Ispat Industries shares jump on JSW Steel's open offer

Shareholders reposed faith in the company after JSW announced attractive open offer price

BY Siddharth Kumar
Delhi

Shares of Ispat Industries Ltd bounced back smartly on Wednesday and closed 11 per cent higher, after the Sajjan Jindal-led JSW Steel Ltd made an open offer to buy a further 20 per cent stake in the firm. The open offer was made at price, higher than the per share deal price announced on Tuesday.

JSW Steel, which announced the acquisition of a 41.3 per cent stake in Ispat Industries, on Tuesday for Rs 2,157 crore, has made an open offer at Rs 20.54 a share. The offer price is 3.5 per cent higher than the Rs 19.85 that JSW will pay to acquire 1,086.6 million equity shares in the debt-ridden company. The offer to Ispat shareholders begins February 12 and will close on March 3.

On the Bombay Stock Exchange, the Pramod Mittal and Vinod Mittal-promoted Ispat Industries ended the day at Rs 23.60. On Tuesday, the scrip had tanked 15 per cent to close at Rs 21.

The rise on the Ispat counter was significant, since investor sentiment in the broader market was weak and the BSE benchmark Sensex settled 44.5 points lower at 20,015.8. Even the JSW Steel counter witnessed profit-booking and ended 0.75 per cent lower at Rs 1,202.90.

Equity analysts said investors rushed towards the Ispat counter as they realised this deal is in favour of the company. "The deal undoubtedly stands attractive over the long term," said Kamlesh Bagmar, an analyst at brokerage house Prabhudas Lilladher.

The deal makes JSW Steel, India's largest steel company. Several big players of the industry, including steel czar LN Mittal's ArcelorMittal, Tata Steel Ltd, were in the race to acquire a stake in Ispat Industries.

The deal will help in timely execution of Ispat's capex plan of Rs 3,140 crore as funding issues are mitigated, given JSW Steel's strong credentials, said Angel Broking in a note to investors.

"We believe the acquisition is positive for JSW Steel in the long term, as it will become India's largest steel company with total capacity of 14.3 million tonnes (Greenfield projects have been difficult to implement because of land acquisition/environmental clearance issues)," it added.

According to Standard Chartered analysts, Satish Kumar and Saurabh Prasad, to fund the acquisition, JSW Steel will need to take on a debt burden of Rs 2000 crore or sell investments worth Rs 1700 crore.

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Gold holds its glitter

It has provided among the best returns on investment

BY Siddharth Kumar
Delhi

India is the biggest consumer of gold in the whole world

With gold prices charging north, Indian marriages have become expensive. The yellow metal, which plays a fundamental role in the marriage ceremony and is seen as a symbol of security as well as a sign of prosperity in India, is hovering around $1,390 (nearly Rs 63,000) an ounce in the international market and at around Rs 20,500 per 10 grams in local markets.

While the soaring price of gold may be spoiling marriage budgets of many Indian households, from an investor point of view returns from the metal this year has outperformed equity, which is considered as the quickest route to make money. In just one year, the value of money invested in gold has significantly grown, by 27 per cent, while the Bombay Stock Exchange’s benchmark Sensex -- the performing index among top 10 global indices – appreciated just 17 per cent during the same period. Over the past 10 years, the value of gold demand in India has increased at an average rate of 13 per cent per year, outpacing the county's real gross domestic product(GDP) growth by almost 6 per cent, according to World Gold Council (WGC). India is the world's largest gold consumer market.

Festivals, economic growth, gold's attraction as an investment and a good monsoon are key reasons for the likely rise in domestic gold prices. In the near term, gold is likely to remain elevated and will take cues from dollar movements, brokers said.

Gold is set for a 10th annual gain and analysts forecast it may hit fresh record highs by early next year as concerns over fiscal imbalances and currency tensions will continue to support investment demand for it.

Apart from the recent additional $600 billion worth of quantitative easing by the US, the weakening of dollar and associated fears of inflation, demand for the precious metal is also likely to be driven by higher gold price expectations as well as increasing availability and accessibility of gold investment products to retail investors.

“We expect a further rise in the prices of precious metals on account of” fresh worries in Europe “which may boost the metals appeal as a safe-haven investment,” brokerage house Nirmal Bang said in a note. Rising crude oil prices is also fuelling the movement of precious metal in global market, dealers said.

“European sovereign crises and geopolitical tension between North Korea and South Korea boosted demand for gold,” ICICI Securities said in a note on Tuesday. Praveen Singh, a research analyst at Sharekhan Commodities, is bullish on the outlook of gold and said that in “the present uncertain economic scenario, we think the yellow metal can reach $1,440 level easily in the next few months.” Gold made fresh all-time high on December 6, touching $1,424 per ounce, and has witnessed some profit-booking at those levels.

A patient investor, who parked savings in gold at the beginning of passing decade, would have made five times the initial investment.

Dealers in Mumbai said a fresh surge in demand is expected in domestic market by the middle of next month when Makar Sankranti festival marks the start of winter-sown crop harvest. The wedding season is already on and demand for jewellery is supporting further rise in the gold. India contributes to almost 15 to 20 per cent of world demand of gold and most of this is in the form of jewellery, said Tanushree Mazumdar, senior economist at National Commodities Exchange (NCDEX).

The demand is increasing in the world’s two largest markets, India and China, as rising income levels, high savings rates and strong economic growth continue to push up consumption.

To reap the benefit in the value of shining metal, financial planners too are advising people to have a minimum of 10 per cent to 20 per cent exposure in gold as part of an asset allocation strategy.

“Gold provides hedge against inflation in your portfolio and is a must for a diversified assets portfolio,” said Sejal Patel, a financial planner at Bonanza Portfolio Ltd. Small investors too are missing the golden chance to make money via exposure of their savings in the precious metal. Retail investors in India are diversifying their investment in gold by investing in gold ETFs (exchange-traded funds), which are basically mutual fund units where the underlying investment is almost exclusively in gold, said Mazumdar. “Though currently the size of the gold ETF market in India is small, but for trend-spotters, tracking investment gold ETFs would be an interesting exercise. It would also be one of the factors to look into when trying to analyse factors affecting demand for gold in India,” she added.

