Emkay Global Financial Services has maintained its buy rating on Sintex Industries with a target price of Rs 112 in its March 2, 2009 research report.
"The current economic situation has prompted us to re-visit our earnings estimates for Sintex. We expect stumbling blocks in key business interests including monolithic construction, important growth driver for Sintex. Consequently, we have revised our assumptions for FY08-FY11E and factored- 1) lower revenue CAGR of 68% in the monolithic construction vertical versus earlier CAGR of 93%, 2) 8% revenue CAGR in standalone custom molding vertical versus 30% CAGR earlier, 3) 25% revenue CAGR in standalone prefabs vertical versus 36% CAGR earlier and 4) 29% decline in net profit of subsidiaries versus 64% CAGR earlier. The overall impact on consolidated earnings is 13% (Rs 23.7), -19% (Rs 24.8) and -26% (Rs 29.6) for FY09E, FY10E and FY11E respectively."
"We expect revised earnings CAGR of 23% during FY08-FY11E. At CMP of Rs 88, the stock is trading at a valuation of 3.5x FY10E earnings and 0.5x FY10E book value - attractive valuations for growth business. Thus in light of strong growth prospects, healthy balance sheet, excellent track record and ROIC of 13%, we maintain ‘BUY’ with a revised target price of Rs 112," says Emkay Global Financial Services' research report.
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Tuesday, March 3, 2009
SBI, 2 others cut deposit rates
Stage set for other lenders to follow suit.
State Bank of India (SBI), IDBI Bank and Yes Bank On Monday slashed deposit rates by 25 to 75 basis points across various maturities – a move that may set the stage for other banks to follow suit.
The largest lender in the country, SBI has reduced deposit rates by 40 to 50 basis points across maturities. On deposits for a period of one year up to two years, the bank has reduced interest rates by 40 basis points to 8.10 per cent. And, deposits for any length of time between two years and 1,000 days would now earn an interest of 8.5 per cent against 9 per cent earlier.
Similarly, the rate for deposits above 1,000 days and less than three years has been lowered by 50 basis points to 8.25 per cent. The new rates would be effective from March 9.
IDBI Bank has reduced interest rates on retail term deposits for one-to-three years, 1,100 days and more than three years up to 10 years by 25-50 basis points. The new rates would be effective from March 6.
“We have brought down deposit rates to reduce the cost of resources. Even after this revision, our rate structure would remain attractive compared to other banks,” said C S Jain, head of retail at IDBI Bank.
Private sector lender Yes Bank has reduced deposit rates across maturities by 25-75 basis points. Interest rates on deposits with tenures of more than a year up to two years were lowered by 75 basis points to 9.25-9.50 per cent, depending on the amount deposited.
Similarly, all deposit rates beyond the tenure of two years have been reduced by 25 basis points. The new rates range between 8.75 per cent and 9.25 per cent, depending upon the deposit amount.
Even the lending rates have been cut. IDBI Bank has also reduced its floating home loan rates by 50-100 basis points. The revised floating interest rate would be 9.75 per cent for loans up to Rs 20 lakh and 10.25 per cent for loans above Rs 20 lakh. The new rates would be effective from March 3.
For loans up to Rs 30 lakh, IDBI Bank has reduced the margin money from 20 to 15 per cent. Also, for loans above Rs 30 lakh, the margin money requirement has been brought down to 20 per cent from 25 per cent.
Reserve Bank of India (RBI) Governor Duvvuri Subbarao had met bank chiefs on Friday to discuss the interest rate scenario. The central bank was particularly keen on private sector lenders to make loans cheaper as they have so far pared interest rates by only 50 basis points. On the other hand, public sector banks have slashed rates by up to 200 basis points.
Following the meeting, some banks such as Punjab National Bank (PNB) and Union Bank of India had reduced home and auto loan rates on Saturday.
While PNB reduced car loan rates by 50 basis points, Union Bank cut rates on home loans by 25-100 basis points and car loans by 125-150 basis points. “Our deposit rates are the lowest in the market at around 8 per cent, so there is little scope for further reduction,” said a Union Bank executive.
SBI has frozen home and auto loan rates at 8 per cent and 10 per cent respectively for a year.
“We have cut deposit rates to reduce the cost of resources. Even after this revision, our rate structure would remain attractive compared to others,” said C S Jain, head of retail, IDBI Bank.
State Bank of India (SBI), IDBI Bank and Yes Bank On Monday slashed deposit rates by 25 to 75 basis points across various maturities – a move that may set the stage for other banks to follow suit.
The largest lender in the country, SBI has reduced deposit rates by 40 to 50 basis points across maturities. On deposits for a period of one year up to two years, the bank has reduced interest rates by 40 basis points to 8.10 per cent. And, deposits for any length of time between two years and 1,000 days would now earn an interest of 8.5 per cent against 9 per cent earlier.
Similarly, the rate for deposits above 1,000 days and less than three years has been lowered by 50 basis points to 8.25 per cent. The new rates would be effective from March 9.
IDBI Bank has reduced interest rates on retail term deposits for one-to-three years, 1,100 days and more than three years up to 10 years by 25-50 basis points. The new rates would be effective from March 6.
“We have brought down deposit rates to reduce the cost of resources. Even after this revision, our rate structure would remain attractive compared to other banks,” said C S Jain, head of retail at IDBI Bank.
Private sector lender Yes Bank has reduced deposit rates across maturities by 25-75 basis points. Interest rates on deposits with tenures of more than a year up to two years were lowered by 75 basis points to 9.25-9.50 per cent, depending on the amount deposited.
Similarly, all deposit rates beyond the tenure of two years have been reduced by 25 basis points. The new rates range between 8.75 per cent and 9.25 per cent, depending upon the deposit amount.
