.0139

0.0226

1.834

2.88624

0.0218

0.082

0.01627

US

44.83

-

1.0103

0.6229

1.0111

82.18

1.2938

0.9747

3.6726

0.7289

Australia

44.3568

0.9898

-

0.61659

1.0009

81.35

1.2808

0.9647

3.635

0.7215

Britain

71.783

1.6053

1.6218

-

1.6232

131.92

2.0771

1.5647

5.895

1.1701

Canada

44.3252

0.989

0.9991

0.6161

-

81.27

1.2796

0.9639

3.6325

0.7209

Japan

0.5441

0.012169

1.2293

0.7581

1.2305

-

1.5745

1.1861

4.4692

0.88704

Singapore

34.6472

0.7729

0.7808

0.4814

0.7814

63.52

-

0.7533

2.8384

0.5633

Switzerland

45.9665

1.026

1.0365

0.6391

1.0375

84.31

1.3275

-

3.7675

0.7479

UAE

12.2025

0.2723

0.2751

0.1696

0.2753

22.38

0.3523

0.2654

-

0.1985

Euroland

61.3568

1.3719

1.3859

0.85459

1.3871

112.74

1.775

1.3372

5.0384

-

EXCHANGE RATES

 

Source: AXIS Bank

Currency

TT Buy

Bill Buy

TT Sell

Bill Sell

TC Buy

CCY Buy

TC Sell

CCY Sell

Australian Dollar

43.6450

43.5575

44.4600

44.5500

43.2000

42.9500

44.9000

45.1500

British Pound

71.0650

70.9225

72.3775

72.5200

70.3500

70.0000

73.1000

73.5000

Canadian Dollar

43.8725

43.7850

44.6925

44.7800

43.4000

43.2000

45.1500

45.4000

Danish Krone

8.0575

8.0400

8.2250

8.2425

7.9500

7.9000

8.3500

8.3500

Euro

60.2400

60.1175

61.3550

61.4775

59.6000

59.3000

62.0000

62.3000

Hong Kong Dollar

5.7125

5.7000

5.8375

5.8500

5.6500

5.6000

5.9000

5.9500

Japanese Yen (*100)

54.1950

54.0850

55.2000

55.3100

53.6500

53.3500

55.7500

56.0500

New Zealand Dollar

34.2400

34.1725

34.8850

34.9525

33.9000

33.7000

35.2500

35.4500

Singapore Dollar

34.1450

34.0750

34.7850

34.8550

33.8000

33.6000

35.1500

35.3500

Swedish Krona

6.4075

6.3950

6.5475

6.5600

6.3000

6.3000

6.6500

6.6500

Swiss Franc

45.4025

45.3100

46.2500

46.3425

44.9500

44.7000

46.7500

46.9500

UAE Dirham

11.9400

11.9150

12.4425

12.4675

11.8000

11.7500

12.6000

12.6500

US Dollar

44.4900

44.4000

44.8925

44.9825

44.0500

43.8000

45.3500

45.6000

CURRENCY FUTURES

 

1 unit denotes 1000 $ : Tick Size - Rs 0.25

Contract

Open

High

Low

Close

Open

Value

No Of

No Of

Price

Price

Price

Price

Interest

(`Lakhs)

Contracts

Trades

MCX-SX

EURINR261110

60.98

61.62

60.74

61.46

13656

41299.84

67512

9784

EURINR291210

61.30

61.95

61.22

61.84

1791

877.60

1424

201

GBPINR261110

71.69

72.20

71.69

72.03

7957

10371.67

14422

3200

JPYINR261110

54.15

55.00

54.15

54.69

9600

8875.88

16246

3284

JPYINR291210

54.50

55.25

54.50

54.93

1198

819.44

1492

138

USDINR261110

44.55

45.01

44.55

44.94

699418

2055846.33

4584849

64676

USDINR291210

44.85

45.26

44.85

45.19

166418

62172.38

137807

3689

USDINR270111

45.13

45.48

45.13

45.44

56243

11664.20

25711

570

USDINR290311

45.53

45.85

45.53

45.81

4629

2314.55

5069

118

NSE

EURINR 261110

60.84

61.61

60.76

61.46

24268

53721.86

87795

6227

EURINR 291210

61.16

61.93

61.09

61.79

4933

3433.20

5586

437

GBPINR 261110

71.82

72.17

71.72

72.04

10866

12780.29

17776

2355

JPYINR 261110

55.05

55.05

54.11

54.69

14265

12854.96

23527

2672

JPYINR 291210

54.40

55.25

54.40

54.88

8067

4677.35

8530

315

USDINR 261110

44.63

45.00

44.62

44.94

778976

1518150.00

3385898

50055

USDINR 291210

44.91

45.26

44.87

45.21

201525

58533.23

129769

2759

USDINR 270111

45.14

45.48

45.12

45.43

59026

7706.19

16998

449

INTEREST RATE FUTURES

 

Instrument

Open

High

Low

Close

Open

Value

No Of

No Of

Price

Price

Price

Price

Interest

(Rs Lakhs)

Contracts

Trades

NSE

10YGS7 291210

92.60

92.60

92.60

92.60

1

1.85

1

1