Lim Say Boon, Chief Investment Strategist, Group Wealth Management Standard Chartered Bank while answering a query told CNBC-TV18 that there is certain degree of economic decoupling between the US economy and the Asian economies ex-Japan but it does not mean decoupling in the financial markets.
Excerpts from CNBC-TV18's exclusive interview with Lim Say Boon:
Q: What’s your sense the entire decoupling theory stands completely negated at this point of, time how bad it could get following US?
A: There has been an absolute carnage and we have been warning of this since early last week and our exact words were that this was a prefect storm brewing and the perfect storm was here, its real and its now.
n terms of the decoupling story economically one does have certain degree of decoupling between the US economy and the Asian economies ex-Japan but it does not mean decoupling in the financial markets. There is economic decoupling but there is also financial market contingent and what we are going through right now is financial market contingent.
Q: At what levels do you see buying opportunities emerge for investors in Asia?
A:I was asked all of yesterday when would be a good time to be bargain hunting and our advice to our clients is that stay out of the market at this moment, there is more downside yet in store. It looks like another 10-15% downside on what we saw as close of yesterday’s trade is possible. We just went through the numbers, the numbers are looking pretty ugly as we speak and the markets are down another 3-4-5% right through out the Asian region depending on which markets you are dealing with.
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Thursday, January 31, 2008
Bajaj Auto to launch two new models in '08
Bajaj Auto has posted a standalone net profit of Rs 326.8 crore in Q3 FY08 as against Rs 344.8 crore in the same quarter of last year. Standalone net sales stood at Rs 2,501.7 crore as against Rs 2,568.2 crore YoY. Consolidated net sales went down at Rs 2,633.26 crore from Rs 2,696.03 crore YoY while net profit stood at Rs 273.82 crore from Rs 321.14 crore YoY.
Rajiv Bajaj, MD, Bajaj Auto, said the company's Q3 EBITDA stands at 14.6% as compared to 14.2% YoY. "EBIDTA is lower due to one-time expense for Platina."
Bajaj said the two-wheeler major plans to launch a new model in the next few months and another by year-end.
Overall, growth in the 100 cc industry is down by 20%, he said. "The 125 cc market grew from 1.83 lakh units to 1.88 lakh units. We plan to focus on the 125 cc segment, of which we have a current market share of 35%.""
He expects Q4 margins to be the same as Q3 but sees volumes lower. Three wheeler profitability will increase and help overall growth, he added.
Excerpts from CNBC-TV18’s exclusive interview with Rajiv Bajaj:
Q: How has this quarter been for you, because both topline and bottomline have been a tad disappointing? What is the margin for this quarter?
A: The street has enough problems of its own to sort out. But you got me on the defensive already. In my view, it is one of the good quarters we have had because our EBITDA is at 14.6%, which is higher than 14.2% of Q3 last year.
The two things I would like highlight are that we had a one-off compensation for dealers due to the reduction of prices on Platina and stocks being held by dealerships. That was about Rs 28 crore in October. If it had not been for that, the EBITDA would actually have been close to 15.7%.
I would like to point out that we have a VRS charge of Rs 51 crore because of the earlier retirement of workmen from our Aurangabad plant. So, this is an additional charge for Q3 and will be there also for Q4.
As opposed to that, in the previous year, it was only about Rs 10-12 crore. So, it is the one time price correction, which is behind us and the VRS charge that makes the difference between the street and us.
Q: What is happening to the TVS case? We believe that it was heard yesterday and has been postponed to today. Could you update us on what is happening?
A: I do not believe it has been postponed. It is just carrying on. I believe we presented arguments yesterday and will continue to do that today. Then, TVS makes its arguments and this may just take a few days.
Q: The street is been waiting to hear your take on Xceed’s success. We have just picked out news that Xceed could be doing only 30,000-40,000 units. Are you close to ramping up to your 75,000 units per month? Do you see visibility of selling that much of bikes per month?
A: In the middle segment, which is often called the value or the executive segment, Hero Honda has a stranglehold with about 94% market share before the Xceed was in.
Today, at the end of three months of our launching this product, we have 18% market share there. So, in a segment where everybody is a non-entity except for the market leader, to take 18% share away in three months is excellent performance. That does translate to only about 30,000-35,000 vehicles.
Where do we go from here? I believe that sales of this model will continue to climb because current consumers are very happy and the model is differentiated. It will sustain consumer interest. Will this model alone make it from 30,000 to 60,000 or 75,000 in the next three-four months? I do not think so. So, the answer for us is to put in the next product from this platform.
We said at the time of launch that we are putting in this capacity for a platform and not just for a single product. Nobody does that anymore.
In a few months, the second product will be out and we should see the next jump in volumes when that comes out. In fact, there will be a third one, towards the end of the year. So, once we have the three products from this platform in place, over a period of 12-15 months since September 9 last year, which is when we launched the first Xceed, we will be in a good position.
Q: Has the financing squeeze seen over the past six months abated? What is Bajaj Auto Finance doing to elevate this pain? Could you take us through that? We have also heard that you were doing 0% financing for a couple of your products, including the Xceed?
A: In general, the financing situation is well known. Even if one looks at the two-wheelers; there is a differential analysis here. The scooters are still growing, even though they need finance. If one looks at motorcycles; the 100cc industry is down. It is not just Bajaj Auto, but the industry as a whole is down by 20%. The 125cc and above has actually grown from an average of 1,83,000 a month to 1,88,000 a month. So there is 2% growth. Certainly, there is no fall there.
It simply tells us that probably the 100cc customer is the one who is in most need of finance and is more sensitive to the interest rate. He is also probably the customer, who in the eyes of the financier, is the least creditworthy relatively. So, he is the guy who is getting squeezed out when financiers are getting cautious.
So, the trend is the bigger motorcycle keeps growing; the smaller one or the 100cc does not grow because consumers do not want to buy it. On top of that, financiers do not want to finance it. So, strategically it aligns well with what we want to do.
Q: Strategically, it is good in the long-term. But two quarters ago, when we asked you how FY08 is likely to be, you told that you will close with sales of 3 million. As of now, you have done 1.98. Our calculations show that you will finish this year with close to 2.5 million units. We are seeing the difference that is happening. Is that how you see a little bit of pain coming through, in the short-term to medium-term?
A: Yes, this is true. The auto industry in general was not prepared for this kind of a squeeze at the front end. So, the story is the same, not just for the two-wheeler industry, but even for commercial vehicles and soon even for cars. It is very important to recognize that, as far as two-wheelers are concerned, this is still the second largest two-wheeler market in the world. It is terribly profitable.
Bajaj, even at 14.6% EBITDA for Q3, continues to be India’s most profitable automotive company. It is all the more important to be true to your strategy and prudent in the way you conduct your operations, so that you maintain profitability. Sooner or later, when the market begins to grow, you will grow again with it.
Q: Talking about profitability, we believe that steel companies are looking at a hike of 8-10% in the next one year. How are you looking at margins for the next twelve months?
A: I do not see any change from Q3. The situation will be the same. What will work against this quarter, in comparison to the previous quarter, will be that volumes will certainly be lower, because the previous quarter has the benefit of the entire festive season.
What will work for this quarter will be in terms of the product mix, especially in motorcycles. I also expect better growth in three-wheelers. So, that is what is going to help this quarter. We will not have that Rs 28 crore charge. So, overall, I see this quarter as very similar to the last one.
In terms of next year, our focus is going to be to grow the 125cc plus segment, as far as motorcycles are concerned, because this is the segment is now 35% of the market. It is a segment where we have 55% market share now. So we cannot do any better than that.
Our whole objective as a company has to be to take this from 35% to 70% of a market. Inevitably, it is going to get there as the country develops. The question is whether we can make it happen sooner rather than later. Other than that, we are going to focus on the bigger bikes, with Kawasaki and KTM, and continuing to push exports where we have been doing well. So, these are going to be our initiatives for the next year.
Q: How is your outlook on three-wheelers? You just said you are expecting better margins over there. Is Tata Ace being a point of concern for you? Are you seeing any pressure coming from Tata Nano for your three-wheelers?
A: All I said with respect to the Nano, when asked previously at the Auto Expo, was no comment and yet people found ways to associate comments with me that I did not make. So, I just want to stay clear off that. It has noting to do with this quarter’s results.
As far as our own three wheelers are concerned, I did not say that I expect them to be more profitable. I said I expect our profitability to be better because I expect us to be able to sell a few more three-wheelers in this quarter. We are now doing about 25,000 three-wheelers a month, which is about 50% market share and half of that is exported.
I expect both the domestic and export markets to do better in terms of sales of three wheelers in this quarter. If that happens, it has more than a proportionate impact on the overall profitability, because that is a very profitable segment for us.
Rajiv Bajaj, MD, Bajaj Auto, said the company's Q3 EBITDA stands at 14.6% as compared to 14.2% YoY. "EBIDTA is lower due to one-time expense for Platina."
Bajaj said the two-wheeler major plans to launch a new model in the next few months and another by year-end.
Overall, growth in the 100 cc industry is down by 20%, he said. "The 125 cc market grew from 1.83 lakh units to 1.88 lakh units. We plan to focus on the 125 cc segment, of which we have a current market share of 35%.""
He expects Q4 margins to be the same as Q3 but sees volumes lower. Three wheeler profitability will increase and help overall growth, he added.
Excerpts from CNBC-TV18’s exclusive interview with Rajiv Bajaj:
Q: How has this quarter been for you, because both topline and bottomline have been a tad disappointing? What is the margin for this quarter?
A: The street has enough problems of its own to sort out. But you got me on the defensive already. In my view, it is one of the good quarters we have had because our EBITDA is at 14.6%, which is higher than 14.2% of Q3 last year.
The two things I would like highlight are that we had a one-off compensation for dealers due to the reduction of prices on Platina and stocks being held by dealerships. That was about Rs 28 crore in October. If it had not been for that, the EBITDA would actually have been close to 15.7%.
I would like to point out that we have a VRS charge of Rs 51 crore because of the earlier retirement of workmen from our Aurangabad plant. So, this is an additional charge for Q3 and will be there also for Q4.
As opposed to that, in the previous year, it was only about Rs 10-12 crore. So, it is the one time price correction, which is behind us and the VRS charge that makes the difference between the street and us.
Q: What is happening to the TVS case? We believe that it was heard yesterday and has been postponed to today. Could you update us on what is happening?
A: I do not believe it has been postponed. It is just carrying on. I believe we presented arguments yesterday and will continue to do that today. Then, TVS makes its arguments and this may just take a few days.
Q: The street is been waiting to hear your take on Xceed’s success. We have just picked out news that Xceed could be doing only 30,000-40,000 units. Are you close to ramping up to your 75,000 units per month? Do you see visibility of selling that much of bikes per month?
A: In the middle segment, which is often called the value or the executive segment, Hero Honda has a stranglehold with about 94% market share before the Xceed was in.
Today, at the end of three months of our launching this product, we have 18% market share there. So, in a segment where everybody is a non-entity except for the market leader, to take 18% share away in three months is excellent performance. That does translate to only about 30,000-35,000 vehicles.
Where do we go from here? I believe that sales of this model will continue to climb because current consumers are very happy and the model is differentiated. It will sustain consumer interest. Will this model alone make it from 30,000 to 60,000 or 75,000 in the next three-four months? I do not think so. So, the answer for us is to put in the next product from this platform.
We said at the time of launch that we are putting in this capacity for a platform and not just for a single product. Nobody does that anymore.
