Share prices may move up: Tuesday Closing Report

If Nifty stays above 5,550 it will target to reach 5,620

As we have been expecting, the market continued its upward move today on support from select blue-chips like Jaiprakash Associates, Reliance Industries (RIL) and Infosys. The main indices, the Sensex and the Nifty, were up for the second day.

The sell-off in US stocks for the fourth day in a row on Monday and weak opening by Asian markets resulted in the domestic bourses opening lower. The Sensex was down 65 points at 18,355 and the Nifty opened at 5,509, 23 points lower from its previous close. The indices fell to their day's low in initial trade, with the benchmarks at 18,351 and 5,508, respectively.

The market was range-bound, hovering on both sides of the neutral line till noon trade, when buying in select heavyweights pushed the indices into the positive. The gains were also supported by European markets that mostly opened in the green. The Sensex and the Nifty crossed their psychological levels of 18,500 and 5,550. The market hit the high-point of the day in the last hour with the indices at 18,546 and 5,570.

The Sensex finished 76 points up at 18,496, marginally off its psychological level, and the Nifty added 24 points to close at 5,556.

The gains over the last two days have covered up last Friday's losses. After a range-bound performance for most of the day, the Nifty managed to keep itself above the first resistance of 5,550. If the Nifty maintains a higher high and stays above 5,550 it could reach 5,620.

The advance-decline ratio on the National Stock Exchange was a positive 801:576.

The broader markets outperformed the Sensex today. The BSE Mid-cap index climbed 0.77% and the BSE Small-cap index surged 0.65%.

The BSE Realty index (up 1.64%) was the top sectoral gainer. It was followed by BSE Oil & Gas (up 1.28%), BSE IT (up 1.24%), BSE Healthcare (up 1.12%) and BSE TECk (up 0.95%). The losers were Capital Goods (down 0.48%) and BSE Fast Moving Consumer Goods (down 0.16%).

The top gainers on the Sensex were Jaiprakash Associates (up 2.12%), RIL (up 1.93%), Infosys Technologies (up 1.91%), Cipla (up 1.88%) and Tata Steel (up 1.37%). The major index losers were Hindustan Unilever (down 2.14%), Hero Honda (down 1.28%), Larsen & Toubro (down 1.11%), Wipro (down 0.97%) and Bharti Airtel (down 0.58%).

The top Nifty gainers were Sun Pharma (up 2.41%), RIL (up 2.33%), Jaiprakash Associates (up 2.05%), Tata Steel (up 2.05%) and Reliance Capital (up 1.85%), whereas the losers were led by Hindustan Unilever (down 2.56%), Hero Honda (down 1.64%), L&T (down 1.26%), ACC (down 1.10%) and Wipro (down 0.91%).

The strike by workers at the Manesar plant of Maruti Suzuki India, the country's largest car maker, entered the fourth day today, and production continued to be affected.

Around 2,000 workers at the plant have been on strike since Saturday, resulting in a production loss of about 1,800 units till Monday and the value of the loss is estimated at around Rs100 crore.

Markets in Asia settled mixed with stocks in Japan paring early losses on a weakening yen against the dollar, as Japan's finance minister Yoshihiko Noda said that he would "closely watch" the currency market, indicating the government's intent to get tough against speculative yen-buying.

European Central Bank president Jean-Claude Trichet's willingness to sanction bond rollovers in Greece, helping ease concerns of a slowdown in the global economy, also supported gains in the region.

The Hang Seng fell 0.29%, the Jakarta Composite declined 0.21%, the KLSE Composite and the Straits Times shed 0.02% each and the Seoul Composite settled 0.65% lower. On the other hand, the Shanghai Composite gained 0.64%, the Nikkei 225 rose 0.67% and the Taiwan Weighted added 0.12% in trade today.

Back home, foreign institutional investors were net sellers of shares worth Rs201.78 crore on Monday, whereas domestic institutional investors were net buyers of stocks worth Rs184.99 crore.


ED’s plea to question Hassan Ali deferred till 17th June

Accused of money laundering and multi-crore tax evasion, Mr Khan is also facing criminal cases under the Passport Act for allegedly possessing six passports from different parts of India

Mumbai: A sessions court today deferred the plea of the Enforcement Directorate (ED), seeking permission to question Pune-based stud farm owner Hassan Ali Khan for three days in a case of alleged money laundering and tax evasion, till 17th June, reports PTI.

Mr Khan, who is in judicial custody in connection with money laundering and tax evasion, is currently admitted to St George Hospital here for treatment.

In a separate development, the ED told the court that it had gone to Mr Khan's residence at Pedder Road in South Mumbai on Saturday to carry out searches but could not find anything as no one, except Mr Khan's cook, was present in the house.

ED also requested the court that it be allowed to question Mr Khan for three days as it needed to trace the source of funds in his possession while complaining that Mr Khan was not co-operating in the case.

Meanwhile, the bail petition of Mr Khan was deferred till 17th June by principal judge, Swapna Joshi, as the government has yet to appoint prosecutor in this case.

ED informed the court that it had instructed Ujjwal Nikam to appear as a special public prosecutor in the case adding that the government would soon come out with a notification in this regard.

