Posts Tagged ‘corporate India’

Domestic Economy Rolls as Corporate India Offers 40% More Bonus Shares

Domestic Economy Rolls as Corporate India Offers 40% More Bonus Shares

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Issue of bonus shares by Corporate India to its shareholders in the first 10 months of the fiscal has shot up 40% over the total during the fiscal ended March ‘09, after declining for two straight years.

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This interesting jump in bonus issues indicates positive sentiment of the corporate sector to serve a larger equity base.

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Companies like Britannia, TCS, Reliance Industries, Adani Enterprises, Jindal Steel, Divi’s Lab, JP Associates etc  have  issued bonus shares in the April ‘09-January ‘10 period.

There are as many as 61 companies which have done so.

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Jagannadham Thunuguntla, equity head with Delhi-based merchant bank SMC Capitals, said:  “The increase in companies doling out bonus equity to its shareholders reflects that the domestic economy is on the path of recovery.”

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Corporate India has got the confidence to expand equity capital base and issue bonus shares owing to the fact that they have performed very well this fiscal.

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Bonus issue is an offer of free additional shares to existing shareholders.

This is one of the ways of rewarding shareholders, who largely benefit from capital gains.

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A company may decide to distribute further shares as an alternative to increasing the dividend payout.

It is also known as a “scrip issue” or “capitalization issue”.

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The number of companies issuing bonus shares declined more than a quarter after hitting a peak in 2006-07 to 72 firms in 2007-08 and shrunk further to just 44 companies for the year ended March ‘09.

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This came after three consecutive years of rise in number of bonus issues, when more listed firms announced a bonus bonanza in line with the bull run of the stock market.

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Bonus shares are issued by companies through capitalization of their free reserves.

When a company announces bonus issue, it is an indication of its management’s confidence to serve a larger equity base.

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Banks May Not Up Interest Rates For Next Six Months

Banks May Not Up Interest Rates For Next Six Months

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New Year has brought a good news for the Corporate India.

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SBI Bank chairman has indicated that there will be no increase in interest rates for next six months despite inflationary pressure.

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As inflation is rising, there was speculation going around that RBI, (in its review of monetary policy) might take measures to tighten the money supply which would have led to the hardening of interest rates.

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As the global economy is still in the grip of recession, industry players feel that any hike in interest rates will affect the economic recovery in India.

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Banks authorities and market analysts feel that there was surplus liquidity in the system and credit offtake was slowly picking up.

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This situation of liquidity surplus will force banks not to increase interest rates, in current situation.

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Because of this surplus liquidity, banks have cut deposits rates.

But they are not cutting the lending rates due to slow credit offtake, despite the speculation that RBI can increase key rates (repo or reverse repo) to contain inflation.

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🙂

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In the eight months of the current financial year till December 4, while the deposits with the commercial banks rose by 3,69,535 crore, credit off take was only Rs 1,44,151 crore.

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This forced the banks to park around Rs 100,000 crore with the RBI at reverse repo rate of 3.25%.

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When the interest rate condition was benign, Banks had cut their lending rates, particularly home loan rate.

This had helped reviving real estate market. The buyers started coming back and cement and steel sectors also started improving.

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The recession did not hit India the way it had affected European countries last year.

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There was only a slowdown in the growth rate which came down to 7% from 9%.

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Market experts believe that withdrawal of stimulus package by the government should not be done in the prevailing situation, but should be phased out in staggered manner.

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Points to Remember while Selling Stocks – Part 1

Hello Friends here we come up with our another write up on “SMC Gyan Series”. 🙂


Points to remember while selling stock

Points to remember while selling stock

 

Buying a stock is simple, but Selling is actually harder as it requires regulation, understandable thoughts, and a tight rein on one’s emotions.

The ongoing optimism, slow economic revival, positive signs on the global front and high expectations from the stable government at home have forced bulls to give up their lethargic activities and to march northward.

Many investors who had seen the value of their stocks hit rock bottom and are now facing dilemma whether to sell or should they hold on? :O

Investors often face problems to take right decisions in volatile market as markets could head either way.