In a few months, the second product will be out and we should see the next jump in volumes when that comes out. In fact, there will be a third one, towards the end of the year. So, once we have the three products from this platform in place, over a period of 12-15 months since September 9 last year, which is when we launched the first Xceed, we will be in a good position.
Q: Has the financing squeeze seen over the past six months abated? What is Bajaj Auto Finance doing to elevate this pain? Could you take us through that? We have also heard that you were doing 0% financing for a couple of your products, including the Xceed?
A: In general, the financing situation is well known. Even if one looks at the two-wheelers; there is a differential analysis here. The scooters are still growing, even though they need finance. If one looks at motorcycles; the 100cc industry is down. It is not just Bajaj Auto, but the industry as a whole is down by 20%. The 125cc and above has actually grown from an average of 1,83,000 a month to 1,88,000 a month. So there is 2% growth. Certainly, there is no fall there.
It simply tells us that probably the 100cc customer is the one who is in most need of finance and is more sensitive to the interest rate. He is also probably the customer, who in the eyes of the financier, is the least creditworthy relatively. So, he is the guy who is getting squeezed out when financiers are getting cautious.
So, the trend is the bigger motorcycle keeps growing; the smaller one or the 100cc does not grow because consumers do not want to buy it. On top of that, financiers do not want to finance it. So, strategically it aligns well with what we want to do.
Q: Strategically, it is good in the long-term. But two quarters ago, when we asked you how FY08 is likely to be, you told that you will close with sales of 3 million. As of now, you have done 1.98. Our calculations show that you will finish this year with close to 2.5 million units. We are seeing the difference that is happening. Is that how you see a little bit of pain coming through, in the short-term to medium-term?
A: Yes, this is true. The auto industry in general was not prepared for this kind of a squeeze at the front end. So, the story is the same, not just for the two-wheeler industry, but even for commercial vehicles and soon even for cars. It is very important to recognize that, as far as two-wheelers are concerned, this is still the second largest two-wheeler market in the world. It is terribly profitable.
Bajaj, even at 14.6% EBITDA for Q3, continues to be India’s most profitable automotive company. It is all the more important to be true to your strategy and prudent in the way you conduct your operations, so that you maintain profitability. Sooner or later, when the market begins to grow, you will grow again with it.
Q: Talking about profitability, we believe that steel companies are looking at a hike of 8-10% in the next one year. How are you looking at margins for the next twelve months?
A: I do not see any change from Q3. The situation will be the same. What will work against this quarter, in comparison to the previous quarter, will be that volumes will certainly be lower, because the previous quarter has the benefit of the entire festive season.
What will work for this quarter will be in terms of the product mix, especially in motorcycles. I also expect better growth in three-wheelers. So, that is what is going to help this quarter. We will not have that Rs 28 crore charge. So, overall, I see this quarter as very similar to the last one.
In terms of next year, our focus is going to be to grow the 125cc plus segment, as far as motorcycles are concerned, because this is the segment is now 35% of the market. It is a segment where we have 55% market share now. So we cannot do any better than that.
Our whole objective as a company has to be to take this from 35% to 70% of a market. Inevitably, it is going to get there as the country develops. The question is whether we can make it happen sooner rather than later. Other than that, we are going to focus on the bigger bikes, with Kawasaki and KTM, and continuing to push exports where we have been doing well. So, these are going to be our initiatives for the next year.
Q: How is your outlook on three-wheelers? You just said you are expecting better margins over there. Is Tata Ace being a point of concern for you? Are you seeing any pressure coming from Tata Nano for your three-wheelers?
A: All I said with respect to the Nano, when asked previously at the Auto Expo, was no comment and yet people found ways to associate comments with me that I did not make. So, I just want to stay clear off that. It has noting to do with this quarter’s results.
As far as our own three wheelers are concerned, I did not say that I expect them to be more profitable. I said I expect our profitability to be better because I expect us to be able to sell a few more three-wheelers in this quarter. We are now doing about 25,000 three-wheelers a month, which is about 50% market share and half of that is exported.
I expect both the domestic and export markets to do better in terms of sales of three wheelers in this quarter. If that happens, it has more than a proportionate impact on the overall profitability, because that is a very profitable segment for us.
FII withdrawal in last 7 days larger than that of entire 07
By Varinder Bansal, CNBC-TV18
To start with the cash market, this is the steepest cut ever seen in the Indian markets. Imagine a small number which I am trying to give you, in the last seven trading sessions, FIIs have withdrawn nearly USD 3.8 billion which is equivalent to around Rs 15,000 crore. This total amount is the biggest which we have ever seen, of course, in the last seven trading sessions. But if you compare it to the total withdrawals seen in the Indian markets in 2007, it was equivalent to around Rs 14,700 crore just in three months. So in the last seven trading sessions, we have seen withdrawals which are far larger than the total withdrawals in entire 2007.
If one sees, in the F&O series, in the last seven trading sessions, FIIs have invested nearly USD 2.09 billion which is a reverse arbitrage which they have done. On a net-to-net basis, if one compares cash plus F&O, the net figure will come at withdrawal of USD 1.7 billion.
One of the strongest pillars of this market has been DIIs, which we say banks insurance companies and domestic financial institutions. In the same period, the total investment by DIIs has been around USD 2.6 billion which is around Rs 10,200 crore. To break this up this into DIIs or into mutual funds, mutual funds have invested nearly Rs 4,100 crore which is around 40% and banks insurance companies and DFIs have invested nearly Rs 6,000 crore which is around 60%.
We had prudential ICICI today in the morning and they mentioned that they have invested nearly Rs 800-900 crore in the market. We also learn that LIC has invested nearly USD 1 billion in the last one week or so. But if you just see the Asian markets, we stand far apart because, as mentioned earlier, in the cash market we have seen a withdrawal of around USD 3.8 billion. In Taiwan there has been USD 1.2 billion of outflow, in Thailand there has been around USD 550 million and Philippines has been around USD 150 million.
As you were mentioning about the F&O markets, we have seen a sell figure of around Rs 10,200 crore since the start of the series till January 18 for which we have seen open interest going up by around 8.8 lakh crore. But most importantly, in the last four days we have seen net buy figure of around Rs 11,700 crore and open interest going down by around 4.2. So all the buy which FIIs have done in the earlier part have been reversed due to reverse arbitrage and also negative cost of carry. But in the cash market, we have seen a huge selling pressure.
To start with the cash market, this is the steepest cut ever seen in the Indian markets. Imagine a small number which I am trying to give you, in the last seven trading sessions, FIIs have withdrawn nearly USD 3.8 billion which is equivalent to around Rs 15,000 crore. This total amount is the biggest which we have ever seen, of course, in the last seven trading sessions. But if you compare it to the total withdrawals seen in the Indian markets in 2007, it was equivalent to around Rs 14,700 crore just in three months. So in the last seven trading sessions, we have seen withdrawals which are far larger than the total withdrawals in entire 2007.
If one sees, in the F&O series, in the last seven trading sessions, FIIs have invested nearly USD 2.09 billion which is a reverse arbitrage which they have done. On a net-to-net basis, if one compares cash plus F&O, the net figure will come at withdrawal of USD 1.7 billion.
One of the strongest pillars of this market has been DIIs, which we say banks insurance companies and domestic financial institutions. In the same period, the total investment by DIIs has been around USD 2.6 billion which is around Rs 10,200 crore. To break this up this into DIIs or into mutual funds, mutual funds have invested nearly Rs 4,100 crore which is around 40% and banks insurance companies and DFIs have invested nearly Rs 6,000 crore which is around 60%.
We had prudential ICICI today in the morning and they mentioned that they have invested nearly Rs 800-900 crore in the market. We also learn that LIC has invested nearly USD 1 billion in the last one week or so. But if you just see the Asian markets, we stand far apart because, as mentioned earlier, in the cash market we have seen a withdrawal of around USD 3.8 billion. In Taiwan there has been USD 1.2 billion of outflow, in Thailand there has been around USD 550 million and Philippines has been around USD 150 million.
As you were mentioning about the F&O markets, we have seen a sell figure of around Rs 10,200 crore since the start of the series till January 18 for which we have seen open interest going up by around 8.8 lakh crore. But most importantly, in the last four days we have seen net buy figure of around Rs 11,700 crore and open interest going down by around 4.2. So all the buy which FIIs have done in the earlier part have been reversed due to reverse arbitrage and also negative cost of carry. But in the cash market, we have seen a huge selling pressure.
Once MF top picks, now value buys
By Varinder Bansal, CNBC-TV18
Which stocks now represent value, post the correction and mild recovery? CNBC-TV18 takes some top picks from a list of mutual funds and private equity players, from the time that they picked up their stakes and evaluates.
There have been interesting price movements in some of the stocks, but more importantly the basis for these movements are far more interesting.
The first stock on our list is Praj Industries, it's trading around Rs 165 and hence fallen nearly 40% from its peak at Rs 265 per share. But interestingly, Tata Sons bought nearly 7.34% stake at Rs 252 per share, so one pays around 35% less than what Tatas paid at the time of acquisition of their stake.
Jai Corp is another stock where the price is trading around Rs 815 and fallen around 44% from its peak of around Rs 1,450. This was the biggest private equity dealing stock in the secondary market and the company raised around USD 500 billion at the average price of Rs 1,064. So one pays, if bought right now, around 25% less than what institutions paid at the time of acquiring these shares.
HEG, another stock, on the radar - the stock price is around Rs 360 and fallen nearly 40% from its peak of around Rs 609. The promoters have recently issued warrants to them at a price of Rs 452 per share. So you are actually buying the stock around 20% low than warrants issue price.
GMR Infrastructure is another stock, which is trading around Rs 170 levels and it has fallen nearly 35% from the peak of Rs 261 per share. The company has recently raised USD 1 billion at a QIP price of around Rs 240 per share. So one will buy the stock at 30% to the discount of what QIPs paid to GMR Infra.
A very interesting stock is Havells India. The stock is trading around Rs 530 levels and has fallen nearly 30% from its peak of around Rs 750. In a very interesting deal Warburg Pincus picked up nearly 11.2% stake in this company for Rs 625 per share and also issued warrants at a price of Rs 690 per share. So you are actually buying the stock at 50% discount to what Warburg paid and also around 20% discount to the preferential allotment. So there are many stocks with very interesting prices and regions in the market.
Which stocks now represent value, post the correction and mild recovery? CNBC-TV18 takes some top picks from a list of mutual funds and private equity players, from the time that they picked up their stakes and evaluates.
There have been interesting price movements in some of the stocks, but more importantly the basis for these movements are far more interesting.
The first stock on our list is Praj Industries, it's trading around Rs 165 and hence fallen nearly 40% from its peak at Rs 265 per share. But interestingly, Tata Sons bought nearly 7.34% stake at Rs 252 per share, so one pays around 35% less than what Tatas paid at the time of acquisition of their stake.
Jai Corp is another stock where the price is trading around Rs 815 and fallen around 44% from its peak of around Rs 1,450. This was the biggest private equity dealing stock in the secondary market and the company raised around USD 500 billion at the average price of Rs 1,064. So one pays, if bought right now, around 25% less than what institutions paid at the time of acquiring these shares.
HEG, another stock, on the radar - the stock price is around Rs 360 and fallen nearly 40% from its peak of around Rs 609. The promoters have recently issued warrants to them at a price of Rs 452 per share. So you are actually buying the stock around 20% low than warrants issue price.
