Companies & Sectors
Electrosteel uses IPO money to prop up share price

The company, which raised Rs285 crore through an IPO in September 2010 for a new steel project, has used substantial amounts from these funds to check the fall in stock price

Electrosteel Steels (ESL), which is setting up an integrated steel plant near Bokaro, has been using a substantial amount of the funds collected through an initial public offering (IPO) to "stabilise" its share price that has been under pressure ever since its listing in October 2010.

The company raised Rs285.27 crore from the public towards the cost of the project, but it is not clear when it will be completed and when production is expected to start for the company to be able to earn revenues.

Consequently, the share price which stood at Rs12.35 on listing on 8 October 2010, has been on the downward path on very little interest, and this has prompted the company to try and prop up the stock.

In September last year, Electrosteel Steels offered 225 million shares in a price band of Rs10-11 a share. The issue was oversubscribed 7.6 times. The company stated in its first quarterly report, submitted to the Bombay Stock Exchange recently, that Rs36.99 crore of the funds collected was deducted as the "fund of green shoe shares utilised by the stabilising agent for price stabilisation."



An email message from Moneylife to the company, requesting details on the "price stabilisation" activity was not answered. Details about the schedule for the steel project were also not available from the company.

Meanwhile, an industry expert, speaking on condition of anonymity, told Moneylife that "it is legal for a company to spend on stabilising the share price. They must have given some funds to their investment banker to buy their shares. Post the IPO, if the share falls, such a measure is possible."

However, this expenditure hasn't stopped the share price from falling. On Tuesday, the Electrosteel Steels stock closed at Rs7.96 on the BSE and Rs8.10 on the National Stock Exchange (NSE).

In other notes in the quarterly results, the auditor has stated that they have reviewed the unaudited financial results of ESL for the December 2010 quarter, "except for the disclosure regarding 'public shareholding' and 'promoter and promoter group shareholding', which has been  traced from disclosures made by the management and have not been audited by us." It further stated that "this statement is the responsibility of the company's management and has been approved by the board of directors. Our responsibility is to issue a report on these financial statements based on our review."

The 2.2 million tonne per annum steel unit, Jharkhand's first greenfield project, when completed by Chinese contractors will make long products, commercial billets, pig iron and ductile iron pipes. The company is promoted by Electrosteel Castings.

With no significant headway on the proposed new steel unit, and the stock continuing to edge lower, shareholders must be totalling their losses, wondering how much worse it may get.

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Star Alliance selects Zero Octa as preferred vendor for sales audit and revenue protection services

Zero Octa had been the preferred supplier for revenue protection services for Star Alliance since September 2005

Zero Octa, the specialist audit subsidiary of Kale Consultants Ltd, and the Star Alliance, today announced that Zero Octa has been selected as preferred vendor for sales audit and revenue recovery and protection services for its member airlines.

Zero Octa had been the preferred supplier for revenue protection services for Star Alliance since September 2005. This new contract in effect extends this agreement and reaffirms Zero Octa as being an industry leader in the delivery of best practice solutions and services in the audit domain for airlines.

The appointment of Zero Octa is the outcome of a central selection process undertaken by Star Alliance on behalf of its member carriers. As a result, participating member carriers can now contract their individual requirements from Zero Octa, at favourable conditions and also expand the scope of work. This agreement covers multiple audit services, including passenger audit, collections management, refund application processing, BIDT audit, direct operating cost audit, etc.

On Tuesday, Kale Consultants ended 2.71% up at Rs98.50 on the Bombay Stock Exchange, while the benchmark Sensex declined 1.47% to 18,167.64.

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Subex wins $12 million contract to implement ROC platform

Subex Ltd has won $12 million licence contract from a mobile group operating in Europe, West Asia and Africa to implement its ROC platform for fraud management and revenue assurance

Bangalore-headquartered Subex Ltd said that it has been chosen for a $12 million licence contract by a mobile group operating in Europe, West Asia and Africa to implement its ROC platform for fraud management and revenue assurance.

Subex Ltd is a global provider of operations and business support systems (OSS/BSS) for communications service providers.

The project would be executed over the next 16 to 18 months, the company said in a statement. The scope of the contract is expected to be expanded, resulting in the contract value potentially going up to $20 million.

The telco, with operations in several countries, would implement ROC in all the networks. "This is the largest ROC contract that the company has won till date and vindicates the company's belief that a huge market is opening up for ROC. Several large contracts for ROC are also in the pipeline," it said.

ROC fraud management is built to help CSPs (Communication Service Providers) move toward fraud prevention by eliminating known frauds, reducing free-run time, augmenting internal controls and continuous fraud management process improvement, Subex said.

ROC revenue assurance is designed not only to detect potential revenue loss, but also to assist an operator with its investigation, diagnosis and recovery of these revenues, it added.

On Tuesday, Subex ended 6.88% down at Rs50.75 on the Bombay Stock Exchange, while the benchmark Sensex declined 1.47% to 18,167.64.

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