Range-bound opening for Indian shares likely: Tuesday Market Preview

The ongoing strife in West Asia threatens to prolong crude supply disruptions from Libya and as protests in Yemen intensified

The local market is likely to open range-bound as the Asian markets are trading with marginal gains as concerns about spiralling crude prices due to the ongoing turmoil in West Asia continues to weigh on investors. However, progress by quake-hit Japan kept the positive momentum going. Wall Street closed in the green on Monday, buoyed by the AT&T acquisition of T-Mobile USA. The SGX Nifty was up 11.50 points at 5,398.50 against its previous close of 5,387.

The domestic market opened in positive territory yesterday on support from its Asian peers, which were in the green in morning trade. The indices were pushed into the red as investors resorted to profit booking early in the day. However, the damage was limited and the market turned positive in late morning trade on support from healthcare, auto and fast moving consumer goods stocks.

The indices touched the day's high in noon trade with the Sensex breaching the 18,000 levels and the Nifty touching 5,409. But the market could not sustain those levels and pared some gains. Continuing to trade sideways, the market dipped into the red again in the last half hour and closed lower for the third day in a row. The Sensex settled 40 points lower at 17,839 and the Nifty closed at 5,365, down nine points.

Markets in the US closed with good gains on Monday, supported by the AT&T’s acquisition of T-Mobile USA for $39 billion, touted to be the biggest merger & acquisition deal this year. Financial stocks gathered strength after the Treasury Department said it plans to start selling off the $142 billion portfolio of agency-backed, mortgage-backed securities it had purchased during the slowdown.

In economic news, the National Association of Realtors said that sales of previously owned homes fell 9.6% to a 4.88 million annual rate in February, more than analysts’ expectations.

The Dow surged 178.01 points (1.50%) to settle at 12,036.53. The winning streak is the Dow’s strongest three-day run since September. The S&P 500 gained 19.18 points (1.50%) to 1,298.38 and the Nasdaq rose 48.42 points (1.83%) to 2,692.09.

Markets in Asia were trading mostly higher engineers made progress in stabilising a nuclear power plant that was crippled by the recent earthquake in Japan. However, worries about the ongoing tensions in West Asia kept investors guarded.

The Hang Seng gained 0.11%, the Jakarta Composite added 0.02%, the Nikkei 225 jumped 2.94%, the Straits Times climbed 0.06%, the Seoul Composite rose 0.44% and the Taiwan Weighted surged 0.72%. On the other hand, the Shanghai Composite declined 0.63% and KLSE Composite shed 0.01%.

Oil rose for a second day in New York as Allied airstrikes in Libya threatened to prolong a supply disruption from Africa’s third-largest crude producer and as protests intensified in Yemen.

Crude for April delivery rose 33 cents to $102.66 a barrel in electronic trading on the New York Mercantile Exchange in morning trade in Singapore. Yesterday, it rose $1.26 to $102.33, the highest settlement since 10th March. The April contract expires today.

Brent oil for May settlement gained 54 cents, or 0.5% to $115.41 a barrel. It climbed $1.03, or 0.9%, to end the session at $114.96 a barrel on the London- based ICE Futures Europe exchange on Monday.

Back home, finance minister Pranab Mukherjee is likely to table a Constitution Amendment Bill in Parliament to facilitate implementation of Goods and Services Tax (GST). The Bill will facilitate implementation of a new tax regime that subsumes levies like excise, sales and service tax.

The Union Cabinet had given green signal to the Bill on the GST and the finance minister could table it in Parliament on Tuesday, sources said. The Bill is likely to be referred to the Parliamentary Standing Committee for scrutiny.


RInfra offers air-conditioners, ceiling fans and T5 tube lights at discount in Mumbai

The Anil Dhirubhai Ambani Group company plans to make available energy-efficient gadgets at lower prices, like it did in 2006-07.

Reliance Infrastructure Ltd (RInfra), after experimenting with an energy efficiency drive a few years ago, has now come up with another scheme, 'Change for Mumbai', under which it will distribute energy-efficient electrical items like air-conditioners and ceiling fans at discounted prices to its subscribers.

The Anil Ambani-led company said it will distribute split air-conditioners and ceiling fans, which have five-star ratings, to its consumers at a discounted price under its 'Change for Mumbai' campaign. Earlier, in 2006-07, the company, under a campaign called 'I will, Mumbai will', claimed to have distributed around six lakh compact fluorescent lamp (CFL) bulbs to its customers.

"The original price of a CFL bulb at that time was Rs162 and we provided it to our customers at Rs81 per piece. Under the scheme, we charged Rs9 per month for nine months to consumers, who procured the bulb. In addition, a consumer, who had paid Rs9 per month for first seven months without fail, was given a waiver for the last two months charges," explained Vivek Devasthali, general manager for corporate communications, RInfra.

RInfra bought the CFL bulbs from Bajaj Electricals Ltd for its 'I will, Mumbai will' scheme during 2006-07.