Investors who do not hold gold or view it purely as a temporary safe haven asset are failing to harness its full potential to protect wealth, says a study published by WGC. According to WGC forecast global gold consumption for 2010 will be higher than 2009 as a result of increasing levels of demand in India and China, sustained global demand for gold investment, together with growth in jewellery and industrial demand.

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2010 most exciting year for India's IPO market

Indian companies raised a record Rs 71,100 crore through public issue activities

BY Siddharth Kumar
Delhi

Going public was never as exciting in one calendar year as it was in 2010 for Indian companies that raised a record Rs 71,100 crore.

The last year of the passing decade, which many Dalal Street pundits term a golden period for public issue activities, would certainly be remembered for setting many records in Indian primary market history.

And if everything goes well with the Indian economy and global markets, the crazy debut saga of India Inc is unlikely to stop here as along with the Centre's ambitious disinvestment plan, there is a big pipeline of papers from private players for the next year, experts say.

"This year (2010) clearly can be termed as a hot period for fund-raising activity through the primary market. This journey is likely to continue with the same pace, if India's growth story does not slows," said Prithvi Haldea, chairman and managing director of Prime Database, which tracks the primary market.

The outlook for new issues seems bullish for the coming period as the government is focusing on modernising country's infrastructure, which would entail large expenditures. The energy sector will support manufacturing growth and emergence of retail as a new consumer class will also boost the activity, market experts say.

"Though it is very difficult to forecast the mood of stock market, going public activity is unlikely to slow in coming months here as India is one of the best performing markets globally and is blessed with strong economic fundamentals," said Yogesh Kapoor, managing director for North India (investment banking) at Enam Securities Private Ltd. According to Prime Database, nearly Rs 60,876 crore of funds are proposed to be raised by a little over 100 companies in the coming period. The list includes companies that have already received approval from market regulator Securities and Exchange Board of India and also those entities that have filed draft papers with the watchdog. "Given the pipeline of capital raising from both public and private sectors, we expect capital rising next year too will not slow," said a primary market analyst at a Mumbai-based domestic brokerage house who did not want to be identified. After a very tough 2008 and lacklustre 2009, the passing year was a clear revival period in the Indian public issue market that was mainly backed by government's mega share sale progamme.

Year 2010 features 70 public issues, which includes 62 initial public offerings (IPOs) and eight follow-on public offerings (FPOs), according to data complied by brokerage firm SMC Global Securities.

The total fund-raising through these issues was to the tune of about Rs 71,114 crore. Of this, fund-raising through 62 IPOs was worth about Rs 39,710 crore and via FPOs, nearly Rs 31,403 crore.

Not only in India but globally also, IPO fund-raising activity will set record levels in 2010. According to an estimate by global consultancy firm Ernst & Young *E&Y), the total amount raised through the IPO route is expected to exceed $300 billion by the end of this year, which will exceed the previous record (the $295 billion raised in 2007).

"Despite the fragility of economic recovery in Western markets, Asia's economic growth story and record-breaking debuts have fuelled a strong worldwide IPO recovery," E&Y said in its year-end Global IPO Update, released a week ago. In the first 11 months of 2010, IPOs worldwide have already raised $255.3 billion in 1,199 deals.

In the domestic market, the public sector dominated primary market activity this year as they had a lion's share of 70.2 per cent (Rs 49,946 crore) of the total issue size. "Whichever way you look at it, the year 2010 was an action-packed year for the Indian primary market, the most happening place being the Department of Disinvestment," said Jagannadham Thunuguntla of SMC Global.

The Centre, which has a target to raise Rs 40,000 crore during the currency financial year -- the highest ever in a single fiscal -- has already garnered Rs 21,000 crore till the end of 2010 by cutting its stake in companies like Engineers India Ltd, Coal India Ltd (CIL) and MOIL Ltd.

CIL's issue, through which the government mopped up Rs 15,200 crore in October, was the biggest IPO in the history of the Indian capital market. Another remarkable story of the year was the listing of Standard Chartered on the Mumbai market through the first ever issue of Indian depository receipts.

"With the strong and dynamic fundamentals of the Indian economy, such new kind of innovation cannot be denied in coming period also," said Kapoor of Enam Securities. In the September quarter of the current financial year, the Indian economy expanded by 8.9 per cent, giving the government enough reason to see a growth of 9 per cent during the full fiscal ending March. The Sensex, the country's most-tracked index, too reached a high of 21,108 points in November, and analysts believe foreign institutional investors' support to this growth will keep investor sentiment buoyant.

Interestingly, the kind of companies that hit the markets this year was diversified and a number of public issues can be seen from the new-age modern industries such as microfinance (SKS), fitness (Talwalkars) and coaching institutes (Career Point).

"Compared to some of the other emerging markets, India is trading only at a slight premium, which we believe is justified considering the superior relative growth outlook," Angel Broking said in a note to investors.

India ranks fourth among the top six top six markets for fund-raising this year, according to E&Y. Greater China tops the list, while the US stands second, followed by Japan. South Korea and Malaysia stand at fifth and sixth place, respectively, according to the E&Y report.

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Punjab & Sind Bank IPO oversubscribed 50 times

Attractive price range in the public offering has contributed to the positive investor response

BY Siddharth Kumar
Delhi

Punjab & Sind Bank's (PSB) strategy to set an attractive price range for its initial public offering (IPO) helped the state-run lender in garnering great response with the share sale offer being oversubscribed 50 times by the end of issue on Thursday.

The only unlisted public sector lender, which entered the capital market with its IPO in a price band of Rs 113-120 per share, received excellent response from all categories of buyers, institutional, retail and employees. At the upper end of price range, the issue would fetch Rs 480 crore.