Even the lending rates have been cut. IDBI Bank has also reduced its floating home loan rates by 50-100 basis points. The revised floating interest rate would be 9.75 per cent for loans up to Rs 20 lakh and 10.25 per cent for loans above Rs 20 lakh. The new rates would be effective from March 3.
For loans up to Rs 30 lakh, IDBI Bank has reduced the margin money from 20 to 15 per cent. Also, for loans above Rs 30 lakh, the margin money requirement has been brought down to 20 per cent from 25 per cent.
Reserve Bank of India (RBI) Governor Duvvuri Subbarao had met bank chiefs on Friday to discuss the interest rate scenario. The central bank was particularly keen on private sector lenders to make loans cheaper as they have so far pared interest rates by only 50 basis points. On the other hand, public sector banks have slashed rates by up to 200 basis points.
Following the meeting, some banks such as Punjab National Bank (PNB) and Union Bank of India had reduced home and auto loan rates on Saturday.
While PNB reduced car loan rates by 50 basis points, Union Bank cut rates on home loans by 25-100 basis points and car loans by 125-150 basis points. “Our deposit rates are the lowest in the market at around 8 per cent, so there is little scope for further reduction,” said a Union Bank executive.
SBI has frozen home and auto loan rates at 8 per cent and 10 per cent respectively for a year.
“We have cut deposit rates to reduce the cost of resources. Even after this revision, our rate structure would remain attractive compared to others,” said C S Jain, head of retail, IDBI Bank.
Japan stocks fall to fresh 26-year low
Japanese stocks fell to a fresh 26-year low today after the Dow Jones industrial average closed below 7,000 for the first time in more than 11 years on growing fears over the health of the US financial sector.
The benchmark Nikkei 225 stock average tumbled 104.82 points, or 1.44 per cent, to 7,175.33 in the morning trade, extending further losses after a 3.8-per cent drop yesterday. That marked a fresh 26-year low for the Nikkei, which closed at 7,114.64 on October 7, 1982.
The broader Topix index also fell 1.67 per cent to 722.32.
"Investors are becoming nervous about the state of the US financial sector. They were worried about deteriorating assets in the US financial sector," said Kazuhiro Takahashi, equity strategist at Daiwa Securities SMBC Co Ltd.
Investors were jittery after insurer American International Group Inc reported a staggering USD 61.7 billion in quarterly losses, sparking fresh fears about the health of the US financial system. The worries pressured the Dow, which fell 299.64, or 4.24 per cent, to 6,763.29. The Dow last closed below 7,000 on May 1, 1997.
The US credit crisis and recession have slashed more than half the average's value since it hit a record high over 14,000 in October 2007. And now many investors fear the market could take a long time to regain the lost 7,000.
The benchmark Nikkei 225 stock average tumbled 104.82 points, or 1.44 per cent, to 7,175.33 in the morning trade, extending further losses after a 3.8-per cent drop yesterday. That marked a fresh 26-year low for the Nikkei, which closed at 7,114.64 on October 7, 1982.
The broader Topix index also fell 1.67 per cent to 722.32.
"Investors are becoming nervous about the state of the US financial sector. They were worried about deteriorating assets in the US financial sector," said Kazuhiro Takahashi, equity strategist at Daiwa Securities SMBC Co Ltd.
Investors were jittery after insurer American International Group Inc reported a staggering USD 61.7 billion in quarterly losses, sparking fresh fears about the health of the US financial system. The worries pressured the Dow, which fell 299.64, or 4.24 per cent, to 6,763.29. The Dow last closed below 7,000 on May 1, 1997.
The US credit crisis and recession have slashed more than half the average's value since it hit a record high over 14,000 in October 2007. And now many investors fear the market could take a long time to regain the lost 7,000.
Buffett's Annual Letter
'Global crisis may pull down India's GDP to 3%'
Continuation of the bearish phase in the global economy could pull down India's economic growth rate to a dismal 3 per cent in 2009, said international financial services major Morgan Stanley.
Morgan Stanley's research report released today said, depending upon the extent of economic recovery in the developed world, India's gross domestic product (GDP) growth rate during 2009 could range between 3 per cent and 5 per cent.
"Based on bull-bear case outlook for G7 (club of developed countries), we see bull scenario growth for India at 5 per cent in 2009 and 7.4 per cent in 2010 and bear case at 3 per cent in 2009 and 4.5 per cent in 2010," it added.
However, on an average, the report projected India's economic growth rate for 2009 at 4.3 per cent and for 2010 at 6.1 per cent.
According to advance estimates of national income released by the government recently, the economic growth rate during 2008-09 is expected to moderate to 7.1 per cent from 9 per cent in the previous fiscal.
The third quarter growth (October-December 2008) rate has been estimated at 5.3 per cent, down from 8.9 per cent posted during the corresponding period last year.
Morgan Stanley's research report released today said, depending upon the extent of economic recovery in the developed world, India's gross domestic product (GDP) growth rate during 2009 could range between 3 per cent and 5 per cent.
"Based on bull-bear case outlook for G7 (club of developed countries), we see bull scenario growth for India at 5 per cent in 2009 and 7.4 per cent in 2010 and bear case at 3 per cent in 2009 and 4.5 per cent in 2010," it added.
However, on an average, the report projected India's economic growth rate for 2009 at 4.3 per cent and for 2010 at 6.1 per cent.
According to advance estimates of national income released by the government recently, the economic growth rate during 2008-09 is expected to moderate to 7.1 per cent from 9 per cent in the previous fiscal.
The third quarter growth (October-December 2008) rate has been estimated at 5.3 per cent, down from 8.9 per cent posted during the corresponding period last year.
Rupee hits new low as foreign funds pull out
Threats of rating downgrade put pressure on currency.
The rupee hit a new low of 51.94 in intra-day trade against the US dollar, mainly owing to a growing risk aversion by foreign funds and rising dollar demand from importers, but recovered to close at 51.46, 30 paise lower than Friday’s close.
