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India Ltd plans to raise equity funds

Jun 272009

share-marketsMax India Ltd plans to raise equity funds of about Rs 500 crore in the next six months to part finance its planned investments in its insurance subsidiary – Max New York Life (MNYL) – for the current fiscal.

Analjit Singh, Chairman and Managing Director of Max India, stated this at a press conference to announce the financial performance of Max India for the fourth quarter of 2008-09 and for the entire financial year.

Earlier, Max India had planned to raise about Rs 1,000 crore this fiscal to support the business growth of MNYL. But now with the foreign direct investment (FDI) limit increase in insurance sector looking imminent, the company has scaled down the capital raising plans. Currently, MNYL is capitalised at Rs 1,782 crore. Indications are that Max India would pump in about Rs 700 crore in MNYL this fiscal.

This announcement comes on the heels of International Finance Corporation (IFC) investing Rs 150 crore in Max India through preferential allotment route.

The current joint venture agreement between Max India and New York Life provides for the latter to raise its stake in Max New York Life to 49 per cent once the necessary legal framework is in place.

Meanwhile, the board of directors of Max India on Friday gave its nod to consumer forum for amending the existing joint venture arrangement in regard to Max Bupa Health Insurance Ltd (MBHI). In the revised arrangement, Max India would have 74 % shareholding in MBHI with the balance 26 per cent to be held by Bupa Finance Plc, UK.

Initially, it was proposed that Max India would hold 50 % stake in MBHI, 26 % by Bupa Finance Plc, UK and the balance 24 % by Analjit Singh and his associates.

MBHI is likely to start its operations in December this year, Singh said.

On MNYL, Singh announced that the “embedded value” of the life insurance business has recorded a healthy growth of 74 per cent to Rs 2,284 crore. He also announced that Max India expects its insurance subsidiary (MNYL) to be break-even at the profit before tax (PBT) level in financial year 2011-12.
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Reduction in interest rates:RBI

Jun 272009

rbi-governorEven as the Union government expects banks to reduce interest rates, Reserve Bank of India (RBI) deputy governor Usha Thorat on Friday
said a reduction in small savings interest rates –a demand from the country s top bankers as a prelude to soften general interest rates — is a complex issue involving the interests of a vast swathes of the population.

Bankers have urged finance minister Pranab Mukherjee to pare small savings rates so that they can cut deposit/lending rates freely. They feel that the small savings rate at 8% acts as a benchmark and a significant reduction in deposit rates below that level will trigger a flight of savings to post offices.

A reduction in the small savings rate is a complex issue as so many people s interests are involved, Ms Thorat said here on the sidelines of an Allahabad Bank event.

The gap between wholesale price index (WPI) and consumer price index (CPI) is also a matter of concern to the banking regulator. A high CPI has negated the advantage of low WPI, which has even gone into the negative zone.

Ms Thorat, however, added that the central bank has been signalling for more lending rate cuts as there is excess liquidity in the system.

Ms Thorat was in the city to inaugurate a financial literacy and credit counselling centre promoted by Allahabad Bank. She said indebtedness had become a major issue and centres like this would help people seek knowledge and make financial management in a prudent way to avoid a debt trap. The centre would act under the aegis of Allahabad Bank s rural development trust.

So far, public sector banks have cumulatively set up nearly 150 credit counselling centres across the country. But, according to her, many of these centres act as bank s marketing channels, defeating the purpose of these centres. We would like banks to maintain arm length distance with such centres, she said.
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Sensex rises flat

Jun 272009

bse-sensexThe stock market rallied on Friday to its best close in two weeks on the back of institutional buying that emerged at lower levels. The
BSE sensex, after a flat start of trading, gained through the session to close at 14,765, up 419 points on the day. The day’s upmove was also helped by trend reversal in most of the major markets in Asia and Europe. Friday’s 3% gain in the sensex also helped the index to a 1.7% gain on weekly basis that came after a 4.3% loss the previous week.

