Recent fall in oil & gold prices to benefit India, says Nomura

While part of the seasonal improvement in the March trade deficit will reverse in April, the recent fall in oil and gold prices can lead to a saving of 1% of GDP on the current account deficit on an annualised basis, if the current price fall sustains

India’s trade deficit narrowed sharply to a two-year low of $10.3 billion in March from $14.9 billion in February, which was better than expected (Nomura expectation: $11.9 billion). While the improvement is partly seasonal as exports tend to rise at the end of the financial year (the average improvement in the trade deficit between February and March is $2.8 billion over the last three years), it also reflects a combination of higher exports and weak imports. These observations were made by Nomura in its First Insights report.


Exports rose 7% y-o-y in March from 4.2% in February. On a three-month seasonally adjusted annualised basis, Nomura estimates that exports grew at 19% from 7.4%, suggesting improving sequential external demand momentum. Import growth contracted by 2.9% y-o-y after rising 2.6% in February due to lower gold imports, weaker oil imports and the continued contraction in non-oil imports; the latter reflecting weak domestic demand.


On a seasonally adjusted basis, Nomura estimates that the trade deficit narrowed to $15.7 billion in March from $16.7 billion in February, indicating that both seasonal and non-seasonal factors are at play. While part of the seasonal improvement in the March trade deficit will reverse in April, the recent fall in oil and gold prices can lead to a saving of 1% of GDP on the current account deficit on an annualised basis, if the current price fall sustains. Hence, the recent combination of improving external demand, low oil/gold prices and weak domestic demand, will improve the outlook for India’s strained current account deficit.


On the basis of today’s trade data, the Q1 CY2013 (Jan-Mar) current account deficit is likely to be 4%-4.5% of GDP versus 6.7% in Q4 of CY2012, according to Nomura.


RTI Judgement Series: Suo moto disclosures by all public authorities under Section 4

The CIC asked health departments of GNCTD and MCD, which run and maintain a large number of hospitals and clinics in Delhi, to suo moto publish all information as required under Section 4 of the RTI Act. This is the 76th in a series of important judgements given by former Central Information Commissioner Shailesh Gandhi that can be used or quoted in an RTI application

The Central Information Commission (CIC), while allowing a complaint, asked

the Additional Commissioner (Health) at Municipal Corporation of Delhi (MCD) and Principal Secretary (Health) at Government of National Capital Territory of Delhi (GNCTD) to make available suo moto the details of Public Information Officers (PIOs) and First Appellate Authorities (FAAs) at all offices and hospitals under its control.


While giving this judgement on 4 November 2010, Shailesh Gandhi, the then Central Information Commissioner said, “These boards (showing detailed information about Public Information Officers—PIOs and First Appellate Authorities-FAAs)—shall be installed at all hospitals, maternity centres, polyclinics, dispensaries and all other non-administrative and administrative units and offices of the departments.”


New Delhi resident Sushma Prasad, had filed a complaint to the Commission under the Right to Information (RTI) Act. Here is what she said in her request to the CIC...


"Section (4) of the RTI act, envisages suo moto disclosures by all public authorities. 

The Department of Health Services, GNCTD and Department of Health, MCD, run and maintains a large number of hospitals and clinics in the city.  However, if one wishes to make a request for information under the RTI act, it is practically impossible to find out the details of the PIO, etc. It is welcomed that this information is available on the website of the departments; however the Commission may take into consideration the fact that a majority of patients coming to these hospitals hail from economically weaker sections of the society and thus, it cannot be assumed that all of them have access to the internet."


Mr Gandhi, the then CIC, while allowing the complaint said the Commission considers this as a bona fide request and observes that this information is a basic requirement under the Act and that the concerned departments ought to have done this earlier. However, that is not the case. There is a clear and unambiguous provision for the same in the Act, in the form of explanation to Section 4 of the RTI Act.


In his order, Mr Gandhi, said, “A sign-board of appropriate dimension shall be installed, mentioning the name(s), designation(s), contact details including the office address/room number, availability hours and telephone numbers of the PIOs, APIOs and FAA, as the case may be, who have been notified under the RTI Act, 2005 (in case of a change of PIO or Appellate Authority, the sign-board will be updated within ten days of the said change.) Information regarding the requisite fees to be paid under various provisions of the RTI Act 2005, modes of payment and the office where such fee will be accepted. Information regarding information handbook/manuals published under Section 4 (1) (b) of the Act; their location and time when they can be accessed should be also mentioned on the board. The exact link/URL to the page on the website of the department where the information handbook can be viewed will also be mentioned. No acronym/ abbreviation should be used. This information shall be inscribed both in Hindi, English, and shall be installed at a location having maximum public view. This will be maintained by the head of the public authority/head of institution as the case may be, or the officer(s) so directed by them in writing, so long as the RTI act is in force. This should be done by the 15 December 2010."


The CIC also asked the Additional Commissioner (Health), MCD and The Principal Secretary (Health), GNCTD to send a consolidated report of compliance of the above directions to this Commission by 20 December 2010.




Decision No. CIC/SG/C/2010/001324/10035

Complaint No. CIC/SG/C/2010/001324


Complainant                                : Sushma Prasad,

                                                            New Delhi - 110 087


Respondents                            : (1) The Additional Commissioner (Health),

                                                        Municipal Corporation of Delhi (MCD),                                                                                            Room No. 28, Town Hall, 

                                                        Delhi - 110 006


                                                        (2) The Principal Secretary (Health),

                                                        Govt. of NCT of Delhi,

                                                        Room no. 907, A - Wing, Delhi Secretariat,

                                                        I.P.Estate, New Delhi - 110 002


What should be the value of Fresenius Kabi Oncology’s shares?