Overall, the Indian currency has weakened 4.15 per cent since last Tuesday, when global rating agency Standard & Poor’s lowered its outlook on India’s sovereign rating owing to growing government fiscal profligacy, raising prospects of a downgrade to sub-investment grade.
This steady weakening has been a big headache for exporters because they are now unsure of the level at which they should hedge their risks.
“There is too much bad news. The fiscal slippage has prompted rating agencies to put some sort of a rating watch and slowing economic growth is adding to the gloom,” said Tarini Vaidya, head of trading at HDFC Bank.
With foreign institutional investors (FII) already withdrawing large sums, a downgrade will only add to the rush out of India, since investors who use the FII route mandate investment in certain grades of instruments.
Data from the Securities and Exchange Board of India (Sebi) shows that FIIs have been net sellers in the equity market to the tune of $1.35 billion since last Tuesday. In the debt segment, too, net sales have been of the order of $409 million.
The rupee hit a new low of 51.94 in intra-day trade against the US dollar, mainly owing to a growing risk aversion by foreign funds and rising dollar demand from importers, but recovered to close at 51.46, 30 paise lower than Friday’s close.
Overall, the Indian currency has weakened 4.15 per cent since last Tuesday, when global rating agency Standard & Poor’s lowered its outlook on India’s sovereign rating owing to growing government fiscal profligacy, raising prospects of a downgrade to sub-investment grade.
This steady weakening has been a big headache for exporters because they are now unsure of the level at which they should hedge their risks.
“There is too much bad news. The fiscal slippage has prompted rating agencies to put some sort of a rating watch and slowing economic growth is adding to the gloom,” said Tarini Vaidya, head of trading at HDFC Bank.
With foreign institutional investors (FII) already withdrawing large sums, a downgrade will only add to the rush out of India, since investors who use the FII route mandate investment in certain grades of instruments.
Data from the Securities and Exchange Board of India (Sebi) shows that FIIs have been net sellers in the equity market to the tune of $1.35 billion since last Tuesday. In the debt segment, too, net sales have been of the order of $409 million.
RIL-RPL merger ratio at 1:16
'This is about size,' says RIL's chief financial officer.
Reliance Industries Ltd (RIL), India’s largest company by market capitalisation, has offered one share for every 16 held in Reliance Petroleum (RPL) to merge its refinery subsidiary.
RIL will issue 69.2 million new shares to shareholders of RPL in order to buy back the company and will have 3.7 million shareholders after the merger. RIL’s equity capital will rise to Rs 1,643 crore and the promoter’s holdings will fall by 2 per cent to 47 per cent, the company said in a statement issued today.
Alok Agarwal, RIL’s chief financial officer, told reporters here today that no fresh treasury stock would be created and the parent’s holding in the petroleum unit would be cancelled. Almost 200 million existing treasury shares would continue, he added.
RIL’s absorption of RPL will be tax neutral for both the entities. “This merger is not about tax benefits. As far as taxation is concerned, the SEZ refinery is a separate undertaking. Both refineries will retain their tax benefits,” Agarwal said.
“This is about size, this is about diversification,” Agarwal said, adding the merger would give RIL the ability to take on projects much larger than done before.
RIL has set April 1, 2008 for the date of the amalgamation. The takeover is subject to approvals by the high courts at Mumbai and Ahmedabad.
WHY THE MERGER?
* Creates one-fourth of the world’s total complex refining capacity
* Becomes the world's single-largest refining hub
* Becomes the world's 17th largest refining company
* Becomes the world’s fifth largest polypropylene producer
* Derives synergies from combined operations — crude sourcing, product placement, supply chain optimisation
* Acquires flexibility in operations planning, higher utilisation of combined cash flows
Analysts were not surprised st the merger as RIL has played the merger game quite often in the past. All of RIL’s subsidiaries involved in refining or petrochemicals in the past have eventually been merged with RIL. RIL’s existing refinery was earlier in a separate company also named Reliance Petroleum. This company, which started operations in FY01, was merged with RIL with effect from March 2002.
Also, RIL acquired petrochemical company IPCL in FY03 as part of the government’s disinvestment programme. IPCL was merged with RIL in FY07. Several other petrochemical companies either promoted by RIL or acquired by it have eventually been merged with RIL.
The latest merger, which was announced after early morning board meetings today, will create a behemoth with a total refining capacity of 1.24 million barrels of crude a day, which is a quarter of the world's total complex refining capacity.
The merger would help source crude oil for the integrated refinery complex and aid marketing of fuels such as gasoline and diesel globally at a time when demand was slumping, Agarwal said.
RIL said the merger would result in RIL operating two of the world’s largest, most complex refineries; emerging as the world’s fifth largest producer of polypropylene; and becoming the world’s largest producer of ultra clean fuels at a single location.
The 1.24 million barrels per day refining capacity made at Jamnagar in Gujarat is the single largest refining hub in the world, beating Paraguana refinery in Venezuela.
The merger, however, did not help the stock price. Shares of RPL dropped as much as 8.3 per cent, but recovered to close 2.3 per cent lower at Rs 74.60. Parent RIL fell as much as 4.2 per cent before closing 3.84 per cent lower at Rs 1,217.4 on the Bombay Stock Exchange. The Sensitive Index dropped 3.7 per cent.
Analysts said the ratio was slightly worse than the market expected. But the cancellation of treasury stock meant RIL’s earnings per share would go up. The stock tumbled today more because of global concerns, they said.
Rating agency Moody’s said the merger simplified the group’s corporate structure, giving RIL access to an additional 30 per cent of cash flow generation from RPL that it did not currently have, for a small cash consideration.
RIL, which owns 70 per cent of RPL, will buy Chevron Corp’s 5 per cent stake in RPL for Rs 1,350 crore as part of the merger. The US oil major is reselling the shares at the same price it bought from RIL at the time of the public offering in April 2006.