The gains during the session made investors richer by Rs 1.10 lakh crore with BSE’s market capitalisation now at Rs 47.8 lakh crore. Banking, capital goods and IT stocks led the rally. Provisional data released by BSE showed that FIIs net bought stocks worth Rs 551 crore while net buying by domestic funds was Rs 334 crore.

Market players said that next week’s trading will be driven mainly by the market’s expectations on the budget, which is scheduled for July 6.

Among the sensex gainers on Friday, ICICI Bank ended 8% up at Rs 754, Sterlite rose 6.1% to Rs 612 and L&T ended 5.5% higher at Rs 1,611.

The top sensex loser of the day was Sun Pharma which ended 12.2% lower at Rs 1,140. The stock tanked on the news that its US subsidiary, Caraco Pharma, was raided by USFDA and all its produces at its Michigan plant was seized the drugs authority.
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metals continue to rule firm on higher global cues

Jun 272009

copper-etnSilver prices firmed up smartly on the bullion market here on Friday due to persistent demand from industrial users amidst higher global

The yellow metal also advanced further on strong domestic demand in view of firming trend in overseas markets.

In London, gold hit a two-week high above USD 945.00 an ounce, continuing its gains at the dollar retreated broadly. Rising oil prices also boosted its appeal as a potential inflation hedge, as supply concerns pushed crude oil above USD 71 a barrel.

Spot gold touched a high USD 945.80 an ounce early in London, up from USD 938.55 an ounce quoted late on Thursday in New York.

Spot silver also firmed up to USD 14.25 an ounce. In the domestic market, silver ready (.999 fineness) shot up by Rs 220 per kilo to Rs 22,980 from yesterday’s closing level of Rs 22,760.

Standard gold (99.5 purity) moved up further by Rs 40 per ten grams to Rs 14,720 from Rs 14,680 previously.

Pure gold (99.9 purity) also advanced further by a similar margin of Rs 40 per ten grams to Rs 14,790 as against Rs 14,750.
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India rupee rises and dollar weak

Jun 272009

finance3The Indian rupee rose to its highest in a week on Friday, as gains in equities supported expectations of capital inflows into Asia’s
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third-biggest economy, and a weaker dollar overseas also bolstered sentiment.

The partially convertible rupee ended at 48.10/11 per dollar, its highest close since May 19 according to Thomson Reuters data, and about 1 per cent stronger than Thursday’s close of 48.595/605.

On Tuesday, it had hit 48.90, its lowest since mid-May. “Stocks have been the biggest support to the market. If the momentum picks up next week, we may see the rupee strengthening beyond 48 a dollar levels,” a senior trader with a foreign bank said.

Indian shares rose 2.9 per cent on Friday, taking the market to its best close in almost two weeks, as investors took cues from Asian and European markets.

Fund flows into shares have been a key driver of the rupee, which hit a record low of 52.2 in early March but rebounded as foreigners bought about $8 billion of stocks over three months.

However, since mid-June foreign investors have sold about $900 million of stocks, and the rupee has fallen about 2 percent so far this month.

Dealers said the dollar’s weakness overseas added support to the rupee. The dollar index, a gauge of the US unit’s performance versus majors, was down 0.8 percent at 1202 GMT, as a series of global liquidity measures boosted investor sentiment.
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Stocks capped a choppy week of trading

Jun 272009

usstockStocks capped a choppy week of trading with a mixed finish Friday after the Commerce Department reported that personal spending, incomes and savings all rose in May. What troubled investors was that the savings rate soared to 6.9 percent, a 15-year high, while spending rose by a modest 0.3 percent.

The trend suggests consumers are being very careful with their money. That’s good for the individual, but not great for the overall economy in the short-term.

Phil Orlando, chief equity market strategist at Federated Investors, said he expects the savings rate to eventually hit 10 percent before it eases. The savings rate had been 5.6 percent in April, and annual savings rates were below 1 percent from 2005 through 2007.

Gross domestic product dropped at an annual rate of 5.5 percent in the first quarter, the government reported earlier this week. As the first half of 2009 ends, investors are growing more anxious about whether the economy can bounce back later this year.