According to the National Stock Exchange website, in the portion reserved for qualified institutional buyers (QIBs), which includes foreign institutional investors and mutual funds, the offer was oversubscribed 49.8 times. Bidding by QIBs closed on Wednesday while Thursday was last date for non-institutional and retail investors.

The demand for PSB's IPO is almost similar to that of Nagpur-based MOIL Ltd, which on Wednesday was listed on the market with a net gain of 24 per cent on day one on the Bombay Stock Exchange (BSE). The state-run manganese ore miner's issue, which closed in the first week of December, was oversubscribed 49.16 times.

"There is strong appetite for investing in the PSU (public sector undertaking) offers," said Arun Kejriwal, founder of the Mumbai-based advisory firm Kejriwal Research & Investment Services Private Ltd. "The PSB issue is being offered at very attractive valuations," he added.

PSB, with 926 branches, is predominantly present in north and central India. The issue, which opened on Monday, was endorsed with "subscribe" tag by many domestic brokerage houses.

"PSB had one of the highest non-performing assets (8.1 per cent) in the industry in FY (fiscal year) 2005, which came down to one of the lowest in the industry (0.4 per cent) in FY 2010," Angel Broking said in note highlighting the bank's asset quality.

Going by share demand, the bank is likely to fix the issue price at the higher end of the price band, said an investment banking official involved in the issue, who did not want to be named.

Overall investment sentiment was also positive on Thursday on Dalal Street, with the BSE benchmark Sensex closing 217 points or 1.1 per cent higher at 19,864.85 points.

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Govt approves sugar exports to benefit from robust global prices

Export concerns of India and Brazil, and the flash floods in Pakistan in July and August contributed to high sugar prices

BY Siddharth Kumar
Delhi

The government on Wednesday allowed sugar mills to export up to 500,000 tonnes of the sweetener this season under the open general licence, which will help the domestic producers to get rich dividends thanks to high international prices.

Announcing the decision, Union Agriculture Minister Sharad Pawar said the permit of shipment will also help sugar producers "in giving good cane prices to the farmers."

Based on predictions of good production, India, the world's second largest producer of sugar, has permitted exports against the pending advance authorisation scheme and the advance licence scheme to take advantage of soaring international prices.

"The details on the export will be finalised within 10 days," Pawar said while addressing 76th annual general meeting of Indian Sugar Mills Association (ISMA), the apex body of sugar producers in the country.

The sugar industry has been seeking exports under the open general licence, or unrestricted exports, to cash in on robust global prices.

"At present, the international market is good for exports of sugars from India. The opportunity for Indian exporters may not remain beyond February 2011, as shortly thereafter the Brazilian sugar production and exports would begin," said Vivek Saraogi, managing director of Balrampur Chini Ltd and president of ISMA.

Due to export concerns of India and Brazil and the flash floods in Pakistan in July and August, sugar prices witnessed a sudden spurt in the global market and reached their highest point in the last 30 years last month.

"Export from India may help to ease out sugar prices in international market," said an agriculture analyst at a Mumbai-based brokerage firm who did not want to be identified. As per ISMA estimates, on-season production of sugar in 2011 will be around 25.5 million tonnes. The country's sugar production in the last marketing year was 18.8 million tonnes.

According to the Australian Bureau of Agricultural and Resource Economics and Sciences, sugar production in India during the current season is likely to be around 27 million tonnes because of increase in cane plantings.

The government has approved a hike in the levy paid to sugar mills to Rs 1,847.05 per quintal, against last year's Rs 1,757.50 per quintal.

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Delhi Stock Exchange may restart trading before March-end

Delhi Stock Exchange may restart trading before March-end

Long-dormant bourse would become third exchange in the country to offer equity trading

BY Siddharth Kumar
Delhi

After remaining non-functional for nearly a decade, the Delhi Stock Exchange (DSE) is now gearing up to restart operations with some technical upgradation and expects to kick off trading again before the end of current financial year.

"The bourse obtained the required approval from capital market regulator Securities and Exchange Board of India (SEBI) a month ago for the commencement of operations. According to the current plan, DSE will start functioning before the end of March 2011," DSE Chief Executive Officer (CEO) and Executive Director HD Sidhu said in an interview.

Trading activity on the DSE was halted in 2001, as the national capital's bourse -- like other regional stock exchanges -- lagged behind with respect to the required technology that made them unable to compete with the National Stock Exchange (NSE) that has a pan-India presence.

This time the bourse is ready with its online share trading platform which has been constructed in association with Financial Technologies (India) Ltd. The platform is equipped with Exchange Technology Framework Product Suite, a software said to be suited for promotion and successful operation of the exchange.

Though the exchange was expected to restart trading activities way back in 2009, it missed the deadline due to various reasons. However, Sidhu did not divulge the reasons behind the delay in the planned launch.

DSE would be the third exchange in the country to offer trading in the equity segment. At present, the NSE and the Bombay Stock Exchange are the two main bourses in India. As part of its business growth, DSE is also in talks with some other smaller regional stock exchanges (RSEs) such as Ludhiana Stock Exchange and Indore Stock Exchange.

"We are in talks with some RSEs and they have expressed interest in tying up with us. Once we start, I hope to see associations with such institutions," Sidhu said.

To lure companies, the exchange has offered an amnesty scheme to retain maximum number of compliant entities and to recover the arrears of listing fees.

About 2,700 companies are listed on the DSE, out of which 1,700 are exclusively listed on the bourse.

DSE, incorporated in 1947, has successfully completed its demutualisation process in August 2007, according to the SEBI guidelines.

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Eight months on, NSE yet to start trading of US indices

Rupee convertibility issue yet to be resolved

BY Siddharth Kumar
Delhi

A DEAL NSE and the Chicago Mercantile Exchange had signed a cross-listing agreement in March this year.

Investors in India wishing to bet on Dow Jones Industrial Average (DJIA) and the Standard & Poor's (S&P) 500, the world's two most-tracked equity indices, may have to wait for some more time.

