In the doldrums

As we have been predicting, the market will continue to hover around 17,600. Keep an eye out for global cues and domestic profit-booking for any possible dips

The market was sluggish on the rollover of the derivatives position from the April 2010 to May 2010 series by traders ahead of the expiry of the near-month April contracts. The Sensex was down 54 points (0.3%) at 17,690 and the Nifty ended 14 points lower (0.26%) at 5,308. The market was on an upswing in the early trading session, touching the intraday high of 17,769.25. However, it slid from there and traded in a narrow range with a negative bias.

Asian stock markets declined on Tuesday after a directionless day on Wall Street on Monday and as commodity prices declined. Key benchmark indices in China, Hong Kong, Indonesia, South Korea, Singapore and Taiwan fell by 0.14% to 2.07%. Japan’s Nikkei rose 0.42%. South Korea’s economic growth accelerated more than estimated in the three months through March 2010. Gross domestic product increased 1.8% in the first quarter.

Most US stocks edged lower on Monday largely due to decline in banking shares on fears that the financial reform package making its way through Congress will curb profits, but Caterpillar’s strong results buoyed the Dow. The Dow Jones Industrial Average edged up 0.75 points (0.01%), to close at 11,205. The S&P 500 dropped 5 points, (0.43%) to 1,212. The Nasdaq lost 7 points, (0.28%) to 2,523.  

Closer home, the trade mister said that there is no need for the Reserve Bank of India (RBI) to intervene and stem rupee appreciation. The bond market welcomed the announcement of the launching of the new 10-year bond. With the current 2020 bond losing popularity, the new bond cheered the market.

Foreign institutional investors were net buyers on Monday of Rs234 crore. Domestic buyers were net sellers of Rs73 crore. The rupee pared its losses against the dollar. The US Democrats were three votes short in the 100-seat Senate, preventing them from introducing a Bill which would have stopped banks from trading in unrelated instruments with clients and which would have devised a new process for dismantling troubled financial firms. The Bill was supposed to take action against the unregulated derivatives market, which had triggered the 2008 financial meltdown. US treasury secretary Timothy Geithner said on Monday that there is a recovery in the job market. However, he conceded that Americans still face difficult economic conditions. 

Jay Shree Tea & Industries (up 0.23%) has acquired three tea gardens in East Africa.  Autoline Industries (down 0.7%) has revised the terms and conditions of its stock-purchase agreement of 9 May 2007 with the CEO and the promoters of DEP Autoline, USA (DEP), by entering into a supplemental agreement, by which promoters of DEP will increase their stake from 49% to 60%. Shree Renuka Sugars (down 1.5%) posted a growth of 380% and 267% in sales and operating profit respectively in the March quarter, over the year-ago period. ONGC (up 2.8%) has added 83 million tonnes (MT) of oil & gas reserves in the fiscal year ended March 2010, the highest in two decades, even as production was lower than the target. Tech Mahindra (down 2.2%) and Wipro (down 0.2%) are reportedly in discussions with Telecom Corp, New Zealand’s biggest phone firm, for a contract potentially worth up to $1billion. SpiceJet (up 2.9%) which plans to raise $75 million through a share-sale, has received responses from half-a-dozen institutional investors for a possible investment. Punj Lloyd (up 0.2%) plans to divest part of its holding in unit Punj Lloyd Engineering, and is hoping to rope in an equity partner for the unit. Retail store operator Trent (down 0.9%) has decided to raise Rs500 crore by issuing shares to existing shareholders on a rights basis.

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Godrej Consumer Products to focus on new ‘3x3 strategy’

GCPL plans to expand its international market presence through this strategic move, with a focus on Asia, Africa and South America

Godrej Consumer Products Ltd (GCPL) has chalked out a new plan for focusing on the international market. It is concentrating on a ‘3x3 strategy’ to penetrate deeper into Asia, Africa and South America, with three product segments—personal wash, hair care and insecticides. 

“It (the 3x3 strategy) is part of our globalisation strategy where we are concentrating on three categories and three continents. We are focussing on these continents to understand the market better. Our strategy always has been to focus on developing countries, because they have high populations. Even consumption of our products is high in these places,” said Hoshedar K Press, vice chairman, GCPL.
 
The company spent Rs100 crore-Rs125 crore to acquire Tura, a Nigerian beauty products company. This is the company’s third acquisition in Africa. 

In April 2010, GCPL acquired Megasari—a leading consumer products company in Indonesia, which has notched up revenues of $120 million in the past fiscal with estimated profit-after-tax margins of 11%-12%.

It is also the second-largest player in the insecticides market, enjoying 35% market share of Indonesia’s household insecticides market (with a total size of $150 million, growing at 20%). It also has 45% market share (of a total $68 million market, growing at 45%) in the air-care segment and 80% market share of the $21-million wipes market (growing at 45%). Megasari has 15% share of the breakfast cereals market.

 Earlier in October 2005, GCPL had acquired UK-based Keyline for approximately £13 million. During the same year in September, it acquired the South African business of British company Rapidol for Rs50 crore. South Africa-based Kinky Group was bought out for around $34 million in April 2008.

Last year, GCPL acquired a 49% stake in Godrej Sara Lee and is looking to buy out the remaining stake. It has passed an enabling resolution to raise Rs30 billion in order to fund inorganic growth (India and other emerging markets would be key focus areas).

All the big players in the FMCG market are now eyeing Africa. Marico Ltd acquired the ‘Fiancee’ hair care brand owned by Egypt-based Ready Group; Emami is looking at buying an FMCG firm in Egypt. Emami is also looking at buying several other personal care firms in the region and the company is almost certain of having its first manufacturing facility up and running in Africa this year. Emami also has plans to set up three more manufacturing bases in Africa over the next two-three years.
 

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Edifying Eddy

Eddy Elfenbein runs a fine website called
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