The world-class oncology drug manufacturer has decided to delist its shares from the bourses at Rs130 instead of complying with SEBI’s mandate of 25% public float. The cunning manner in which it has done this may set a dangerous precedent. Incidentally, what should be the fair value of the company?

Fresenius Kabi Oncology (FKOL) the Delhi-based multinational firm and subsidiary of Fresenius Kabi Singapore Pvt Ltd (FKSL), which is into oncology and chemotherapeutic drugs, has adopted a new albeit harmful tactic to delist itself from the bourses. As SEBI’s mandate to keep public float at over 25% nears deadline, it has made a voluntary delisting offer of Rs130 to its shareholders. According to the latest filing with exchanges on 17 April 2013, the company said: “Fresenius Kabi (FKSL) intends to pay an indicative price up to Rs130 per share to acquire the shares offered to it in the delisting offer, subject to FKSL’s right under the Delisting Regulations to accept or reject any price discovered under the reverse book building process set forth therein.” However, there is more than meets the eye in this delisting offer. More than this, is this a fair price and is it fair to minority shareholders?

The promoter’s holding in the company was 90%. It had to increase public float to 25% to comply with SEBI’s new regulations or be delisted. Hence, it decided to offer its shares for sale. On 30 May 2012, the company notified the exchange of its offer for sale (OFS) on the bourses. It said, “The objective of the proposed OFS is to increase the public shareholding of the company. Under the Securities Contracts (Regulation) Rules, 1957, the company is required to increase its public shareholding to at least 25% by June 3, 2013. The current public shareholding of the company is 10%.”

The stock had reached a high of Rs175.75 on 16 April 2012. However, after it announced its OFS scheme the share price careened to a low of Rs78.30 on 18 October 2012. The OFS price of Rs80 took place on 12 October 2012. Right now, the share price is hovering around Rs132.

Now, instead of complying with the SEBI’s norm of 25% public float, it has decided to delist all of a sudden, citing “a change in its strategy”. From OFS it has now resorted to delisting. In the letter disclosed to the exchanges it said: “During an inspection conducted by the US Food and Drug Administration (US FDA) at FKOL’s API plant located at Kalyani, the US FDA made certain observations relating to GMP non-conformities in relation to manufacturing, documentation practices and product testing. FKOL took immediate steps to implement remedial measures and has voluntarily put its production on hold in February 2013. Given the GMP non-conformity issues observed at the Kalyani plant, FSKL needs to focus on the operations of FKOL as opposed to maintaining investor relations”. Minority shareholders be damned. This is a sudden U-turn from the earlier intention to keep public float of 25%.

Earlier, the offer for sale to comply with the public float of 25%, was picked up by four entities: The Royal Bank of Scotland Asia Merchant Bank (Singapore), Macquarie Bank, Morgan Stanley Asia (Singapore) Private Limited and Nomura Singapore. They each bought 30,52,625 shares, 29,47,375 shares, 25,10,841 shares and 23,24,852 shares respectively—all at Rs80 floor price. FKOL sold a total of 14,240,489 shares in the OFS scheme totalling over Rs113 crore, which represented 9% of its share capital and brought down its promoter shareholding from 90% to 81%. Now, it is not known whether the entities who participated in the OFS will tender their shares at Rs130 (thus taking clean profit of Rs50 per share) while leaving minority shareholders in the dark. Or these four could be holding the shares on behalf of this unscrupulous company. After all, name lending by international merchant banks is common.

How the so called ‘indicative’ price of Rs130 was arrived at by the company is unknown. For a company with healthy sales and operating profits, it seems undervalued. According to the Moneylife database, over the past five quarters, the company’s average quarterly sales growth was 25%. Its market capitalisation to sales ratio was 2.41.

The company is into the manufacturing of world-class oncology drugs. A multinational drug company like Pfizer's market capitalisation is  2.91 times the sales while Glaxo is valued at 7.04 times sales. Surely, a company intending to delist should be prepared to pay the top end rather than the bottom end of valuation, especially when its sales and profits have been rising.

FKOL has adopted unscrupulous means to diddle the minority shareholders and delist from the bourses cheaply. Will SEBI take any action?




3 years ago

The posponement of the delisting offer now gives us, the minority shareholders, to get together and form a forum and do not accept this FORCED CEILING rather than the norm of DISCOVERED PRICE by reverse book building. Let us get together and not be made SUCKERS by this MNC !


4 years ago

Sebi should certainly look into the matter. Many such Placements to the selected investors are just planned deals to circumvent the rules.In the past there has been many such buybacks which though proven to be successful were apparently organised and small shareholders were paid negligible amount in comparison to the company's true worth.
If the share market is to be revived in the true sense then more efforts should be made to frame the policies which bring the small investors at Par with promoters and make small investors true partners of the company. This may decrease a few IPO's but would surely make people more willing to participate as Shareholders and returns would flow to small shareholders also. In the present scenario while the promoters grow through pref. allotments, creeping acquisitions, open market sales, Hefty salary, commissions etc as per their choice which is like unofficial insider trading as they are best known of the company's working and can easily change the companies displayed performance as per their plans to suit these activities.


4 years ago

Thanks for the article. Even I was invested in it with a delisting view in mind. But due to unscrupulous tectics by the management, I had to book loss in the scrip. And now all of a sudden they are coming up with the delisting offer. Similar is the case with Chettinad Cement, When it was ruling 900 Plus levels, many shareholders tendered shares @720 with a view to delist. Why anyone would like to sell @720 when market price was 900 Plus. Sebi has not taken any action.

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