Corruption, policy uncertainties pose credit risk in India: S&P

According to a S&P report titled “Increased Country Risk And Reduced Demand To Test Most South Asia Companies In 2012”, the rise in risk in India is due to a perceived increase in corruption and uncertainty in policies, while, political turmoil and an energy crisis have raised country risk in Pakistan

New Delhi: The perceived notion about growing corruption and the policy uncertainties have increased the country-specific credit quality risks for the companies in India, reports PTI quoting global rating agency Standard and Poor’s S&P.

As per S&P, the country-specific risks have increased in India in the past two years, making it harder for the companies to manage their cash flows, make their long-term strategies, and proceed with investment plans.

“In India, the government is engaging with the industry to address policy issues, but we have yet to see any significant positive actions,” it added.

However, the creditworthiness of large companies in India and other parts of South Asia is strong enough to withstand the impact of demand slowdown, rising costs and other country-specific risks, it noted.

On the other hand, many of the smaller companies in this region are not on a similar footing and their credit quality faces the risk of deteriorating in such a scenario.

“The outlook on most of the companies that we rate in South Asia is stable,” Standard & Poor’s credit analyst Mehul Sukkawala said.

“These companies are generally large in their respective markets and have diversified operations, experienced managements, and strong financial resources. This should help them sustain their credit profiles,” Mr Sukkawala added.

S&P believes liquidity for companies it rates in the region “will remain adequate to strong because of companies’ large cash balances, strong banking relationships, and access to capital.”

According to a S&P report titled “Increased Country Risk And Reduced Demand To Test Most South Asia Companies In 2012”, large companies in India, Pakistan, and Sri Lanka are strong enough to withstand the effects of a slowdown in demand and a rise in input costs and country risks.

However, the credit quality of a large number of their smaller peers is likely to deteriorate.

The rating agency however, cautioned that South Asian companies are vulnerable to any further weakening in domestic demand in 2012 as “their respective governments have limited capability to provide a fiscal boost in the face of a domestic or global crisis”, it said.

The report notes that country risk has increased in Pakistan as well in the past two years.

The rise in risk in India is due to a perceived increase in corruption and uncertainty in policies, while, political turmoil and an energy crisis have raised country risk in Pakistan.

Mr Sukkawala further added that “we expect new capital expenditure commitments to continue to slow down in South Asia, with the exception of Sri Lanka. The slowdown is most intense for projects in the electric utilities, and metals and mining sectors.”



SEBI notifies IPP norms to help promoters dilute stake

As per the new norms for IPP of shares, the companies would be allowed to issue fresh equity to institutional investors to dilute stake of promoters

Mumbai: In a move that could expedite government's disinvestment process, market regulator Securities and Exchange Board of India (SEBI) on Wednesday notified the Institutional Placement Programme (IPP) guidelines that will allow companies to reduce promoter shareholding through private placement, reports PTI.

As per the new norms for IPP of shares, even the companies would be allowed to issue fresh equity to institutional investors to dilute stake of promoters.

The notification, according to official sources, will help the government, which is hard pressed for funds, to expedite disinvestment process.

According to the SEBI (Issue of Capital and Disclosure Requirements) (Amendment) Regulations, 2012, a company will be allowed to dilute only 10% of its equity through sale of promoter stake or issuance of fresh equity.

"The provisions... Shall apply to issuance of fresh shares and or offer for sale of shares in a listed issuer for the purpose of achieving minimum public shareholding...," SEBI said in its notification.

The issue, according to the norms, would remain open for a maximum of 2 days and the aggregate demand schedule would have to be displayed by the stock exchanges without disclosing the price.

For coming out with an IPP, the guidelines said, the issuer would be required to obtain an in-principle approval from the stock exchanges and file the offer document with BSE, NSE and SEBI.

The government is facing the tough task of meeting the disinvestment target of Rs 40,000 crore in the current fiscal and is hopeful that the opening up of new avenues would help it fast track stake sale in PSUs.

"The IPP norms are broadly similar to QIP. But the 10% limit for stake sale can create roadblocks for companies where promoters hold above 85% stake. There auction will become compulsory after IPP," SMC Global Securities strategist and head of research Jagannadham Thunuguntla said.

While any company can come out with a Qualified Institutional Placement (QIP), IPP will be permitted only for reducing promoter shareholding.

As per government norms, at least 10% of the shareholding in all listed state-owned companies should be with the public by June 2013, though in the case of private sector companies it has to be 25%.