GMR Infrastructure is another stock, which is trading around Rs 170 levels and it has fallen nearly 35% from the peak of Rs 261 per share. The company has recently raised USD 1 billion at a QIP price of around Rs 240 per share. So one will buy the stock at 30% to the discount of what QIPs paid to GMR Infra.
A very interesting stock is Havells India. The stock is trading around Rs 530 levels and has fallen nearly 30% from its peak of around Rs 750. In a very interesting deal Warburg Pincus picked up nearly 11.2% stake in this company for Rs 625 per share and also issued warrants at a price of Rs 690 per share. So you are actually buying the stock at 50% discount to what Warburg paid and also around 20% discount to the preferential allotment. So there are many stocks with very interesting prices and regions in the market.
Fed cuts fund rate by 50 bps to 3%
2008-01-31 08:35:56 Source : CNBC-TV18
The Fed has cut federal funds rate by 50 bps to 3%, reports CNBC-TV18. Fed officials said they see a deepening in housing contraction and soft labour markets. According to them, financial markets are still under considerable stress and the downside risks to growth remain. They added that credit has tightened for businesses, households and that cumulative policy action should moderate inflation, promote growth, ease risks.
Fed treasury secretary Paulson said that monetary policy not answer to everything. Meanwhile, US President George Bush said the government can help the economy stay strong and that the US economy is slowing but resilient.
The Fed has cut federal funds rate by 50 bps to 3%, reports CNBC-TV18. Fed officials said they see a deepening in housing contraction and soft labour markets. According to them, financial markets are still under considerable stress and the downside risks to growth remain. They added that credit has tightened for businesses, households and that cumulative policy action should moderate inflation, promote growth, ease risks.
Fed treasury secretary Paulson said that monetary policy not answer to everything. Meanwhile, US President George Bush said the government can help the economy stay strong and that the US economy is slowing but resilient.
Sunday, January 27, 2008
No ordinary thriller this!
The markets witnessed unprecedented volatility this week, with losses and recoveries of a 1,000 points becoming par for the course. The magnitude of the volatility could be gauged from the fact that the week was witness to both the highest ever single day loss as well as single day gain on an absolute basis on the Sensex. However, in the end it were the bears that triumphed, pulling the Sensex down by a little more than 3% and the Nifty down by nearly 6%
The week began on a disastrous note as the indices plummeted throughout the day to clock the biggest ever fall in the Indian stock market history. The Sensex lost 1,408 points while the Nifty shed 497 points on Monday. The bloodbath continued on Tuesday as the indices struggled to recover from the day's lows at which point the Sensex had shed more than 2,000 points. The day ended with the Sensex closing 875 points lower while the Nifty lost 289 points. The US Fed played the knight in shining armour on Wednesday enabling the broader markets to close well above the dotted line. Index heavyweights from the power and software sectors registered gains amidst buying activity across the board. The Sensex gained 864 points while the Nifty accumulated 319 points.
It looked like it would be an encore performance on Thursday, but it turned out to be quite the opposite as the day wore on. The Sensex closed lower by 372 points after a steady decline during the latter part of the day. The Nifty lost 169 points. Select index heavyweights from the telecom sector registered gains while stocks from the power sector bore the brunt of selling activity. Inspired by their global counterparts, the bulls on the Indian indices were back with a huge bang on Friday, enabling the Sensex to record its biggest ever one day rise on an absolute basis.
The week began on a disastrous note as the indices plummeted throughout the day to clock the biggest ever fall in the Indian stock market history. The Sensex lost 1,408 points while the Nifty shed 497 points on Monday. The bloodbath continued on Tuesday as the indices struggled to recover from the day's lows at which point the Sensex had shed more than 2,000 points. The day ended with the Sensex closing 875 points lower while the Nifty lost 289 points. The US Fed played the knight in shining armour on Wednesday enabling the broader markets to close well above the dotted line. Index heavyweights from the power and software sectors registered gains amidst buying activity across the board. The Sensex gained 864 points while the Nifty accumulated 319 points.
It looked like it would be an encore performance on Thursday, but it turned out to be quite the opposite as the day wore on. The Sensex closed lower by 372 points after a steady decline during the latter part of the day. The Nifty lost 169 points. Select index heavyweights from the telecom sector registered gains while stocks from the power sector bore the brunt of selling activity. Inspired by their global counterparts, the bulls on the Indian indices were back with a huge bang on Friday, enabling the Sensex to record its biggest ever one day rise on an absolute basis.
Future Capital Holdings to list on February 1
2008-01-25 14:31:03 Source : moneycontrol.com
The first public issue of calendar 2008, Future Capital Holdings (FCHL), the financial services arm of the Future Group, will create several records when it lists on the stock exchanges on February 1, within 11 working days from the day of issue closing.
The company and the registrars will start sending out the refunds from January 29, which is eight working days from the day of issue closing.
The company has set the tone for speedy process of refunds by reducing the time-lag for the refund process for IPOs in calendar 2008.
Due to the speedy process, an amount of Rs 16,000 crore will be pumped back into the market and the liquidity will improve
The company had fixed the issue price at Rs 765 per equity share (upper end of the price band) for its initial public offering (IPO) of 6,422,800 equity shares of Rs 10 each for cash at the above price decided through a 100% book-building process.
The issue had opened for subscription on January 11, 2008, and closed on January 16, 2008. According to the preliminary data obtained from the stock exchanges, the issue was subscribed to approximately around 133 times (Source: NSE website). The qualified institutional bidders portion was subscribed to approximately around 180 times; the non institutional investors portion 84 times; and the retail portion 55 times. The public issue received more than 11.71 lakh applications and bids for 85.7 crore equity shares as against 6.422 million shares on offer.
The equity shares are proposed to be listed on Bombay Stock Exchange and the National Stock Exchange. The issue constitutes 10.16% of the post-issue paid-up capital of the company.
The book running lead managers to the issue are Kotak Mahindra Capital Company Limited, Enam Securities Private Limited, JM Financial Consultants Private Limited and UBS Securities India Private Limited.
The first public issue of calendar 2008, Future Capital Holdings (FCHL), the financial services arm of the Future Group, will create several records when it lists on the stock exchanges on February 1, within 11 working days from the day of issue closing.
The company and the registrars will start sending out the refunds from January 29, which is eight working days from the day of issue closing.
The company has set the tone for speedy process of refunds by reducing the time-lag for the refund process for IPOs in calendar 2008.
Due to the speedy process, an amount of Rs 16,000 crore will be pumped back into the market and the liquidity will improve
The company had fixed the issue price at Rs 765 per equity share (upper end of the price band) for its initial public offering (IPO) of 6,422,800 equity shares of Rs 10 each for cash at the above price decided through a 100% book-building process.
The issue had opened for subscription on January 11, 2008, and closed on January 16, 2008. According to the preliminary data obtained from the stock exchanges, the issue was subscribed to approximately around 133 times (Source: NSE website). The qualified institutional bidders portion was subscribed to approximately around 180 times; the non institutional investors portion 84 times; and the retail portion 55 times. The public issue received more than 11.71 lakh applications and bids for 85.7 crore equity shares as against 6.422 million shares on offer.
The equity shares are proposed to be listed on Bombay Stock Exchange and the National Stock Exchange. The issue constitutes 10.16% of the post-issue paid-up capital of the company.
The book running lead managers to the issue are Kotak Mahindra Capital Company Limited, Enam Securities Private Limited, JM Financial Consultants Private Limited and UBS Securities India Private Limited.
Apply for KNR Constructions IPO: Arihant Cap Mkts
2008-01-25 14:25:22 Source : moneycontrol.com
Arihant Capital Markets has come out with research report on KNR Constructions IPO. The firm has recommended subscribing to the issue.
KNR Constructions, an infrastructure project development company, has opened for subscription with an initial public offering (IPO) of 7,874,570 equity shares of Rs 10 each for cash at a price to be decided through a 100% book-building process.
The issue will close for subscription on January 29, 2008. The price band has been fixed between Rs 170 and Rs 180 per equity share
Arihant Capital Markets report on KNR Constructions IPO
Investment Positive
Strong Order Book
Order book is considered an indicator of potential future performance since it represents a significant portion of the likely future revenue stream. The value of work remaining to be completed from order book as of November 30, 2007, was Rs 1733.82 crore. The current order book of the company is around 5.4x of the operational income for the period ended March 07 with an execution period of 24 – 30 months.
Currently the company has 25 projects on hand across various states in India covering Uttar Pradesh, Assam, Karnataka, Andhra Pradesh and Tamil Nadu. Most of the company’s road projects under execution are with their joint venture partner, Patel Engineering Ltd with whom they have a business association for the past 7 years.
Good clientele base
Most of KNRC’s clients are governmental agencies like the NHAI, and public works department under the State Governments of Andhra Pradesh, Madhya Pradesh, Karnataka, Tamil Nadu and Uttar Pradesh. They have also been executing projects, funded by multilateral agencies like World Bank and Asian Development Bank.
Expertise in sourcing and maintaining supply chain for raw material
One of the primary raw materials required for all road constructions projects is stone aggregate. KNRCL’s requirement is met out of boulders crushed through their own crushers at various sites. It enables to control the operating costs and the project execution period. Procurement from the captive quarries has also enabled an assured supply on a timely basis at reasonable prices.
Concerns
Competition
KNRCL operates in a competitive environment. While service quality, technical ability, performance record, experience, health and safety records and the availability of skilled personnel are key factors in client decisions among competitors, price is often the deciding factor in most tender awards. KNRC mainly competes with domestic Indian entities in the different segments in which they operate. Some of key competitors are MSK Projects Limited, Patel Engineering, Sadbhav Engineering Limited, and Madhucon Projects Limited.
Heavy dependence on road transportation engineering projects
As on September 30, 2007 revenues from road transportation-engineering segment has contributed to approximately 95% of the income from operations on consolidated basis. The balance order book of the Company as on November 30, 2007 also reflects substantial dependence of Company on the segment, 89.34% of the total balance order book position.
This segment is able to generate operating revenues of about 12.5%-13% on the upper side. Also KNRCL’s operations primarily comprise of contracts under the NHDP awarded by NHAI, which is a government agency and various State Governments. There may be delays associated with collection of receivables from the Government, Government owned or controlled entities. KNRCL also derives a major portion of the revenues from contracts, which they have/are jointly executed/executing with Patel Engineering Limited.
Valuations
The issue is priced at 23.94x FY07 earnings on post issue capital at floor price and at 25.35x at cap price.
Recommendation
With an order book of Rs 1734 crore for a period of 24 – 30 months which translates to 5.4x of FY 07 revenues, KNRCL seems to be well positioned to take advantage of the opportunities showing good growth prospects in the future.
Based on the valuations of 23.94x and 25.35x at a price band of 170 and 180 respectively the issue looks to be reasonably priced as compared to its peers. With the gearing up of infrastructural development, aggressive development plans and strong order book in hand we believe KNRCL is well poised to take advantage of the opportunity Also the current order book provides strong visibility for the future revenue growth of the company. We recommend our investors to subscribe to the issue with a long term view.
Arihant Capital Markets has come out with research report on KNR Constructions IPO. The firm has recommended subscribing to the issue.
KNR Constructions, an infrastructure project development company, has opened for subscription with an initial public offering (IPO) of 7,874,570 equity shares of Rs 10 each for cash at a price to be decided through a 100% book-building process.