This is because the National Stock Exchange (NSE), where the future contracts on these US indices were to be traded, is yet to announce a timeframe for their introduction.

Industry experts believe regulatory approvals from the Reserve Bank of India (RBI) may be a reason for the delay.

"Since in this case the matter of rupee convertibility is also involved, it may come under the review of central bank also," said Sandeep Parekh, a former Securities and Exchange Board of India (SEBI) executive director and founder of Finsec Law Advisors.

A futures contract is an agreement that allows an investor to bet on the underlying asset -- an index or a stock -- for a predetermined price and period.

NSE and the Chicago Mercantile Exchange (CME) had signed a cross-listing agreement in March this year.

Under the deal, DJIA and S&P 500 could be traded on NSE and Nifty -- the benchmark index of the NSE -- would be traded on the CME.

Several calls made to the SEBI spokesperson remained unanswered.

CME owns the rights for S&P 500 and DJIA and has given the licence to NSE for trade in futures contracts in India.

While the dollar-denominated derivatives contracts on Nifty have already been traded in the US, NSE is yet to start similar contracts on the American indices in rupee denominations on its platform. Almost eight months have passed on since the two bourses inked the cross-listing agreement.

Replying to a questionnaire, an NSE spokesperson said: "The agreement between the two exchanges won't be scrapped."

The spokesperson did not give any further details on when the trading would start.

In July this year, the CME has introduced two new contracts -- E-mini and E-micro S&P CNX Nifty Futures -- on its platform designed to access Indian market opportunities.

Investors can trade for nearly 23 hours on the CME Globex. These hours include the market hours in India except the last hour before the Indian market opens.

"The introduction of these two contracts will make Nifty available to a larger community of traders and investors across various exchanges and time zones," NSE Chief Executive Officer and Managing Director Ravi Narain had said earlier.

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Private sector IPOs succumb to stock market weakness

Investors cold-shoulder to corporate offers but give a thumbs up to public sector floats

BY Siddharth Kumar
Delhi

Volatility and resistance to high valuations in the domestic stock markets in the recent past have dashed the aspirations of several corporate houses that have floated initial public offerings (IPOs), especially small and mid-sized ones.

However, public sector floats have not yet felt the heat.

The high prices of public issues from the private sector have failed to attract investors. The Rakesh Jhunjhunwala-backed A2Z Maintenance & Engineering Company Ltd's IPO, which closed last week, was the latest victim. The issue, after a number of hurdles, was fully subscribed only in last hour of bidding.

Last month, Ahmedabad-based Claris Lifesciences Ltd's IPO, too, failed to attract buyers initially and was forced to reduce its original price range. The issue later sailed through, after the company extended the bidding period.

Faced with a fresh weakness in the market, Delhi-based mobile valued-added services provider One97 Communications, which was set to hit the market in the first week of this month, has postponed the issue for the time being.

Market sources said the company will now come out with its IPO in the second or the third week of January. "It is a natural phenomenon. First-time comers into the capital market hesitate when market is not normal," said Kishore P Ostwal, chairman, CNI Research Ltd, a listed Mumbai-based brokerage firm.

The Sensex is down 1.2 per cent in the last seven days and fell 2.84 per cent in the last one month. But some believe the market downturn is not key to the success of an IPO.

"Pricing of the issue and the fundamentals of a company is the key driver to attract investors," said a senior official at Enam Securities, who did not want to be identified.

The postponement of issues, in fact, started in December as November saw five successful IPOs that raised Rs 16,188 crore. Interestingly, this was more than the total amount raised during the period between January and November 2009: Rs 14,345 crore from 16 issues, according to Grant Thornton.

However, it seems that weak investor sentiment has not deterred public sector enterprises from going ahead with their public floats. Punjab and Sind Bank (PSB) is confident that its IPO, which closes on Thursday, will sail through.

"The issue has been attractively priced and a good amount has been left on investors' table," said Ashwini Mehra of SBI Capital Markets Ltd, one of the lead managers to the PSB offering. Mehra is also a general manger at State Bank of India.

Analysts say that after the Coal India Ltd (CIL) record IPO, investors' perception for public sector offerings has improved. The recently concluded issues of MOIL Ltd and Power Grid Corporation of India Ltd, too attracted investors.

The follow-on public offer (FPO) of the state-run Shipping Corporation of India too was oversubscribed five times, even though the issue price was slightly higher than its existing price on the bourses.

"Volatility is the beauty of market," said PK Anand, executive director, PSB, when asked whether this is the right time to enter the market. “We are confident that the issue will get good response, he added.”

The IPO of PSB, which is the only unlisted public sector bank in India, is priced in the range of Rs 113 to Rs 120 per share.

“Currently, there is enough appetite in the market for public sector papers, and positive sentiment for such issues is helping the state-run entities not to worry about market volatility," Ostwal said.

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Tirupati's famous laddus face battle on GI tag

GI registry asks for counter-arguments

BY Siddharth Kumar
Delhi

Tirupati's famous laddus, the iconic sweet offered to devotees as prasadam at the world famous Lord Venkateswara Temple in Andhra Pradesh, now find itself at the centre of a bitter controversy over the grant of a geographical indication (GI) tag to this sacred sweetmeat.

Barely a year after getting protection under the intellectual property rights (IPRs), the laddu is now facing a threat that could see it losing this coveted tag.

The Tirupati Tirumala Devasthanams (TTD), the trust which runs the temple that is believed to be the world's richest Hindu shrine and also has the highest number of visitors, are busy preparing legal documents to prove that their laddus merit a GI certification.

The Chennai-based Geographical Indications Registry, the registered authority for GI certification in India, has issued a notice to TTD that seeking counter-statements to retain this coveted tag.

GI is a sign used on goods that have a specific geographical origin and possess qualities, reputation or characteristics that are essentially attributable to that origin. Once registered, the certification legally prohibits others to use the same brand or name for commercial or any other use.

Globally, Scotch whisky, Champagne and tequila are some of the other products that enjoy this status.

