Gainers & losers of the first week of the New Year

Well-begun is half done, goes the saying. These stocks have set a scorching pace in the first week’s trading of the New Year

Investors of Ucal Fuel Systems and Mangalam Timber Products have a common thing to cheer about. Both the stocks are up an incredible 52% in the first week of this year. These stocks are continuing with their run-up of 2009. Among the other major gainers in the first seven days were JJ Exports (47%), Bhagwati Banquets & Hotels (46%) and Kaushalya Infrastructure Development Corporation (42%).

Lakshmi Mills Company leapt 46% and Ruchi Infrastructure was up 40%. There was intense buying interest in the counter of Hindustan National Glass & Industries (up 39%) and Goldstone Infratech (up 37%). Moneylife has looked at the performance of the first seven days as an indicator of the rest of the year. While there is no clear correlation, it is interesting to note that the big gainers of last year indeed did well over the course of 2009.

For instance, Kitply Industries was up 89% in the first week of last year. It also performed well throughout the year with a gain of 53%. Jenson & Nicholso (43%), Lyka Labs (41%), JBF Industries (28%) and Adhunik Metals (26%) started year 2009 with a rally in their counters and also ended the year with huge gains (105%, 86%, 224% and 243% respectively). There are other stocks like Delta Corp (25%), Hindustan Zinc (25%) and Winsome Yarns (24%) which continued their robust performance throughout the year (48%, 237% and 76% respectively). Would the early racers this year live to their promise?

As a matter of interest, in the first week this year, Anik Industries, Crew BOS Products and Repro India were down 8% each. Crew BOS has announced that it would issue 20,00,000 warrants convertible to equity shares on preferential basis to the promoters. SKM Engineering Products Export fell 9%, Tasty Bite Eatables was down 10%and slipped 10%. Accel Frontline (down 11%) lost its sheen this year and was marginally high last year. Shah Alloys (down 12%), Manasia (down 15%) and Gufic Bioscience (down 17%) plunged during the very first week of the year.

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    ITC lights up a tobacco war

    ITC is apparently using its political clout for blocking FDI in tobacco, leaving foreign investment proposals high and dry. Intense lobbying on ITC’s part has even led to a shift in the government’s stance

    Indian tobacco-to-hotels conglomerate ITC Ltd (formerly Indian Tobacco Co) is apparently up in arms against foreign investment in cigarette manufacturing, its principal profit source. Its intense lobbying for blocking foreign direct investment (FDI) in tobacco has not only caused a distinct turnaround in the government’s stance, it has even split government opinion on the matter.

    The department of industrial policy and promotion (DIPP), which is responsible for FDI policy, was, at first, a strong supporter of allowing foreign investment in tobacco in existing joint ventures. In a clear case of government flip-flop, the same department recommended a ban on such a move. It moved an inter-ministerial note in October last year, asking for a complete ban on FDI in cigarette manufacturing. Indeed, commerce and industry minister Anand Sharma, citing health concerns, has put forth a strong case for blocking the proposed FDI move. This is the same tune which was sung by the previous commerce minister, Kamal Nath.

    However, opinion within government offices appears divided. While the finance ministry is for allowing FDI in cigarettes, the commerce ministry is vehemently standing by its opposing stance. The issue came to fore last year when the foreign investment promotion board (FIPB) considered a proposal by Japan Tobacco International to raise stake in its Indian subsidiary, JTI India, to 74%. The DIPP had, at that time, supported the proposal, allaying concerns that it would lead to raising fresh capacity for cigarette manufacturing. The government does not allow creation of fresh cigarette manufacturing capacity under the current rules. The DIPP’s call for a complete ban on the proposal late last year marks a complete turnaround. Philip Morris, one of the largest tobacco companies in the world, has made similar attempts to bring in FDI to acquire its partner KK Modi’s stake in Godfrey Philips.

