The market is getting long in the tooth and the chance of a sudden reversal is strong
Market indices touched a two-year high today. They opened high, sold off in late morning trade and rebounded to record new highs. Even after selling went up in late afternoon trades, the BSE Sensex ended the day with a gain of 67 points (up 0.38%) at 17,711 points and the Nifty ended at 5,302 points, 21 points higher (up 0.3%).
European stocks traded higher on Monday. Asian stock markets were mostly higher on Monday as stronger earnings from Chinese companies and a deal to provide Greece a financial safety net helped buoy sentiment. The key benchmark indices in Hong Kong, Singapore, and Taiwan rose by 0.49% to 0.88%. However, the key benchmark indices in South Korea, Indonesia and Japan fell by 0.09% to 0.94%. Japan's retail sales gained at the fastest pace in more than a decade in February as economic recovery spread to households. Sales rose 4.2% from a year earlier, the Japanese trade ministry said in Tokyo. Sales posted the biggest monthly jump since 1997.
Russia's central bank cut key rates by 25 basis points on Friday, and analysts forecast more easing to come as the economy remains sluggish and the currency still strong. China's annual economic growth will reach 12% this quarter, a government researcher said. The Dow Jones Industrial Average rose 9.15 points and the S&P 500 Index inched up just 0.86 points on Friday. World trade in merchandise goods is expected to rebound strongly this year as economic recovery takes hold, expanding by 9.5%, said the World Trade Organization’s director-general.
Closer home, the finance ministry said that gross domestic product grew at the rate of 5.6% in the 4th quarter against 5.9% estimated earlier. The RBI said that it will hold the liquidity adjustment auction on Tuesday and Wednesday. It usually conducts one such auction, except for reporting Fridays when there are two repo and reverse repo auctions.
The government will sell Rs2.87 trillion ($64 billion) of bonds in the first half of 2010-11—63% of its record full-year target, less than market expectations, sending yields down. On an average, Rs110 billion-Rs150 billion of issuance would come to the market every week.
FIIs were the strong net buyers on Friday (Rs591 crore). Domestic buyers also purchased stocks worth Rs49 crore. Among stocks, Punj Lloyd (down 3.8%) will sell its stake of just over 19% in Pipavav Shipyard to co-founder SKIL Infrastructure to raise cash by selling assets. The report said that the deal was likely to be struck at Rs700 crore, at a discount to the prevailing market price as Punj Lloyd is selling before the end of a three-year lock-in period. Pipavav Shipyard listed last year, with an initial public offer. Founder-shares are locked in for a period of three years from the completion of an IPO, under Indian regulations. SKIL, which holds about 20% in Pipavav, will have to make an open offer to minority shareholders for a further 20% stake. Axis Bank (up 0.68%) has issued 5.5-year bonds worth $350 million, priced at 275 basis points over comparable US treasuries. The transaction was upsized to $350 million from an original $300 million to accommodate additional investor demand. Nagarjuna Construction Company (up 3.5%) is about to reach financial closure for its thermal power project at Srikakulam district in Andhra Pradesh. We expect the market to trend higher over the medium term thanks to a strong rupee, low interest rates and expectations of continued economic growth.
However, the market is getting long in the tooth and a chance of a sudden reversal is strong.
According to sources, the fruit-juice manufacturer has not been issuing salaries and has also stopped production
Another likely casualty of the financial turmoil in the Indage empire is Seabuckthorn Indage Ltd (SIL), which reportedly has not been paying salaries to its employees since February 2009. Last week, Indage Vintners was on the brink of being liquated (it has subsequently received a stay from the Bombay High Court). Indage Vintners has a considerable stake in SIL.
An employee of SIL has written to us saying, “I am working with Seabuckthorn Indage Limited, our company is not paying salaries and expenses of field staff from last February 2009 and expenses from April 2008 to date.”
SIL is a producer of the ‘Leh Berry’ range of juices. The brand produces eight different types of flavoured juices like sea-buckthorn, mixed-fruit, orange, mango, guava, blackcurrant, litchi and peach.