The GI Registry, which works under the office of the Controller General of Patents, Designs and Trademarks -- part of the Ministry of Commerce and Industry -- has sent a letter to TTD in response to an application filed by a Kerala-based IPR activist, RS Praveen Raj.

Raj had approached the registry in October this year seeking the removal of GI for Tirupati laddu. He argued that GI tag for these sweets pointed towards the complete commercialisation of religion. "Giving the Tirupati laddu a GI tag gives out a wrong message to the public, that temple prasadams are akin to industrial goods," he said.

PH Kurian, the controller general of patents, designs and trademarks, refused to comment, saying, "It is a legal matter. There will be a hearing, once we will get counter-statement from TTD in this regard."

Officials say it will take about four months to reach a final conclusion. "There are several procedures which we have to follow. We will proceed further after getting response from TTD," said GL Verma, deputy registrar of trademarks & GI.

A person familiar with the situation explained that TTD had sought GI protection for these laddus, the most sought-after prasadam for hundreds of thousands of pilgrims who throng Tirumala, to avoid it being replicated and sold on the black market by hawkers and middlemen.

TTD authorities did not respond to an email query. Several calls to the executive officer as well as public relations officer too remained unanswered.

When contacted, Praveen Anand, a veteran IPR expert lawyer at Anand & Anand -- the legal advisor to TTD on this issue -- said that there are "negligible chances" that the GI tag will be removed.

"It is a case where the GI was granted after detailed considerations and I do not think it can be removed so easily," Anand said.

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Uncertainty hits MFIs' share sale plans

Share Microfin Ltd IPO postponed for now, say sources

BY Siddharth Kumar
Delhi

The unrest in India's microfinance sector due to recent regulatory changes has spoiled the party for several microfinance institutions (MFIs) that had hoped to to tap the buoyant capital markets to meet their funding requirement.

Hyderabad-based Share Microfin Ltd, which was planning to hit the market in early 2011, has postponed its initial public offering (IPO) for the time being, people involved in the IPO planning told Financial World. Udai Kumar, chairman and managing director of Share Microfin, did not respond calls made on his mobile number.

Spandana Spoorthy Financial Ltd, another Hyderabad-based lender, has also reportedly shelved its IPO plan. Spandana, India's second largest MFI in terms of reach, was planning to come out with a share sale in IPO in the first of 2011.

"Microfinance is an emerging sector. It is facing trouble even before it could have reached the peak. The unrest in the sector is of course hitting the company's plan to get funds from public," said Jagannadham Thunuguntla, strategist at the Delhi-based brokerage SMC Global Securities.

"The uncertainties in sector is making hard for microfinance lenders, especially the smaller companies, to meet their fund requirement," said an official of one of the top MFIs. The official did not want to be identified.

The situation was not same four months ago and it seemed that all was well when the country's largest MFI, SKS Microfinance, mopped up Rs 1,600 crore through a highly successful IPO. This was first listing by an MFI in Asia and second in the world.

However, after Andhra Pradesh took the lead in setting a cap on the interest rate that could be charged by MFIs, the valuation of the SKS share has fallen sharply from its high of Rs 1,490 it was trading at two months ago. The scrip is now trading below its IPO issue price of Rs 985 per share. The SKS counter ended Monday at Rs 710.40, down 0.18 per cent, on the National Stock Exchange.

"Uncertainties in the sector is a major hindrance to meet fund requirement of players in this field," said an official of SKS Microfinance on condition of anonymity. He, however, clarified that SKS is well capitalised and has no dearth of funds.

The Indian microfinance sector has faced heightened regulatory scrutiny in past few months. Analysts said the sector's growth, access to funding, asset quality and operational costs has suffered severely because of these regulatory changes.

Andhra Pradesh passed an ordinance a month ago that enhances regulatory control on MFIs in the southern state. The government headed by then K Rosaiah made it mandatory for microfinance players in the state to register themselves, specify the area of operations, the rate of interest and system of recover.

Besides, under the new rules, MFIs collections have be on a monthly basis instead of weekly. Andhra's share of loans outstanding represents nearly 35 per cent of the sector's total portfolio, according to rating agency Crisil.

"Post-ordinance, the entire sector is in the wait and watch mode. As a consequence to this ordinance, fresh investment in the sector is on hold and lending from public sector banks is also not in very good," said Alok Prasad, chief executive officer of Micro Finance Institutions Network, an industry body of microlenders.

Additionally, the Reserve Bank of India has also announced formation of a sub-committee to assess MFI functioning. Moreover, the Union government has for a long time been mulling a regulatory act for the sector.

The small-scale lenders have attracted criticism from various quarters for charging high interest rates and the coercive means of recovery they are alleged to adopt.

Market experts also said that because of delay in IPOs by these companies, several private equity (PE) players are also worried as they are unable to cash in the buoyant Indian stock market, the best performer in top 10 markets across the globe. Public issues provide PE funds an option to exit a company by selling its stake.

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MOIL issue garners robust response

Boosts Centre's divestment plan

BY Siddharth Kumar
Delhi

The initial public offering (IPO) of the state-run MOIL (former Manganese Ore India Ltd) received robust response from investors, institutional as well as retail, and was 54 times oversubscribed at close on Wednesday.

Market analysts believe the strong response to the Nagpur-based manganese ore miner will act as a booster to the Centre, which aims to garner Rs 40,000 crore by cutting its stakes in public sector undertakings this financial year..

The Rs 1,200-crore issue, which opened on November 26, was subscribed more than 26 times in the portion reserved for retail buyers. The increased retail limit of Rs 2 lakh against the earlier 1 lakh also helped the issue to bring higher subscription levels in retail portion, added analysts. In the non-institutional category, the IPO received bids for 143 times more than on offer for them.

“The response to the issue is mindboggling,” said Arun Kejriwal, founder of the Mumbai-based advisory firm Kejriwal Research and Investment Services.

