It has been seven months since Octant Interactive demerged its financial arm and vested in Five X Finance. But Five X Finance is still awaiting the market regulator’s permission for listing—leaving investors in the lurch
Octant Interactive Technologies Ltd demerged its financial division business and vested in Five X Finance and Investment Ltd (with a whopping 80% of its capital) on 7 December 2010. Octant Interactive Technologies Ltd de-merged into Octant Industries and Five X Finance. Effectively, Octant Interactive Technologies Ltd is now called Octant Industries.
However, seven months after the de-merger, Five X Finance has not yet been listed, leaving investors stranded with the shares.
Even the market regulator seems to be not interested in investors' interest. Five X Finance has been waiting for SEBI (the Securities and Exchange Board of India) approval since January 2011, for listing.
As per the Scheme of Agreement, post the de-merger, Octant Interactive Technologies Ltd's shareholders got 4 shares in Five X Finance and Investment for every 5 shares in Octant Interactive which they held. For every 5 shares of Octant Interactive, the equity holder was to receive 1 share of Octant Industries, each share with face value of Rs10. In other words, the shareholders of Octant Interactive were given 80% of their current holding in Five X Finance and 20% in Octant Industries. This effectively reduced shareholder stake in Octant Industries.
The shareholding in Octant Industries—as on 30th September—was 2.56 crore equity shares, which was effectively reduced to 51.38 lakh equity shares.
"It is a really horrible experience for all of the investors, as our major capital and hard-earned money is stuck with Five X since the past 7 months and we are not getting a response from anywhere," an investor told Moneylife, preferring anonymity.
The listing of Octant Industries took place on 7 February 2011 at Rs12. The company informed investors through an update on the BSE (Bombay Stock Exchange) website on 19 April 2011 that Five X Finance is "under the process of obtaining listing approvals with the concerned exchanges for which the Company has applied for the permission of the respective authorities concerned." It has been almost three months since this announcement-and there are no signs of the new company being listed.
When Moneylife contacted Octant Industries, a spokesperson of the company said, "Five X Finance is now being looked after by a different management. Octant Industries has nothing to do with them."
Five X, on the other hand, said in an e-mail reply to Moneylife, "The demerged entity Five X Finance and Investment has moved the application with SEBI for Relaxation of Rule 19(2) (b) of the Securities Contracts Regulations Rules 1957, which is under the consideration of SEBI. (The) Company is following up with SEBI. Unless SEBI gives its approval, which is process driven, we will not be in a position to move the application for listing of Five X Finance and Investment Limited. We are waiting for the same. Any demerged entity prior to Listing after obtaining the Hon'ble High Court Approval, needs mandatory approval for Relaxation of Rule 19(2) (b) of the Securities Contracts Regulations Rules 1957. We have applied to SEBI through Stock Exchanges where the company got listed for the said relaxation in the month of January 24th 2011."
Mumbai-based First Call Equity, which was the merchant banker for the merger/demerger plan said, "The formalities required for listing the company are on. We have submitted all the necessary documents to SEBI. It's a totally new company and hence the delay. In about one month's time, the company should be listed."
This indicates that the listing procedure is pending with the SEBI, and investors are in a limbo.
Moneylife has pointed out earlier instances where companies, despite coming out with demerger plans, have not been not listed on the bourses for a long time. (SEBI keeps Innovassynth investors hanging as stock awaits listing approval for more than a year)
When they it was going in for the de-merger, Octant Interactive had stated, "Both companies have (the) potential to attract different set of investors, require different kind of investment and need to pursue different business strategies." The company said its "focus is on the IT industry" and therefore it considered separating the finance business. According to the statement, post de-merger, Octant Interactive would ostensibly be able to focus on its core business. However it is interesting to notice that despite being a software company, the company website "http://www.octantinteractive.com/" is still under development.