RIL officials said the company would continue its commercial relations with Chevron though both agreed to discontinue the equity participation. As per the agreement, Chevron was supposed to sign crude supply and product off-take agreement with RIL. But it did not happen as they wanted to exit from the investment in refining. RIL was now well prepared to buy crude and supply products and hence could go ahead alone,” the officials said.
RIL said the merger would unlock significant operational and financial synergies that existed between RIL and RPL. Through this merger, RIL consolidated a complex refinery with minimal residual project risk, while complementing RIL’s product range. There would be further gains from reduced operating cost arising from synergies of combined operations, RIL added.
The RPL refinery, which was commissioned on December 25, 2008, has so far earned $300 million revenue through early product deliveries.
RIL’s 33 million tonne per annum (mtpa) refinery at Jamnagar together with RPL's newly built 29 mtpa export oriented refinery would make it the largest refining company in India. It would displace state-owned Indian Oil Corporation (IOC) with 50.7 mtpa refining capacity.
In the list of world's largest refining companies, RIL will become the 17th largest firm after the merger. The list is led by Exxon Mobil with a massive 5.6 million barrels per day (mbpd), followed by Shell with 4.6 mbpd and Sinopec’s 3.8 mbpd refining capacities.
Citigroup Global Markets India advised RPL on the deal and Ernst & Young and Morgan Stanley India advised RIL valuation, the company said.
Reliance Industries Ltd (RIL), India’s largest company by market capitalisation, has offered one share for every 16 held in Reliance Petroleum (RPL) to merge its refinery subsidiary.
RIL will issue 69.2 million new shares to shareholders of RPL in order to buy back the company and will have 3.7 million shareholders after the merger. RIL’s equity capital will rise to Rs 1,643 crore and the promoter’s holdings will fall by 2 per cent to 47 per cent, the company said in a statement issued today.
Alok Agarwal, RIL’s chief financial officer, told reporters here today that no fresh treasury stock would be created and the parent’s holding in the petroleum unit would be cancelled. Almost 200 million existing treasury shares would continue, he added.
RIL’s absorption of RPL will be tax neutral for both the entities. “This merger is not about tax benefits. As far as taxation is concerned, the SEZ refinery is a separate undertaking. Both refineries will retain their tax benefits,” Agarwal said.
“This is about size, this is about diversification,” Agarwal said, adding the merger would give RIL the ability to take on projects much larger than done before.
RIL has set April 1, 2008 for the date of the amalgamation. The takeover is subject to approvals by the high courts at Mumbai and Ahmedabad.
WHY THE MERGER?
* Creates one-fourth of the world’s total complex refining capacity
* Becomes the world's single-largest refining hub
* Becomes the world's 17th largest refining company
* Becomes the world’s fifth largest polypropylene producer
* Derives synergies from combined operations — crude sourcing, product placement, supply chain optimisation
* Acquires flexibility in operations planning, higher utilisation of combined cash flows
Analysts were not surprised st the merger as RIL has played the merger game quite often in the past. All of RIL’s subsidiaries involved in refining or petrochemicals in the past have eventually been merged with RIL. RIL’s existing refinery was earlier in a separate company also named Reliance Petroleum. This company, which started operations in FY01, was merged with RIL with effect from March 2002.
Also, RIL acquired petrochemical company IPCL in FY03 as part of the government’s disinvestment programme. IPCL was merged with RIL in FY07. Several other petrochemical companies either promoted by RIL or acquired by it have eventually been merged with RIL.
The latest merger, which was announced after early morning board meetings today, will create a behemoth with a total refining capacity of 1.24 million barrels of crude a day, which is a quarter of the world's total complex refining capacity.
The merger would help source crude oil for the integrated refinery complex and aid marketing of fuels such as gasoline and diesel globally at a time when demand was slumping, Agarwal said.
RIL said the merger would result in RIL operating two of the world’s largest, most complex refineries; emerging as the world’s fifth largest producer of polypropylene; and becoming the world’s largest producer of ultra clean fuels at a single location.
The 1.24 million barrels per day refining capacity made at Jamnagar in Gujarat is the single largest refining hub in the world, beating Paraguana refinery in Venezuela.
The merger, however, did not help the stock price. Shares of RPL dropped as much as 8.3 per cent, but recovered to close 2.3 per cent lower at Rs 74.60. Parent RIL fell as much as 4.2 per cent before closing 3.84 per cent lower at Rs 1,217.4 on the Bombay Stock Exchange. The Sensitive Index dropped 3.7 per cent.
Analysts said the ratio was slightly worse than the market expected. But the cancellation of treasury stock meant RIL’s earnings per share would go up. The stock tumbled today more because of global concerns, they said.
Rating agency Moody’s said the merger simplified the group’s corporate structure, giving RIL access to an additional 30 per cent of cash flow generation from RPL that it did not currently have, for a small cash consideration.
RIL, which owns 70 per cent of RPL, will buy Chevron Corp’s 5 per cent stake in RPL for Rs 1,350 crore as part of the merger. The US oil major is reselling the shares at the same price it bought from RIL at the time of the public offering in April 2006.
RIL officials said the company would continue its commercial relations with Chevron though both agreed to discontinue the equity participation. As per the agreement, Chevron was supposed to sign crude supply and product off-take agreement with RIL. But it did not happen as they wanted to exit from the investment in refining. RIL was now well prepared to buy crude and supply products and hence could go ahead alone,” the officials said.
RIL said the merger would unlock significant operational and financial synergies that existed between RIL and RPL. Through this merger, RIL consolidated a complex refinery with minimal residual project risk, while complementing RIL’s product range. There would be further gains from reduced operating cost arising from synergies of combined operations, RIL added.
The RPL refinery, which was commissioned on December 25, 2008, has so far earned $300 million revenue through early product deliveries.
