SEBI bars 7 companies from issuing fresh shares

The companies have been barred from issuing fresh shares due to matters relating to manipulation of GDR issues. SEBI also barred has 10 other persons and entities from dealing in securities or instruments for involvement in the matter

Mumbai: Market regulator Securities and Exchange Board of India (SEBI) on Wednesday barred seven companies, including Asahi Infrastructure & Projects and K Sera Sera, from issuing any fresh shares or altering their capital structure in a matter relating to manipulation of GDR issues, reports PTI.

“...in order to protect the interest of investors and the integrity of the securities market...direct following companies not to issue equity shares or any other instrument convertible into equity shares or alter their capital structure in any manner till further directions in this regard,” SEBI said in an order.

Besides Asahi Infrastructure & Projects and K Sera Sera, the other companies are IKF Technologies, Avon Corporation, CAT Technologies, Maars Software International and Cals Refineries.

SEBI also barred 10 other persons and entities from dealing in securities or instruments for involvement in the matter.

They are India Focus Cardinal Fund, MAVI Investment, KII Ltd, Sophia Growth, European American Investment Bank Ag, Basmati Securities, Oudh Finance & Investment, Alka India, SV Enterprises and JMP Securities.

SEBI has also directed the National Securities Depository (NSDL) and Central Depository Services (India) (CDSL) to “freeze the beneficial owner accounts” of the ten persons or entities.

“Further, the concerned stock exchanges should also ensure that said persons/entities do not take fresh positions or increase their open positions,” it said.

SEBI had in 2009-10 received alerts regarding large scale off-market transactions in its IMSS system regarding a few scrips like IKF Technologies, Avon Corporation, Asahi Infrastructure and K Sera Sera.

The companies had issued the GDRs, a financial instrument used by private markets to raise capital denominated in either dollars or euros, between 2007 and 2009.

“A preliminary examination revealed that foreign institutional investors (FIIs) like India Focus Cardinal Fund and Mavi Investment Fund, were converting the GDRs held by them into normal shares (known as cancelling GDRs) to sell in Indian markets.”

“It was also observed that most cancellations were happening within a short period from the issue of the GDRs by the company,” it said.

It was observed that between 33% and 75% of the shares sold by these FIIs in various scrips were bought by recurring clients. In view of such large scale selling by the FIIs and its matching with these clients, a detailed examination was carried out in these scrips.

It was found that between 1 January 2009 and 31 May 2010, the average daily volume has increased significantly on the days when the entities, sub-accounts and group, were found to be trading in the scrip.

A detailed examination was carried out into the matter by SEBI.

“The companies examined were generally less-liquid before the GDR issues compared to the period post-GDR issues. After the GDR issue there has been substantial increase in the average daily volume of these scrips,” it added.

SEBI also found that one Arun Panchariya of India Focus Cardinal Fund facilitated issue of GDRs and later their sale to a set of counterparties on domestic exchanges who in turn sell to retail domestic investors.

“... it is prima facie found that Arun Panchariya related Group entities buy shares from sub-accounts like India Focus and later sell it to retail investors thereby setting up a funds flow from retail clients to Panchariya related counterparties and then to sub-accounts which take the money outside India,” SEBI said.

In its order, the regulator also barred Pan Asia Advisors and Arun Panchariya from rendering services in connection with any securities instruments.

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RINL IPO likely to be postponed till FY12-13

The postponement of RINL’s issue could be another setback for the government, which has set up a target of Rs40,000 crore through disinvestments in PSU during this fiscal. It has managed to garner only Rs1,000 crore so far due to continuous volatility in the domestic market

New Delhi: Disinvestment in Rashtriya Ispat Nigam (RINL) is likely to be postponed to 2012-13 after it completes the Rs12,500-crore first phase expansion by the end of this fiscal which will improve valuation of the company, reports PTI.

The IPO of the Navratna firm, in which the government is considering to divest 10% its stake, was earlier being planned for January-March quarter of this fiscal.

