The Indian market is likely to witness a flat-to-positive opening on the back of supportive global cues. The US markets ended with marginal gains overnight while the Asian pack was mostly in the green, guided by stronger-than-expected economic growth for the September quarter. The SGX Nifty was up 18 points to 5,943 over its previous close of 5,925.
The government is set to release the weekly food inflation numbers around noon today. Besides, oil stocks will be in focus as the government is set to hike auto fuel prices next week.
The market opened in negative terrain on Wednesday, tracking its Asian peers which were trading mixed. Profit-taking, along with fears of a hike in fuel prices due to a rise in global crude prices, weighed on the sentiments. The slide continued as the day progressed, and the indices touched the day's lows amid range-bound trade in the post-noon session. The broader indices continued to languish and ended sharply lower. A news report that the Intelligence Bureau is looking at likely price-rigging in select second-rung stocks is said to have caused the decline in the market today. However, the key indices pared some losses, but ended in the red, down over 1% each. The Sensex ended at 19,696.48, down 238.16 points (1.19%). The Nifty settled 72.85 points (1.22%) lower at 5,903.70.
Wall Street settled with marginal gains on Wednesday led by financial and technology stocks. Banking stocks ended higher on hopes of higher profits going forward. Positive outlook from technology majors Texas Instruments Inc and Nouvellus Systems Inc boosted the sector. Besides, a strengthening dollar kept a tab on commodity prices.
The Dow rose 13.32 points (0.12%) to 11,372.48. The S&P 500 added 4.53 points (0.37%) to 1,228.28. The Nasdaq advanced 10.67 points (0.41%) to 2,609.16.
Asian markets were mostly higher in early trade on Thursday on positive economic data emanating from the region and support from its US peers, which ended with modest gains overnight. Japanese gross domestic product grew at an annualized 4.5% in the three months ended September, faster than the 3.9% reported last month and higher than analysts’ estimates. The Bank of Korea left the seven-day repurchase rate at 2.5%, the central bank in Seoul today.
The Hang Seng was 0.57% higher, the KLSE Composite gained 0.15%, the Nikkei 225 rose 0.21%, the Straits Times was up 0.39%, the Seoul Composite surged 0.72% and the Taiwan Weighted advanced 0.84%. On the other hand, the Shanghai Composite shed 0.02% and the Jakarta Composite lost 0.05% in early trade. The SGX Nifty was up 18 points to 5,943 over its previous close of 5,925.
The Supreme Court has favoured widening of the ambit of the ongoing probe into the second generation (2G) spectrum case, saying it should also include the period since 2001 when first-come-first-served was the norm for spectrum allocation.
The judges’ remarks assume importance as the former telecom minister, A Raja, has maintained that he was treading on the footsteps of his predecessors and was following the 2001 policy.
Ketan Parekh is trading in dozens of stocks, according monthly intelligence reports. Top ministry officials have been getting these reports regularly. But why are they sitting idly, and why is SEBI keeping mum?
Ketan Parekh has been banned from trading in securities from December 2003 till 2017, but by all accounts Mr Parekh has been very active in the market all these years.
Most amazingly, the government's own intelligence wing is regularly tracking his trades and sending the reports to senior-most government officials. These reports are drawn up every month and sent to SS Menon, national security advisor; TKA Nair, principal secretary to the prime minister; KM Chandrashekhar, cabinet secretary; GK Pillai, secretary, ministry of home affairs; and Ashok Chawla, secretary, finance ministry.
Strangely, there has been no regulatory action against Mr Parekh so far, even after his involvement has been widely reported by the media. This raises the question, why top officials of this country who have enormous powers to investigate and harass small businesses and even tax-payers who are senior citizens, are so benign about Mr Parekh's illegal trading even when they are being briefed every month about his enormous purchases and sales?
Another equally important question is whether the market regulator, Securities and Exchange Board of India (SEBI) knows about these activities? Moneylife asked SEBI whether it has been briefed about Mr Parekh's activities, but has not received any reply so far. It would be stunning indeed if all the top officials and the regulator maintain a don't-hear-evil-don't-see-evil attitude, even as they sermonise about what is ethical and moral on various issues in the securities market.