That uncertainty, bolstered by a mix of promising and worrisome data, led to a bumpy week in the stock market. After sliding early in the week, the Dow Jones industrial average rebounded by 2.1 percent on Thursday. But traders appeared eager to take some profits from that jump ahead of the weekend, analysts said.

Investors have been worrying that a 35.8 percent rally in the Standard & Poor’s 500 index from a 12-year low on March 9 is overdone, because an economic recovery may be further out than many had earlier hoped. But with the end of the quarter on Tuesday some portfolio managers could be eager to take the market higher to burnish their numbers for the April-June period.
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Nifty Midcap 50 Index

Jun 272009

bombay-stock1National Stock Exchange said five companies will be included in Nifty Midcap 50 Index with effect from June 26.

IDBI Bank, JSW Steel, United Phosphorous, Cummins India and Educomp Solutions would be included stocks in Nifty Midcap 50 Index from June 26, the exchange said in a notice.

Besides, five others stocks Bombay Dyeing, Mahindra Lifespace, Peninsula Land, Kesoram Industries and TVS Motor Company would also be excluded from the index.

The Futures and Options contracts for new expiry months in the following securities will not be issued on expiry of existing contract months,
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Brokerage house Citi ‘sell’ Reliance Capital

Jun 272009

reliance-capitalBrokerage house Citi has retained its ‘sell’ rating on Reliance Capital, with a price target of Rs 821, citing pressure on profitability and fair valuations as main reasons.

We believe Reliance Capital’s profitability will be under pressure in the medium term due a likely higher cost distribution build-out and increasing competitive intensity,

While parts of Reliance Capital’s businesses are likely to grow significantly (especially asset management, broking) in the current environment, and profitability is showing signs of stabilisation, we expect its insurance and consumer finance segments to continue on a moderate growth path. Moreover, we believe the sharp rise in the stock price more than adequately captures the improvement in the business environment,
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Unitech raises Rs 2800

Jun 272009

equity-negliReal estate major Unitech raised $575 mn (Rs 2,800 crore) on Friday by placing shares with overseas private equity (PE) funds at Rs 81
a unit. This clearly indicates the rising interest of foreign investors in the Indian real estate market.

The company planned to raise only $200 mn, but as demand was huge, it decided to increase the issue size. According to a source, total demand in the auction was for over $1 bn. In the deal, the company will issue 342 mn shares, which will expand its equity base by around 16.7%. This will bring down the promoter’s stake in the company to around 43%. However, following the conversion of warrants , subscribed by the promoter in May at Rs 50 per share for Rs 1,155 crore, this stake will increase to 49%.

The company had raised $325 mn in April by selling 421 mn shares to PE funds at Rs 38.5 per share. A senior company official said this was the last dilution of the company’s capital base. The money raised will be partly used to repay high cost debt of and partly to launch affordable houses in various regions of the country. At present, the company has a loan of Rs 7,800 crore.
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The traded stocks has increased

Jun 272009

share-market-india1The three-and-a-half month long rally in the stock market has resulted in renewed activity in some of the stocks that had gone into

hibernation during the downturn that began in January 2008. From a daily average of 2,510 in February, the number of traded stocks has increased to 2,800 in June.
If shares of a particular company are trading infrequently in a bad market, it could be because of poor fundamentals. In such a situation, it is difficult to sell the shares as there are no takers ” said Karvy Stock Broking vice-president Ambareesh Baliga. “If such stocks move sharply in the bull market, it is possible there could be speculative interest behind it. Retail investors , however, should grab this opportunity to exit the stock before the momentum eases,
Interestingly, some of the stocks that resumed trading, have offered much higher returns than the benchmark indices. The list mostly includes illiquid, small or midcap stocks, including those like Veer Energy and Infrastructure, Visagar Polytex, Industrial & Prudential Investment, Bio-Green Industries and Kanani Industries, among a few notable examples. Most of them have been hitting new highs amid rising volumes in the current market. The stocks rose between 20% and 116% over the past one month while the Sensex rose 9% during the same period.
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