According to ICRA, with some housing finance companies focusing more on riskier products like loans against property and builder loans or leaning more towards the self-employed segment, there may be some stress on their asset quality numbers
Ratings agency, ICRA said although housing finance companies (HFCs) have been able to report good asset quality indicators there may be some stress on their asset quality due to focussing on riskier products.
According to ICRA, an associate of Moody's Investor Service, despite a high interest rate scenario and difficult operating environment, HFCs have been able to report good asset quality indicators with a gross NPA percentage at 0.84% as on 31 December 2013. "However, with some HFCs focusing more on riskier products (like loans against property, or LAP, and builder loans) and/ or leaning more towards the self-employed segment (where income streams can be more volatile) some stress on their asset quality numbers is not unlikely," it said in a report.
According to ICRA's estimates, the total housing credit outstanding in India as on 31 December 2013 was over Rs8.6 lakh crore as against Rs7.5 lakh crore as on 31 March 2013, indicating a growth of 18% (annualised) in the first nine months of the financial year 2013-14 (9M, FY2014). Overall ICRA expects the growth in housing credit to be around at 18-20% in FY2014.
HFCs witnessed a marginal decline in lending spreads in third quarter of FY2014 as compared to the previous quarter on account of some compression in yields. “The yields have been largely impacted due to incremental growth coming from home loans at finer spreads, and lower disbursements to relatively higher yielding non-housing segments like builder loans,” said Vibha Batra, senior vice president, ICRA.
However, according to ICRA, the adverse impact on the HFCs' margins was somewhat mitigated by their improved operating efficiencies resulting in almost stable profitability (ROA of 2.18%) for Q3FY2014. Batra said, "Overall, the decline in net interest margins and some rise in credit provisions could lead to a 15-20 bps reduction in the profitability of HFCs in FY2014. However, despite this, profitability is likely to remain good for HFCs in FY2014, with return on assets (ROA) at 2.0-2.2%, or return on equity (ROE) at 17-19%"
Only a close below 6,470 the Nifty may reverse the rising trend
We had mentioned in the Friday’s closing report that the NSE Nifty will continue to hit new highs over the course of the next few days. On Monday the Indian stock market had a weak opening on the back of weak data from China and Japan but soon it hit a fresh high.
After four consecutive session of opening in the positive, the BSE 30-share Sensex opened the week 101 points lower at 21,819 while after three consecutive session of opening in the positive, the Nifty opened lower by 35 points at 6,492. In the morning session itself, both the indices hit their lows at 21,805 and 6,487, respectively. In the noon session, both Sensex and Nifty to stay in the green when it hit day’s high at 22,024 and 6,562, respectively. Sensex closed at 21,935 (up 15 points or 0.07%) while Nifty closed at 6,537 (up 11 points or 0.16%). NSE recorded a huge volume of 81.26 crore shares, which was however, lower than Friday’s.
Among the other indices on the NSE, the top five gainers were Realty (2.63%); P S U Bank (2.24%); Bank Nifty (1.88%); Infra (1.84%) and Finance (1.62%) while the only five losers were I T (2.44%); Pharma (1.85%); Metal (0.98%); F M C G (0.43%) and Commodities (0.07%).
Of the 50 stocks on the Nifty, 28 ended in the green. The top five gainers were I D F C (6.85%); Kotak Bank (5.83%); IndusInd Bank (5.49%); Jaiprakash Associates (5.01%) and Maruti (3.71%). The top five losers were T C S (3.75%); Tata Motors (3.36%); H C L Technologies (3.15%); Sun Pharma (3.14%) and N M D C (2.69%).
Of the 1,549 companies on the NSE, 793 closed in green, 669 closed in red while 87 closed flat.
Aam Admi Party (AAP) leader and activist lawyer Prashant Bhushan sought the Supreme Court's urgent intervention to stop the increase in natural gas prices, saying that the new rates would enrich Reliance Industries (RIL) and hurt the people of the country, on whose behalf the state is a trustee of natural resources, as ruled earlier by the top judicial authority. Bhushan, representing NGO Common Cause, said the government's decision should be stayed at least for a few months so that the new regime after the elections, which will bear the consequences of higher gas prices, can look at the matter afresh. Bhushan had earlier filed a petition challenging higher gas rates. It was listed for 4 March 2014 but it could not be taken up.
US indices closed flat with a positive bias on Friday. American employers added 175,000 workers in February, the most in three months. The unemployment rate, which is drawn from a different survey of households, ticked up to 6.7% from 6.6% in January.
Separately, the US trade deficit rose slightly to $39.1 billion in January from a revised $39 billion in the prior month, the Commerce Department said on Friday.
