Watch Out! They Are Out to Get You

Sucheta Dalal explains the role of companies, investment bankers and regulators in fetching poor IPO returns which has made the market comatose

We are back a full circle. A dozen-odd years after the IPO (initial public offering) mania of 1992-96, the market is dead again. Ironically, the Confederation of Indian Industry (CII) is the first to kick off a discussion on how to revive the...

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  • Stocks climb to five-week high

    Sensex gains 68 points to close at 17,199 in volatile trade

    The stock market climbed to a five-week high in volatile trade on Wednesday, with the BSE Sensex gaining 68 points to close at 17,199 while the Nifty closed 18 points up at 5,108. Market volatility is expected to continue over the next two days as traders roll over positions in the derivatives segment ahead of expiry of the November 2009 contracts on Thursday. At the end of Tuesday’s trading, rollover in Nifty futures was about 54% while rollover in Mini Nifty futures was about 33%. The market-wide rollover was about 48%.
    Reliance Industries (RIL) rose 1% on reports that the company has reopened 900 gas stations, which were shut down when state-run oil marketing firms were selling heavily subsidised fuel.

    India’s largest small-car marker Maruti Suzuki India rose 1% on reports that the company will spend Rs2,000 crore to expand production capacity at its Manesar factory in Haryana.

    However, India’s largest commercial vehicle maker Tata Motors fell 1% on reports that the company is looking at buying private equity firm Actis’s stake in truck and bus-maker Swaraj Mazda.
    Mahindra Satyam slumped 11% on reports that the Central Bureau of Investigation found evidence of an additional Rs4,739 crore corporate fraud in the company, committed by its founder R Ramalinga Raju and his associates.

    Bajaj Hindusthan was up 5% on reports that a foreign fund hiked its stake in the firm.
    Unitech fell 2% on equity-dilution worries following reports that the company has sought approval from the department of industrial policy and planning and the Reserve Bank of India to raise $700 million through foreign currency convertible bonds.

    J Kumar Infraprojects’ order book is worth Rs1,475 crore after receiving pilling works orders from Larsen & Toubro and others worth Rs8.75 crore. The stock remained flat.

    Welspun Gujarat Stahl Rohren was up 3% on reports that the company has successfully mobilised $250 million.

    During the day, Asia’s key benchmark indices in Hong Kong, China, Japan, Singapore, South Korea and Taiwan rose by between 0.34%-2.07% on expectations of stronger economic growth.

    As per data released by the Japanese finance ministry, Japan’s exports fell 23.2% in October, compared with a 30.6% decline in September.

    On Tuesday, in the US markets, the Dow Jones Industrial Average was down 17 points while the S&P 500 and the Nasdaq Composite slipped one point and seven points, respectively.

    As per reports, US Federal Reserve officials are confident that the US economic recovery will be durable, but they do not see employment or inflation picking up soon. The US Fed projected the economy will shrink 0.1% to 0.4% this year and grow by 2.5% to 3.3% in 2010. US GDP growth in the September 2009 quarter was revised to 2.8%, lower than the initial reading of 3.5%. The conference board’s gauge of consumer confidence rose to 49.5 in November 2009 from 48.7 in October 2009 and home prices improved for a fifth straight month in September 2009.

    According to the Office for National Statistics in London, the UK’s gross domestic product fell 0.3% less than previously estimated in the third quarter as consumer spending stopped falling and the service industries’ slump eased.
    — Swapnil Suvarna [email protected]

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    Who Is Golden Tobacco's Hostile Bidder?

    Pramod Jain has a fairly colourful record of investments

    Pramod Jain, a minority shareholder in Sanjay Dalmia-controlled cigarette-maker Golden Tobacco Ltd (GTL), made news with his hostile offer to acquire another 25% holding in the company at a hefty Rs101 a share. Who is Pramod Jain? A little digging reveals that he wasn't always hostile to Sanjay Dalmia and has a fairly colourful record of investments.

    Mr Jain and his companies, Pranidhi Holdings and JP Financial Services, acquired a 6.47% stake in GTC when Mr Dalmia wasn’t able to redeem 890,000 shares pledged with the group. Mr Jain has since told the media that his open offer is aimed at ensuring that Mr Dalmia does not alienate GTC assets to meet his other obligations, including the large sums owed to India Bulls.

    Mr Jain was also a director in GHCL, another Sanjay Dalmia company. Mr Dalmia had accused Mr Jain of trading in the GHCL shares without making appropriate disclosures. The latter resigned from the board in April.

    In May 2006, Mr Jain was also involved in what turned out to be an extremely curious takeover bid for Cinerad Communications through his Delhi-based group company, Pranidhi Estates Pvt Limited. This company belonged to the noted film maker Zafar Hai and his wife Colleen Hai. Mr Jain's investment companies first acquired a big chunk of 25.80% of the shares from the Hai couple for Rs9.25 each and went on to make an open offer to the public to acquire another 20% at the same price. 

    Strangely, in less than a year, on 29 January 2007, Mr Jain resigned from Cinerad and his investment company sent a letter to the board asking that his investment vehicle, Pranidhi Estates, which made the open offer, should not be considered a part of the 'promoter group'. As of July 2009, however, the promoter group shareholding in Cinerad continued to be around 38.83%. This stake is held by India Emerging Capital Market Pvt Ltd which is listed in stock exchange records as a Promoter Group holding. Individual shareholders hold nearly another 40% of the equity while some corporate bodies hold 20%. Institutional investment is negligible.

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