According to a statement, RInfra, in its new campaign, would distribute air-conditioners and ceiling fans, which have five-star ratings, on a pilot basis in Goregaon (West) and Kandivali (West) areas of suburban Mumbai. However, since the scheme was launched just a month ago, it is not appropriate to comment, said Mr Devasthali.

RInfra has collaborated with LG Electronics, Havells and Osram for supplying split air-conditioners, ceiling fans and T5 energy efficient tube lights, respectively under its new scheme.

According to Mr Devasthali, the company is offering these gadgets to its customers at big discounts. "We are offering big discounts for our consumers. For instance, the original price of a T5 energy efficient tube is Rs750, while we are procuring it at Rs350 from Osram and offering it at Rs150 to our consumers," he said.

There is still no clarity on the selection of customers for the new offer from RInfra.

According to a source close to the developments, this offer is limited to only a few selected customers of RInfra. For this, the customer has to register his/her name on the company's website, after which RInfra would select the names of the 'lucky' customers. He said distributors will offer discounts on tube lights, bulbs, ceiling fans and air-conditioners to consumers, while RInfra will pay the difference between the original and discounted price to the distributor or supplier.


Nagarjuna Fertilizers’ shareholders unhappy with demerger proposal, shares down 13% since announcement

The company’s board of directors approved a scheme to demerge its oil business into a separate entity called Nagarjuna Oil Refinery. However, this has made minority shareholders of the company unhappy due to the proposed share swap formula, which they feel is in favour of the promoters. Nagarjuna Fertilizers shares have fallen 13% since the demerger proposal.

Nagarjuna Fertilizers and Chemical Ltd (NFCL) is demerging its oil business under a scheme of arrangement and amalgamation that has been approved by its directors, in to a separate entity. The scheme is expected to come into effect from 1 April 2011. However, minority shareholders have raised doubts over the plan with regard to the post-merger shareholding of the promoters. In addition, the company shares have also fallen 13% to Rs25.85 since January 2011, just above its 52-weeks low.

According to a letter, dated 10 January 2011, from the company to the Bombay Stock Exchange, the board of directors considered and approved a composite scheme of arrangement and amalgamation of iKisan Ltd, Kakinanda Fertilizers Ltd (KFL), NFCL and Nagarjuna Oil Refinery Ltd (NORL). The scheme envisages "demerger of oil business undertaking of NFCL into NORL and the merger of the residual NFCL and iKisan into KFL."

KFL is a subsidiary of NFCL, while iKisan is a company, which provides Information Technology Enabled Services in Agriculture.

Pursuant to this scheme, the share allotment for the demerger of the oil business undertaking, will be "one equity share of Re1 each fully paid up of NORL for every one equity share of Rs10 each fully paid up, held by the shareholders in NFCL." Also, "one preference share of Rs10 each fully paid up of NORL for every one preference share of Rs100 each held in NFCL" the company states.

For the merger of residual NFCL into KFL, the letter says that "11 equity shares of Re1 each fully paid up of KFL for every ten equity shares of Rs10 each fully paid up, held by the shareholders in NFCL" and "one fully paid preference share of Rs90 each of KFL shall be issued and allotted for every one preference share of Rs100 each held in NFCL."

The share allotment for the merger of iKisan into KFL will be "43 equity shares of Re1 each fully paid up of KFL of every 10 equity share shares of Rs10 each fully paid up, held by shareholders in iKisan," the letter says.

The company informed that the share exchange ratio has been recommended by Grant Thornton, Bangalore. Mumbai-based Keynote Corporate Service Ltd has also provided fairness opinion.

In another statement, NFCL informed the National Stock Exchange, that in an order on 4 March 2011, the Andhra Pradesh High Court had directed the company to convene a meeting of its members on "15 April 2011 for the purpose of considering and, if thought fit, approving with or without modification(s), the proposed arrangement and amalgamation embodied in the Composite Scheme of Arrangement and Amalgamation."

There has been much speculation among retail investors, who feel that the proposed scheme goes against the interests of minority shareholders.

The NFCL stock price has slipped nearly 13% since the demerger plan was approved early January. In fact it has been on a sharp losing streak for over four months, down nearly 40% from its 52-week high of Rs 42.45 on 10 November 2010. The Sensex has lost about 14% in this period.

Moneylife has sent a detailed questionnaire by email to the NFCL company secretary, seeking an explanation on the valuation details and the method used to arrive at the valuation. The message to the company also seeks information about KFL and iKisan. No reply has been received so far.




6 years ago

As is usual a corporate house is making fool of small investors. Ahead of UREA price decontrol promoters are increasing thier stack indirectly in Fertiliser entity.


6 years ago

Isn't it normal for shareholders to receive notification of such actions before they occur ?

Are we also not entitled to vote ?

I have not received any communications from the company at all regarding this issue. I don't think this is fair.

Ajay Sarvagnam

6 years ago

I understand, on demerger, the total equity value of the 2 'new' entities, NORL & KFL vis-a-vis the original entity NFCL, will remain only 21%.
If I have got it right, the remaining 79% goes to Reserves of NORL & KFL, no?
How does this 'benefit' (if at all) retail shareholders like me?

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