According to the BSE website, Octant Interactive is into "Speciality Chemicals". Along with the de-merger, Octant Interactive merged with Swarnajyothi Agro & Exports Ltd, Indrabati Energies Pvt. Ltd. and Vanishekar Green Energy Pvt. Ltd. The only website running was that of "http://swarnaagro.com", where Octant Industries mentions it engaged into a greenfield project to manufacture castor oil derivatives.
Den, promoted by a key member of the TV18 team, Sameer Manchanda, is down almost 70%. Even news of a joint venture with Turner hasn’t helped
After its high-profile IPO (initial public offering) in 2009, Den Networks, promoted by a key insider of the TV18 group (Den's chairman and managing director is Sameer Manchanda who helped raise hundreds of crores for TV18) has being going the same way as the TV18 group—savagely destroying shareholder value. Interestingly, TV18 has a stake in Den.
After a couple of disclosures regarding insider trading during November last year, the stock has been on a steady decline. Two months after the announcement of the Star Den-Zee Turner joint distribution venture, the stock is close to its nadir.
"The counter has been marked by insider trading. The company has done well otherwise, but its short term performance is not up to the mark," an analyst told Moneylife, preferring anonymity.
Though the news of compulsory digitisation in February and then of the Den-Turner pact in May created some positive sentiment, the stock's fall remains unbroken. On Friday, Den Networks closed at Rs81.50 on the BSE, 64% down from Rs215.10 in 23rd November last year.
For about a year since its listing in November 2009, the price of Den stayed close to its issue price. On 6th August last year, Den Networks peaked at Rs256. But after it disclosed insider selling as per SEBI (the Securities and Exchange Board of India) norms in November, its stocks took a big hit. The first three disclosures came on 19th November, about company CFO (chief financial officer) Rajesh Kaushall selling some shares which were of pre-IPO acquisition. More disclosures followed on 22nd and 24th November about the digital services president of the company Vikas Dali selling shares, and notices reappeared on 21st January and 3rd March.
On 18th November 2010, the company was trading at Rs229.25. On 23rd November 2010, the stock had fallen by 6% to Rs215.10. From 23rd November 2010, the tumble started, and till 22nd July, it had suffered a 64% decline.
When TRAI (the Telecom Regulatory Authority of India) announced compulsory digitisation of analogue services on 4th February, the company was trading at Rs143.20. While the media sector had a positive outlook about TRAI's move, Den's slide continued. The company attributed its performance to the slow pace of digitisation. On 1st April, the stock reached its lowest level at Rs78.
Revival started with the announcement of the joint distribution deal between Star Den and Zee Turner on 26th May, but even that failed to check the tumble. "We have to see how the company fares once digitisation speeds up," added the analyst.
During the bull run, the highly persuasive and entreprenurial Sameer Manchanda has been a darling of institutional investors when he was a key aide of Raghav Bahl. Manchanda helped TV18 raise hundreds of crores from investors by selling them attractive stories built around the TV18's initiatives covering broadcast, web and films. These haven't worked out so far. Investors have lost money heavily in TV18. When Den was launched, there was a belief that this company will not go the TV18 way because it would have a stable franchise like a utility. This hope too has soured - at least for now.
Nifty may go up to 5,700
The Nifty today recorded a higher high, higher low and a higher close, after a long time, signalling an upmove on the cards. The Nifty gained 92 points on higher volumes, which is well above the 10-day moving average. Also, the past three dips on 20th June (closing: 5,258), 12th July (closing 5,526) and 21 July 2011 (closing: 5,542), were each at a higher level than the previous one, indicating that the bulls are winning.
Easing of the debt situation in Greece and a clutch of good corporate earnings on the domestic front saw the market snap its two-day losing streak and close with good gains.
The market opened with good gains on news of a fresh bailout package for Greece and hopes that the US debt issue will be resolved soon. The Nifty opened 35 points higher at 5,577 and the Sensex resumed trade at 18,565, 129 points up from its previous close. All-round buying by institutional investors supported the upmove.
