Wockhardt: The stock was rising on rumours of the company selling some property to pay off debt. Wockhardt has several hospitals spread across Mumbai, Navi Mumbai, Goa, Nagpur, Nashik, Rajkot, and Surat. Recently, Sun Pharma put a spanner in its plan to settle its foreign currency convertible bond (FCCB) creditors, by approaching the high court asking to be heard before any settlement was allowed between Wockhardt and its creditors on FCCB dues. Sun demands the original FCCB terms be honoured. Wockhardt had taken most creditors on board to clear a preferential issue of up to $400 million and fresh issue of FCCBs up to $74 million as part of the settlement on bond dues. Sun says it holds close to 20% of the FCCBs that Wockhardt had issued to raise $110 million.
Suzlon: There were rumours of RIL planning to take over Suzlon. After the Vedanta-Cairn deal, it is wise to mention even absurd-sounding rumours about large-cap companies. In its latest quarter, Suzlon reported a 42% fall in consolidated revenues, while losses deepened to Rs9.12 billion from Rs4.5 billion y-o-y. Its European operations caused most of the pain while operations in India, Brazil and China improved.
Mudra Lifestyle: There is a buzz around a stake sale to a Korean company. This was also flashed by CNBC TV18 quoting ‘sources’. Mudra is promoted by Murarilal Agarwal, Ravindra Agarwal and Vishwambharlal Bhoot. It posted a revenue of Rs1.1 billion and profit of Rs25 million in its June quarter (Rs904 million and Rs2 million in June 2009). The stock hit a high of Rs50 in mid-August but has been falling ever since.
Shree Ram Mills: A rumour that was doing the rounds earlier has resurfaced. In June, the buzz was that Shree Ram Urban Infrastructure, the Vikas Kasliwal-run real-estate company, is set to sell a part of its 2.65 million sq ft in Shree Ram Mills in Worli (central Mumbai) for around Rs25 billion. This stock was being touted by many mid-size and small brokers in August.
Venky’s India: There is some buzz of a strategic stake sale to a foreign company. Promoters hold 56% stake in the company. The company was founded by BV Rao and Uttaradevi Rao. The stock has risen from Rs250 in February to current levels of Rs715. In its June quarter, the company posted revenues of Rs2 billion and profit of Rs281 million (Rs1.7 billion and Rs111 million in June 2009). It recently set up a poultry-feed manufacturing facility in the Tay Ninh province of Vietnam with a total investment of Rs1.5 billion.
UB Holdings: Strong rumours of bonus/split in the Vijay Mallya-promoted company. The stock has risen from Rs190 in June to the current Rs270 levels.
Tide Water: Rumours of a big bonus issue have resurfaced. Apparently the announcement will be made in the board meeting on 3rd September. Moneylife had reported this rumour on 9th August. (See: http://www.moneylife.in/article/8/7976.html).
The fund will closely track the stocks represented in the S&P CNX Nifty; but ETF volumes have remained on the lower side
More and more fund companies are launching passive mutual funds, also called index funds. Among the passive fund products, after launching index funds which are supposed to replicate the underlying index with 'passive' management, fund houses are now trying their hands at Exchange Traded Funds (ETFs). Birla Sun Life Mutual Fund has recently filed a draft offer document with the Securities and Exchange Board of India (SEBI) to launch an open-ended 'Nifty exchange traded fund' (ETF). The fund will closely track the stocks represented in the S&P CNX Nifty.
Over the past decade, around 20 index funds have hit the market. Suddenly in the past few months, we have seen a slew of index fund launches by fund houses. Taurus Mutual Fund launched Taurus Index Fund; IDFC Mutual Fund introduced the passively-managed IDFC Nifty Fund in April 2010 and in May 2010, IDBI Asset Management Company (AMC) launched IDBI Nifty Index Fund. This was followed by ICICI Prudential Mutual Fund which floated a Nifty Junior Index Fund in June.
Unlike index funds, ETFs do not carry an entry or exit load. Just like stocks, ETFs can be bought and sold through the stock exchanges on a real-time basis. ETFs can be cost-effective for investors as they charge a miniscule fund management fee compared to index funds. There has been as much a rush to launch ETFs, as index funds. There are 24 ETFs available in the market. Birla Sun Life Nifty ETF will be the fifth Nifty ETF joining the ranks of four existing ETFs like Kotak Nifty ETF, Nifty BeES, UTI Sunder, Motilal Oswal MOSt Shares M50 ETF, which are all benchmarked against the S&P CNX Nifty. The S&P CNX Nifty constitutes of 50 stocks.