Share prices to move sideways: Wednesday Closing Report

Nifty may oscillate between 5,130 and 5,290 with a downward bias

Concerns about the government’s excessive borrowing, as pointed out by the RBI, kept the market lower in the fist session. However, the buoyant European markets lifted the momentum in post-noon trade, resulting in the benchmarks closing in the green for the second straight day. Post noon, European indices helped the Nifty cross the upper range of 5,215, which we gave in our yesterday’s closing report, and close positive. We may see the index moving between 5,130 and 5,290 with a downward bias. The NSE saw a huge volume of 92.42 crore shares.

The market opened lower today as traders resorted to profit booking since the opening bell following recent gains. Also, a mixed trend across Asia on the back of lower-than-expected January manufacturing data from China and a fall in South Korean exports weighed on the sentiments. Back home, the Nifty opened one point lower at 5,198 and the Sensex lost 14 points as it resumed trade at 17,180.

The market was seen moving sideways till noon trade after which concerns raised by the Reserve Bank of India (RBI) over the government’s excessive borrowing pushed the benchmarks to the day’s lows. At the lows, the Nifty fell to 5,159 and the Sensex dropped to 17,062. The advance-decline ratio on the NSE was 1217:481.

However, a positive opening in the European markets resulted in smart recovery, which pushed the indices into positive terrain. The positive trend helped the market hit the day’s high at the fag end of the session. At the highs, the Nifty rose to 5,245 and the Sensex surged to 17,327.

The market closed marginally below those levels and in the positive for the second straight day. At the end of trade, the Nifty gained 36 points to 5,236 and the Sensex added 107 points to finish at 17,301.

The Asian markets, which opened mixed on economic growth concerns, closed mostly higher on support from the European bourses. While Chinese government data showed a rise in manufacturing output last month, the HSBC Manufacturing PMI data disappointed investors.

The Jakarta Composite gained 0.59%; the Nikkei 225 added 0.08%; the Seoul Composite rose 0.18% and the Taiwan Weighted advanced 0.43%. On the other hand, the Shanghai Composite tanked 1.07% and the Hang Seng settled 0.28% lower. KLSE Composite, the Malaysian benchmark was closed for trade today on account of a local holiday. At the time of writing, key European indices were higher by over 1% and the US stock futures were in the green.

Back home, foreign institutional investors were net buyers of shares totalling Rs624.10 crore on Tuesday whereas domestic institutional investors were net sellers of stocks aggregating Rs241.26 crore.

Among the broader indices, the BSE Mid-cap index rose 1.12% and the BSE Small-cap index moved up 1.71%.

The BSE Metal index (up 2.97%) was the top among all sectoral indices today. It was followed by BSE Capital goods (up 2.34%); BSE Auto (up 2.02%); BSE Power (up 1.62%) and BSE Realty (up 1%). The major loss was seen in BSE Consumer durable index which fell 1.31% while indices like BSE FMCG, BSE TECk, BSE IT, BSE PSU fell in the range of  0.03% to  0.15%.

Jindal Steel (up 6.43%); Tata Power (up 6.02%); Hindalco Industries (up 4.23%); Tata Steel (up 4.11%) and Hero MotoCorp (up 3.45%) were the top performers on the Sensex. The losers were led by Coal India (down 2.61%); ICICI Bank (down 1.53%); ONGC (down 1.32%); HDFC (down 1.28%); Bharti Airtel (down 1.04%).
ABG Shipyard has won an order worth Rs500 crore from Shipping Corporation of India (SCI) for construction of six new Bollard Pull AHTS vessels. The price of the vessels is $101.40 million (about Rs500 crore) and it will be delivered in 15 to 25 months from the date of signing the contract, with a gap of two months for each vessel. ABG Shipyard shares jumped 8.23% to close at Rs418.10 on the BSE.

Regency Ceramics has declared lock-out of its factory situated at Yanam in the Union Territory of Puducherry effective today, owing to unprecedented violence that occurred at the factory premises leading to police firing and imposition of Section 144 in the town. This caused extensive damage to the plant and machinery and the death of KC Chandrasekhar, president (operations), Regency Ceramics. According to the preliminary estimates by insurance companies, the loss could be over Rs150 crore. The company has an insurance cover of about Rs500 crore. Regency Ceramics' scrip closed at Rs 3.62 on the BSE, down 4.99%.

Fortis Healthcare, through its unit Fortis Healthcare Singapore Pvt Ltd bought 85% stake in RadLink-Asia Pvt Ltd for 62.9 million Singapore dollar (about Rs245 crore). RadLink has four main business segments -- diagnostic imaging, molecular imaging, cyclotron (radio isotopes manufacturing) and GP clinics. According to Fortis, this transaction will enable it get a strong foothold in the premium diagnostics and molecular imaging segment in one of South East Asia's most attractive markets. Fortis share closed 1.63% higher at Rs 106.30 on the BSE.


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