The issue will close for subscription on January 29, 2008. The price band has been fixed between Rs 170 and Rs 180 per equity share
Arihant Capital Markets report on KNR Constructions IPO
Investment Positive
Strong Order Book
Order book is considered an indicator of potential future performance since it represents a significant portion of the likely future revenue stream. The value of work remaining to be completed from order book as of November 30, 2007, was Rs 1733.82 crore. The current order book of the company is around 5.4x of the operational income for the period ended March 07 with an execution period of 24 – 30 months.
Currently the company has 25 projects on hand across various states in India covering Uttar Pradesh, Assam, Karnataka, Andhra Pradesh and Tamil Nadu. Most of the company’s road projects under execution are with their joint venture partner, Patel Engineering Ltd with whom they have a business association for the past 7 years.
Good clientele base
Most of KNRC’s clients are governmental agencies like the NHAI, and public works department under the State Governments of Andhra Pradesh, Madhya Pradesh, Karnataka, Tamil Nadu and Uttar Pradesh. They have also been executing projects, funded by multilateral agencies like World Bank and Asian Development Bank.
Expertise in sourcing and maintaining supply chain for raw material
One of the primary raw materials required for all road constructions projects is stone aggregate. KNRCL’s requirement is met out of boulders crushed through their own crushers at various sites. It enables to control the operating costs and the project execution period. Procurement from the captive quarries has also enabled an assured supply on a timely basis at reasonable prices.
Concerns
Competition
KNRCL operates in a competitive environment. While service quality, technical ability, performance record, experience, health and safety records and the availability of skilled personnel are key factors in client decisions among competitors, price is often the deciding factor in most tender awards. KNRC mainly competes with domestic Indian entities in the different segments in which they operate. Some of key competitors are MSK Projects Limited, Patel Engineering, Sadbhav Engineering Limited, and Madhucon Projects Limited.
Heavy dependence on road transportation engineering projects
As on September 30, 2007 revenues from road transportation-engineering segment has contributed to approximately 95% of the income from operations on consolidated basis. The balance order book of the Company as on November 30, 2007 also reflects substantial dependence of Company on the segment, 89.34% of the total balance order book position.
This segment is able to generate operating revenues of about 12.5%-13% on the upper side. Also KNRCL’s operations primarily comprise of contracts under the NHDP awarded by NHAI, which is a government agency and various State Governments. There may be delays associated with collection of receivables from the Government, Government owned or controlled entities. KNRCL also derives a major portion of the revenues from contracts, which they have/are jointly executed/executing with Patel Engineering Limited.
Valuations
The issue is priced at 23.94x FY07 earnings on post issue capital at floor price and at 25.35x at cap price.
Recommendation
With an order book of Rs 1734 crore for a period of 24 – 30 months which translates to 5.4x of FY 07 revenues, KNRCL seems to be well positioned to take advantage of the opportunities showing good growth prospects in the future.
Based on the valuations of 23.94x and 25.35x at a price band of 170 and 180 respectively the issue looks to be reasonably priced as compared to its peers. With the gearing up of infrastructural development, aggressive development plans and strong order book in hand we believe KNRCL is well poised to take advantage of the opportunity Also the current order book provides strong visibility for the future revenue growth of the company. We recommend our investors to subscribe to the issue with a long term view.
Subscribe to OnMobile Global IPO: Emkay
Source : moneycontrol.com
Emkay Share and Stock Brokers has come out with research report on OnMobile Global IPO. The firm has recommended subscribing to the issue.
OnMobile Global, a leading provider of telecommunications value added software products and services in India with an expanding international presence, has opened for subscription with an initial public offering of 10,900,545 equity shares of Rs 10 each for cash at a price to determined through a book building process.
The issue will close for subscription on January 29, 2008. The price band has been fixed between Rs 425 and Rs 450 per equity share.
Emkay Share and Stock Brokers report on OnMobile Global IPO
OnMobile Global is a leading provider of telecom value added services (VAS) in India and is expanding its international presence, especially in the emerging markets of Asia. The company offers value added services such as ringback tones, voice portals, ringtone downloads, etc. to its carrier customers. OnMobile not only rides on the telecom growth with increasing subscribers, but also enables operators to protect their ARPUs by providing innovative services, thus generating a pull from them.
Service offerings
OnMobile's offerings include services like ringback tones, voicemail, missed call alerts, voice SMS, music solutions, information and entertainment solutions (stock alerts, sports & news updates, etc) interactive media solutions, m-commerce solutions (mobile ticketing, bill payment, etc) mobile marketing solutions, etc.
Strong customer base
OnMobile's customers include major telecom operators like Bharti Airtel, BSNL, Vodafone, Tata Teleservices, Reliance Communications and Idea Cellular in India. It also offers the services to international operators such as Sheba Telecom Bangladesh, Maxis Malaysia, BTEL and Indosat in Indonesia and SingTel Optus Australia and media companies like AOL, Disney, ESPN, etc.
Robust growth opportunity
The Indian mobile telecom industry is witnessing a robust growth, with the mobile subscribers increasing from 13mn in 2003 to 230mn in December 2007. The lower penetration (~20%), along with the falling handset prices and widening network coverage together provide huge potential for further growth in the mobile subscribers. With robust monthly subscriber additions, Gartner expects the mobile subscriber base to increase by a CAGR of 27% to 462mn by 2011.
While the mobile subscriber base is rapidly growing, the average revenue per user (ARPU) is consistently declining, provoking the mobile operators to find ways to generate higher ARPU thus making a strong business case for companies like OnMobile.
OnMobile's service offerings create new revenue sources for its customers primarily the telecom operators, who are desperately exploring ways to increase their ARPUs. OnMobile derives its revenues on a revenue sharing model from the revenues generated by the carriers using the value added services provided by the company. OnMobile's revenue share typically ranges between 15-40% averaging at 20-25%.
The rising demand for value added services along with the want of higher margins by the operators are the primary drivers for the growth in this segment. The value added services segment of the mobile sector in India is expected to grow at a 36% CAGR from Rs65bn in 2007 to Rs225bn in 2011. With the normal person-to-person (P2P) SMS contributing around 45-50% of the VAS market, the remaining 50-55% of the market is the target market for OnMobile.
Valuation & recommendation
With strong presence in the value added services market and very good relationships with carriers, OnMobile is likely to benefit from the growth in the Indian and international telecom markets. Considering the strong growth opportunity in Indian as well as international telecom markets, and healthy operating margins enjoyed by the company (~45%), we believe that OnMobile is poised for a robust revenue growth in excess of 50% over FY07-10E and an even higher earnings growth due to higher operating leverage. The company also has strong ROE and ROCE of over 30%, which is not only sustainable but also likely to improve. At upper end of the price band of Rs 450 per share, the stock is offered at around 10x EV/EBIDTA and 15x earnings for FY10E. Thus we recommend subscribe on the issue.
Concerns
* OnMobile's business depends on technological and product innovations. Inability to innovate new solutions that are accepted by the market could affect the future growth of the company.
* A reduction in the end-user pricing by the carrier customers could result in loss of revenues as the company primarily derives revenues on sharing arrangement with the carriers.
* OnMobile's major carrier customers operate in a regulated environment and any changes in regulation could affect the operations of the company.
Emkay Share and Stock Brokers has come out with research report on OnMobile Global IPO. The firm has recommended subscribing to the issue.
OnMobile Global, a leading provider of telecommunications value added software products and services in India with an expanding international presence, has opened for subscription with an initial public offering of 10,900,545 equity shares of Rs 10 each for cash at a price to determined through a book building process.
The issue will close for subscription on January 29, 2008. The price band has been fixed between Rs 425 and Rs 450 per equity share.
Emkay Share and Stock Brokers report on OnMobile Global IPO
OnMobile Global is a leading provider of telecom value added services (VAS) in India and is expanding its international presence, especially in the emerging markets of Asia. The company offers value added services such as ringback tones, voice portals, ringtone downloads, etc. to its carrier customers. OnMobile not only rides on the telecom growth with increasing subscribers, but also enables operators to protect their ARPUs by providing innovative services, thus generating a pull from them.
Service offerings
OnMobile's offerings include services like ringback tones, voicemail, missed call alerts, voice SMS, music solutions, information and entertainment solutions (stock alerts, sports & news updates, etc) interactive media solutions, m-commerce solutions (mobile ticketing, bill payment, etc) mobile marketing solutions, etc.
Strong customer base
OnMobile's customers include major telecom operators like Bharti Airtel, BSNL, Vodafone, Tata Teleservices, Reliance Communications and Idea Cellular in India. It also offers the services to international operators such as Sheba Telecom Bangladesh, Maxis Malaysia, BTEL and Indosat in Indonesia and SingTel Optus Australia and media companies like AOL, Disney, ESPN, etc.
Robust growth opportunity
The Indian mobile telecom industry is witnessing a robust growth, with the mobile subscribers increasing from 13mn in 2003 to 230mn in December 2007. The lower penetration (~20%), along with the falling handset prices and widening network coverage together provide huge potential for further growth in the mobile subscribers. With robust monthly subscriber additions, Gartner expects the mobile subscriber base to increase by a CAGR of 27% to 462mn by 2011.
While the mobile subscriber base is rapidly growing, the average revenue per user (ARPU) is consistently declining, provoking the mobile operators to find ways to generate higher ARPU thus making a strong business case for companies like OnMobile.
OnMobile's service offerings create new revenue sources for its customers primarily the telecom operators, who are desperately exploring ways to increase their ARPUs. OnMobile derives its revenues on a revenue sharing model from the revenues generated by the carriers using the value added services provided by the company. OnMobile's revenue share typically ranges between 15-40% averaging at 20-25%.
The rising demand for value added services along with the want of higher margins by the operators are the primary drivers for the growth in this segment. The value added services segment of the mobile sector in India is expected to grow at a 36% CAGR from Rs65bn in 2007 to Rs225bn in 2011. With the normal person-to-person (P2P) SMS contributing around 45-50% of the VAS market, the remaining 50-55% of the market is the target market for OnMobile.
Valuation & recommendation
With strong presence in the value added services market and very good relationships with carriers, OnMobile is likely to benefit from the growth in the Indian and international telecom markets. Considering the strong growth opportunity in Indian as well as international telecom markets, and healthy operating margins enjoyed by the company (~45%), we believe that OnMobile is poised for a robust revenue growth in excess of 50% over FY07-10E and an even higher earnings growth due to higher operating leverage. The company also has strong ROE and ROCE of over 30%, which is not only sustainable but also likely to improve. At upper end of the price band of Rs 450 per share, the stock is offered at around 10x EV/EBIDTA and 15x earnings for FY10E. Thus we recommend subscribe on the issue.
Concerns
* OnMobile's business depends on technological and product innovations. Inability to innovate new solutions that are accepted by the market could affect the future growth of the company.
* A reduction in the end-user pricing by the carrier customers could result in loss of revenues as the company primarily derives revenues on sharing arrangement with the carriers.
* OnMobile's major carrier customers operate in a regulated environment and any changes in regulation could affect the operations of the company.
Subscribe to OnMobile Global IPO: Emkay
Source : moneycontrol.com
Emkay Share and Stock Brokers has come out with research report on OnMobile Global IPO. The firm has recommended subscribing to the issue.
OnMobile Global, a leading provider of telecommunications value added software products and services in India with an expanding international presence, has opened for subscription with an initial public offering of 10,900,545 equity shares of Rs 10 each for cash at a price to determined through a book building process.
The issue will close for subscription on January 29, 2008. The price band has been fixed between Rs 425 and Rs 450 per equity share.