Among the four existing ETFs benchmarked against S&P Nifty, UTI Sunder launched in July 2003 has yielded 26% compounded annual growth rate (CAGR) return since its inception while its benchmark S&P Nifty has posted 24.98% during the same period. Nifty BeES was launched in January 2002 by Benchmark Mutual Fund. The fund has posted an NAV return of 21% since inception while its benchmark climbed 20.77% between the same period. As these two examples prove, ETFs closely track the underlying indices. But not all funds manage funds passively while pretending to. Moneylife had earlier reported on how index funds have deviated from their objective of passive investment. See here: (http://www.moneylife.in/article/8/5098.html).
Motilal Oswal MOSt Shares M50 ETF is a fundamentally weighted basket based on the S&P CNX Nifty Index and has its own pre-defined methodology with different weights for the same Nifty stocks.
Despite their lower cost, ETFs continue to be unpopular among investors. Only two products - the ETFs launched by Benchmark Mutual Fund (Nifty BeES and Nifty Junior BeES) contribute to 90% of the trading volume. The low trading volumes are reflected in the bid-ask spread too.
According to The Association of Mutual Funds in India (AMFI) data, the assets under management (AUM) of ETFs (including gold ETFs) stood at Rs3,504 crore as on July 2010. During July 2010, ETFs saw net inflows of Rs530 crore.
An Edelweiss Securities survey points out that infrastructure companies have firmed up higher capex plans over the next two years. This will benefit smaller engineering companies
A strong sentimental boost amid robust economic growth is likely to translate into a sustained capex programme for India Inc over the next couple of years, says Edelweiss Securities. This expansion drive is likely to be led by infrastructure companies, who will account for 40% of the capex planned by India Inc. This may mean a windfall for small electrical, electronics and engineering companies, as the corporate giants loosen their purse-strings and place orders for equipment and machinery.
The survey conducted by Edelweiss among its coverage universe of around 200 companies finds that the overall capital expenditure of India Inc will go up by 24% for this fiscal year. Out of the total planned capex of around Rs5,60,000 crore, infrastructure (40%), power utilities (19%), metals and telecom (14% each) will account for a large chunk of the investments. The expansion thrust by infrastructure companies will result in a strong order-book for engineering companies, especially Cummins India, Siemens, Thermax, among others. Some of the major companies to have firmed up big-ticket expansion plans include Bharat Heavy Electricals Ltd (BHEL), Larsen & Toubro (L&T), Gujarat State Petronet Ltd (GSPL), Reliance Industries Ltd (RIL), National Thermal Power Corporation (NTPC), GVK Infra and GMR Infra among others.
Vikas Khemani, executive VP & head - Institutional Equities of Edelweiss Capital pointed out that the only bottleneck to the capex programme of these infrastructure companies remains from the pending government clearances in terms of land acquisitions, environmental approvals etc. The recent delay in execution of some projects was only due to this factor.
Analysis by Edelweiss suggests that only 10% of the companies surveyed are apprehensive of meeting their guidance or expect to incur a lower capex in FY11 and FY12. Almost 90% are confident of either maintaining or exceeding their capex programme target.
Interestingly, a whopping 75% of companies in the survey are incurring capex based on growth as the key agenda. Edelweiss states, "The balance expenditure is more due to routine maintenance capex led by the media sector, all consumer based industries like FMCG, retail and auto are also investing for growth as they believe consumer demand is making a comeback."
Commenting on the impact of a rising interest rate scenario on companies' investment plans, Edelweiss states that even if the cost of credit jumps 50-100 bps from the current level, credit growth and, hence, investment demand will continue to gather demand. "If the underlying demand in the economy and the business expectations of future demand are robust enough, the rising cost of credit could be absorbed by corporates fairly easily because they enjoy the pricing power during times of robust demand. In fact, at such a stage, rising cost of credit is actually a testament to the robust economic recovery and is reflected in rising credit growth," says Edelweiss.