    In 1994, ITC was involved in a battle of its own with British American Tobacco (BAT) Industries, which held a 31.5% stake in the company. The British conglomerate had tried to oust ITC’s then chairman, Krishnan Lal Chugh, in a bid to gain control of ITC. However, ITC’s top management and government financial institutions worked hand-in-hand to deal a crippling blow to BAT’s India plans. It also sent a strong signal to other foreign tobacco manufacturers.

    ITC is leaving no stone unturned to protect its Indian ownership. It has ensured the government’s nearly 34% stake in the company remains undiluted. When the Specified Undertaking of the Unit Trust of India (SUUTI), which holds an 11.86% stake in the company, was looking at selling its stake in ITC, it was met with severe opposition, which deterred it from doing so.

    With foreign players making desperate attempts to break into the Indian tobacco space, Indian counterparts like ITC are going all out to protect their turf. The matter is expected to come up for discussion at an inter-ministerial meet soon. If the government were to accept the proposal to ban FDI in cigarette manufacturing, it would be the final and telling blow to foreign players seeking a larger share of the Indian pie.

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    On-road price of the Tata Nano may touch Rs2 lakh

    Tata Nano, the much talked about ‘lakhtakia’ car, may actually cost you around Rs2 lakh, including registration, insurance, taxes and loan repayment charges

    Tata Motors’ ambitious ‘lakhtakia’ car, the Nano priced at Rs1 lakh—excluding taxes and duties—is in fact costing customers nearly Rs2 lakh. According to both new and used car dealers, when you include registration, taxes, insurance and the total value of instalments to repay the loan, the real cost of even the basic version of the Tata Nano goes up to Rs2 lakh.

    “People had booked the car under the perception that the vehicle will cost only Rs1 lakh. But it comes to more than that or nearly Rs2 lakh, when all things (additional expenses) are considered,” a car dealer said.

    Tata Nano comes in four different variants, namely Nano, Nano CX, Nano CX-Metallic and Nano LX. Including registration and insurance charges, the Nano’s on-road cost comes to Rs1.53 lakh, Nano CX costs Rs1.81 lakh, Nano CX-Metallic costs Rs1.85 lakh and the Nano LX comes at a cost of Rs2.09 lakh. Nearly 70% of the total bookings for the Nano have been done through bank loans. So when you add the interest component into the on-road cost of the basic version, it goes up to nearly Rs2 lakh. Prospective buyers had taken a loan ranging from Rs90,000 to Rs1.40 lakh—depending on the version of the Nano that they had booked—which attracts an interest of 10%-12% per annum.

    Again, the fact that customers have to pay the interest first and then posses the car has not been well received by many prospective Nano buyers, car dealers said.

    Most dealers said that customers did not like the fact that the price of the car was much higher than what they had initially expected, as the vehicle had always been touted as a Rs1-lakh automobile.

    “They (Tata Motors) advertised the price of the Nano at Rs1 lakh, so everyone believed that they would get the car within that amount. However, that is not the case. Even the bare minimum or basic version of the Nano has an on-road cost of Rs1.35 lakh,” added a dealer. Also, since the Nano has a minimal resale value, potential customers are thinking twice before buying the vehicle, he added.

    Last year in August, Moneylife had published news items regarding Nano cancellations from prospective buyers due to the delay of the actual car delivery date coupled with higher interest rates being charged by various banks.

    However, according to media reports, Tata Motors managing director Prakash M Telang had said that cancellations are not very large in numbers and a few cancellations “here and there” were normal. According to reports, he said that the company was doing its best to ramp up and start production at its Sanand-based plant.

    If at all you have to spend nearly Rs2 lakh for a small car, then why not go for something that can offer more features, asked a dealer. He said, “If you intend to spend Rs2 lakh on a car, then go for any second-hand Santro or Zen.”

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    Azam Ali

    1 decade ago

    I m resides in Hyderabad. i want to purchase of Tata Nano

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