The stock has been rallying by 126% since February 2011, six months before the US entertainment giant announced its plan to buy out the Indian company and subsequently delist it, but the market watchdog has been looking elsewhere
US-based entertainment giant Walt Disney recently announced the buyout of UTV Software Communications by acquiring the shares held by promoters and public, and the delisting of the company. Reacting to the news, the stock jumped by 5.39% and closed at Rs950.45 on 26th July on the Bombay Stock Exchange (BSE). But little did people notice that the scrip has been rallying since February 2011, six months before the big announcement.
Surprisingly, market regulator Securities and Exchange Board of India (SEBI), has not taken any note of the upward movement of the company's stock, which is without any specific reason.
On 9 February 2001, company's stock closed at around Rs437.50. Since then it continued to climb, till 27th July, where it closed at Rs987.85. In six months, the scrip has gone up by 126%. During this period the Sensex was flat.
Market experts point out that such a steady rise in the stock price, followed by a major announcement is highly unusual and needs investigation by SEBI. There was no fundamental reason for the stock to have steadily moved upwards.
Walt Disney, a group promoter, currently holds 50.44% paid-up equity share capital of the company. It has now offered to acquire shares held by the public and original promoters. UTV's managing director Ronnie Screwvala, Unilazer Export and Management Consultants Limited, Unilazer (Hong Kong) Limited and Zarina Mehta are the promoters of the company who hold 19.82% of the equity.
Interestingly, on 10th February, Unilazer Export bought 44,000 shares of the company. This is just a day after when the scrip started moving up.
In a filing to the BSE, UTV said, "The company's board of directors has approved the delisting offer and is acquiring shares from public at a price not exceeding Rs1,000 per equity share. Walt Disney will also acquire 80,53,480 equity shares representing 19.82% of the current paid-up equity share capital from its other promoters of the company at the same price as discovered pursuant to the delisting offer."
Importantly, the company has further mentioned that Walt Disney has informed them that, "if for any reason, the delisting offer is not successful, the Acquirer (Walt Disney) shall evaluate all potential strategies and opportunities in relation to the acquirer's investment in the company."
Such a statement, market participants say, raises speculations over the buyout offer. Small-time investors are already in doubt over the deal. SEBI, so far, has failed to act and ascertain the reason for the rise in the company's stock. At least the regulator should now keep a tight vigil on the company's activity, to protect investors.
The domestic market will rely on global cues for directions
The domestic market is likely to see a subdued opening as the markets in Asia were trading lower in early trade on Friday on the growing uncertainty about US political leaders finalising a deal to hike the nation’s debt ceiling. Earlier, Wall Street settled mixed after erasing early gains on growing worries about the impasse over a consensus about increasing the debt ceiling to avoid a default. The SGX Nifty was 28.50 points lower at 5,470.50 against its previous close of 5,499.
The market was range-bound and the indices stayed below Wednesday’s close through the entire trading session yesterday. The Nifty's intra-day high and closing levels were the lowest over the past 24 days. Thursday’s fall was on large volumes. The Nifty is currently trading below the 50-day moving average of 5,520. We expect the Nifty to remain weak over the next few days.
Earlier, the Nifty opened 54 points lower at 5,492 and the 30-share BSE Sensex resumed at 18,301, down 131 points from its previous close. Reliance Industries, State Bank of India and HDFC led the losses as financials, realty, auto and oil & gas stocks were on the sellers' radar.
The indices made insignificant highs early on, as the Nifty touched 5,512 and the BSE Sensex moved to 18,328. The indices traded sideways for a major part of the session as other stocks like Jaiprakash Associates, Sterlite Industries and Hindalco were also under selling pressure. ITC was the exception, gaining over 2% following the announcement of 25% rise in quarterly earnings.
Volatility associated with the expiry of the July futures and options (F&O) contract was also evident. There was a little recovery on the release of food inflation data for the week ended 16th July that was marginally lower at 7.33%, as compared to 7.58% in the previous week. But this did not give enough momentum to lift the indices into the green.
The indices closed in the red for a third consecutive day with the Nifty losing 59 points to end at 5,488 and the Sensex ended the day at 18,210, down 223 points, extending its losses to 3.5% over the three days.
The US markets closed mixed overnight after erasing early gains as investors were unconvinced that a key vote by Congress would lead to a deal to avoid a US default. A vote on a Republican-led bill to raise the debt limit was expected in the US House of Representatives after the market closed on Thursday, but fears that it would get defeated by the Senate led investors to sell stocks. The impasse overshadowed some positive economic news.
Weekly jobless claims fell more than expected last week, dropping below the key 400,000 level for the first time since early April, according to the Labor Department. Also, pending sales of existing US homes unexpectedly rose in June from May and jumped sharply from a year ago, according to the National Association of Realtors.