Emkay Share and Stock Brokers report on OnMobile Global IPO
OnMobile Global is a leading provider of telecom value added services (VAS) in India and is expanding its international presence, especially in the emerging markets of Asia. The company offers value added services such as ringback tones, voice portals, ringtone downloads, etc. to its carrier customers. OnMobile not only rides on the telecom growth with increasing subscribers, but also enables operators to protect their ARPUs by providing innovative services, thus generating a pull from them.
Service offerings
OnMobile's offerings include services like ringback tones, voicemail, missed call alerts, voice SMS, music solutions, information and entertainment solutions (stock alerts, sports & news updates, etc) interactive media solutions, m-commerce solutions (mobile ticketing, bill payment, etc) mobile marketing solutions, etc.
Strong customer base
OnMobile's customers include major telecom operators like Bharti Airtel, BSNL, Vodafone, Tata Teleservices, Reliance Communications and Idea Cellular in India. It also offers the services to international operators such as Sheba Telecom Bangladesh, Maxis Malaysia, BTEL and Indosat in Indonesia and SingTel Optus Australia and media companies like AOL, Disney, ESPN, etc.
Robust growth opportunity
The Indian mobile telecom industry is witnessing a robust growth, with the mobile subscribers increasing from 13mn in 2003 to 230mn in December 2007. The lower penetration (~20%), along with the falling handset prices and widening network coverage together provide huge potential for further growth in the mobile subscribers. With robust monthly subscriber additions, Gartner expects the mobile subscriber base to increase by a CAGR of 27% to 462mn by 2011.
While the mobile subscriber base is rapidly growing, the average revenue per user (ARPU) is consistently declining, provoking the mobile operators to find ways to generate higher ARPU thus making a strong business case for companies like OnMobile.
OnMobile's service offerings create new revenue sources for its customers primarily the telecom operators, who are desperately exploring ways to increase their ARPUs. OnMobile derives its revenues on a revenue sharing model from the revenues generated by the carriers using the value added services provided by the company. OnMobile's revenue share typically ranges between 15-40% averaging at 20-25%.
The rising demand for value added services along with the want of higher margins by the operators are the primary drivers for the growth in this segment. The value added services segment of the mobile sector in India is expected to grow at a 36% CAGR from Rs65bn in 2007 to Rs225bn in 2011. With the normal person-to-person (P2P) SMS contributing around 45-50% of the VAS market, the remaining 50-55% of the market is the target market for OnMobile.
Valuation & recommendation
With strong presence in the value added services market and very good relationships with carriers, OnMobile is likely to benefit from the growth in the Indian and international telecom markets. Considering the strong growth opportunity in Indian as well as international telecom markets, and healthy operating margins enjoyed by the company (~45%), we believe that OnMobile is poised for a robust revenue growth in excess of 50% over FY07-10E and an even higher earnings growth due to higher operating leverage. The company also has strong ROE and ROCE of over 30%, which is not only sustainable but also likely to improve. At upper end of the price band of Rs 450 per share, the stock is offered at around 10x EV/EBIDTA and 15x earnings for FY10E. Thus we recommend subscribe on the issue.
Concerns
* OnMobile's business depends on technological and product innovations. Inability to innovate new solutions that are accepted by the market could affect the future growth of the company.
* A reduction in the end-user pricing by the carrier customers could result in loss of revenues as the company primarily derives revenues on sharing arrangement with the carriers.
* OnMobile's major carrier customers operate in a regulated environment and any changes in regulation could affect the operations of the company.
Emkay Share and Stock Brokers has come out with research report on OnMobile Global IPO. The firm has recommended subscribing to the issue.
OnMobile Global, a leading provider of telecommunications value added software products and services in India with an expanding international presence, has opened for subscription with an initial public offering of 10,900,545 equity shares of Rs 10 each for cash at a price to determined through a book building process.
The issue will close for subscription on January 29, 2008. The price band has been fixed between Rs 425 and Rs 450 per equity share.
Emkay Share and Stock Brokers report on OnMobile Global IPO
OnMobile Global is a leading provider of telecom value added services (VAS) in India and is expanding its international presence, especially in the emerging markets of Asia. The company offers value added services such as ringback tones, voice portals, ringtone downloads, etc. to its carrier customers. OnMobile not only rides on the telecom growth with increasing subscribers, but also enables operators to protect their ARPUs by providing innovative services, thus generating a pull from them.
Service offerings
OnMobile's offerings include services like ringback tones, voicemail, missed call alerts, voice SMS, music solutions, information and entertainment solutions (stock alerts, sports & news updates, etc) interactive media solutions, m-commerce solutions (mobile ticketing, bill payment, etc) mobile marketing solutions, etc.
Strong customer base
OnMobile's customers include major telecom operators like Bharti Airtel, BSNL, Vodafone, Tata Teleservices, Reliance Communications and Idea Cellular in India. It also offers the services to international operators such as Sheba Telecom Bangladesh, Maxis Malaysia, BTEL and Indosat in Indonesia and SingTel Optus Australia and media companies like AOL, Disney, ESPN, etc.
Robust growth opportunity
The Indian mobile telecom industry is witnessing a robust growth, with the mobile subscribers increasing from 13mn in 2003 to 230mn in December 2007. The lower penetration (~20%), along with the falling handset prices and widening network coverage together provide huge potential for further growth in the mobile subscribers. With robust monthly subscriber additions, Gartner expects the mobile subscriber base to increase by a CAGR of 27% to 462mn by 2011.
While the mobile subscriber base is rapidly growing, the average revenue per user (ARPU) is consistently declining, provoking the mobile operators to find ways to generate higher ARPU thus making a strong business case for companies like OnMobile.
OnMobile's service offerings create new revenue sources for its customers primarily the telecom operators, who are desperately exploring ways to increase their ARPUs. OnMobile derives its revenues on a revenue sharing model from the revenues generated by the carriers using the value added services provided by the company. OnMobile's revenue share typically ranges between 15-40% averaging at 20-25%.
The rising demand for value added services along with the want of higher margins by the operators are the primary drivers for the growth in this segment. The value added services segment of the mobile sector in India is expected to grow at a 36% CAGR from Rs65bn in 2007 to Rs225bn in 2011. With the normal person-to-person (P2P) SMS contributing around 45-50% of the VAS market, the remaining 50-55% of the market is the target market for OnMobile.
Valuation & recommendation
With strong presence in the value added services market and very good relationships with carriers, OnMobile is likely to benefit from the growth in the Indian and international telecom markets. Considering the strong growth opportunity in Indian as well as international telecom markets, and healthy operating margins enjoyed by the company (~45%), we believe that OnMobile is poised for a robust revenue growth in excess of 50% over FY07-10E and an even higher earnings growth due to higher operating leverage. The company also has strong ROE and ROCE of over 30%, which is not only sustainable but also likely to improve. At upper end of the price band of Rs 450 per share, the stock is offered at around 10x EV/EBIDTA and 15x earnings for FY10E. Thus we recommend subscribe on the issue.
Concerns
* OnMobile's business depends on technological and product innovations. Inability to innovate new solutions that are accepted by the market could affect the future growth of the company.
* A reduction in the end-user pricing by the carrier customers could result in loss of revenues as the company primarily derives revenues on sharing arrangement with the carriers.
* OnMobile's major carrier customers operate in a regulated environment and any changes in regulation could affect the operations of the company.
Where to invest and Why
Some readers are asking me where to invest. I have been guarded with my answers and start with the observation that since everyone has different financial goals and risk appetite, my recommendation may not work for him or her.
But when my elder brother asked me this question, I did not have an escape route anymore. And I had a responsibility too. After all I can't vanish from him after a year or so! Let's take a look at some of the popular options available which are Bonds, Stocks, Real Estate, Mutual Funds (MFs), Unit Linked Insurance Policies (ULIP) and Exchange Traded Funds (ETF).
Now I'll try to rate them on four parameters of investing. i.e. 1) Growth, 2) Liquidity, 3) Security and 4) Expenses
Growth: Stocks, MFs and ETFs top the rankings here. Over a period of over 5 years, the Compounded Annual Growth Rate (CAGR) is above 15% in comparison to 8% in Bonds. ULIPs begin to give a good growth only after 5 years or so because initially they are very expensive. Real estate is on a fairytale run these days too
Liquidity: Again, Stocks, MFs and ETFs score heavily while Bonds and ULIPs have a lock-in period or have substantial surrender charges. Real estate scores low here (You have to be lucky to get good buyers at the right time).
Security: I would rate all of them at par over a long-term of over 5 years. But you may get into a bad stock or real estate which are unsecured. Otherwise also, stocks and real estate are very volatile and can affect your blood pressure too!
Expenses: ETF is the least expensive with charges of around 0.5% compared to 2% from MFs and much more in ULIPs (especially in the initial years). Stocks too, are the least expensive, provided you get into the right stocks at the right time.
Based on the short analysis, I would recommend ETFs. Read more about ETFs here. But as I said earlier, one man's meat could be another man's poison. Moreover, the diversification rule says that one should not keep all our eggs/ apples (for the vegetarians) in one basket.
So let us take a look at the various options, one at a time.
Shares: Investing in the equity market directly is exciting and sexy. You are in the thick of things and learn a lot in the process. Though the volatility and the information overload makes it a daunting task, investing in stocks is not rocket science. One should start with identifying a list of 10-15 companies out of 3-5 sectors which you know about and interests you. You can then keep a tab on their management team, financials, and future outlook and over a period of time, and will be able to take a call on them.
Real Estate: I feel that one has to be plain lucky to get into a good deal and be able to get the right buyer at the right price and time. I can't think of any other factor other than luck. So if you feel you are blessed and have the right tip, go for it. Otherwise, it's a no-no.
Mutual Funds: One should allocate their time to investment decisions in proportion to their income generation goals. Also, convenience and hassle free investing should be a major factor. Mutual Funds fit the bill where Fund Managers are into it full time. If you van identify fund managers who have consistently performed over last 3-5 years, nothing like it. The fund manager also has the muscle power of crores of Rupees and is able to take entry and exit decisions impartially. MFs continuously churn their portfolio. When MFs buy and sell stocks, they don't have to pay capital gains as you would do when you churn. With Systematic Investment plans (SIP), you can start investing with as low as Rs 500 per month. But MFs have its own loading and administrative charges and the fund managers make merry on your hard earned money.
Exchange Traded Funds: While the index fund has given a one-year return of 42% last year, diversified equity schemes (MF) could only come up with 34% returns. Diversified equity funds usually have large expense ratios compared to index funds. For example, the expense ratio of Banking BeES, an index fund, is only 0.45, while it is anywhere between 2-2.50% for diversified equity schemes. That's why I recommend ETFs.
ULIPs: Unit linked insurance policies combine two products, i.e. Insurance and Mutual Funds. In the initial few years, ULIPs are very expensive. But in case you don't want any hassles of investing, and you have a tried and tested Insurance agent who is almost part of your family, then ULIPs are for you.
Bonds: For those of you who are risk averse.
But when my elder brother asked me this question, I did not have an escape route anymore. And I had a responsibility too. After all I can't vanish from him after a year or so! Let's take a look at some of the popular options available which are Bonds, Stocks, Real Estate, Mutual Funds (MFs), Unit Linked Insurance Policies (ULIP) and Exchange Traded Funds (ETF).
