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Two Ambani groups seek settlement with SEBI on separate probes

New Delhi: In what could be a coincidence, the two Ambani groups have separately approached the Securities and Exchange Board of India (SEBI) for settlement of probes by the regulator in two separate cases of alleged violation of trading regulations, reports PTI.

A settlement order is likely to be passed soon by SEBI in its probe related to Anil Ambani group firms, Reliance Infrastructure and erstwhile RNRL (which has now merged with Reliance Power), sources said.

When contacted, an Anil Ambani group spokesperson declined to comment on the matter.

On the other hand, elder brother Mukesh Ambani-led Reliance Industries (RIL) group has approached SEBI for the third time for a settlement in the probe involving alleged violation of insider trading norms way back in 2007 in the dealings of shares of now-delisted subsidiary Reliance Petroleum (RPL).

Queries made to an RIL spokesperson were unanswered.

RIL's consent to the settlement appeal in this case has previously been turned down twice as the market regulator did not agree to consent fee that was offered to settle the case, sources said.

The last two appeals were made by RIL in August 2010 and November 2009. SEBI is said to have assessed the illegal gains from the alleged insider trading at over Rs500 crore and had found the offered consent fee very less in those appeals.

It could not be ascertained as how much Mukesh Ambani group offered to pay as consent fees in its latest appeal.

Interestingly, the probes related to both the groups are regarding transactions that occurred way back in 2007 and investigations were initiated by the SEBI in both cases on the basis of anonymous complaints.

SEBI had begun quasi-judicial proceedings against RIL after it found violations in insider trading regulations pursuant to its investigation in the trading pattern in the RPL stock for the period between 1 and 29 November, 2007.

A subsidiary of RIL, RPL was merged with the parent in 2009 and subsequently delisted from the stock market.

SEBI first issued show-cause notices to RIL in this matter in May 2009, while the initial probe began in early 2008.

The other case involves a probe into certain market "dealings" by the two Anil Ambani group companies-Reliance Infrastructure and Reliance Natural Resources.

In this case, R-Infra, RNRL, along with some top group executives including chairman Anil Ambani, were issued notices several times in the second half of 2010 to appear for personal hearing before the SEBI.

While SEBI, in its notice did not clarify what "dealings" by RNRL and R-Infra it was probing into, various agencies, including Enforcement Directorate, have been investigating alleged irregularities in overseas debt instrument transactions by the two companies way back in 2007.


Infosys Q3 results disappoint markets, stock falls 4.8%

Infosys' Q3 results fall short of expectations; the company says the next quarter is likely to stay soft. Stock suffers biggest decline in 15 months, but analysts do not expect it will drop much further as IT is considered a 'safe haven' for now

Infosys Technologies, the country's second largest software services exporter, today posted lower-than-expected third quarter results that saw the stock fall by nearly 5%. The Infosys share closed at Rs3,212, a loss of 4.82% on the Bombay Stock Exchange.

It's the biggest drop in 15 months. However, analysts believe that the stock should not fall much further here on, as the information technology sector is still a 'safe haven' for investors. The stock gained 13% in the October-December period, lagging the nearly 15% rise in the sector index.

The company's net profit for the quarter ended December 2010 rose to Rs17.8 billion from Rs15.6 billion a year ago. Net sales rose 26% to Rs71.06 billion. But these figures were marginally lower than market expectations.  

Volume growth at just around 3% was also lower than the 6%+ expected and the company's revenue guidance for FY11 at $6.04-6.06 billion and an EPS of Rs118.68-118.90 were also below expectations. Analysts had estimated an EPS of Rs120 EPS.

Pricing growth of 1.6% was the only positive. Margins were constant at 30%, more or less in line with expectations. In dollar terms, revenues for the quarter were $1.585 billion, a growth of 6 % quarter-on-quarter, against expectations of a 7%+ growth.

In a televised news conference, chief executive officer and managing director S Gopalakrishnan said that the weaker economic recovery in developed markets, coupled with unemployment and risk of sovereign default could undermine industry growth. The management is also concerned that the effects of the European sovereign debt crisis could spill over to the US and result in a volatile economic and currency environment. This commentary from the management has worried the market which was hoping for a confident report.

Infosys is the first among the country's major IT companies to report results and analysts will now be keenly watching for the other biggies like TCS and Wipro. These companies have increased recruitment recently and have given good pay hikes, which raised hopes of a pickup in demand.

Infosys added 40 clients in the quarter and 11,067 employees, largely in line with expectations. It believes that the next year could be 'normal' in terms of clients' budgets-it expects the industry to grow at 18-20%. The company has a track record of above average industry growth (at least 500-600 basis points). However, the fourth quarter is expected to be another 'soft' period. Attrition has been lower (17.5%) than the previous quarter, but this is still not at a comfortable level.

Infosys continues to be positive about growth in North America, especially in the financial services and retail segments. But it is somewhat skeptical about the telecom business. It is also slightly negative about Europe. Telecom as a percentage of overall revenues decreased to 12.5% this quarter from 16% in the previous corresponding period.

The management believes that while pricing may go up in bits and spurts for now, a sustained increase will take time. It expects volume growth to continue, although it is obvious that the market overestimated on this front.

Infosys says its clients are positive on budgets and the offshore portion going up, but when this will happen is not clear. It expects more clarity by Q1FY12, when most clients would have finalised their budgets.

For now, the company aims to manage margins through tight cost control. The $30 million-$100 million deals, in what it calls transformation, and the $100 million-$300 million deals it calls operation and innovation continue to be its 'sweet spots'.

Infosys believes that the chances of the rupee depreciating are higher than appreciating and it will continue to hedge for the next two quarters. A stronger rupee hurts margins of software services exporters who earn more than half of their revenue from the US.

A quick look at the revenue by service offerings reveals that application development and maintenance has seen a sharp fall, while consulting has seen a rise; normally consulting is a higher margin business. However, sharply higher wage hikes seem to have kept this from being reflected in the margins. Systems integration has also risen.

(This article is based on secondary research. The report is for information only. None of the stock information, data and company information presented herein constitutes a recommendation or solicitation of any offer to buy or sell any securities. Investors must do their own research and due diligence before acting on any security. Some of the opinions expressed in this article are the author's own and may not necessarily represent those of Moneylife.)


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