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No beating about the bush.
In probably the first such action in India, NDTV, through its law firm Amarchand Mangaldas has sent a legal notice to Sanjay Dutt, who holds a 1% stake in the broadcasting company for raising questions about its corporate policies and practices
In June, Moneylife wrote how Sanjay Dutt, director of Quantum Securities, has levelled a series of allegations about wrong practices and poor governance at NDTV Ltd. He made these charges in writing to almost every regulatory authority in India – the Ministry of Corporate Affairs, the Securities & Exchange Board of India (SEBI), the Reserve Bank of India (RBI) and other institutional investors. See our report Allegations of NDTV’s Many Shenanigans. Following our article, on 27th June 2013, NDTV Ltd sent a legal notice to Quantum Securities, Sanjay Dutt and directors of the company, (27th June 2013) through its law firm Amarchand Mangaldas accusing him of making defamatory statements, writing to various regulators and ‘launching a tirade’ against NDTV because he bears a ‘grudge’ against the broadcaster. This is probably the first time that charges by a significant shareholder have been termed ‘defamatory’ by a company, mainly because he was a ‘remunerated consultant’ sometime in the past. Mr Dutt and his firm Quantum Securities hold a significant stake in NDTV.
Essentially, the legal notice enumerates all the allegations that it has made in the letters attached to the article above. It also asks Sanjay Dutt to tender an unconditional apology to NDTV and withdraw all the letters, emails and complaints that he has sent to various authorities. Moneylife learns that far from apologising, Mr Dutt sent another letter to SEBI seeking the regulator’s intervention to help a ‘minority shareholder’. What is unique is that none of the regulators have responded to Mr Dutt, not even to dismiss his charges as false. Yet, the same SEBI has now been armed by the government with powers of search, seizure and attachment.
It is just short of a month since NDTV sent the notice, but it has apparently not translated this to actual litigation as yet. Therefore, it is time to revisit what Mr Dutt has to say. We also emailed NDTV’s executive vice chairman Narayana Rao asking if the litigation is filed.
The NDTV promoters together hold over 61% of the equity as per public records. In response to Moneylife’s queries, its executive vice chairman KVL Narayan Rao confirmed the serving of the legal notice and the sequence of events leading up to it. But, nearly a month after its legal notice and our first article, there is no sign of NDTV actually filing defamation charges against Mr Dutt.
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Macroeconomic headwinds, longer execution cycle and poor margins are big hurdles that L&T needs to clear their huge order book backlog, which is a daunting task, according to the brokerage
Larsen & Toubro is going through a difficult phase, with margins and execution both weakening amidst difficult economic times and increased competition, according to Nomura Equity Research. The brokerage downgraded L&T’s target price to Rs921 from Rs997 while maintaining a ‘neutral’ stance.
“We believe that L&T is among India's best players on infrastructure and the corporate capex cycle. However, an unfavourable macro environment and impediments to new orders driven by policy paralysis across sectors plague the medium-term growth and margin outlooks for the company. We are 5-6% lower than consensus on FY14/FY15 PAT estimates,” Nomura said in a research report.
The infrastructure sector has been riddled with execution problems for the last few years, particularly the power segment where orders have stalled and state electricity boards restructured. Hydrocarbons and heavy engineering were the key margin drags, while power dragged down revenue growth. Nomura believes that execution will be difficult and could drag revenues.
Nomura, “On our estimates (for L&T) to achieve revenue growth of 15%y-y (with revenue break up 80:20 –exports: imports), the execution rate on the domestic order book has to be close to 43%. We believe it will be difficult to achieve such high execution rate given 27% of L&T’s order book is from the B&F segment (primarily domestic) where execution cycle is higher.”
Even though order inflows for L&T have been strong this quarter. The order inflow during first quarter of the 2014 fiscal was pegged at Rs25,200 crore, while the total order book as of March 2013 was Rs1.65 lakh crore. Order book growth rate was pegged at 20% year-on-year, which is optimistic. Despite macroeconomic headwinds, Nomura expect L&T’s revenue growth will be driven by higher execution of domestic order book.
Two key factors that affect L&T are longer execution times and poor margins. The company is less inclined to press ahead with projects if margins deteriorate. “A depleting book to bill ratio in exports and faltering revenue growth in domestic markets are a key concern area,” says Nomura .
According to Nomura, the company has retained its full-year guidance for order inflow and margins, but was cautious about the future citing difficult macro economic environment.
L&T shares closed 4% down at Rs867 on the BSE, while the 30-share Sensex too ended 1% down at 20,090.