The indices erased some of the initial gains in early trade, but buying resumed subsequently, boosting sentiment. TECk, IT, capital goods and auto stocks were in demand in noon trade lifting the benchmarks to above their psychological levels of 5,600 (on the Nifty) and 18,700 (on the Sensex).
The market continued the upmove in the post-noon session and was range-bound for a period, till a minor bout of profit-booking in late trade pushed the benchmarks to the day's lows. The Nifty slipped to 5,567 and the Sensex to 18,533.
The gains resumed in the last 30 minutes of trading, as the market climbed to the day's high. The Nifty touched an intra-day high of 5,642 and the Sensex hit 18,747. The market recouped the losses incurred over the last two days with the Nifty settling 92 points higher at 5,634 and the Sensex climbing 286 points to close at 18,722.
The advance-decline ratio on the National Stock Exchange (NSE) was a splendid 1071:621.
In the broader market, the BSE Mid-cap index gained 1.25% and the BSE Small-cap index rose 0.82%.
With the exception of the BSE Consumer Durables index (down 0.57%), all other sectoral gauges settled higher. The top sectoral gainers were BSE Bankex (up 2.14%), BSE TECk (up 2.06%), BSE Auto (up 1.76%), BSE Capital Goods (up 1.72%) and BSE IT (up 1.55%).
The top gainers on the Sensex were Bharti Airtel (up 3.99%), Reliance Communications (up 3.43%), Mahindra & Mahindra (up 2.98%), ICICI Bank (up 2.61%) and Tata Motors (up 2.18%). The major losers on the index were DLF (down 0.43%), Hindalco Industries (down 0.28%) and Jindal Steel (down 0.07%).
The major gainers on the Nifty were Axis Bank (up 4.55%), Bharti Airtel (up 4%), RCom (up 3.37%), M&M (up 3.05%) and Grasim (up 3%). The main losers on the index were Jindal Steel (down 0.30%) and ITC (down 0.05%).
Markets in Asia, with the exception of the KLSE Composite, settled higher on the last trading day of the week. European leaders endorsing a second bailout package for Greece and reports of the possibility of a deal which is expected to help stave off a debt default in the US, boosted investor sentiment.
The Shanghai Composite rose 0.18%, the Hang Seng jumped 2.08%, the Jakarta Composite gained 0.95%, the Nikkei 225 surged 1.22%, the Straits Times climbed 1.42%, the Seoul Composite advanced 1.22% and the Taiwan Weighted was up 0.55%. On the other hand, the KLSE Composite was 0.05% lower at the close of trade today.
Back home, foreign institutional investors were net sellers of shares worth Rs577.64 crore on Thursday. On the other hand, domestic institutional investors were net buyers of stocks worth Rs408.36 crore.
HCL Technologies, together with HCL Great Britain, has entered into an agreement with Mecom Group plc for outsourcing a significant portion of Mecom's IT operations. HCL will initially provide Mecom with infrastructure and applications management services in the Netherlands, Denmark and Norway.
Service provision will commence in the first half of 2012 and will last for five years, with the option of extension for a further two years. HCL Tech closed 0.24% higher at Rs504.60 on the NSE.
Kirloskar Oil Engines (KOEL) has entered into a licence agreement with Japan-based Daihatsu Diesel Company for manufacturing and supply of diesel engines of Daihatsu design in India. Under the agreement, the engines manufactured by KOEL will be in the range of 440KW to 2560KW and will cater to the requirement of propulsion and auxiliary power (diesel generation sets) for commercial ships. KOEL fell 0.22% to Rs134.90 on the NSE today.
Engineering major Thermax reported a net profit of Rs79.88 crore for the quarter ended 30 June 2011, a growth of 20.72% over the Rs66.17 crore in the corresponding period last year. Total income increased by 31.77% to Rs1,059.16 crore for the reporting quarter from Rs803.77 crore in the previous corresponding quarter. The stock gained 2.63% to Rs598.35 on the NSE.