RIL’s 33 million tonne per annum (mtpa) refinery at Jamnagar together with RPL's newly built 29 mtpa export oriented refinery would make it the largest refining company in India. It would displace state-owned Indian Oil Corporation (IOC) with 50.7 mtpa refining capacity.
In the list of world's largest refining companies, RIL will become the 17th largest firm after the merger. The list is led by Exxon Mobil with a massive 5.6 million barrels per day (mbpd), followed by Shell with 4.6 mbpd and Sinopec’s 3.8 mbpd refining capacities.
Citigroup Global Markets India advised RPL on the deal and Ernst & Young and Morgan Stanley India advised RIL valuation, the company said.
Wall Street's free fall on; Dow plunges 299.64
Investors' despair about financial companies and the recession has brought the Dow Jones industrial average to another unwanted milestone: its first drop below 7,000 in more than 11 years. The market's slide Monday, which took the Dowdown 300 points, was nowhere near the largest it has seen since last fall, but the tumble below 7,000 was nonetheless painful. The credit crisis and recession have slashed more than half the average's value since it hit a record high over 14,000 in October 2007. And now many investors fear the market could take a long time to regain the lost 7,000. ``As bad as things are, they can still get worse, and get a lot worse,'' said Bill Strazzullo, chief market strategist for Bell Curve Trading. Strazzullo said he believes there's a significant chance the S&P 500 and the Dow will fall back to their 1995 levels of 500 and 5,000, respectively. The ``game-changer,'' he said, will be the housing market and whether it can stabilize. A recovery will also require signs of health among financial companies, but so far in 2009, it is clear that banks and insurance companies' losses are multiplying despite hundreds of billions of dollars in government help. The market fell Monday after insurer American International Group Inc. posted a staggering $61.7 billion in quarterly losses and as the government agreed to inject more money into the company. AIG will get another $30 billion in loans, on top of the $150 billion the government has already invested. And it's not just U.S. companies that have Wall Street frightened. HSBC PLC, Europe's largest bank by market value, said Monday it needs to raise $17.7 billion. The company reported a 70 percent drop in 2008 earnings and said it would cut 6,100 jobs. While the root of financial firms' problems lie with the bad bets they made on mortgages and mortgage-backed securities, now the recession is exacerbating their problems as it also forces millions of job cuts. ``The economy definitely has deteriorated since November,'' said Sean Simko, head of fixed income management at SEI Investments. ``It's just the fact that we haven't seen signs of improving or stabilizing, per se, which is adding to the morass of the market.'' According to preliminary calculations, the Dow fell 299.64, or 4.24 percent, to 6,763.29. The Dow last closed below 7,000 on May 1, 1997 and hadn't finished at this level since April 25, 1997. The Dow's descent has been swift. It took only 14 sessions for the average to go from above 8,000 to below 7,000. So far this year, the Dow is down 22.9 percent. Broader stock indicators also slid. The Standard & Poor's 500 index fell 34.27, or 4.7 percent, to 700.82. The index briefly traded below the 700 mark in the final minutes of the session. S&P 500 index hadn't traded below 700 since Oct. 29, 1996. It hasn't closed below that level since the previous day, Oct. 28. The Nasdaq composite index fell 54.99, or 4 percent, to 1,322.85. The Russell 2000 index of smaller companies fell 21.22, or 5.5 percent, to 367.80. About 16 stocks fell for every one that rose on the New York Stock Exchange, where volume came to a heavy 1.80 billion shares.
US moves to aid AIG yet again; when will it end?
A new definition of desperate times: Even as the government threw a stunning new $30 billion lifeline to American International Group on Monday, the beleaguered insurance giant confirmed it had lost more than twice that much, $62 billion, in a single three-month period. And many more billions of federal dollars are almost sure to be shoveled into the company for a simple reason: Officials fear its collapse would cripple financial markets in the US. and around the world. The source of trouble for AIG, which has 74 million customers worldwide and operations in more than 130 countries, is its business insuring mortgage-backed securities and other debt against default. That business imploded once the credit crisis struck with force. The government has now made four separate efforts to save the company, totaling more than $170 billion. AIG is so big and sprawling, so intertwined with institutions around the globe that its downfall could set off a vicious chain reaction. Upheaval on such a global scale would plunge the US. economy deeper into recession, drive up unemployment and stifle hopes for an economic rebound any time soon.
The company provides life, property and other insurance offerings, with 30 million policyholders in the United States alone. It also provides asset-management services and airplane leases. Its International Lease Finance Corp., which leases jets to airlines, has been up for sale and was thought to be one of the insurer's jewels. But falling travel demand has forced airlines to shrink fleets. AIG's businesses also are linked to mutual funds, annuities and other retirement products held by many Americans. “Given the systemic risk AIG continues to pose and the fragility of markets today, the potential cost to the economy and the taxpayer of government inaction would be extremely high,'' the Treasury Department and the Federal Reserve said in a joint statement Monday. Turning AIG into a smaller, more viable company, “will take time and possibly further government support,'' the Treasury and the Fed acknowledged. Indeed, many analysts say the United States will eventually be forced to funnel billions more into the company, which the government seized control of last year. And they say AIG has become a seemingly bottomless money pit that poses a cautionary tale about the effectiveness of US. bailouts. Mark Williams, professor of finance and economics at Boston University and a former Federal Reserve bank examiner, said he thinks at least $200 billion more will have to be extended to AIG.