Meanwhile, Mr Nikam, who appeared on ED's instructions, urged the court to adjourn the hearing to enable the government to issue a notification of his appointment as special public prosecutor. Thereupon, the court adjourned the matter to 17th June.

Accused of money laundering and multi-crore tax evasion, Mr Khan is also facing criminal cases under the Passport Act for allegedly possessing six passports from different parts of India.


Companies selling out businesses reluctant to share gains with minority shareholders

Piramal Healthcare, Kanoria Chemicals and Laffans Petrochemicals are some of the companies that have earned huge amounts of cash recently by selling their businesses; but minority shareholders have got little out of this

Recently, promoters of quite a few companies have sold off parts of their business, saying that the sale proceeds are to be used for expansion and growth. But how much of this amount is actually being used for expanding business? Or, are they depriving shareholders of their legitimate dues? We looked at five companies that have taken this step over the past year.

Piramal Healthcare, India's second largest pharmaceutical company, made headlines when it announced on 20 May 2010 that it had signed a deal to sell its stake in its domestic formulation business (the Healthcare Solutions division) to Abbott Healthcare, the global, broad-based health care company.

The deal included an upfront payment of $2.12 billion, plus $400 million annually over the next four years, amounting to a total Rs17,000 crore. In reaction to the announcement, the share price of Piramal Healthcare fell by 11.81%, from Rs569.65 to Rs502.35, whereas the price of Abbott India surged by nearly 9%.

In the first week of May 2011, Piramal Healthcare said it plans to enter the financial services sector, by setting up two non-banking financial companies (NBFCs). The business will fund real estate and infrastructure projects. It is seems odd that a company engaged in the manufacture of pharmaceuticals would be interested to enter the financial services business. To add to this, the company says it plans to invest around Rs24,000 crore by leveraging its equities.

Having two completely unrelated businesses raises the risk profile of a company and this has not gone down well with investors. Therefore, in spite of announcing a 300% dividend payout amounting to Rs12 per share, the Piramal Healthcare stock price fell once again, from Rs458.80 to Rs417.55, a drop of nearly 9%. Investors who have put their money in Piramal Healthcare during the past year will be disappointed with the company's management, as the stock price has fallen about 30% over the past 12 months and the dividend payout has not been interesting either.

It's a similar story with Maharaja Shree Umaid Mills, a composite textile company that makes cotton yarn, cotton fabrics and synthetic yarn. On 21 August 2010, the company informed the Bombay Stock Exchange (BSE) about the sale of a 22,000 square yards property in downtown Jaipur, which housed the registered office. The property which was said to be valued at Rs200 crore, was sold for Rs158 crore, as per the agreement. The stock hit a 52-week high of Rs243, gaining about 19% in two days.

Towards the end of March 2011, the company made another announcement that it was selling its 21.65% stake in Andhra Pradesh Paper Mills to IP Holding Asia Singapore PTE, a subsidiary of International Paper Company, USA. The deal is to be completed by 14 June 2011. This time the company's stock price shot up by 43.96% in the two days following the announcement. On 26 May, Maharaja Shree announced a dividend payout of just Rs5 per share, amounting to a mere Rs4.32 crore. The dividend is identical to that in the previous year.

When we asked the company how it planned to use the funds from the sale, Govind Sharda, executive director, said, "The investment plans of the company to utilise the funds generated/likely to be generated would be announced in due course, keeping in mind the potential of growth for stakeholders."

"In the interim, the company has begun its process for implementation of its expansion plans for value addition in the existing line of textile business, where it could invest in excess of Rs1 billion over the next two years. The commercial closure of the process is underway and once accomplished, the same would be suitably communicated to the stakeholders," Mr Sharda said.

The other companies that have taken a similar course are Laffans Petrochemicals, Kanoria Chemicals and JB Chemicals and Pharmaceuticals.

Laffans Petrochemicals is a leading manufacturer and exporter of chemicals, textiles and dyeing finishing chemicals. On 3 April 2011, Laffans said it was selling its chemicals division at Ankleshwar, in Gujarat, to Huntsman Corporation, the global manufacturer and marketer of differentiated chemicals. Despite both the companies being listed on reputable stock exchanges, the price of the deal has not been made public. The Laffans stock price jumped by 19.8% after the announcement. However, the company which has made profits has no history of paying dividends.

On 17 April 2011, Kanoria Chemicals and Industries (KCI), the chemical intermediates manufacturer, announced the sale of its chloro-chemicals unit to the Aditya Birla Group for Rs830 crore. The Kanoria stock price shot up by 20%. The company said funds from the sale would be used for growth of its core businesses. When asked for details of the plans, NK Nokhla, CFO, said, "Considering that the deal was concluded quickly, KCI is yet to firm up detail plans for utilisation of the sale proceeds." At a meeting on 28 May, the company board decided on a 100% dividend payout.

A few days back, JB Chemicals and Pharmaceuticals also announced the sale of its over-the-counter business in Russia for Rs938.51 crore. The proceeds from the sale, it said, will be used for expanding the business. Investors were understandably unhappy as this was a major revenue generating arm, and the share price fell by 13.06% following the announcement.