Now I'll try to rate them on four parameters of investing. i.e. 1) Growth, 2) Liquidity, 3) Security and 4) Expenses
Growth: Stocks, MFs and ETFs top the rankings here. Over a period of over 5 years, the Compounded Annual Growth Rate (CAGR) is above 15% in comparison to 8% in Bonds. ULIPs begin to give a good growth only after 5 years or so because initially they are very expensive. Real estate is on a fairytale run these days too
Liquidity: Again, Stocks, MFs and ETFs score heavily while Bonds and ULIPs have a lock-in period or have substantial surrender charges. Real estate scores low here (You have to be lucky to get good buyers at the right time).
Security: I would rate all of them at par over a long-term of over 5 years. But you may get into a bad stock or real estate which are unsecured. Otherwise also, stocks and real estate are very volatile and can affect your blood pressure too!
Expenses: ETF is the least expensive with charges of around 0.5% compared to 2% from MFs and much more in ULIPs (especially in the initial years). Stocks too, are the least expensive, provided you get into the right stocks at the right time.
Based on the short analysis, I would recommend ETFs. Read more about ETFs here. But as I said earlier, one man's meat could be another man's poison. Moreover, the diversification rule says that one should not keep all our eggs/ apples (for the vegetarians) in one basket.
So let us take a look at the various options, one at a time.
Shares: Investing in the equity market directly is exciting and sexy. You are in the thick of things and learn a lot in the process. Though the volatility and the information overload makes it a daunting task, investing in stocks is not rocket science. One should start with identifying a list of 10-15 companies out of 3-5 sectors which you know about and interests you. You can then keep a tab on their management team, financials, and future outlook and over a period of time, and will be able to take a call on them.
Real Estate: I feel that one has to be plain lucky to get into a good deal and be able to get the right buyer at the right price and time. I can't think of any other factor other than luck. So if you feel you are blessed and have the right tip, go for it. Otherwise, it's a no-no.
Mutual Funds: One should allocate their time to investment decisions in proportion to their income generation goals. Also, convenience and hassle free investing should be a major factor. Mutual Funds fit the bill where Fund Managers are into it full time. If you van identify fund managers who have consistently performed over last 3-5 years, nothing like it. The fund manager also has the muscle power of crores of Rupees and is able to take entry and exit decisions impartially. MFs continuously churn their portfolio. When MFs buy and sell stocks, they don't have to pay capital gains as you would do when you churn. With Systematic Investment plans (SIP), you can start investing with as low as Rs 500 per month. But MFs have its own loading and administrative charges and the fund managers make merry on your hard earned money.
Exchange Traded Funds: While the index fund has given a one-year return of 42% last year, diversified equity schemes (MF) could only come up with 34% returns. Diversified equity funds usually have large expense ratios compared to index funds. For example, the expense ratio of Banking BeES, an index fund, is only 0.45, while it is anywhere between 2-2.50% for diversified equity schemes. That's why I recommend ETFs.
ULIPs: Unit linked insurance policies combine two products, i.e. Insurance and Mutual Funds. In the initial few years, ULIPs are very expensive. But in case you don't want any hassles of investing, and you have a tried and tested Insurance agent who is almost part of your family, then ULIPs are for you.
Bonds: For those of you who are risk averse.
Financial Literacy for You and Me
We all need to go through a financial literacy programme and I am making that effort. So do you, dude.If you think it's too early for you to bother, let me tell you that the first principle of investing is to start early and see the magic of compounding. College grads, fresh MBAs and guys under 25, the smart thing to do is to start now.
Do you think that you have mastered the basics but are not able to use it to your advantage, it's time to put your thinking cap on and review your strategies. Learn from your failures. Often we tend to get stricken by some deadly internal enemies which Kartik Jhaveri details here.
Some of you guys would be rich enough not to be bothered about these mundane things. But have you ever given a thought that you are in a position to contribute to the nation's economy by being more efficient about your finances. Wealth has the unique ability to create more wealth. Are you using that power?
Before I move on, let me articulate the background to this financial literacy programme that I am so smitten about. The following facts and questions keep on humming in my mind:
Do you think that you have mastered the basics but are not able to use it to your advantage, it's time to put your thinking cap on and review your strategies. Learn from your failures. Often we tend to get stricken by some deadly internal enemies which Kartik Jhaveri details here.
Some of you guys would be rich enough not to be bothered about these mundane things. But have you ever given a thought that you are in a position to contribute to the nation's economy by being more efficient about your finances. Wealth has the unique ability to create more wealth. Are you using that power?
Before I move on, let me articulate the background to this financial literacy programme that I am so smitten about. The following facts and questions keep on humming in my mind:
- Equities give the best returns and you are putting your money in a professionally managed corporate organisation. Compare this with your insurance products which give much lesser returns and your money is invested in the Government which is inefficient with your money, to say the least.
- However the total AUM under Mutual Funds is about Rs 3.5 lakh crores while LIC alone manages funds worth more than Rs 6 lakh crore. Yes it's true that LIC has been there for over 50 years and has a huge distribution reach. But it has hardly tapped the huge insurance potential that India has.
- Financial experts scoff at ULIP saying that it's very expensive compared to Mutual Funds. But LIC collected more than Rs 25000 crore in 2006-07 and it's total fund under ULIP is approx 40000 crore which is more than UTI's AUM of approx 39000 crore (since existence)
All this and more points to widespread financial illiteracy at all levels. Be it college grads, software geeks, MBAs, Engineers, even CFA/Economists( they are experts at business finance or government finance) and even Financial advisors (they rarely have a holistic view), everyone needs to be literate about his personal finances.
And there are over 700 mutual funds, 5000 stocks, 300 insurance policies and hundreds of other financial products to choose from!!
Interested! And the literacy programme that I have in mind will have the following details:
- Financial planning basics.
- Financial markets.
- Financial products like Mutual Funds, Stocks.
- Research reports, Financial analysis, technical analysis.
- Insurance : Basics, Company review, product review.
- ETF : Basics, Company review, product review.
- Bonds : Basics, Company review, product review.
- Tax Planning : Basics, product review.
- Retirement Planning : Basics, product review.
- Children's education. : Basics, Company review, product review.
- Calculators :Budgeting, Networth, Loan, Asset allocator, Risk analyser,etc.
Emaar MGF Land IPO opens on Feb 01, price band Rs 610-690
Emaar MGF Land Limited (“Emaar MGF” or the “Company”), a joint venture between one of the world’s leading real estate companies, Emaar Properties PJSC of Dubai, and MGF Development Limited of India, is entering the capital market with an initial public offering (“IPO”) of 102,570,623 equity shares of face value Rs 10 each for cash at a price (“Equity Shares”) to be determined through a 100% book building issue.
The Bid/Issue will open for subscription on
The Issue has been assigned an IPO grading of 4 out of a possible 5 by the rating agency, Credit Analysis and Research Limited (“CARE”), a credit rating agency registered with the Securities and Exchange Board of
At least 60% of the Issue shall be allocated on a proportionate basis to Qualified Institutional Buyers (“QIBs”), out of which 5% shall be available for allocation on a proportionate basis to Mutual Funds only. Further, not less than 10% of the Issue shall be available for allocation on a proportionate basis to Non Institutional Bidders and not less than 30% of the Issue shall be available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid Bids being received at or above the Issue Price.
Emaar MGF commenced its operations in
Emaar MGF has access to its promoter's track record, especially the Dubai-based JV partner, Emaar Properties PJSC's rich experience in international real estate sector; and its demonstrated support in providing capital assistance; access to global management & systems; and business associations. The Company has a diversified business model with the requisite execution capability. It draws strength from the presence of an experienced management team; the presence of professionals on the Board; and large land reserves across the country with a high proportion of fully paid for land reserves.
As of December 31, 2007, Emaar MGF had land reserves (as defined and stated in the Red Herring Prospectus filed with the Registrar of Companies, Delhi and Haryana) across India admeasuring to approximately 13,024 acres out of which it has development plans for approximately 12,028 acres, which in turn, is expected to provide it with a proposed saleable area of approximately 566 million square feet. The Company estimates that its land reserves will provide it with a proposed saleable area of approximately 136.5 million square feet of plotted residential development (including built up villas); 318.8 million square feet of built up residential properties; 88.9 million square feet of commercial properties; 18.0 million square feet of retail properties; and 4,960 keys in hospitality properties as of December 31, 2007.
The Issue proceeds will be used for part payment towards the acquisition of land and land development rights and related approvals for its ongoing and planned projects. The Issue proceeds will also be used for the development and construction costs for project
For the six months ended
The equity shares of the Company are proposed to be listed on the Bombay Stock Exchange Limited (“BSE”) and the National Stock Exchange of India Limited (“NSE”).
The Global Co-ordinators and Book Running Lead Managers (“GCBRLMs”) to the Issue are Enam Securities Private Limited and DSP Merrill Lynch Limited. The Book Running Lead Managers (“BRLMs”) are Citigroup Global Markets India Private Limited, Goldman Sachs (
Sourced From: Adfactors Public Relations Pvt Ltd
Saturday, January 26, 2008
2008 will be volatile for mkts: Advent Adv
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KR BharatInvesting 101: Introduction
Have you ever wondered how the rich got their wealth and then kept it growing? Do you dream of retiring early (or of being able to retire at all)? Do you know that you should invest, but don't know where to start?
If you answered "yes" to any of the above questions, you've come to the right place. In this tutorial we will cover the practice of investing from the ground up. The world of finance can be extremely intimidating, but we firmly believe that the stock market and greater financial world won't seem so complicated once you learn some of the lingo and major concepts.
We should emphasize, however, that investing isn't a get-rich-quick scheme. Taking control of your personal finances will take work, and, yes, there will be a learning curve. But the rewards will far outweigh the required effort. Contrary to popular belief, you don't have to allow banks, bosses or investment professionals to push your money in directions that you don't understand. After all, no one is in a better position than you are to know what is best for you and your money.
Regardless of your personality type, lifestyle or interests, this tutorial will help you to understand what investing is, what it means and how time earns money through compounding. But it doesn't stop there. This tutorial will also teach you about the building blocks of the investing world and the markets, give you some insight into techniques and strategies and help you think about which investing strategies suit you best. So do yourself a lifelong favor and keep reading.
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We should emphasize, however, that investing isn't a get-rich-quick scheme. Taking control of your personal finances will take work, and, yes, there will be a learning curve. But the rewards will far outweigh the required effort. Contrary to popular belief, you don't have to allow banks, bosses or investment professionals to push your money in directions that you don't understand. After all, no one is in a better position than you are to know what is best for you and your money.
Regardless of your personality type, lifestyle or interests, this tutorial will help you to understand what investing is, what it means and how time earns money through compounding. But it doesn't stop there. This tutorial will also teach you about the building blocks of the investing world and the markets, give you some insight into techniques and strategies and help you think about which investing strategies suit you best. So do yourself a lifelong favor and keep reading.
Stock-Picking Strategies:Introduction
When it comes to personal finance and the accumulation of wealth, few subjects are more talked about than stocks. It's easy to understand why: playing the stock market is thrilling. But on this financial roller-coaster ride, we all want to experience the ups without the downs.
In this tutorial, we examine some of the most popular strategies for finding good stocks (or at least avoiding bad ones). In other words, we'll explore the art of stock-picking - selecting stocks based on a certain set of criteria, with the aim of achieving a rate of return that is greater than the market's overall average.
Before exploring the vast world of stock-picking methodologies, we should address a few misconceptions. Many investors new to the stock-picking scene believe that there is some infallible strategy that, once followed, will guarantee success. There is no foolproof system for picking stocks! If you are reading this tutorial in search of a magic key to unlock instant wealth, we're sorry, but we know of no such key.