Wouldn’t it be disheartening if the markets rallied northwards, the day after you sold your stocks?

What if the markets come crashing down tomorrow, depriving you of the opportunity to enhance profits?

So, the decision to sell is critical.

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Some of the points when to sell your stocks:

Prima facie, if there is any drastic change in fundamental of a company, this should be the only reason to sell stock.

But a depth research has to be done before taking any decision.

Changes includes;

-restructuring of its business model,

-different business focus and directions.

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FIRST THREE POINTS :

1. Margins Crashed

Margins are the profit that a company makes on its sales.

Rising gross margins tell us that a company is reducing production costs or raising prices.

Conversely, deteriorating margins say either that production costs are increasing and the company can’t raise prices proportionally or that the company is cutting prices in an attempt to maintain marketshare.

If there are expenses related to a new product’s introduction then margins might fall for inoffensive reasons.

Falling margins, either gross or operating, often signal a declining competitive position. Thus it’s important to check both.

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2.Is There Any Drastic Change In Company’s Management?

If people in top management of the company say director or president who are liable for a company’s success begin to go away, there might be a few negative implications for the future outlook of that company as an investor.

You must look into and find out the root cause and also to see how much it could impact you.

If negative prospects, investor should sell the stock and should relocate the funds into a similar company that has stronger and more constant management.

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3. What First Fascinated You To The Stock, No Longer Applies

For example, let’s suppose that you bought a stock of a health care company because of its innovative products in the pharmaceutical field and all of a sudden, it loses a crucial patent for a life-saving medicine.

This may result in a decrease of market share in its industry, which might lead to a reduction in future profits (resulting in a decline in the value of its stock).

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Stay Tuned for more on this where we would touch upon other major points needed to keep in mind by investors before making any Buy and sell decision.

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Corporate India is Likely to Register 22.8% Growth

corporate India is likely to clock 22.8% growth in net profit in 2009-10

corporate India is likely to clock 22.8% growth in net profit in 2009-10

Corporate India is likely to register 22.8% growth in net profit in 2009-10 despite the slowdown in the global economy and bad monsoon.

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Centre for Monitoring Indian Economy (CMIE) in its latest report has attributed theimprovement in the margins..due to fall in input costs” as the major reason for the concerned growth of corporate India.

According to the report, the revenue of the companies will grow at much slower pace.

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The report said, “Corporate sales growth will average at a meagre 4.1% in 2009-10.

At the same time, profit after tax (PAT) will rise by a robust 22.8%.”

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The performance of the manufacturing sector, excluding petroleum sector, would be encouraging.

The report said the sectors PAT would manage to grow at 24.3% mainly on account of low raw material prices and soft interest rates.

PAT of the financial and nonfinancial services would rise by 32.2% and 20.4% respectively, the report projected.

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According to the report, corporate India took a hit on its sales due to the fall in commodity prices, drying up of export demand and postponement of purchases by the domestic consumer following the global liquidity crisis.

The report estimated that corporate profits have grown by 44% in the second quarter of 2009-10 due to the handsome profit likely to have been made by the petroleum products sector as against the losses incurred in the year ago quarter.

Aggregate PAT of the rest of the manufacturing sector is also estimated to have risen by a modest 4.5% in the second quarter, the report said.

CMIE estimated the PAT of the financial and non-financial services to have risen by 26%-29%.

Sales, however, is estimated to have fallen by 5.3%, it said.

The fall in sale realization is also because of sharp fall in the prices of the commodities.

The report said that non-financial services chose to keep their employees cost and other expenses on a tight leash and enjoyed benefit of fall in interest rates.

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India Inc Cautions Govt. for any Regulation on CEO’s Pay !

Corporate India cautioned the government that any regulation of CEOs' pay might lead to escape of talent and capital from the country

Corporate India cautioned the government that any regulation of CEOs' pay might lead to escape of talent and capital from the country

Corporate India cautioned the government that any regulation of CEOs’ pay might lead to escape of talent and capital from the country and that salaries are best decided by the industry.