It seems that some companies can be really tight-fisted when it comes to sharing capital gains with shareholders. Usually, they will claim-legitimately-that they plan to use the cash for growth. And while institutional investors rarely pressure companies to pay dividends, minority shareholders who hope for higher dividends hardly have a say in these matters. Clearly, investors must take into consideration the attitude of company managements in such matters, before putting their money into such companies.



Govind Sharda

5 years ago

Maharaja's dividend payout has doubled in the current year.
Not sure, how the author can estimate value of land sold for Rs 200 cr when it couldn't be sold for more than 158 cr. It is speculation to assess any value and not in good taste.
By restricting div payout to a 50%, the promoters have conveyed the need to plough back funds for the future growth despite their controlling almost 75%. This is contrary to general belief where promoters are perceived to be looting the Corp resources. Pl note, promoters have reduced their holding by almost 9% after disposal of Jaipur land. If the intentions were negative, the dilution could have been avoided.
I wish, the author could research the material before perceiving himself the authority to comment on a professionally managed company like Maharaja. Knowing this company well, I seriously doubt intentions of the author for other companies as well.

P K Biswas

5 years ago

The scenario is far worse with unlisted private companies.

Abha Vijayavargiya

5 years ago

Very informative. i appreciate yr non biased comments.

Sudip Sheth

5 years ago

There are so many companies Doi not reward shareholders. most of them do not bring money to the company itself, promoter sell their stake directly to new promoter (like ranbaxy).
Piramal Health were better promoter who brought money to the comany, offered buyback.

Other recent property gainer are Borosil Glass.

Earlier Atlas Cycle, Victoria Mills etc. who has given back Nil to share holders as gain or Share market price.

nagesh kini

5 years ago

May & Baker to Piramal Healthcare had a French co. in between for M&A. Suggest you check with the Co.


5 years ago

What do you expect out of this so called professionally CHOR companies?This is the same story of Corporate world who have brought our Nation to such a spectacle.Whom to Blame when Government itself is run by Mafias with full cooperation from unscrupulas Corporate Thieves.Many More Tihar Jails have to be built to accomodate this Shameless people.

nagesh kini

5 years ago

I've been a shareholder of May & Baker a onetime British pharma major ever since it went public under FERA dilution more out of sentimental reasons - my father was with the co. for over 35 years. It went on to change of name to Rhone Polonc. I continue to hold the shares even as a minority shareholder.No regrets so far.



In Reply to nagesh kini 5 years ago

kini sir what is present status of May & Bake
my uncle also holding them


5 years ago

Then Abbott has got Solvey pharma merged in it. It will be worth to find out whether Piramal Health invested money in Solvey or Abbott? At Solvey's last AGM monority shareholders
did complain about the swap ratio n dividend.


5 years ago

I think the author missed few things in piramal healthcare deal.. They got 10,000 crores this year and paid tax of 3700 cr, retired debt of 600 cr....out of the remaining money they done 25% share buyback for 2500 crores i.e. they spent about 45% of the proceeds to reward the shareholders.... You just mentioned that there is only a dividend of 12rs for the shareholders.... and i dont know how anyone can judge the management based on the performance of share price in the past 1 year.....expecting little of in-depth analysis rather than surface-scratching from ML :(



In Reply to Jagadees 5 years ago

Jagadees/Sudip: If the buy-back & dividend by Piramal healthcare were so investor-friendly (as u seem to suggest), then, why did the scrip price languish post the jumbo deal? For the investors, scrip price is what really matters...not management talk/image.

Sudip Sheth

In Reply to Jagadees 5 years ago

I agree with You


5 years ago

Legitimately the sale proceeds of any Co asset belongs to all shareholders in proportion to their shareholding. Therefore my suggestion is maybe amend Companies Act to say that whenever an asset of the Co is sold above a certain threshold level, the net sale proceeds per share to be worked out and any proposal of the Mgt to utilise such proceeds for business expansion or diversification should be voted upon by every shareholder by postal ballot either for the resolution or for encashment of his share of the sale proceeds. Only the amt voted for by shareholders for spending as per mgt proposal should be used for such activities.Such shareholders who vote for the proposal should then get coupons, which will entitile them to an additional add-on dividend over and above the normal dividend for the next 3 years only. Hopefully this will protect the small shareholder and may encourage Mt to come up with workable and viable business plans for the sale proceeds. If Moneylife gets a consensus on this it could moot a paper to the Corporate Affairs Ministry.


Deepak Shenoy

In Reply to SANarayan 5 years ago

But most of these managements own more than 50% shareholding, so they will be able to say yes for anything. Add-on dividend coupons aren't really legal; but they could issue preference shares at 7% guaranteed dividend for free to all investors.


In Reply to Deepak Shenoy 5 years ago

our managments will still find a way around it. undervaluibf deals and complicated structuring , they can do almost anything. kyunki unke liye company is personal property. they need to be reminded that its a limited co! an ageing promoter of a large group will show you what indian promoters really think of their shareholders. he plans to divide all his property between his family members and such is the clamour for his wealth that eventually the interest of the companies will be undermined . companies will be run by people without merit.

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