Limited customer concentration mars Mandhana IPO

The company’s top ten customers accounted for 55.34% of its revenue for the nine-month period ended 31 December 2009

Mandhana Industries Ltd hits the market on 27 April 2010. The company derived 77.79% of its exports from Europe compared to 83.62% as on 31 March 2010. As of 31 December 2009, exports constituted 17.13% of the company’s total sales. The company derived 55.34% (Rs243.07 crore) of its revenues for the nine-month period ended 31 December 2009 from its top 10 customers. Mandhana’s earnings per share (EPS) stands at Rs16.11 for the year ended 31 March 2009 while the average return on net worth is 27.35%.

The company recorded a net profit of Rs36.56 crore in FY09 compared to Rs35.30 crore in FY08 with total income of Rs463.25 crore and Rs406.93 respectively.
The company had negative cash flows from its operating activities in financial year 2007-2008 and for the nine-month period ended 31 December 2009 amounting to Rs4.32 crore and Rs11.68 crore respectively due to an increase in inventory holding and receivable levels and also due to sharp increase in debtors and advances paid. For the corresponding periods the company’s earnings before interest, depreciation, tax and amortisation (EBIDTA) were Rs73.09 crore and Rs93.28 crore respectively.

The company’s non-executive director Sanjay Asher, who was associated with Duck Tarpaulins Ltd (1 January 2002 to 31 March 2002) and Asian Electronics Ltd (31 March 2008 to 31 December 2009) appeared in the wilful defaulters list of the Reserve Bank of India (RBI).

Mandhana has obtained various export licenses under the Export Promotion Capital Goods Scheme (EPCG) wherein the company is required to export goods of a defined amount, failing which, it has to make payment to the Indian government equivalent to the duty benefit enjoyed by the company under the particular scheme along with interest. Promoters will own 62.21% equity post the issue. As on 31 December 2009, its export obligation was Rs317crore.

Ratings agency CARE has assigned ‘IPO Grade 3’ to the issue. According to the Red Herring Prospectus, the proceeds of the IPO will be utilised for setting up of a new garment manufacturing facility at Tarapur, for expansion of yarn dyeing and weaving facility at Tarapur, and to pump margin money for working capital and general corporate purposes. There are 11 litigations pending against the company and four litigations against the director in various categories including one criminal case.

The issue opens on 27 April 2010 and closes on 29 April 2010. The company plans to mop up Rs99.60 crore to Rs107.90 crore at a price band of Rs120-Rs130 per share by issuing fresh equity of 83 crore shares of Rs10 each.

Edelweiss Capital Ltd and Axis Bank Ltd are the lead book-running managers to the issue.


HSBC MF gets off SEBI hook with a mere warning

Despite finding the fund house contravening regulations, the market watchdog has let it off the hook with a mere warning, on technical grounds

Market regulator Securities and Exchange Board of India (SEBI) has let off HSBC Mutual Fund, HSBC Asset Management (India) Pvt Ltd (HSBC AMC) and its chief executive officer with a mere warning, despite finding them contravening regulations.

In an order, SEBI's full-time director Dr KM Abraham said, “I hereby warn the Board of Trustees of HSBC Mutual Fund, HSBC Asset Management (India) Pvt Ltd and its chief executive officer that they shall strictly comply with the law governing their conduct and business of mutual funds in the securities market.” 

The matter relates to the HSBC Gilt Fund. It was alleged that in January 2009, HSBC AMC changed fundamental attributes of the scheme without following procedures. In a letter dated 3 March 2009, the AMC told the market regulator that it has made certain changes in the scheme. HSBC AMC said that it changed the name of the scheme to HSBC Guild Fund from HSBC Guild Fund-Short Term Plan, changed the benchmark index to 'I Sec Composite Index' from 'I Sec Si-Bex' and modified duration of the portfolio not exceeding 15 years from 'normally not exceeding 7 years'.

Following the changes, some investors complained to SEBI that their value of investments in the scheme had come down. They also alleged that the same was because of the abrupt changes in the investment objective such as shifting the investments from ultra short-term to long-term bonds of the scheme in January 2009.

There were some media reports which said that the Fund had shifted about 80% of its assets from ultra short-term to long-term bonds in a single day. The AMC cited liquidity crisis and the corresponding volatility of the assets under management, as the reasons for increasing the duration.

The AMC had launched a scheme called HSBC Gilt Fund during the year 2003. The scheme is an open-ended scheme, which sought to generate reasonable returns through investments in government securities (also referred to as G-Secs). The said scheme had two plans—Long Term Plan and the Short Term Plan. In the offer document, it was mentioned that the Short Term Plan was suitable for investors seeking to obtain returns from a plan investing in gilts (including treasury bills) across the yield curve with the average maturity of the portfolio normally not exceeding seven years and modified duration of the portfolio normally not exceeding five years. The Long Term Plan was intended to suit investors with surpluses for medium to long periods and that the plan would invest in gilts (including treasury bills) across the yield curve with the average maturity of the portfolio normally not exceeding 20 years and modified duration of the portfolio normally not exceeding 12 years.