This doesn't mean you can't expand your wealth through the stock market. It's just better to think of stock-picking as an art rather than a science. There are a few reasons for this:
At this point, you may be asking yourself why stock-picking is so important. Why worry so much about it? Why spend hours doing it? The answer is simple: wealth. If you become a good stock-picker, you can increase your personal wealth exponentially. Take Microsoft, for example. Had you invested in Bill Gates' brainchild at its IPO back in 1986 and simply held that investment, your return would have been somewhere in the neighborhood of 35,000% by spring of 2004. In other words, over an 18-year period, a $10,000 investment would have turned itself into a cool $3.5 million! (In fact, had you had this foresight in the bull market of the late '90s, your return could have been even greater.) With returns like this, it's no wonder that investors continue to hunt for "the next Microsoft".
Without further ado, let's start by delving into one of the most basic and crucial aspects of stock-picking: fundamental analysis, whose theory underlies all of the strategies we explore in this tutorial (with the exception of the last section on technical analysis). Although there are many differences between each strategy, they all come down to finding the worth of a company.
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Before exploring the vast world of stock-picking methodologies, we should address a few misconceptions. Many investors new to the stock-picking scene believe that there is some infallible strategy that, once followed, will guarantee success. There is no foolproof system for picking stocks! If you are reading this tutorial in search of a magic key to unlock instant wealth, we're sorry, but we know of no such key.
This doesn't mean you can't expand your wealth through the stock market. It's just better to think of stock-picking as an art rather than a science. There are a few reasons for this:
- So many factors affect a company's health that it is nearly impossible to construct a formula that will predict success. It is one thing to assemble data that you can work with, but quite another to determine which numbers are relevant.
- A lot of information is intangible and cannot be measured. The quantifiable aspects of a company, such as profits, are easy enough to find. But how do you measure the qualitative factors, such as the company's staff, its competitive advantages, its reputation and so on? This combination of tangible and intangible aspects makes picking stocks a highly subjective, even intuitive process.
- Because of the human (often irrational) element inherent in the forces that move the stock market, stocks do not always do what you anticipate they'll do. Emotions can change quickly and unpredictably. And unfortunately, when confidence turns into fear, the stock market can be a dangerous place.
At this point, you may be asking yourself why stock-picking is so important. Why worry so much about it? Why spend hours doing it? The answer is simple: wealth. If you become a good stock-picker, you can increase your personal wealth exponentially. Take Microsoft, for example. Had you invested in Bill Gates' brainchild at its IPO back in 1986 and simply held that investment, your return would have been somewhere in the neighborhood of 35,000% by spring of 2004. In other words, over an 18-year period, a $10,000 investment would have turned itself into a cool $3.5 million! (In fact, had you had this foresight in the bull market of the late '90s, your return could have been even greater.) With returns like this, it's no wonder that investors continue to hunt for "the next Microsoft".
Without further ado, let's start by delving into one of the most basic and crucial aspects of stock-picking: fundamental analysis, whose theory underlies all of the strategies we explore in this tutorial (with the exception of the last section on technical analysis). Although there are many differences between each strategy, they all come down to finding the worth of a company.
IFCI Quite undervalued By SP Tulsian
IFCI is a financial institution , presently not engaged in any commercial, financial or lending business, except for recovering its NPA and has been posting profits.
- For Q1 of FY08, it had PAT of Rs 247 crores, Q2 had PAT of Rs 497 crores and Q3 had a PAT of Rs 319 crores. Since these NPAs were earlier provided in the books, now any recovery is shown as income of the company. First 9 months have seen recovery of Rs 1,519 crore, on which tax provision was Rs 456 crore with PAT of Rs 1,063 crore.
- IFCI had initiated a process to induct a strategic partner by issuing 26% equity to such investor, but the process could not get completed, with Sterlite, who was lone bidder for such stake.
- Before inducting strategic investor, IFCI had agreed with various holders of Zero Coupon Optionally Convertible Debentures (OCD) to convert Rs 1,324 crore of such OCD into equity shares of Rs 10 each at Rs 107 per share. This would increase paid up equity by Rs 124 crore while net worth would rise by R s1,200 crore.
- The present equity is at Rs 640 crore which would rise to Rs 764 crore after conversion of OCD as stated above.
- IFCI has 11 regional offices and 6 other offices located at Mumbai, Delhi, Chennai, Kolkata, Jaipur, Bangalore, Hyderabad, Kochi and Ahmedabad with about 4.66 lakh sq ft of commercial premises. Of this, IFCI Tower in New Delhi has 2.13 lakh sq ft owned area and 0.84 lakh sq ft of car parking, plus 0.30 lakh sq ft at Nariman Point in Mumbai. The estimated value of the commercial property is close to Rs 1,500 crores.
- IFCI also has 7.55 lakh sq ft of residential premises with 3.50 lakh sq ft in Delhi, 0.46 lakh sq ft in Mumbai and 0.40 lakh sq ft in Bangalore. Value of all these properties are close to Rs 1,000 crores.
- IFCI holds 5.44% stake in NSE, 19% in Tourism Finance, 17% in Stockholding and 8% in GIC Housing. Value of quoted and unquoted investments are close to Rs 5,000 crores.
- As hinted by IFCI and Finance Minister earlier, it is likely that the process of inducting strategic investor on more attractive terms would get revived in the near future. This may lead to better valuation of IFCI..
- IFCI is presently ruling at Rs 62 which values it close to Rs 4,800 crores. Taking debt of about Rs 10,000 crores, total value is close to Rs 15,000 crores. The assets of realty, quoted and unquoted investments and standard loan of Rs 6,000 crores are estimated at about Rs 20,000 crores.This leaves a scope of share getting valued close to Rs 100 per share.
- Improvement in valuation is due to conversion of loan of Rs 1,324 crores into net worth and recovery of bad debts of Rs 1,500 crore in 9 months.
- In future course of disinvestment, even banking permission may be given to IFCI, which would vastly improve its valuation.
- Considering these, share at Rs 62 makes a good buy with limited downside risk of about Rs 5 while on upside it can touch Rs 95 to Rs 100 in the next couple of months.
Types Of Market Transactions
You will find it easier to transact in the stock market once you attain a basic understanding of market mechanics. Before a share is purchased or sold, the investor must instruct his broker about the order. This means clearly specifying how the order is to be placed. Sending proper instructions to your broker – either by phone or online- is the first step to avoid hassles later on.
Basically, two types of share transaction exist -buy orders and sell orders. Technically sell orders can be further classified as either selling long or selling short.
Buy Orders
Buy orders are placed when you anticipates a rise in prices. The investor enters a buy order when he finds the price appropriate, after deciding the number of shares he wants to purchase and ensuring that he has the requisite funds to take delivery, if needed.
Sell Orders
When you wish to sell shares of a company you own at present, either because the investment target has been met or you expect a decline in price, you place a sell order with your broker.
Various types of orders that you can put through to exchanges are as follows:
Price Limit Orders
An investor can have his order executed either at the best prevailing price on the exchange or at a pre-determined price.
Market Order
A market order is one you place to sell shares at the prevailing price, when your order is entered in the system. They are executed as fast as possible at the best prevailing price on the exchange. It means that your order quantity will be executed the moment it reaches the exchange provided the required quantity is available. This order type is accepted by both the exchanges i.e. BSE and NSE.
The obvious advantage of a market order is the speed with which it is executed. The disadvantage is that the investor does not know the exact execution price until after the execution. This advantage is potentially most troublesome when dealing in either very inactive or very volatile securities.
Limit orders
Limit type orders refer to a buy or sell order with a price limit. Limit orders overcome the disadvantage of the market order, namely not knowing in advance the price at which the transaction will take place. It means that if the order gets executed, them it will be within the limit specified or at a better rate than that. This order type is accepted by both the exchanges i.e. BSE and NSE.
When using a limit order, the investor specifies in advance the limit price at which he wants the transaction to be carried out. It is always understood that the price limitation includes an "or better" instruction. In the case of a limit order to buy, the investor specifies the maximum price he will pay for the share; the order can be carried out only at the limit price or lower. In the case of a limit order to sell, the investor specifies the minimum price he will accept for the share; the order can be carried out only at the limit price or higher.
Use of Market and Limit order
When do you use a limit order? To safeguard against extreme volatility, you can put a limit on the price at which you want your order to be executed. Generally, limit orders are placed "away from the market." This means that the limit price is somewhat removed from the prevailing price (generally, above the prevailing price in the case of a limit order to sell, and below the prevailing price in the case of a limit order to buy).
Obviously, the investor believes his limit price will be executed during the trading day. That, however, is also the chief disadvantage of a limit order. It may never be executed at all. If the limit price is set very close to the prevailing price, there is little advantage over the market order. Moreover, if the limit is considerably removed from the market, the price may never reach the limit – even because of a fractional difference. Also because limit orders are filled on a first come first basis, it is possible that so many of them are in ahead of the investor’s limit at a given price that his order will never be executed. Thus, selecting a proper limit price is a delicate exercise.
On the other hand a market order is filled at the best possible price as soon as an investor places the order and it will not be even possible to cancel the order. However, a limit order may be cancelled or modified at any time prior to execution.
Various types of specific orders
So far orders have been classified by type of transaction (buy or sell) and by price (market or limit). Now differences stemming from the time limit placed on the order will be examined. Orders can be for either a day or until canceled.
Day Order or End of Day Order
A day order is one that remains active only for the normal trading time on that day. Unless otherwise requested by the investor, all orders are treated as day orders only. Market orders are almost day orders because they do not specify a particular price. One key rationale for the day order is that market conditions might change overnight, and thus a seemingly good investment decision one day might seem considerably less desirable the following day.
Special Types of Orders
Stop Loss Order
A stop loss order allows investor to place an order which gets activated only when the last traded price of the share is reached or crosses a predefined threshold price also called as trigger price. It means that if investor feels that any particular share will be worth buy or sell only after it crosses some threshold rate then this type of order gets activated. For example, a buy order at Rs 100 with a stop loss of Rs 90, will mean that if the share falls to Rs 90, the shares will be sold, limiting the loss to Rs 10.
Several possible dangers are inherent when using this type of order. First, if the stop is placed too close to the market, the investor might have his position closed out because of a minor price fluctuation, even though his idea will prove correct in the long run. On the order hand, if the stop is too far away from the market, the stop order serves no purpose.
Further classification of this type of orders can be defined depending upon the price limit of orders, i.e. the price on which the order should execute, as explained under:
Stop Loss Market Order
A stop loss market order is a special type of limit order. A stop loss market order to sell is treated as a market order when the stop price or a price below is "touched" (reached); a stop market order to buy is treated as a market order when the stop price or a price above it is reached. Thus, stop market order to sell is set at a price below the current market price, and a stop order to buy is set at a price above the current market price.
The possible inherent danger associated with this type of order is that because they become market orders after the proper price level has been reached, the actual transaction could take place some distance away from the price the investor had in mind when he placed the order. The reason may be prior queuing up of other orders or order quantity not being available.
Stop Loss Limit Order
The stop loss limit order overcomes the uncertainty associated with the stop loss market order, of not knowing what price the order will be executed at. The stop limit order gives the investor the advantage of specifying the limit price: the maximum price on which the buy order should filled or minimum price on which the sell order should filled. Therefore, a stop limit order to buy is activated as soon as the stop price or higher is reached, and then an attempt is made to buy at the limit price or lower. Conversely, a stop limit order to sell is activated as soon as the stop price or lower is reached, and then an attempt is made to sell at the limit price or higher.