The company provides life, property and other insurance offerings, with 30 million policyholders in the United States alone. It also provides asset-management services and airplane leases. Its International Lease Finance Corp., which leases jets to airlines, has been up for sale and was thought to be one of the insurer's jewels. But falling travel demand has forced airlines to shrink fleets. AIG's businesses also are linked to mutual funds, annuities and other retirement products held by many Americans. “Given the systemic risk AIG continues to pose and the fragility of markets today, the potential cost to the economy and the taxpayer of government inaction would be extremely high,'' the Treasury Department and the Federal Reserve said in a joint statement Monday. Turning AIG into a smaller, more viable company, “will take time and possibly further government support,'' the Treasury and the Fed acknowledged. Indeed, many analysts say the United States will eventually be forced to funnel billions more into the company, which the government seized control of last year. And they say AIG has become a seemingly bottomless money pit that poses a cautionary tale about the effectiveness of US. bailouts. Mark Williams, professor of finance and economics at Boston University and a former Federal Reserve bank examiner, said he thinks at least $200 billion more will have to be extended to AIG.
AIG enters record books with $61.7 billion loss
American International Group Inc posted a $61.7 billion fourth-quarter loss -- the biggest quarterly loss in corporate history -- after reaching a revised rescue deal with the US government that wards off for now the prospect of crippling credit ratingdowngrades. The massive quarterly loss, equal to $22.95 a share, was AIG's fifth in a row, bringing the total loss over that period to more than $100 billion. The US Treasury and Federal Reserve said AIG had posed a systemic risk requiring government action to prevent its problems from damaging the entire financial system. AIG, the recipient of $150 billion in taxpayer aid last year, will get access to an additional $30 billion under the government's revised plan announced on Monday. It also got more lenient terms on existing financing and will be able to significantly pay down an outstanding credit facility in a swap that will give the government a preferred-share stake in two life insurance businesses. AIG also announced plans to spin off part of its property-casualty business, to be renamed AIU Holdings.
The revamped rescue package is the third since last fall when the government stepped in to bail out AIG, once the world's biggest insurer by market value. The Treasury and the Fed said that AIG, which has counterparties around the globe, was so important to the US economy and financial system that it had to be helped, and they held out the possibility more aid might be needed. "This will take time and possibly further government support if markets do not stabilize and improve," they said in a statement.
The revamped rescue package is the third since last fall when the government stepped in to bail out AIG, once the world's biggest insurer by market value. The Treasury and the Fed said that AIG, which has counterparties around the globe, was so important to the US economy and financial system that it had to be helped, and they held out the possibility more aid might be needed. "This will take time and possibly further government support if markets do not stabilize and improve," they said in a statement.
Monday, March 2, 2009
Reebok's India turnover touches Rs 1,400 crore
Reebok, the leading sports and fitness brand in the country with a 54 per cent market share, says its Indian revenues touched Rs 1,400 crore (at retail prices) for the calendar year ending December 2008. Revenues at retail price is an industry term for comparison between branded apparel and footwear industry players.
The company has added that it will also maintain its advertising and marketing spends at 10 per cent of its sales, even as its spends for the Indian Premier League (IPL) increase this year.
“We are increasing our marketing expense three-fold for IPL with 25 per cent of our total A&M budgets dedicated to the event,” Sajid Shamim, Executive Director for Marketing, Reebok India Company (RIC), says. The brand will be associated with Team Mohali, a new addition to its fold besides last year’s Kolkata Knight Riders, Bangalore’s Royal Challengers and the Chennai Super Kings.
Marketed and traded in India through RIC – a subsidiary of the Germany-headquartered Adidas – Reebok has grown its revenues eight times in the last six years in India, according to Vishnu Bhagat, the firm’s chief financial officer.
Earlier this month, RIC received an LAA- long-term rating, and an A1+ short-term debt rating for its Rs 300-crore bank limits.
“The company has availed of Rs 300 crore in funds to support our aggressive growth plans in the past few years,” Bhagat explains. These funds are reflected as working capital credit lines in the company’s balance sheet. According to IRCA, RIC’s turnover for the nine-month period ending September 2008 is Rs 406 crore, with a profit after tax of Rs 17 lakh.
The company, however, admits that calendar year 2009 is fraught with uncertainty. With a retail footprint of 720 franchise stores and presence in 230 cities, the plan for 2009 includes expansion to 300 cities with 900 franchise stores, says Bhagat.
However, “...we will not require any additional loans this year to support our expansion plans as the company’s operating margins have been improving and is now expected to improve further due to the high credit rating by ICRA,” he adds. “We plan to substitute some of our existing working capital lines with commercial paper and, thus, reduce our interest costs by 2 per cent, giving us a saving of 20 per cent on our operating costs,” says Bhagat.
The company has added that it will also maintain its advertising and marketing spends at 10 per cent of its sales, even as its spends for the Indian Premier League (IPL) increase this year.
“We are increasing our marketing expense three-fold for IPL with 25 per cent of our total A&M budgets dedicated to the event,” Sajid Shamim, Executive Director for Marketing, Reebok India Company (RIC), says. The brand will be associated with Team Mohali, a new addition to its fold besides last year’s Kolkata Knight Riders, Bangalore’s Royal Challengers and the Chennai Super Kings.
Marketed and traded in India through RIC – a subsidiary of the Germany-headquartered Adidas – Reebok has grown its revenues eight times in the last six years in India, according to Vishnu Bhagat, the firm’s chief financial officer.
Earlier this month, RIC received an LAA- long-term rating, and an A1+ short-term debt rating for its Rs 300-crore bank limits.
“The company has availed of Rs 300 crore in funds to support our aggressive growth plans in the past few years,” Bhagat explains. These funds are reflected as working capital credit lines in the company’s balance sheet. According to IRCA, RIC’s turnover for the nine-month period ending September 2008 is Rs 406 crore, with a profit after tax of Rs 17 lakh.
The company, however, admits that calendar year 2009 is fraught with uncertainty. With a retail footprint of 720 franchise stores and presence in 230 cities, the plan for 2009 includes expansion to 300 cities with 900 franchise stores, says Bhagat.
However, “...we will not require any additional loans this year to support our expansion plans as the company’s operating margins have been improving and is now expected to improve further due to the high credit rating by ICRA,” he adds. “We plan to substitute some of our existing working capital lines with commercial paper and, thus, reduce our interest costs by 2 per cent, giving us a saving of 20 per cent on our operating costs,” says Bhagat.
