Commerce dept asked to conduct study on drug firm takeovers

New Delhi: The Department of Pharmaceuticals has requested the commerce department to conduct a study on the impact of recent takeover of Indian drug firms by multinational companies (MNCs) on healthcare, Parliament was informed today, reports PTI.

“Department of Pharmaceuticals has requested the Department of Commerce to conduct a study on recent takeovers of Indian companies by MNCs,” minister of state for chemicals and fertilisers Srikant Kumar Jena said in a written reply.

The minister said that in various quarters it was felt that the takeover of Indian drug makers by MNCs could impact the healthcare scenario as well as on pricing and availability of medicines in India.

Once the study is completed recommendation could be placed before the economic advisory council to the prime minister.

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Government favours probe into leakage of Radia tapes

New Delhi: The government today told the Supreme Court that the issues raised by Tata chief Ratan Tata in his petition relating to the Nira Radia tapes require investigation, reports PTI.

Sources said that the affidavit filed by the government has maintained that “it is an issue that requires investigation”.

The government is also understood to have taken a stand that the publication of Mr Tata’s conversation with Ms Radia is an issue between the media and the petitioner.

The apex court had issued notices on 2nd December to the Union home secretary, the Union finance ministry, the Central Bureau of Investigation (CBI) and the Income Tax Department on Mr Tata’s plea seeking probe into the leakage of audio tapes of his telephonic conversation with Ms Radia.

The court had also issued notices to Outlook and Open magazines which had published parts of transcripts of the taped conversation.

The apex court had given ten days to all respondents to file their reply and had posted the case for hearing on 13th December.

Mr Tata has sought a direction to the government to probe leakage of tapes containing his private conversation with corporate lobbyist Nira Radia, and stop their further publication.

In his petition, the industrialist has sought action against those involved in the leakage of tapes alleging that such an act amounts to infringement of his fundamental Right to Life, which includes Right to Privacy under Article 21 of the Constitution.

Mr Tata has contended that since Ms Radia’s phone was tapped for the purposes of alleged tax evasion, the tapes cannot be used for any other purpose.

The petition has cited the apex court guidelines in the PUCL case in which it was held that the phone surveillance can be done only for a specific purpose.

Mr Tata has argued that making public his conversation with Ms Radia also violates his Right to Speech and Expression under Article 19(1)(a) of the Constitution.

Mr Tata's petition filed on 29th November has sought an interim relief that steps should be taken to prevent online portals and electronic media from publishing material which had been “illegally” and “unlawfully” obtained by them.

The petition has also asked the apex court to give a direction to the government and its probe agencies to “retrieve” and “recover” the leaked tapes.

In the wake of 2G spectrum allocation scam allegedly involving Rs1.76 lakh crore, some journals have published taped conversation Ms Radia had with politicians, journalists and industrialists.

Transcripts of some of these tapes have also come up in various websites, stirring a controversy over the alleged nexus between lobbyists and journalists.

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Brokerages dare to recommend Anant Raj, Sobha even as realty struggles

CLSA is recommending Anant Raj, based on a low debt level and strategic shift towards residential sales; Kotak is betting on Sobha as it believes that the impact of new launches is not reflected in the stock price

From a high in January this year, the BSE Realty Index slid to the year's low late November. Since then it has only managed to recover a little. However, with the 20-50% fall in real estate stocks, brokers have started pushing the ones they believe are better placed-essentially with higher visibility and low debt-to-equity levels. Frontline brokers CLSA and Kotak are recommending Anant Raj Industries and Sobha Developers, respectively, to institutional clients.

CLSA's argument is that "Anant Raj stands out as one of the few developers that has stuck to its core geographical area (National Capital Region) and it has avoided the temptation of excessive landbanking over the last few years-evident in the D/E of 0.2x." Kotak has upgraded Sobha to a 'buy' saying, "We see three key positives: (1) steady demand and pricing in Sobha's primary market, Bengaluru, (2) Sobha's new launches in Q3FY11 validate sales guidance of three million square feet, and (3) current stock price implies steady-state real estate development of only one million square feet."