Moreover, in the portion reserved exclusively for qualified institutional buyers (QIBs), which includes foreign institutional investors, mutual funds and insurance firms, the offer was subscribed more than 49 times the portion on offer for them, according to data on the National Stock Exchange (NSE) website. Bidding for QIBs closed on November 30 and December 1 was the last date for retail investors.

The issue, priced in a range of Rs 340 to Rs 375 per share, would see divestment of a 10 per cent stake by the Centre and 5 per cent each by the state governments of Maharashtra and Madhya Pradesh.

The recently share sales by Coal India Ltd (CIL) and Power Grid Corporation of India Ltd also attracted excellent support. “Clearly, these numbers would bolster the government's divestment programme,” added Kejriwal. Meanwhile, the follow-on public offering of the Shipping Corporation of India (SCI) was subscribed 44 per cent by the end of the second day on Wednesday. The offer, in the range of Rs 135 and Rs 140 per share, closes on December 3.

In secondary market also, the shares of SCI moved up and ended at Rs 144.10 each, higher by 0.31 per cent, on the NSE.

http://www.tehelka.com/story_main48.asp?filename=Ws011210MOIL_IPO.asp

Spicing up the market

BY SIDDHARTH KUMAR

PHOTO: GETTY IMAGES

BETTING ON turmeric is fetching even better returns than investment in stock markets. At a time when the government and the Reserve Bank of India (RBI) are struggling to cool down inflationary pressures, turmeric prices have soared over 40 percent. The common man suffers but the spot price was quoting at Rs. 15,176.30 per 100 kg on 16 November on the National Commodities and Derivative Exchange (NCDEX) — which is a jump of 40.62 percent from the beginning of the year.

Interestingly, the BSE Sensex became the world’s best performing index earlier this month after touching its lifetime best of 21,000. This was a jump of 20 percent, while turmeric gained more than 40 percent. Thus investors betting on turmeric made more money than stock investors. “This year is beneficial for investors who put in their money in agriproducts like turmeric,” says Nalini Rao, senior research analyst at Angel Commodities.

Some equity analysts say there is a relationship between high production of commodities and stock prices. Better performance of commodities is good for companies if they use these products as raw material. “Busi - ness in some fundamental commodity products can be termed more lucrative in comparison to equities,” says Kishore Ostwal, chairman and managing director at the Mumbai-based CNI Research.

India is the largest producer, consumer and exporter of turmeric. “Lower supply in the market and higher demand are the major reasons behind turmeric’s soaring prices. In the past two years, its production was lower. This season production is good, but delay in fresh arrivals is pushing prices northward,” Rao adds. The price rise in spice is important, especially in the backdrop of the high inflation rate, which has forced the RBI to hike key policy rates six times this year. India’s headline inflation stood at 8.58 percent in October, while the food articles inflation rate for the same month was 14.13 percent.

“Food price inflation is a structural problem,” observes Aditi Nayar, economist at ICRA Ltd, while Finance Minister Pranab Mukhejee feels the basic problem is not merely on the demand side. “Inflationary pressures are coming from the supply side. International food prices are going up,” he explains.

High prices of food articles are a major concern for the common man in a country where about 800 million people earn less than $2 a day, according to the World Bank.

Investors betting on turmeric made more money than stock investors at the BSE Sensex

Indian turmeric, considered to be of the best quality due to its high curcumin content, has been rapidly gaining acceptance in global markets, pushing up exports exponentially; and the trend is likely to continue. Dealers say turmeric may trade even higher in the near future on firm demand from stockists, and fresh export enquiries coupled with lower carryover stocks in spot markets. Other commodities like pepper and cardamom too are likely to remain firm in the coming week. According to Angel Commodities, “lower turmeric stocks till fresh arrivals expected in January next year will control the near month futures (derivative contracts on NCDEX) from falling sharply down.”

The sheer volume of India’s turmeric production makes it a major player of the miracle spice used in cosmetics and medicine. According to the Spices Board of India, turmeric exports from April to September 2010 stood at 26,750 tonnes, as compared to 30,275 tonnes in the same period previous year.

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siddharth.kumar@ fwtehelka.com

http://www.tehelka.com/story_main47.asp?filename=Bu271110SPICING_UP.asp

National Spot Exchange plans to launch new metal e-products

Will allow smaller investors to participate in the demat trade

BY Siddharth Kumar
Delhi

The National Spot Exchange Ltd (NSEL) sees big opportunity for its e-series products, which allows retail investors to invest in physical commodities in dematerialised or demat form and is planning to launch 20 products under this umbrella by the next year.

E-series consists of a series of investment products in commodities, which are focused on retail investors. Bourse officials say these products are unique as they have turned commodities from mere hedging and raw material sourcing products to investment instruments.

The e-series functions exactly like the equities cash segment but offers commodities in demat form and in lower denominations, thus enabling even small-time traders to invest in these products, said Anjani Sinha, managing director and chief executive of NSEL.

The spot exchange would currently focus on e-series and sees its future growth coming from this segment, he said.

“We are working on a number of non-perishable commodities such as zinc and nickel that we want to launch next. We are planning to have more than 20 e-series products that would include several ferrous and non-ferrous metals by the end of next year.”

NSEL, promoted by Financial Technologies India Ltd (FTIL) and National Agricultural Cooperative Marketing Federation of India (NAFED), currently has three e-series products–e-gold, e-silver and e-copper.

Sinha claimed that since their launch early this year, e-gold and e-silver products have been a huge success with investors. The depository participants (DP) empanelled with NSEL have till date registered more than 22,000 demat accounts.

The e-series have also proved to be a better investment option over other popular investment products in commodities, such as physical gold and exchange-traded funds as these have given more than 25 per cent return in less than six months, said Sinha.

“There has been consistent growth in turnover as well. The current turnover in e–series products ranges between Rs 100 crore per day to Rs 200 crore per day. With more commodities coming under this series, turnover will soon be reaching to the level of Rs 500 crore per day,” he said.

