Companies & Sectors
Murli Industries scrip shoots up on corporate debt restructuring plans

The stock of Murli Industries, whose promoter was indicted recently by SEBI, is shooting up. Since 28th February, the share price has gained over 40%, indicating possible market manipulation

The promoter of Murli Industries was recently banned from trading, by the market regulator for involvement in price-rigging. Yet, the Murli Industries (MIL) stock price has recently seen an upward trend after sliding since November, suggesting that there is some manipulation.

Since 28 February 2011, till the time it was last traded, the share price has moved up from Rs26.35 to Rs37.05, a leap of over 40%.

On 7th March, when the BSE benchmark index, the Sensex, was down by 236 points, MIL climbed by Rs2.75, or nearly 10%. In three months from 25 November 2010, the stock price crashed from Rs111.20 crashed to Rs25.75 on 25 February 2011, a fall of 77%.

According to industry sources, last week the company's officials met bankers for the first round of corporate debt restructuring (CDR). This is said to be the main reason for the stock hitting the upper circuit over the past couple of days.

The company, which is into diversified businesses like power, cement, paper and paperboard and operates a solvent extraction refinery, reported a loss of around Rs97.20 crore for the December 2010 quarter.

Moneylife recently reported on possible accounting manipulation in Murli Industries. The interest cost for the third quarter stood at Rs52.48 crore, nearly double that in the earlier quarter when it was at Rs25.68crore. According to industry sources, the company has not taken on any new debt during this quarter. (Read, Murli Industries: A story of accounting malpractices?)

MIL made an ambitious foray into cement, but was weighed down by the debt that it ostensibly used to build up its production capacity. Now that it is selling off its cement business, the company will be able to concentrate more on its core businesses like solvent extraction, paper and power.

In November last year, there were various media reports which indicated that MIL was close to offloading its cement division to Mexico's Cemex, the world's third-largest cement maker.

A few months ago, SEBI banned the company and its promoter from trading in its own shares and the shares of group companies. MIL was one of the four companies where promoters had colluded with speculators to ramp up prices. The others were Ackruti City, Welspun Gujarat Stahl Rohren and Brushman India.

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Infra, robust economy to boost credit-rating biz in 10 yrs: SEBI

Strong growth of financial markets over the next decade due to buoyant domestic demand and huge infrastructure investments will translate into better business opportunities for CRAs in India, market regulator SEBI stated

New Delhi: Market regulator Securities and Exchange Board of India (SEBI) has said the credit rating agencies (CRAs) in India are likely to witness a surge in their activities in the coming decade on the back of robust economic growth and substantial investments in infrastructure, reports PTI.

In its latest monthly bulletin, SEBI also said regulations governing the activities of CRAs in the country would ensure a fair play for the sector.

"...India will experience strong growth of financial markets over the next decade due to buoyant domestic demand and huge infrastructure investments," SEBI said.

This will translate into better business opportunities for CRAs in India, provided they function properly, the market regulator added.

CRAs are firms that provide investors with assessments of an investment's risk. The issuers of investments, especially debt securities, pay credit rating agencies to provide them with ratings.

According to SEBI, CRAs in India acted in a fairly responsible manner during the recent financial meltdown, unlike many other countries where they played a dubious role and aggravated the crisis.

"Prima facie, there is no immediate concern about the operations and activities of CRAs in India even in the context of the recent financial crisis," the market regulator quoted a recent report by the High Level Coordination Committee on Financial Markets.

India has taken steps to overhaul the regulatory framework for CRAs, in the wake of recent global financial meltdown to improve the quality of their services.

"India was among the first countries in the world to have formally adopted a regulatory framework for CRAs way back in 1999," SEBI said.

It added that the country has been introducing amendments to these regulations in line with the changing market conditions, the latest amendments being introduced in May last year.

"The regulations cover all aspects of CRAs functioning with respect to ownership, code of conduct, operations, conflicts of interests, etc and have served the market well over the last decade," SEBI said.

CRAs are currently regulated by SEBI though there have been demands by other regulators to supervise some of their activities.

In this matter, SEBI said: "The CRAs should be registered and regulated by the regulator for securities market. They may acquire further accreditation with other regulators, if felt necessary, for rating products that come in their regulatory domain or that are used by their regulated entities."

Credit rating agencies like Standard & Poor's, Crisil, ICRA and CARE have operations in India.

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Bank credit offtake up 23.3%, deposits up over 16%: RBI

As of 25th February, credit offtake stood at Rs39.26 lakh crore while deposits rose to Rs52.29 lakh crore, according to RBI data. The apex bank, at the beginning of the fiscal, had estimated credit offtake to grow by 20% this fiscal

Mumbai: Credit offtake from public and private sector banks in the country grew by over 23.3% for the one-year period ended 25th February, indicating an upswing in the industrial activity, reports PTI.

According to the Reserve Bank of India (RBI), for the one-year period ended 25th February, credit offtake stood at Rs39.26 lakh crore as against Rs31.83 lakh crore a year ago.

During the period, deposits rose to Rs52.29 lakh crore from Rs45.07 lakh crore as on 26 February 2010, the latest RBI data showed. This is a rise of over 16% on an annual basis.

The RBI, in its annual monetary policy at the beginning of the fiscal, had estimated credit offtake to grow by 20% this fiscal.

However, in December 2010 the apex bank expressed concern over the widening ratio between the credit and deposit rates of banks.

This has the potential to affect the supply of liquidity in the system due to higher lending by the banks vis-à-vis lower deposits.

In its recent third quarterly monetary policy review, the RBI had noted that the deposit growth moderated during 2010.

Several banks raised their deposit rates after the Second Quarter Monetary Policy Review of 2010-11, which led to a larger deposit mobilisation in December.

Consequently, deposit growth increased to 16.5% by end-December 2010, close to the indicative projection of 17% for the current financial year.

However, annual non-food credit growth has been above the RBI's indicative projection of 20% since early October 2010, rising to 24% by end-December 2010, the central bank said.

The widening gap between credit growth and deposit growth resulted in a sharp increase in the incremental non-food credit-deposit ratio to 102% by end-December 2010, up from 58% in the corresponding period of previous year, it added.

During the past few months, credit offtake has grown at the rate of 20% on average.

Credit offtake has been higher this fiscal on account of large borrowings by telecom firms to pay for third generation (3G) spectrum licences.

The government realised over Rs1 lakh crore from the sale of spectrum of high-speed mobile and broadband wireless services, much higher than the budget estimate of Rs35,000 crore.

Credit rating agencies like Crisil had earlier said the country was likely to see credit offtake growth at the rate of around 20%-22% this fiscal.

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