“Valuations of the company will improve post expansion of our steel unit at Vizag, which is scheduled for commissioning in January-February next year. So, we are targeting to come out with the IPO of RINL only in the first quarter of next fiscal,” said a senior company official.

Meanwhile, the company has initiated the IPO process and appointed four merchant bankers—UBS Securities, Deutsche Bank, Edelweiss Capital and IDBI Capital—as the book running lead managers (BRLMs) to manage its issue, he said.

The second largest steel PSU has embarked upon a major capacity expansion drive to have a capacity of 11.5 million tonnes per annum (MTPA) by 2015-16 at an investment of Rs45,000 crore. The expansion is to be completed in three phases.

Of this, phase-I is slated to be commissioned in January-February of next year, taking the production capacity of RINL to 6.3 MTPA from existing 2.9 MTPA, at a cost of Rs12,500 crore.

The company is looking to increase its valuation before hitting the markets, the official said.

“The company has time till November 2012 to fulfil the guidelines of being a Navratna company. So listing of our company on the stock exchange can be done anytime before that and we are not in a hurry,” he added.

Pointing out the current market conditions, the official further said that time was not ripe for coming out with the IPO and there was no pressure either from Disinvestment Department or from the steel ministry on this front.

“Every company looks for favourable conditions before coming out with its issue; we are also looking for the same,” he said, adding that preparation for the IPO and securing government and other regulatory clearances will take 4-5 months time.

In 2010-11, RINL had posted a sales turnover of Rs11,517 crore, while during this fiscal it is targeting a turnover of Rs13,600 crore. The Navratna firm is a zero debt company and is sitting on cash reserves of Rs5,500 crore.

As of 31 March 2011, the company has a paid-up capital of Rs7,827.32 crore. This comprises Rs4,889.85 crore paid-up equity capital (4,88,98,462 shares of face value of Rs1,000 each) and Rs2,937.47 crore preference capital.

According to the request for proposal (RFP) to appoint merchant bankers for RINL issue, the government is considering disinvestment of 10% of its stake in the Navratna firm, comprising 48,89,846 shares of face value of Rs1,000 each through a domestic IPO.

The shares are proposed to be split into Rs10 each before the disinvestment, so as to make the RINL issue more affordable to the investors.

Moreover, the postponement of RINL’s issue could be another setback for the government, which has set up a target of Rs40,000 crore through disinvestments in PSU during this fiscal. It has managed to garner only Rs1,000 crore so far due to continuous volatility in the domestic market.

The big ticket issues of SAIL and ONGC are yet to hit the market due to adverse conditions, while other issues like BHEL and NBCC are now being planned for January-March quarter this fiscal.

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Share prices await US stimulus announcement: Wednesday Closing Report

Nifty may struggle between 5,125 and 5,230 before a decisive move

The market closed flat with a negative bias as investors all over the world wait for positive signals from the US Federal Reserve. The NSE traded on a volume of 61.12 crore shares, the second highest in the past six days. Today the Nifty managed a higher high of 5,168 and a low of 5,110, which was the highest in the past 26 days (including today). Although the indicators show signs of a rally, global events may cause impediments in the upmove. The Nifty may move between 5,125 and 5,230 tomorrow.

Continuing from yesterday's positive close, the Indian market opened higher, tracking the Asian markets that were in the green in early trade as investors awaited the outcome of the two-day US Federal Open Market Committee (FOMC) meeting. The Nifty started the day at 5,154, up by a modest 14 points and the Sensex added 30 points to resume trade at 17,129.

Capital goods, consumer durables and PSU stocks supported early gains, which enabled the indices to hit their intraday high in the initial half hour. At the highs, the Nifty rose to 5,168 and the Sensex touched 17,191. However, a high degree of choppiness saw the indices fluctuating on both sides of the neutral line till noon trade.