Raymond to double West Asia store count in 3 yrs
Indian textile and apparel major Raymond plans to more than double its current network of 24 stores in West Asia to 50 within three years. This will, according to the company’s chairman and managing director Gautam Hari Singhania, increase its share from the region to 45 per cent of its international revenues from 37 per cent at present.
Unveiling Raymond’s ‘Middle East Vision for 2012’ plan, Singhania said the company is targeting 1.5 million metres of textile in sales in the next three years in West Asia alone, increasing volumes by 50 per cent from current levels.
The company has 35 overseas ‘The Raymond Shop’ stores currently, with the 24 in West Asia spread across a total store area of 63,000 square feet. The 26 new stores will come up in various malls, such as Mall of Emirates, Dubai Mall, Burjuman, Villagio Mall and Pearl Mall, a release from the company said.
‘’The retail sector in West Asia is projected at $500 billion by 2010,” Singhania said.
Presently, Raymond has stores in malls such as Al Rashid Mall Madinah, Al Khobar and Safeer Mall Dubai, the release added.
Raymond also has plans to open 50 stores in the country by the end of the current financial year in smaller cities, a top company official said recently. The company is looking to expand into cities with less than 1 million (10 lakh) population to avoid being crowded out, and to take advantage of lower real estate costs, the official said.
Unveiling Raymond’s ‘Middle East Vision for 2012’ plan, Singhania said the company is targeting 1.5 million metres of textile in sales in the next three years in West Asia alone, increasing volumes by 50 per cent from current levels.
The company has 35 overseas ‘The Raymond Shop’ stores currently, with the 24 in West Asia spread across a total store area of 63,000 square feet. The 26 new stores will come up in various malls, such as Mall of Emirates, Dubai Mall, Burjuman, Villagio Mall and Pearl Mall, a release from the company said.
‘’The retail sector in West Asia is projected at $500 billion by 2010,” Singhania said.
Presently, Raymond has stores in malls such as Al Rashid Mall Madinah, Al Khobar and Safeer Mall Dubai, the release added.
Raymond also has plans to open 50 stores in the country by the end of the current financial year in smaller cities, a top company official said recently. The company is looking to expand into cities with less than 1 million (10 lakh) population to avoid being crowded out, and to take advantage of lower real estate costs, the official said.
Hero Honda sales up 24 pc in Feb
The country's largest two-wheeler maker Hero Honda Motors Ltd (HHML), on Sunday reported a 24 per cent jump in its total sale for themonth of February, at 3,29,055 units, as compared to 2,65,431 units in the same month last year. "Our new launches, including Passion Pro Power Start in particular, have been driving strong volumes across the geographies, further consolidating our more than 56 per cent share in the domestic motorcycle market," Hero Honda Motors Senior Vice President (Marketing and Sales) Anil Dua said in a statement. We have just introduced a Special Edition Hunk to commemorate our 25th year, which is also expected to catch the fancy of our customers, he added.
Jet fuel price slashed by 7%
State-run oil companies slashed prices of jet fuel by about 7% on Saturday, but airline companies said they would use the opportunity cover accumulated losses and may not lower airfares in the near term. This is the eleventh reduction in aviation turbine fuel (ATF) since September 2008, helping prices slide by about 61% since August last. ATF makes up nearly 40% of airlines’ operating costs. “We want to take a long-term view on ATF prices before taking a call. There is no major fare change on the anvil,” said a spokesperson for India’s biggest private airliner, Jet Airways. Low-cost airliners, which till recently were challenging full service carriers like Jet and Kingfisher with a fare war, too seemed to echo Jet’s views on fresh price cuts. “We are not going for any fare revision at this stage. The drop in ATF will help the airline to recover from the huge accumulated losses faced,” said a spokesperson for nofrills carrier SpiceJet. The Indian aviation sector witnessed a traffic slump of 9% in 2008 over the previous year. The seat factor (average passengers travelling per aircraft) has come down to around 64% in January this year from 73% in the corresponding period last year. The worst affected have been Kingfisher Red and Go Air. In the past airlines have been hiking fares and cutting capacity to cut mounting losses. Besides a base fare of Rs 1,000-1 ,500, airlines charge around Rs 3,000 as fuel surcharge and taxes per ticket sold in the domestic market. Kingfisher Airlines, which operates flights under two brands — Kingfisher Airlines as the full service carriers and Kingfisher Red, a low-fare subsidiary — too has decided not to change fares. “There has been drop in ATF prices but other operating costs have been rising. We are paying high amount for lease rentals and our maintenance bill on aircraft checks have increased on the back of stronger dollar. There is no scope for any immediate fare revision. Hence, we have to wait for sometime before taking any decision ,” said a company spokesperson. Saturday’s announcement will see price of ATF in Delhi fall by Rs 2,052 per kilolitre (KL) to Rs 27,106 per KL. In Mumbai it will come down from Rs 29,985 per KL to Rs 27,861 per KL. On an average, jet fuel prices have been cut by Rs 2,125 per kilolitre.
Analyst's Pick: LARGE CAP : Nestle India
Nestle India CMP: Rs 1,493
Nestle India is best placed to ride on the expected growth in processed food market due to the strong technology of the parent company. Dominant market share and strong brands will prevent margin erosion of the company. Going ahead, high penetration and innovative prod-uct launches would further fuel its growth.
Nestle India is best placed to ride on the expected growth in processed food market due to the strong technology of the parent company. Dominant market share and strong brands will prevent margin erosion of the company. Going ahead, high penetration and innovative prod-uct launches would further fuel its growth.