E-copper has been a hit too, witnessing significant volumes and turnover since its launch last week. On the first day of its launch, investment in e-copper was more than Rs 70 crore while the closing price was Rs 452.10 per kg. Boosted by the success of its e-series products, NSEL’s total turnover at the end of its second year of operations soared by a whopping 235 per cent to Rs 7,320.47 crore.

http://www.tehelka.com/story_main48.asp?filename=Ws261110COMMODITIES.asp

Excess UP rains hit sugar production

Production may not meet its target this year but that is not leaving the sugar industry worried as even a slightly lower achievement would be much better than last year's

BY Siddharth Kumar
Delhi

Sugar production in India may not touch the target of 25.5 million tonnes this marketing year due to excess rain in Uttar Pradesh that has affected the cane yield in the state.

Production may not meet its target this year but that is not leaving the sugar industry worried as even a slightly lower achievement would be much better than last year’s, analysts observed.

“Rain impacted badly on cane crops in Uttar Pradesh and consequently production target for the state this year has been reduced to 6.66 million tonnes from the earlier estimate of 7.09 million tonnes,” said an Indian Sugar Mills Association (ISMA) official, who did not wish to be identified.

According to Vivek Saragoi, managing director of Balrampur Chini Mills Ltd, sugar production in Uttar Pradesh, India’s second largest sugar producing state, would suffer as rains have devastated the cane crop. On Wednesday the International Sugar Organisation (ISO) lowered its 2010-11 world production estimate and said the surplus sugar stocks would be 1.29 million tonnes, less than half its previous production.

The world body hopes for a record sugar production of 169 million tonnes this year, but inclement weather in key sugar producing countries has prompted the global body to slash its output estimate for August by 1.4 million tonnes.

The ISO has also lowered the initial production forecasts for China, the European Union (EU), Russia, Ukraine and Colombia, apart from the largest sugar producing nations. India is world’s second largest producer of sugar after Brazil.

Flash floods in Pakistan in July and August had wiped out large tracts of maturing crops, leading to a spurt in sugar prices in the international markets.

“Commodities prices have moved northward in the recent past on firm demand and lower supply,” said Ravindra V Rao, assistant vice president (commodities advisory) at Unicon Commodities. Sugar prices recently crossed a 30-year high in international market and are seen remaining high and extremely volatile. “Outside Asia, crop expectations for Egypt, the EU and the US were also curtailed,” said the Food and Agriculture Organisation.

However, according to ISMA forecasts India is likely to produce 25 million tonnes of the sweetener in 2010-11. The country’s sugar production in the last marketing year (October to September) was 18.8 million tonnes.

“Bad weather and other factors could lead to a shortfall in sugar production but it will not be worrisome,” said Mehul Agrawal, research analyst (commodities) at Sharekhan, an online trading portal. India is expected to decide on easing curbs on sugar exports after the actual production figures are available, Agriculture Minister Sharad Pawar had told Parliament recently.

http://www.tehelka.com/story_main47.asp?filename=Ws181110SUGAR.asp

MOIL scouting for overseas mines ahead of IPO

Expecting higher demand for manganese

BY Siddharth Kumar
Nagpur

Government-run MOIL Ltd, formerly Manganese Ore (India) Ltd, which is expected to hit the capital market with a Rs 1,500 crore initial public offering (IPO) later this month, is scouting for mines overseas. The company expects higher demand for manganese in the coming years.

"We are looking to acquire mining properties in South Africa, Congo and Turkey, as the demand for manganese by Indian steel producers is expected to rise in the near future," said KJ Singh, chairman and managing director, MOIL Ltd.

"We are at the initial stage of acquisition. We have sufficient cash balance for such deals - about Rs 1,700 crore," added GP Kundargi, director (production and planning), MOIL. "MOIL is a debt free company and has healthy profit margins."

MOIL currently has 10 mines -- six located in the Nagpur and Bhandara districts of Maharashtra and four in the Balaghat district of Madhya Pradesh. All these mines are about a century old. Most of the mines are underground except three which are open-cast.

Tehelka visited MOIL’s Kandri mine, which is an underground mine in the Nagpur district and found that the company maintains high safety standards. Unlike coal blocks, where gases like methane and carbon mono-oxide pose a threat to human health, mining at Kandri was quite clean. The working conditions in the mine were quite conducive with proper ventilation and good lighting. “The output at Kandri is about 60,000 metric tonne per annum and 700 people working on the site”, said Kundargi.

According to rating agency CARE Research, with increasing domestic steel capacities the demand for manganese ore is expected to be strong.

For the production of steel, manganese is a key component. Industry experts say India's steel output is likely to increase to 120 metric tonne by 2012 from about 70 metric tonne at present.

MOIL Ltd's 20 percent stake sale is expected to fetch about Rs 1,500 crore. The company's public offering of 33.6 million shares, comprises 10 per cent stake sale by Centre and 5 percent each by Madhya Pradesh and Maharashta governments.

At present, the union government holds 81.57 per cent in the company, Maharashtra 9.62 per cent and Madhya Pradesh 8.81 per cent.

The government-run miner's officials say the company is getting full support from its employee union for this stake sale. “We see bigger participation under the staff quota of the IPO,” Kundargi added.

MOIL, which functions under the Ministry of Steel, had a profit after tax of Rs 466 crore for the financial year 2009-10.

(The visit to Kandri mines (Nagpur) was sponsored by MOIL)

http://www.tehelka.com/story_main47.asp?filename=Ws151110moil.asp

Trading on the move, NSE style

Trading on the move, NSE style

NSE kicks off trading via the mobile phone

BY Siddharth Kumar
Delhi

The National Stock Exchange (NSE) kicked off mobile trading to enable investors to execute buy or sell orders any time on the move, even while roaming outside the country.

So far, only a handful of member brokers provided this option to their clients, at their own cost. But now, for the first time an Indian exchange will provide this facility to all traders, the bourse said in a statement.

The facility will be available through brokers who have enrolled for NOW – the software used by NSE members – free of cost, the statement said. The brokers or the clients will not have to make any investments.