Among stocks, DuPont added less than 0.1% after raising its full-year earnings forecast and posting better second-quarter profit. Cisco gained 2% after Goldman Sachs Group raised the networking gear maker’s rating to to “buy” from “neutral” citing the outlook for higher earnings estimates. Akamai Technologies Inc, which operates a server network that helps websites load faster, slumped 19% after third-quarter revenue and earnings forecasts missed estimates. Exxon Mobil declined 2.2% as its results that fell short of expectations.
The Dow declined 62.44 points (0.51%) at 12,240.11 and the S&P 500 shed 4.22 points (0.32%) at 1,300.67. On the other hand, The Nasdaq closed up 1.46 points (0.05%) at 2,766.25.
Markets in Asia were lower on fears of a possibility of a downgrade of the US credit rating as the country’s policymakers are yet to find a solution to raise the debt ceiling. Meanwhile, Japan’s industrial output rose 3.9% in June. However, the rise was slower than a 6.2% rise in the previous month.
Among stocks, Sony Corp declined 2.5% after cutting profit forecasts and Nintendo Co dived 20% after announcing its forecast cut and discounting devices. On the positive side, Japanese lender Shinsei Bank surged 6.7% after reporting a 31% jump in net income.
The Shanghai Composite declined 0.18%, the Hang Seng tanked 0.89%, Jakarta Composite was down 0.04%, the KLSE Composite fell 0.39%, the Nikkei 225 shed 0.08%, the Straits Times slipped 0.52%, the Seoul Composite was down 0.49% and the Taiwan Weighted sank 1.02%.
Back home, India and EU have reached an ‘interim settlement’ under which none of its 27 members will detain Indian generic medicines transiting through Europe on suspicion of intellectual property right (IPR) violations.
However, New Delhi will not withdraw its case against EU in the World Trade Organisation (WTO) filed in May 2010, which was triggered by repeated detentions and seizures of Indian pharmaceutical products at EU ports particularly in the Netherlands.
Market announces new measures to attract retail investors, revive mutual funds
Mumbai: The Securities and Exchange Board of India (SEBI) today announced a host of steps like simplification of IPO forms and greater disclosure by companies, with an aim to attract retail investors back to the stock market. The market regulator also modified the takeover norms.
In a statement after a board meeting held today, SEBI said it has also decided to impose a transaction fee of Rs100-Rs150 on investments of Rs10,000 in mutual funds to incentivise brokers to sell schemes to investors, PTI reports.
The regulator announced guidelines for the Infrastructure Debt Fund (IDF) and simplified the Know Your Customer (KYC) registration process for investors in different segments of the financial market.
Talking to reporters, the SEBI chairman UK Sinha said that the investor form for initial public offers (IPO) will henceforward be short and simple and the number of pages would now come down by as much as half. “The IPO form is not investor friendly. It takes a lot of time to understand it. Taking all this into account, the whole form has been changed and this will lead to reduction in the size of the form,” Mr Sinha said.
The form would carry information regarding peer companies’ price-earnings (PE) ratio and track record of lead managers of the IPO. Currently, the IPO forms run into 15-20 pages, although there are only 2-3 pages where particulars are needed to be filled in by investors and the rest contain instructions, information about the company and the issue and details about bankers, registrars and bidding centres.
The SEBI board also decided on uniform KYC norms for different market players and accepted the 'Aadhar' or Unique Identity system as one of the documents as identity proof for bidding in IPOs and FPOs.
Currently, there are separate KYC norms for different segments like FIIs, mutual funds and brokerage customers. The idea behind uniform KYC norms is to ensure seamless identification of customers in the securities market.
As regards the Takeover Code, an entity buying 25% stake in a listed firm, will have to mandatorily make an open offer to buy an additional 26% from public shareholders. The new norms mark an increase in the open offer size for public shareholders from the existing 20%, while the trigger for such offer has also been raised from 15% in the existing regulations.
Partly accepting the recommendations of a SEBI-appointed panel on the matter, the market regulator decided to abolish the non-compete fees that acquirers generally pay to the sellers in merger and acquisition deals.
In its reaction to the changes in the Takeover Code, the Confederation of Indian Industry said, “This would enable more private equity investors to provide capital to the industry. However, abolition of non-compete fee may be a cause of concern.”
As regards mutual funds, the new investors will now have to cough up an additional Rs150 for investment of Rs10,000 and above in mutual funds, while the charge will be Rs100 for existing investors. Investors already pay a commission in some cases, besides up to 2.5% of their investment towards expenses of fund management.
The decision, SEBI said, will help mutual funds penetrate the retail segment in smaller towns, as the distributor would be allowed to charge Rs100 as transaction charge per subscription. No charge can be made for investments below Rs10,000.