The lower opening of the key European markets on news that international policymakers would meet in Athens next week to review the measures taken by the Greece government and nervousness ahead of the FOMC announcement, pushed the domestic indices into the negative with the benchmarks falling to the day's low in the noon session. At the lows, the Nifty fell to 5,110 and the Sensex went back to 17,001.

The market was sideways in subsequent trade. It made a feeble recovery attempt in the last half hour, but selling pressure kept the indices in the red till close of trade. The market ended flat with a negative bias. At the end of the session, the Nifty lost seven points at 5,133 and the Sensex settled 34 points down at 17,065.

The advance-decline ratio on the National Stock Exchange (NSE) was 973:689.

Even as the Sensex settled almost flat, the broader indices outperformed the benchmark. The BSE Mid-cap index gained 0.73% and the BSE Small-cap index advanced 0.71%.

The leaders in the sectoral space were BSE Consumer Durables (up 2.04%), BSE Bankex (up 0.96%), BSE Realty (up 0.83%), BSE PSU (up 0.50%) and BSE Power (up 0.43%). The top losers were BSE Oil & Gas (down 1.16%), BSE Auto (down 0.91%), BSE Metal and BSE IT (down 0.26% each) and BSE Fast Moving Consumer Goods (down 0.14%).

The major gainers on the Sensex were ICICI Bank (up 2.15%), Jaiprakash Associates (up 2.14%), Coal India (up 1.57%), Wipro (up 1.30%) and State Bank of India (up 0.89%). The top losers on the index were Hero MotoCorp (down 3.06%), Hindalco Industries (down 2.80%), Maruti Suzuki (down 2.65%), Reliance Industries (down1.57%) and Bajaj Auto (down 1.49%).

The key Nifty gainers were Siemens (up 2.03%), ICICI Bank (up 1.99%), Grasim (up 1.80%), Ambuja Cement (up 1.74%), and JP Associates (up 1.66%). The main losers were Hero MotoCorp (down 3.43%), Hindalco Ind (down 3.27%), Maruti Suzuki (down 3.19%), Cairn India (down 2.55%) and RIL (down 1.97%).

Markets in Asia edged higher on speculation that the US Fed, later today, will announce new measures to boost the economy. A rise in China's economic indicator index in July also supported the gains. However, less-than-expected growth in Japanese exports in August by 2.8% on a year-on-year basis capped the gains on the Nikkei.

The Shanghai Composite jumped 2.66%, the KLSE Composite gained 0.60%, the Nikkei 225 rose 0.23%, the Straits Times advanced 0.39%, the Seoul Composite climbed 0.89% and the Taiwan Weighted was up 0.57%. On the other hand, the Hang Seng lost 1% and the Jakarta Composite declined 1.46%.

Back home, domestic institutional investors were net buyers of stocks worth Rs318.84 crore on Tuesday. On the other hand, domestic institutional investors were net sellers of equities worth Rs317.69 crore.

Power Finance Corporation (PFC) has received the Reserve Bank of India's (RBI) approval to raise $1 billion (Rs4,600 crore) via offshore medium-term note borrowing. The funds would be utilised for funding the power projects, including ultra mega power projects, financed by the company. The stock gained 3.14% to close at Rs164.25 on the NSE.

Belgium-based WABCO Holdings has embarked upon a Rs60 crore investment plan for its Indian operations during the current financial year. WABCO-TVS, which has been renamed WABCO India, will invest around Rs40 crore for expanding its facility at Mahindra World City SEZ in Chennai and another Rs10 crore for setting up a facility at Lucknow. The remaining would be utilised for other purposes. WABCO India added 0.52% to close at Rs1,308 on the NSE.

Sterlite Technologies, engaged in providing transmission solutions for the power and telecom industries, has received a Rs114 crore contract from state-run BSNL for establishment of a broadband network in the state-run company's telecom circles. The company will install and commission the system by the end of FY12-13 and will manage this network for seven years thereafter. The stock jumped 3.88% to settle at Rs41.50 on the NSE.

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