The danger is that, in a volatile market, the order may not get executed because the difference between the execution limit and the stop price may be too low. However, if things work out as planned, the stop limit order to sell will be very effective.
Disclosed Quantity (DQ) order
The system provides a facility for entering orders with quantity conditions: DQ order allows you to disclose only a part of the order quantity to the market.
Price Bands
Also known as circuit filters or circuit breakers, price bands set the upper and lower limit within which a stock can fluctuate on any given day. A price band for the day is a function of previous trading day’s closing.
Currently the both BSE and NSE has fixed price bands for different securities within which they can move within a day.
Price bands are supposed to prevent extreme price movements, reducing the scope of price manipulation. Price bands do slow things down and make it that much harder for operators wanting to quickly manipulate prices in huge leaps. When there is general euphoria or panic in the market that seems fundamentally unwarranted, price bands give wary investors the benefit of a cooling period.
Operators with access to large funds, shares and time at their disposal, however can manipulate the price bands to their advantage by blocking exit/entry of other investors from a particular counter by placing huge orders. For example when a stock touches the lower circuit in a sharp downtrend, ordinary buyers would wait for the next trading session believing that the stock will be available at a still lower price. As a result, investors wanting to sell the stock won’t find buyers at the lower circuit price but would have to offload at a much lower price due to the volume-led manipulation executed by operator. The operator would thus be able to batter the stock down by a large gap created by his own sell orders.
Much larger volume of the battered stock would then be accumulated by the same operator at a much lower price as panic-stricken ordinary investors would happily exit the stock.
Basically, two types of share transaction exist -buy orders and sell orders. Technically sell orders can be further classified as either selling long or selling short.
Buy Orders
Buy orders are placed when you anticipates a rise in prices. The investor enters a buy order when he finds the price appropriate, after deciding the number of shares he wants to purchase and ensuring that he has the requisite funds to take delivery, if needed.
Sell Orders
When you wish to sell shares of a company you own at present, either because the investment target has been met or you expect a decline in price, you place a sell order with your broker.
Various types of orders that you can put through to exchanges are as follows:
Price Limit Orders
An investor can have his order executed either at the best prevailing price on the exchange or at a pre-determined price.
Market Order
A market order is one you place to sell shares at the prevailing price, when your order is entered in the system. They are executed as fast as possible at the best prevailing price on the exchange. It means that your order quantity will be executed the moment it reaches the exchange provided the required quantity is available. This order type is accepted by both the exchanges i.e. BSE and NSE.
The obvious advantage of a market order is the speed with which it is executed. The disadvantage is that the investor does not know the exact execution price until after the execution. This advantage is potentially most troublesome when dealing in either very inactive or very volatile securities.
Limit orders
Limit type orders refer to a buy or sell order with a price limit. Limit orders overcome the disadvantage of the market order, namely not knowing in advance the price at which the transaction will take place. It means that if the order gets executed, them it will be within the limit specified or at a better rate than that. This order type is accepted by both the exchanges i.e. BSE and NSE.
When using a limit order, the investor specifies in advance the limit price at which he wants the transaction to be carried out. It is always understood that the price limitation includes an "or better" instruction. In the case of a limit order to buy, the investor specifies the maximum price he will pay for the share; the order can be carried out only at the limit price or lower. In the case of a limit order to sell, the investor specifies the minimum price he will accept for the share; the order can be carried out only at the limit price or higher.
Use of Market and Limit order
When do you use a limit order? To safeguard against extreme volatility, you can put a limit on the price at which you want your order to be executed. Generally, limit orders are placed "away from the market." This means that the limit price is somewhat removed from the prevailing price (generally, above the prevailing price in the case of a limit order to sell, and below the prevailing price in the case of a limit order to buy).
Obviously, the investor believes his limit price will be executed during the trading day. That, however, is also the chief disadvantage of a limit order. It may never be executed at all. If the limit price is set very close to the prevailing price, there is little advantage over the market order. Moreover, if the limit is considerably removed from the market, the price may never reach the limit – even because of a fractional difference. Also because limit orders are filled on a first come first basis, it is possible that so many of them are in ahead of the investor’s limit at a given price that his order will never be executed. Thus, selecting a proper limit price is a delicate exercise.
On the other hand a market order is filled at the best possible price as soon as an investor places the order and it will not be even possible to cancel the order. However, a limit order may be cancelled or modified at any time prior to execution.
Various types of specific orders
So far orders have been classified by type of transaction (buy or sell) and by price (market or limit). Now differences stemming from the time limit placed on the order will be examined. Orders can be for either a day or until canceled.
Day Order or End of Day Order
A day order is one that remains active only for the normal trading time on that day. Unless otherwise requested by the investor, all orders are treated as day orders only. Market orders are almost day orders because they do not specify a particular price. One key rationale for the day order is that market conditions might change overnight, and thus a seemingly good investment decision one day might seem considerably less desirable the following day.
Special Types of Orders
Stop Loss Order
A stop loss order allows investor to place an order which gets activated only when the last traded price of the share is reached or crosses a predefined threshold price also called as trigger price. It means that if investor feels that any particular share will be worth buy or sell only after it crosses some threshold rate then this type of order gets activated. For example, a buy order at Rs 100 with a stop loss of Rs 90, will mean that if the share falls to Rs 90, the shares will be sold, limiting the loss to Rs 10.
Several possible dangers are inherent when using this type of order. First, if the stop is placed too close to the market, the investor might have his position closed out because of a minor price fluctuation, even though his idea will prove correct in the long run. On the order hand, if the stop is too far away from the market, the stop order serves no purpose.
Further classification of this type of orders can be defined depending upon the price limit of orders, i.e. the price on which the order should execute, as explained under:
Stop Loss Market Order
A stop loss market order is a special type of limit order. A stop loss market order to sell is treated as a market order when the stop price or a price below is "touched" (reached); a stop market order to buy is treated as a market order when the stop price or a price above it is reached. Thus, stop market order to sell is set at a price below the current market price, and a stop order to buy is set at a price above the current market price.
The possible inherent danger associated with this type of order is that because they become market orders after the proper price level has been reached, the actual transaction could take place some distance away from the price the investor had in mind when he placed the order. The reason may be prior queuing up of other orders or order quantity not being available.
Stop Loss Limit Order
The stop loss limit order overcomes the uncertainty associated with the stop loss market order, of not knowing what price the order will be executed at. The stop limit order gives the investor the advantage of specifying the limit price: the maximum price on which the buy order should filled or minimum price on which the sell order should filled. Therefore, a stop limit order to buy is activated as soon as the stop price or higher is reached, and then an attempt is made to buy at the limit price or lower. Conversely, a stop limit order to sell is activated as soon as the stop price or lower is reached, and then an attempt is made to sell at the limit price or higher.
The danger is that, in a volatile market, the order may not get executed because the difference between the execution limit and the stop price may be too low. However, if things work out as planned, the stop limit order to sell will be very effective.
Disclosed Quantity (DQ) order
The system provides a facility for entering orders with quantity conditions: DQ order allows you to disclose only a part of the order quantity to the market.
Price Bands
Also known as circuit filters or circuit breakers, price bands set the upper and lower limit within which a stock can fluctuate on any given day. A price band for the day is a function of previous trading day’s closing.
Currently the both BSE and NSE has fixed price bands for different securities within which they can move within a day.
Price bands are supposed to prevent extreme price movements, reducing the scope of price manipulation. Price bands do slow things down and make it that much harder for operators wanting to quickly manipulate prices in huge leaps. When there is general euphoria or panic in the market that seems fundamentally unwarranted, price bands give wary investors the benefit of a cooling period.
Operators with access to large funds, shares and time at their disposal, however can manipulate the price bands to their advantage by blocking exit/entry of other investors from a particular counter by placing huge orders. For example when a stock touches the lower circuit in a sharp downtrend, ordinary buyers would wait for the next trading session believing that the stock will be available at a still lower price. As a result, investors wanting to sell the stock won’t find buyers at the lower circuit price but would have to offload at a much lower price due to the volume-led manipulation executed by operator. The operator would thus be able to batter the stock down by a large gap created by his own sell orders.
Much larger volume of the battered stock would then be accumulated by the same operator at a much lower price as panic-stricken ordinary investors would happily exit the stock.
Stimulus package pleases US Market
US Market managed to end higher for the second consecutive day today, Thursday, 24 January, 2008. Reports that a bond insurer bailout is not imminent weighed on the stock market shortly in the morning hours. But a stimulus package from the Bush administration to ward off recession in US cheered investors and stocks rallied in the post lunch hours.
The Dow Jones industrial Average ended the day with a gain of 108 points at 12,378. The Nasdaq Composite Index, finished higher by 45 points at 2,360. S&P 500 finished higher by 13 points at 1,352. Twenty-one out of thirty Dow stocks ended in the green today.
As per the stimulus package from the current administration, House leaders Nancy Pelosi and Treasury Secretary Paulson announced their bipartisan $150 billion fiscal stimulus plan. As per the plan, individuals who earn up to $75,000 will be eligible for a $600 check and couples who earn up to $150,000 will be eligible for $1,200. Individuals who do not pay income tax, but have earned more than $3,000 will be eligible for a $300 check. Parents will get $300 per child. Businesses will get $50 billion in incentives.
Though, the stimulus plan still has to pass the House and Senate, investor sentiments got a good boost as the morning economic reports did not have much of a good news to deliver.
December existing home sales lower than expected
On the economic front, December existing home sales came in at a worse than expected. December existing home sales was reported at 4.89 million. This was short of the consensus estimate of 4.95 million. Existing sales are down 2.2% compared to last month's reading of 5 million. The median sale price of an existing home is down 6% against last year.
Also, weekly jobless claims came in at 301,000, lower than the expected reading of 320,000. The good part was that the figure is less than the typical recessionary levels of over 450,000
Earlier this week, it was announced that the Federal Open Market Committee (FOMC) approved a 75 basis point intermeeting cut in the fed funds rate to 3.50%. The Board of Governors also approved a 75 basis point cut in the discount rate to 4%. This was Feds first move this year to keep recession at a bay.
Crude prices erased all of yesterdays gains and prices rallied today. Prices rose today after the Bush Administration announced a stimulus package to ward off recession. Prices rose despite Energy Department announcing a rise in crude inventories for week ended 18 January, 2008. Crude-oil futures for light sweet crude for February delivery today closed at $89.41/barrel (higher by $2.42/barrel or 2.8%) on the New York Mercantile Exchange. Prices are 61% higher than a year ago.
As per the weekly inventory report by the Energy Department, U.S. crude inventories, rose for a second week, increased to 289.4 million barrels in the week ended 18 January. Crude inventories at Cushing, Oklahoma, the delivery point for Nymex-traded crude, fell by 800,000 barrels to stand at 15.7 million barrels. Total commercial petroleum inventories, including crude, motor gasoline, heating oil, increased by 2.2 million to 972.3 million barrels last week, and were in the middle of the average range for this time of year.
Volume on the New York Stock Exchange neared 2.2 billion, and advancing stocks topped those declining almost 2 to 1. On the Nasdaq, more than 2.5 billion shares traded, and advancing issues outran decliners 4 to 3.
Indian ADRs mostly ended in the red today. ICIC Bank was one of the main losers today shedding 3.8%. Dr Reddys remained one of the winners gaining 3%.
Investors will again be focused on earnings reports tomorrow. Caterpillar and Honeywell are the main Dow names to report their earnings tomorrow.
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