We learn from Intelligence Bureau sources that their monthly briefing reports routinely reach the regulators in some form. The intelligence reports a few months ago documented that "using various front entities" Mr Parekh was active in Orchid Chemicals, GMR Infrastructure, Cairn India, Deccan Chronicle, Reliance Industries, Punj Lloyd, India Bulls Real Estate, Pipavav Shipyard, MVL, Amtek Auto, Hindustan Oil Exploration Company, Camson Biotechnologies, Crew Bos Products, UCO Bank, East India Hotels, State Bank of India, OCL India, Kemrock Industries, Tatia Global Ventures and JSW Steel. Further, KP has apparently "sold his holdings in HPCL and BPCL" in August.
Interestingly, Mr Parekh was also supposedly active in SKS Microfinance, "having taken up the share price from Rs850 to around Rs1,100." The report also adds that "KP using his Kolkata-based associate, Ashok Poddar, held a big position (5-6 lakh shares) in Parsvanath Developers. The report also informs the top government officials that "associates of Mr Parekh, such as Dinesh Singhania and Raj Aggarwal, contemplated modalities for IPOs, wherein cartel members would secure 50% of IPO proceeds from promoters of unknown or fringe companies. In this context, the IPO of Aster Silicates was discussed." Apparently, Mr Parekh is using a Chennai-based broking firm, Shri Ram Insight Share Brokers for his trading.
According to the reports, associates of Mr Parekh were involved in manipulating the Microsec IPO, both in its pre- and post-listing stages. "The gameplan included pre-listing short selling at Rs36 in the grey market, multiple retail and HNI applications through proxies, benami demat accounts and instant selling of the allotment on the day of listing to keep the price below Rs34 levels. Anticipating panic-selling by regular shareholders, the cartel members proposed to mop up shares and subsequently orchestrate a sustained hike through circular trading. Further, the cartel was also involved in the IPO grey market relating to Eros International Media, VA Tech Wabag and Carrier Point Infosystems."
A few months ago, Mr Parekh also planned to buy 60 million shares of Amtek Auto, alternately on the National Stock Exchange and the Bombay Stock Exchange. In June, the intelligence sleuths found Mr Parekh active on the counters of Dish TV, Piramal Healthcare, Pipavav Shipyard and Housing Development Finance Corporation.
Interestingly, Mr Parekh and his associates "were involved in market operations to raise funds in Temptation Foods. The plan included a cash transfer of Rs3.5 crore from one associate (DS) to another (GM) in return for which, GM was to issue a cheque worth one crore to Temptation Foods as application money for 14 lakh shares. While the normal preferential allotment of 14 lakh shares was to be at Rs36 per share, these were to be given at Rs30 per share to GM. Subsequently, KP and associates planned to hike up the shares of Temptation Foods, with the understanding that they would receive 50% of the profit. In the event of a loss, the promoter was expected to make good the losses by providing cash to GM through DS."
It may be recalled that Vinit Kumar, the present owner of Temptation Foods, was recently identified as being an ally of home ministry official Ravi Inder Singh, who was arrested for leaking out sensitive information to companies, and which also led to further revelations in the telecom scam. Vinit Kumar is said to have played a big role in the scandal. According to a report in the Mumbai Mirror, Mr Kumar was the go-between who would take information from Mr Singh to corporate houses, and in return give him cash and supply him with prostitutes. He is widely suspected to have strong links with Mr Parekh, the Mumbai Mirror report says.
When the Intelligence Bureau reports about Mr Parekh's activities are so detailed, the regulator's inability to check his market manipulation can only be deliberate. - Additional research by Sanket Dhanorkar
Ispat Industries has failed to live up to every commitment it made as part of the corporate debt restructuring package so generously approved by lenders in 2003. Will the lenders now act as they would if it were a small business they were dealing with?
Ispat Industries Ltd (IIL), which finds itself in dire straits thanks to almost two decades of severe mismanagement, responded to our recent series of articles on the company by asserting that it has been fulfilling its obligations to its lenders, "though there are some delays". However, the latest report on the progress of corporate debt restructuring (CDR), a copy of which is available with us, shows that the reality is quite the opposite. Ispat is way behind in meeting every commitment and the lenders are, at least on paper, concerned.