However, Corporate Affairs Minister Salman Khurshid stated that the CEOs’ compensation should be regulated.

On the other hand, heads of apex industry chambers said that they would like the issue to be complete by and within India Inc.

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Moreover, the Confederation of Indian Industry is working on a governance code for its members to deal with remuneration of executives at board level and a level below.

Further, Khurshid’s remark activated a debate whether pay packets of CEO’s, some of whom are paid as much as Rs two crore a month, should be regulated.

On the other hand, Singhania said with government regulations already in place, any further regulation is in the first place unnecessary whereas as per the present regulation, compensation of all directors cannot exceed 11% of the total profits of a company.

Additionally, the compensation of all directors, including the executive chairman and whole time directors cannot exceed 10% of the company profit.

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Thanks for the advice. But, no thanks..seems to be the polite message emanating from India Inc to the government drive to extend its new found penchant for austerity into corporate boardrooms.

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Corporate affairs minister Salman Khurshid at the weekend said the government could not shut its eyes on CEO salaries and urged corporate bosses to avoid “excessive remuneration” .

According to figures compiled by ET, top 30 Indian executives together pocketed around Rs 500 crore ($100 million) in compensation last year, which is less than what each of their top five global counterparts earned.

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44,000 Crores to be Raised by Indian Firms :)

Indian-corporates-raise-44k crores

Indian corporates raised Rs 21,691 crore through the qualified institutional placement (QIP) route during the first half of this fiscal and the funds raised through this route are expected to double in the second half.

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Mr Jagannadham Thunuguntla, the equity head of SMC Capital, said: “As of now, about 48 companies have received requisite resolutions from either shareholders or their boards to raise the funds through QIP route. The total amount proposed to be raised by these companies is about Rs 44,000 crore.”

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He further said: “As there is no requirement for the approval of the Securities and Exchange Board of India (Sebi) for the QIP issuance. These companies are ready to offer their QIP whenever they are confident about the market conditions.”

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“Some of the prominent names of the corporates that would be raising funds through this route include Tech Mahindra, Essar Oil, Hindalco, RCom, Omaxe, Pantaloon Retail, Jet Airways, Ansal, JSW Steel and L&T,” he said.

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It seems that the Indian promoters have regained their confidence and enthusiasm for fund raising, he added.

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It is turning out that corporates are raising funds through QIP route as a last alternative and not as a preference.

Most of the IPOs launched in the last seven to eight months had put up a flop show.

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The bank funds that are another source of funding are not available for most of the corporates.

Depending upon the sector and profile, banks are asking for premium over interest rates and for smaller companies, banks are not offering loans.

So the corporates that are looking for the expansions would opt for the QIP route to raise the funds, Mr Thunuguntla added.

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India Inc Raises Rs.40K cr in Debt Market in Q1 :)

Indian-inc-raises-40k crores

Improved investment sentiments have led corporate India‘s fund raising plans to sky high level.

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With more than half of the fund being mobilized by financial institutions, India Inc’s fund raising through private placement of debt has touched Rs 40,300 crore in the Q1 of the current fiscal.

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This is an increase of huge 42% from first quarter of last financial year.

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However, the April-June quarter of the present financial year saw a mobilization through debt (bonds) on private placement basis of Rs 40,300 crore, staggering 42% up from Rs 28,385 crores, raised in the first quarter of last financial year.

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Moreover, the largest mobilization through the route came in from financial institutions and banks with more than 67 institutions and corporate houses raising the full amount during the June quarter.

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Private placement of Debt is issue of securities, usually bonds that are sold without an initial public offering to a small number of private investors.

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Further, fund raising of financial institutions through debt private placement increased 35% to Rs 21,002 crore in the June quarter.

Additionally, private sector beat public sector in terms of fund raising where its mobilization increased by 50% from Rs 11,184 crore to Rs 16,753 crore.

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On the other hand, public sector financial institutions combined together, saw a decline in fund raising activity, whose mobilization stands 58% of the total amount, slipping 61% that mobilized in the previous year.

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