According to the employee, earlier in the year, SIL’s managing director Mahendra Singh Dhanota told the staff that the company would pay all its dues in the coming months. However, the employee alleges that on 27 March 2010, Mr Singh told the employees that the Indage Group is winding up operations, so it would not be possible for SIL to pay its dues.
Moneylife repeatedly contacted SIL but we were told that nobody in senior management was available to speak on the issue. Finally, an employee called Mr Dassan told us that the company has not been producing any juice in the past three to four months owing to financial problems.
In January 2007, Indage Vintners acquired 6.5 lakh shares or 52.63% stake in SIL. As on 31 March 2008, the company retained this stake in SIL. Latest figures on Indage’s stake in SIL were not available.
We contacted Ranjit Chougule, managing director, Indage Vintners, for information on SIL. He sent us a text message which says, “We are only shareholders of Seabuckthorn Indage. You would need to contact their management.”
At one stage SIL was planning to diversify into home and personal care products, confectionery, biscuits, specialty cosmetics and OTC pharmaceuticals. It introduced its bottled water under the ‘Mountain Spring’ brand in 2007.
The company, which listed on the BSE, has new plans for expansion and broadening its revenue base
DQ Entertainment (DQE), a global animation, gaming and live-action entertainment production & distribution company, listed on the Bombay Stock Exchange (BSE) on Monday. Its order book stands at $95.50 million (spread over 2.5 years), said a top official. The company is also producing two animated 3D stereoscopic feature films which will hit global screens by the winter of 2011.
The shares of the company listed at Rs135 on the BSE on Monday (29th March), a premium of 68.75% against the issue price of Rs80 a share. “We hope to increase our order book of $95.50 million, as we are coming up with a series of new projects,” said Sanjay Choudhary, financial controller, DQE.
Apart from the television series, the company is ready to foray into television feature films ranging from 85 minutes to 90 minutes. “We completely own both the properties, but we need to raise funds for the production of the two movies. We will have to part with around 50%-60% of ownership to raise the fund. There will be around two distributors for each film. The distributors will own 50%-60% stake in these two films. The revenue earned from the distribution will be divided among these two distributors (for each film) according to the stake they own,” said Tapaas Chakravarti, chairman and CEO, DQE.
“Besides the ownership revenue, we will also receive the revenue earned by the movies in the box office. This will not be shared with the distributors,” he added.
The company has also signed a co-production deal with Hive Enterprises Ltd for a new animated series—‘The Hive’. DQE will produce 78 episodes of 3D computer-generated imagery (CGI) ranging for 7 minutes each for each episode of ‘The Hive’. The total cost of production of the series is Rs24 crore. The company has still not finalised the global satellite broadcaster for this series.
Moneylife had earlier reported on how DQE has tied up with Walt Disney for co-producing three animated series. The company on Monday announced that it is partnering with Marvel Animation, LLC, a wholly-owned subsidiary of the Walt Disney Company and Method Animation for co-producing 26 new episodes for the second season of the animated series, ‘Iron Man: Armored Adventures Season Two’. The production budget for ‘Iron Man’ stands at Rs60 crore.
“We have signed one co-production deal with Disney and we are in the process of signing two more. Disney has already bagged the pay television rights for ‘Jungle Book’ for 29 countries. The rights are for four years,” confirmed Mr Chakravarti.
The company holds 20% equity stake in ‘Iron Man’. DQE will earn 20% of the total revenue from the series. The company also expects a substantial amount from merchandising, licensing and publishing agreements for this series. Earlier, the company was earning 95% of its revenue from production and the balance from merchandising, licensing and publishing agreements. Currently the company is looking at earning around 10%-15% from these marketing activities.
DQE is planning to employ 600 fresh recruits over the next two months, which will raise its employee strength to 3,800. The new recruitments are mainly for 3D HD stereoscopic animation production. Around 90% of the content produced by the company is in the 3D stereoscopic format.
“We produce 90% of our content in 3D stereoscopic (format) and we have plans to launch a series based on this format. We will be launching ‘Jungle Book’ by this calendar year. Next year, we will be launching ‘Peter Pan’, ‘Iron Man: Armored Adventures Season Two’ and ‘Charlie Chaplin’. All these series will be (in) 3D stereoscopic (format),” said Mr Chakravarti.