Analyst's Picks: MID CAP : Britannia Industries
Britannia Industries CMP: Rs 1,315
After witnessing consistent drop for four years, Bri-tannia’s market sharehas stabilised over the last two years, both in value and volume terms. Going ahead, Britannia’s sales would be driven by Good Day, growing at 25-30% in the premium category and Tiger brand, growing at 18-20% in the value-for-money category.
After witnessing consistent drop for four years, Bri-tannia’s market sharehas stabilised over the last two years, both in value and volume terms. Going ahead, Britannia’s sales would be driven by Good Day, growing at 25-30% in the premium category and Tiger brand, growing at 18-20% in the value-for-money category.
Analyst's Picks: MID CAP : Marico
Marico CMP: Rs 58
Consolidated net sales of Marico recorded a 23% YoY growth, largely led by 15% price increases and 7% volume growth. Brands in pure coconut oil category — Parachute & Nihar — have reported a volume growth of 9% and 15%, respectively. GLobal business grew 44% YoY. Decline in copra and safflower oil prices benefited the co.
Consolidated net sales of Marico recorded a 23% YoY growth, largely led by 15% price increases and 7% volume growth. Brands in pure coconut oil category — Parachute & Nihar — have reported a volume growth of 9% and 15%, respectively. GLobal business grew 44% YoY. Decline in copra and safflower oil prices benefited the co.
Analyst's Picks: SMALL CAP: McLeod Russell
McLeod Russell CMP: Rs 49
The tea price boom helped McLeod Russel to post 61.48% growth in net profit in the last quarter. It attributes the improved performance to strong domestic demand. It plans to acquire Vietnam-based Phu Ben Tea for $2 million. McLeod, the world’s largest bulk tea player, will continue to gain from increased preference to tea world over.
The tea price boom helped McLeod Russel to post 61.48% growth in net profit in the last quarter. It attributes the improved performance to strong domestic demand. It plans to acquire Vietnam-based Phu Ben Tea for $2 million. McLeod, the world’s largest bulk tea player, will continue to gain from increased preference to tea world over.
Unitech in talks with Oriental Bank to sell office space
Real estate firm Unitech is in talks with Oriental Bank of Commerce (OBC) to sell its office building in Saket, New Delhi, said a top company executive. If the deal materialises, it could fetch Unitech around Rs 500 crore. The company is also simultaneously in talks with 7-8 wealthy individuals to sell floors in that office, in the event of a deal with OBC not working out. “We are working on two options — either selling the entire building to one buyer or different floors to multiple buyers,” said Unitech MD Sanjay Chandra. The six-floor 2.2 lakh sq ft office, which is almost ready to be occupied, can fetch around Rs 500 crore if sold to one buyer and higher if sold floor-wise to multiple buyers. “Our aim would be to maximise realisation. But the deal will also depend on how soon we can close it,” said Mr Chandra, adding that the negotiation process with Oriental Bank of Commerce has been initiated. Unitech, which has a total debt of Rs 10,000 crore on its balance sheet, has been looking to raise fresh funds through sale of its assets to repay debt and cover for its operational expenditure. Besides its Saket office, Unitech is also in the process of selling its mid-segment hotel in Gurgaon. It is understood that the company has entered into an agreement with a wealthy individual Roop Madan, a Delhi-based auto dealer, to sell its hotel for around Rs 230 crore. Unitech has also sell-off some land parcels in Gurgaon lately to raise funds. These asset sale would help the financially-troubled firm to get fresh capital, but wouldn’t be enough to sail it through the tough times. That’s why the company is also looking at diluting stake to private equity funds at project as well as company level to raise fresh funds. “We expect to raise around $500 million through private equity deals at company as well project level,” said Mr Chandra. “We are talking to 6-7 real estate funds to raise capital for our mid-income residential housing projects in the national capital region and in Mumbai,” said Mr Chandra.
Ajit Jain may succeed Buffett in Berkshire Hathaway
Legendary investor Warren Buffett has blamed himself for making certain "dumb" investment decisions last year and has hinted at India born Ajit Jain becoming the possible successor for his businesses.
Warning that the downturn could well continue for a longer time, Buffett has said the economy would be in shambles throughout 2009. "During 2008, I did some dumb things in investments. I made at least one major mistake of commission and several lesser ones that also hurt. "Furthermore, I made some errors of omission, sucking my thumb when new facts came in that should have caused me to re-examine my thinking and promptly take action," the much revered investor wrote in his annual letter to the shareholders. Showering praise on Jain, who handles the reinsurance division, Buffett noted that there is no one like him and added that his business is "never the same". "Ajit came to Berkshire in 1986. Very quickly, I realised that we had acquired an extraordinary talent. So I did the logical thing: I wrote his parents in New Delhi and asked if they had another one like him at home. "Of course, I knew the answer before writing. There isn't anyone like Ajit," Buffett said. Buffett noted a major mistake was buying ConocoPhillips shares when oil and gas prices were near their peak. "I in no way anticipated the dramatic fall in energy prices that occurred in the last half of the year... Even if prices should rise, moreover, the terrible timing of my purchase has cost Berkshire several billion dollars," he said. According to him, "other already-recognisable errors" committed include buying shares of two Irish banks'. "During 2008, I spent 244 million dollars for shares of two Irish banks that appeared cheap to me. "At year end, we wrote these holdings down to market: 27 million dollars, or an 89 per cent loss. Since then, the two stocks have declined even further. The tennis crowd would call my mistakes unforced errors," Buffett said. He noted that derivatives are "dangerous" and that they have increased the leverage and risks in the financial system. On derivatives contracts, Buffett said they go unsettled for years, with counterparties building up huge claims. "... a frightening web of mutual dependence develops among huge financial institutions. Receivables and payables by the billions become concentrated in hands of a few large dealers who are apt to be highly-leveraged in other ways. "Participants seeking to dodge troubles face the same problem as someone seeking to avoid venereal disease: Its not just whom you sleep with, but also whom they are sleeping with," he added. |
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