Anant Raj Industries (CMP Rs105, CLSA target Rs172)

Anant Raj Industries, which has incidentally constructed Delhi's landmark India Gate, currently has 73 million square feet of projects in hand, the land cost of which is completely paid for. Out of its total land bank of 1,178 acres, 42% is in Delhi, 17% in outer Delhi, 24% in Manesar and 17% in Gurgaon. According to CLSA, out of its gross asset value of Rs76 billion (GAV), 58% comes from Delhi, 14% from outer Delhi, 12% from Manesar and 16% from Gurgaon. To arrive at a March 2012 net asset value of Rs230/share, CLSA has assumed 47 million square feet of development.

Between March 2007 and March 2010, Anant Raj added very little to its landbank-only 72 acres, or 8% of its total land bank. However, after land prices contracted substantially thereafter, it turned a little aggressive and has undertaken an addition of 150-200 acres in Gurgaon and Manesar at a cost of Rs10 billion. Even with these purchases its gearing is expected to stay low at 0.2x in March 2011. From a cash surplus level of Rs3.5 billion in FY10, CLSA assumes net debt at Rs6.9 billion in FY11 falling to Rs6.1 billion in FY12. CLSA believes that a lot of the new land that Anant Raj has purchased will have a low gestation period, or turnaround time, since it is very close to large developments by its competitors. Most have a development potential of just 2-3 years.

CLSA points out that Anant Raj's business model transformation to a faster turnover/residential portfolio started in early FY11 and it expects residential sales to scale up substantially from FY12 onwards. From nothing in FY10, the residential area sold is expected to be 9,00,000 square feet in FY11, 2.3 million square feet in FY12 and 2.5 million square feet in FY13. Comparative value sales are expected to be Rs5.3 billion in FY11 and Rs13.2 billion in FY12 against nothing in FY10. "The 150-200 acres of new land that Anant Raj is acquiring is entirely in the residential segment and will shift the percentage contribution of residential land to 38-41% from 25%," says the CLSA report.

A key trigger for the stock could be the launch of the Hauz Khas property that was stalled due to litigation. CLSA expects to re-launch in the fourth quarter of FY11. Another positive is its rapidly increasing rentals portfolio. "Anant Raj's portfolio of rental assets started maturing in FY10 with the company adding a 1.1 million square feet IT Park at Manesar and four hotels with 190 rooms to its rent-earning portfolio by March 2010 end. Its area on lease is to triple to 3.6 million square feet by March 2013."

A big risk is that 52% of Anant Raj's NAV comes from the commercial space, making it sensitive to the capitalisation rate. CLSA has assumed 11% cap rate, and estimates that a 1% compression in cap rates can lead to a 4.3% increase in NAV. But the reverse will also be true. Another overhang is that its Delhi land parcels have faced considerable delays in monetization on various regulatory and legal counts and further delays could be a big risk to expectations.

Sobha Developers (CMP Rs331; Kotak target Rs408)

Kotak's main argument is that absorption in the Bengaluru residential market (Sobha's primary market) remains stable. Also, prices are relatively steady. Sobha's new launches are also comforting and Kotak believes it will achieve its target of three million square feet in FY11. 

 "Sobha has already sold 1.4 million square feet in H1FY11 and broad demand trends remain similar, so achieving 10% higher sales in H2FY11 would not be difficult-it has 2.65 million square feet of inventory to sell from ongoing projects, apart from the  on million square feet launched in Q3FY11, implying that the target can be achieved even without further launches in Q4FY11E," Kotak says in a report.

Kotak believes that the current value of the stock is factoring in execution of only one million square feet per year on an ongoing basis. 

(This article is based on secondary research. The report is for information only. None of the stock information, data and company information presented herein constitutes a recommendation or solicitation of any offer to buy or sell any securities. Investors must do their own research and due diligence before acting on any security. Some of the opinions expressed in this article are the author's own and may not necessarily represent those of Moneylife.)  

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COMMENTS

farouk

6 years ago

When most people feel there is a glut of properties available and demand becoming more scarce, how can these brokers recommend these stocks??

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