However, the AMC wound up the Long Term Plan after failing to get the minimum 20 investors mandated by SEBI and continued the Short Term Plan. Subsequently, the said plan underwent certain changes, the major change being the change of the modified duration from 'normally not exceeding 5 years' to 'not exceeding 15 years'.

The counsel for the AMC argued that it was specifically mentioned in the offer document that the average maturity and the modified duration could undergo a change in case the market conditions warrant and according to the views of the concerned fund manager and contended that SEBI did not object to the same while scrutinising the offer document.

Dr Abraham in his order said: "The noticees may be technically correct in stating that the changes made by them are not fundamental attributes, as per the aforesaid SEBI Circular, and therefore there is no legal compulsion on them to adhere to the procedure and manner prescribed under Regulation 18 (15A) of the Mutual Funds Regulations. However, the vital point that the noticee seems to have sadly overlooked is the aforesaid Regulations clearly extend to all changes that affect the interests of unit-holders."

"I am of the view that the board of trustees of the Fund and the Fund have contravened the provisions of Regulations 18(9) & 18(22) of the Mutual Funds Regulations and Clauses 2, 6 and 9 of the Code of Conduct laid down in the Fifth Schedule of the Mutual Funds Regulations. Further, the AMC has contravened Regulations 25(1) & 25 (16) of the Mutual Funds Regulations and Clauses 2, 6 and 9 of the said Code of Conduct. The Chief Executive Officer of the AMC having failed to ensure that the mutual fund complies with all the relevant legal provisions has contravened Regulation 25 (6A) of the Mutual Funds Regulations," Dr Abraham said in an 18-page order.




7 years ago






In Reply to JS 7 years ago

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ramesh b

7 years ago

good one. SEBI will let off big ones..but will catch mini ones. like in Deewar movie, Police-shashi kapoor fired/caught a poor man who ran with a bread for his hungry parents from a shop. very touchy/memorable scene sequence...

Government plans to hike ONGC gas price to $4.20/mmBtu

The proposed move follows the finance ministry’s insistence that any hike in APM gas price should be in one stage and not in phases as previously suggested by the oil ministry

The government plans to more than double the price of natural gas produced by Oil and Natural Gas Corp (ONGC) to $4.20 per mmBtu, in a move that will help the State-run firm to break even in the gas business, reports PTI.

The oil ministry is likely to move a Cabinet note next month for raising price of the gas, produced by ONGC and Oil India Ltd from fields given to them on a nomination basis (called APM gas), to rates equivalent to that produced from Reliance Industries’ KG-D6 fields, official sources said.

This follows the finance ministry’s insistence that any hike in APM gas price should be in one stage and not in phases as was previously proposed by the oil ministry.

The oil ministry had earlier proposed raising APM gas price from $1.79 per million British thermal unit to $4.20 per mmBtu in phases over the next three years.

ONGC, in 2008-09, lost Rs4,745 crore in revenues on selling 17.71 billion cubic metres of gas at the government fixed rate and the move to jack up prices to $4.20 per mmBtu would help the firm break even, sources said.

The oil ministry had previously proposed an immediate 30% hike in the price of gas produced by ONGC and OIL to $2.3 per mmBtu and in three more stages to $4.2 per mmBtu.

Price of gas produced by ONGC and OIL from fields given to them on a nomination basis were last revised in 2005. Current rates of Rs3,200 per thousand cubic meters ($1.79 per million British thermal unit) are less than half of the $4.2 per mmBtu price of gas from the KG-D6 field of RIL.

The oil ministry had, a while ago, circulated a Cabinet note for hiking the price of gas under administered pricing mechanism (APM) to Rs4,142 per thousand cubic meters ($2.32 per mmBtu).

However, on the insistence of the finance ministry, it has withdrawn the Cabinet note and is likely to move a fresh one seeking to raise the price of the gas under APM to Rs7,500 per thousand cubic meters or $4.2 per mmBtu, sources said. The increase in rates would be in one stage, they said.

About 39% of the nation's 140 million standard cubic meters a day of gas output is sold at the administered rate.

A hike in rates is an attempt to reduce distortions in a market with more than a dozen prices.

The government has set $4.2 per mmBtu as the sale price of gas from Reliance Industries’ eastern offshore KG-D6 fields, while the gas from BG Group-operated Panna/Mukta Tapti fields is sold at $5.73 per mmBtu.

Sources said 54.32 mmscmd of gas produced by ONGC and OIL is sold at APM rates of $1.79 per mmBtu. RIL produces about 64 mmscmd of gas from KG-D6.


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