Investors will be able to trade through their GPRS-enabled mobile sets, while travelling anywhere in India or abroad. They will have access to trade in the cash market, derivatives or currency, just the way they do on their trading terminals, and at the same speed.

“This is another facility the exchange is providing to the large universe of investors, to make trading simpler and easily accessible to clients on the move,” said Ravi Narain, chief executive officer and managing director, NSE.

“Someone sitting in a remote corner like Darbhanga or Siliguri” execute trades, he added. “We expect that nearly 5 million investors would benefit from this move.”

http://www.tehelka.com/story_main47.asp?filename=Ws091110TECHNOLOGY.asp

PowerGrid FPO fully subscribed on Day 1

BY Siddharth Kumar
Delhi

Investors planning to bid for a bigger pie in the state-run Power Grid Corporation of India Ltd’s (PGCIL) follow-on public offer (FPO) after the changed investment limit for retail investors will be disappointed, as the market regulator is yet to officially notify the amendments.

Last month, the Securities and Exchange Board of India (SEBI) had approved an increase in the application limit in public issues for retail investors to Rs 2 lakh from the existing Rs 1 lakh.

The decision to hike the retail limit is yet to be notified by the SEBI and hence the new increased cap “will not be applicable to the Power Grid Corporation of India Ltd’s follow-on public offer,” Union Disinvestment Secretary Sumit Bose told reporters here on Tuesday, during a road show of the state-run power transmission major.

PGCIL has came out with a public offering worth about Rs 7,600 crore and the issue has received good response from investors as it was fully subscribed on the first day of launch on Tuesday. In the secondary market as well, shares of PowerGrid bounced back and gained 5.49 per cent to close at Rs 103.75 each on the Bombay Stock Exchange. In the previous session, the scrip had fallen 3.6 percent.

“Since the FPO is on, volatility in the stock cannot be ruled out,” SMC Global Securities strategist Jagannadham Thunuguntla said.

The issue, priced in a range of Rs 85 to Rs 90 per share, closes on November 12. However, for qualified institutional investors, the bidding will end on November 11. A discount of 5 per cent will be offered to retail investors and employees on the FPO issue price.

The state-run navratna firm is the country’s largest power transmission company and aims to double its capital spending to about $27 billion (about Rs 112,000 crore) in the five years following April 2012.

“We expect PGCIL to achieve the capex (capital expenditure) of Rs 550 billion (Rs 55,000 crore) targeted under the Eleventh Plan, despite meaningful delays in generation capacity additions, given the incremental capex towards high-speed transmission corridors,” domestic brokerage house Motilal Oswal said in a note.

Under the issue, the Centre is divesting its 10 per cent stake by offering to offload its 420 million shares. The FPO also comprises a fresh issue of 420 million shares, representing another 10 per cent stake. Post-issue, the government’s total stake will come down to 69.4 per cent.

According to PGCIL Chairman and Managing Director SK Chaturvedi, the company plans to expand its telecom infrastructure network, including further diversification into value-added services.

The firm aims to diversify into the business of leasing its tower infrastructure to independent tower firms and telecommunications service providers and has appointed a consultant for the same.

The company has also floated tenders for the selection of telecom tower infrastructure providers for utilising its transmission towers in Punjab, Haryana, Himachal Pradesh and Jammu and Kashmir, he said. According to the Motilal Oswal report, “The revenue potential of this business could possibly be Rs 4.5- 5 billion.”

When asked whether the PGCIL issue will be able the generate the kind of demand Coal India’s Rs 15,200 crore initial public offering (IPO) did, Chaturvedi said, “The two should not be compared as demand for an IPO is different from a FPO.”

PGCIL had been entrusted with the statutory role of Central Transmission Utility (CTU) by the government. As CTU, the company operates and is responsible for the planning and development of the country’s nationwide power transmission network, including interstate networks. It was ranked as the world’s third largest transmission utility by the World Bank in January 2009.

http://www.tehelka.com/story_main47.asp?filename=Ws091110MARKETS.asp

The feud continues

MCX-SX challenges SEBI order with writ petition in the Bombay High Court

BY Siddharth Kumar
Delhi

MCX Stock Exchange (MCX-SX), which is at loggerheads with the capital market regulator, has filed a petition in the Bombay High Court challenging the order of the Securities and Exchange Board of India (SEBI) that rejects the bourse’s application against their starting business in equity and some other segments.

The writ petition was filed on October 29 and is expected to be taken up for admission after the court vacation.

"We have confidence in the judicial system and we are sure that justice will prevail," MCX-SX Managing Director and Chief Executive Joseph Massey said in a statement.

SEBI on September 23, 2010, had passed an order rejecting the application made by the bourse to get a regulatory nod for commencement of trading in equity, futures and options, wholesale debt market and other segments products. SEBI cited the failure to comply the mandatory shareholding norms by promoters, among several other issues, for the rejection of the application.

Earlier, in July, MCX-SX had dragged the market watchdog in the Bombay High Court for delaying the decision over its application to start new products.

MCX-SX, promoted by Multi Commodity Exchange (MCX) and Financial Technologies (India) Ltd (FTIL), presently offers trading in currency derivatives.

In a further setback to MCX-SX, last month SEBI granted the green signal to the National Stock Exchange and the Bombay Stock Exchange (BSE)-backed United Stock Exchange to begin trading in currency options. MCX-SX, however, failed to get the nod till now to start trading in currency options, a derivative instrument used to hedge against currency fluctuations.

"The recent decision of SEBI not granting currency options to us along with other exchanges was vindictive, biased and discriminatory, like its earlier decision of not granting IRF (interest rate futures) to us. Such a decision has already started impacting our business adversely," Massey said.

Despite a weaker broader market, shares of FTIL on Monday gained over 2 percent on the BSE to settle at Rs 1,063.40 each. The BSE bellwether Sensex shed was down 0.7 per cent.

http://www.tehelka.com/story_main47.asp?filename=Ws081110TheFeud.asp