All the Asian indices closed in the negative. Shanghai Composite (2.86%) was the top loser. Its exports in February fell 18.1% from a year earlier, following a 10.6% jump in January, the General Administration of Customs said on Saturday. Imports rose 10.1%, yielding a trade deficit of $23 billion ($25.4 billion) for the month versus a surplus of $32 billion in January. Producer prices slid 2%, the most since July, while the inflation rate was 2% for February, reports at the weekend showed.
Japan's economy expanded less than estimated in the fourth quarter and the current-account deficit widened to a record in January. Gross domestic product grew an annualized 0.7% from the previous quarter, the Cabinet Office said today in Tokyo, less than estimates. The current-account deficit widened to 1.59 trillion yen ($15.4 billion), a record in data back to 1985, the finance ministry said.
European indices were showing mixed performance while US Futures were trading marginally in the negative.
SEBI, which is preaching to world about corporate governance, has ignored investor complaints about GDR scam and blatant manipulation of Transgene Biotek shares. This is first part of a two-part series
Minority shareholders of Transgene Biotek Ltd have alleged misuse of global depository receipts (GDRs)—a financial instrument used to raise capital overseas, and several “well-timed” announcements by the company. According to these shareholders, Transgene used the structured GDR route to create equity shares without real net cash flow, converted it and then sold to gullible investors. After making several announcement to increase its share price, Transgene, then announced buy back and delisting of the company.
These investors have filed several complaints before market regulator Securities and Exchange Board of India (SEBI), but till date there is no action.
In September 2011, Transgene set up a subsidiary, Transgene Biotek Hong Kong Ltd to source strategic partnerships, acquisition and offering services to overseas customers. At that time, its price was around Rs30.50 per share. Next month, the company issued 25 lakh GDRs at $7 per GDR, worth $17.50 million. Transgene said this was done to meet its research and development (R&D), pre-clinical and clinical trials, new manufacturing facility, acquisition of technology and working capital requirements. The company soon transferred most of the money raised through GDR route, to its Hong Kong unit for buying technology. Whether the money was really paid to buy technology or refunded to ‘ghost’ GDR holders is still a big question. However, on 11 November 2011, Transgene share price moved to Rs55 per share, after the infusion of capital.
On 23rd November, the company announced sale of technology to TSS Export GmBH FZE worth $5 million that was expected to be completed over five-six months. However, there is no news on this front as well.
On 24 May 2012, Transgene announced ‘excellent’ results from its TrabiOral oral insulin studies. At that time, its share price was Rs26.50. Two months later, on 20th July, Transgene reiterated its ‘excellent’ study results while referring to unnamed customers and expected orders. At the same time it made a specific mention about its stock prices not keeping pace with its ‘development’.
On 16th August, Transgene announced good profit due to forex gains while talking about possible agreements with European pharmaceutical company for Tacrolimus, an immuno suppressant product and DHA, a healthcare supplement. By now, its shares had collapsed to Rs10.59.
Suddenly on 4 September 2012, Transgene board announced its decision to delist its shares. Three days later it announced delisting price of over Rs25 per share as against the prevailing price of only Rs10.36 per share.
Shareholders allege that the company had deliberately announced its delisting at a price 2.5 times more than its prevailing share prices for manipulation. After all, why will shareholders disapprove such a “generous” proposal?
The share prices of Transgene Biotek surged nearly 30% in just 17 trading sessions when the decision to consider delisting was announced for the first time on 27 August 2012. It made high of R14.20 on 17 September 2012 on appointing merchant bankers for its delisting process. This was a trap. The share price fell more than 65% to Rs4.91 in next two months, i.e. during 17 September 2012 to 19 November 2012. However, during the same period, the turnover of Transgene shares was huge. On 14 September 2012 its turnover stood at Rs25 crore. The stock price moved up to Rs14 from Rs10. At the same time its average volume also shots up due to several bulk deals. According to market sources, this helped the GDR holders to liquidate their position in the domestic market thus reduce their holdings.
Here are the questions raised by minority shareholders before SEBI…
1. Why was the Hong Kong subsidiary formed? What was its activity? Was it used as a conduit to transfer GDR money? What happened to the technology transfer of Rs86.50 crore which was 25% of the company’s balance sheet? Where are the accounts of this subsidiary and why are they not audited? The Auditor of Transgene has qualified the accounts on this matter.
2. Who are the GDR allottees? How are they related to the parties selling GDR converted shares through bulk deals?
3. What is the background of the FII - Stream Value Fund which invested in the company? Did they and the promoters have the wherewithal of making an open offer worth Rs175 crore? What was the understanding with this FII?
4. Were all the announcements including the advance indication of the buyback price of Rs25 meant to manipulate the market price?
5. What is the mystery behind postal ballots not being received by most of the shareholders across the country?
6. Was the postal ballot rigged to ensure that the "delisting" resolution is defeated?
SEBI has neither provided any answers to these questions nor initiated any action in the matter, according to the investors.
Tomorrow: Did promoters of Transgene used structured GDRs as an end game?