The report dated 22nd October says that the Lenders' Monitoring Committee (LMC) "felt that in order to bring financial discipline in the company, TRA mechanism should be strictly implemented immediately and close monitoring for the same is required by the TRA bank, viz. SBI." (TRA stands for Trust and Retention Account.) The report goes on to state that "the company was directed to submit expenses budget on a monthly basis in advance in respect of subsequent month to the lenders for their examination and approval by the LMC for effective monitoring of TRA." The report goes on to discuss the various compliance steps that Ispat has failed to take as part of the CDR. Here is a summary of how lenders see Ispat's compliance on various counts.
Financial closure for Ispat Energy Ltd (IEL): Ispat is setting up 110MW captive power plant through Ispat Energy Ltd (IEL), a separate company. The CDR scheme for Ispat approved in January 2003 envisaged financial closure of IEL by 31 March 2003, almost eight years ago. However, IIL could not complete the project. The CDR package envisaged recovery of Rs250 crores (already incurred by IIL on the above project prior to CDR package) by IIL from IEL in 13 annual instalments of Rs19.40 crore each from FY2006, payment of Rs70 crore per year by IEL to IIL towards Blast Furnace Gas (BFG), reduction in the expenditure towards power for IIL by Rs70 crore per year on implementation of power project and receipt of dividend by IIL from IEL to the tune of Rs18 crore per year. All these promises failed miserably. Further, while approving Rework Package in May 2009, the lenders stipulated that the financial closure for the captive power plant should be achieved by 31 March 2010. Ispat failed in this too. The deadline was extended up to 30 June 2010. This deadline has also come and gone. The generous lenders now say that "as the process for sanction of loan to IEL by FI/Bank is expected to take some time, IIL has now requested the CDR lenders to grant extension of time up to 30 December 2010."
Sale of flats of Peddar Road property: Ispat was required to receive Rs105 crore from the booking proceeds of the flats being developed in the Peddar Road property by March 2006. However, Ispat has not still done this. Two years after the initial deadline, Ispat was still talking of a schedule of payments extending well into November 2008. Ispat was generously allowed time up to 31 March 2010 to sell two flats. This was extended to 20 June 2010. How many small businesses would be given this luxury after they have mismanaged their businesses and have been unable to meet any commitments to their bankers? Ispat then came up with a new idea-that DTZ, one of the world's independent property consultants, has been appointed to market the flats. Ispat has been asked to bring in at least Rs40 crore by 31 October 2010 and Rs215 crore by April 2011. Ispat will in all likelihood fail to meet this commitment too.
In May 2009, Ispat got a "rework package". This comprised loans equivalent to interest for the period from January 2009 to 31 December 2009, aggregating Rs638.89 crore, to meet the working capital gap. Ispat promptly defaulted in payment of dues for July, August and September 2010. The overdue amount on 30 September 2010 was Rs294.46 crore, half of which was the interest cost.
Coke oven and pellet plants: Ispat was supposed to achieve financial closure for a one million tonne per annum (tpa) coke oven and a two million tpa pellet plant by 31 March 2010. Ispat failed in both. The bankers extended the time up to 30 June 2010. Ispat failed to meet this deadline too and requested for an extension up to 31 December 2010.
Damkowadi mines: Ispat has mines in Damkowadi near Nagpur, in Maharashtra, and had committed to start production from these mines by FY2011. It is nowhere near meeting this deadline and the lenders have decided to "appoint an independent consultant to evaluate the legal status, estimated reserve and present status of acquisition, etc."
Capex: The lenders had told Ispat not to incur further capital expenditure acquisitions and investments "without prior written approval of CDR lenders, except the normal capex required for the plant of about Rs60 crore per year." But Ispat has spent Rs143.81 crore during the 15 months (April 2009 to June 2010) on fixed assets, as against normal capex of Rs60 crore per annum provided in the CDR package. The lenders have told Ispat "to give justification for the said expenditure."
The lenders conclude their assessment of Ispat's compliance with the terms of the CDR by stating that as Ispat "has not been able to comply with the above conditions", EOD has occurred and lenders "have the right to convert the entire outstanding (Rs638.89 crore) along with outstanding interest, if any, into fully paid equity shares of IIL. Individual lenders shall have the right to exercise their respective conversion right." (EOD stands for 'event of default'.)
Well, we are not holding our breath to see what the lenders, IDBI Bank, IFCI, ICICI, Punjab National Bank and State Bank of India do. They will probably extend their generosity again. But a steel industry source told Moneylife, "time is running out for Ispat. It can only be rescued through a takeover, even though the Mittals are fighting hard to avoid it."