Friday, September 09, 2005

Auto stocks shrug off fuel price hike


Auto scrips edged higher for the third day in a row despite a hike in petrol
and diesel price by Rs 3 per litre and Rs 2 per litre respectively announced
on Tuesday. Car major Maruti Udyog advanced 1.2% to Rs 508. 3.5 lakh shares
changed hands in the counter on BSE. Bajaj Auto moved up 1.2% to Rs
1,554.90. 36,598 shares were traded in the counter on BSE. Tata Motors
inched up 0.3% to Rs 512.75. 2.8 lakh shares were exchanged in the counter
on BSE. TVS Motor jumped nearly 4% to Rs 89.90. 8.01 lakh shares changed
hands in the counter on BSE. Eicher Motors climbed 2.2% to Rs 300 and
Mahindra & Mahindra put on 1.4% to Rs 370.65. On Thursday (8 September
2005), Tata Motors (up 3% to Rs 510.85), Bajaj Auto (up 4.6% to Rs
1,535.85), TVS Motor (up 3% to Rs 86.45), Ashok Leyland (up 2.2% to Rs
29.45), and Force Motors (up 2.4% to Rs 373.95), had all risen. On the day
of the announcement of the fuel price hike on Tuesday (6 September 2005),
auto stocks like Tata Motors, Hero Honda and Maruti Udyog had bounced back
from the lower level. The announcement of the fuel price hike had hit the
market in early afternoon trade on Tuesday. In fact, a host of auto stocks
had bounced back in the past few days with some of the scrips of two-wheeler
majors Hero Honda, Bajaj Auto and car major Maruti Udyog having rallied on
expectation of a pick up in demand post monsoon following good rains in July
2005 – a crucial sowing month. Improved sales figures for August 2005, too,
supported auto stocks like Maruti Udyog, Hero Honda, Bajaj Auto, Tata
Motors, and TVS Motor recently.

Market breadth weakens


While blue chips witnessed mixed trends, with select stocks advancing and
select others losing ground, a host of side counters slipped today on profit
taking. There were two losers on BSE for every gainer. In fact, in what has
been an unusual occurrence in the ongoing bull the market, the breadth
weakened from early trade itself. The breadth weakened further by afternoon
trade when the Sensex had slipped into the red. Even as the market breath
was weak, select side counters spurted today. Stocks like Shalimar Paints,
Sterling Biotech, Sonata Software, Dhanlakshmi Fabrics, Madhucon Projects,
Patel On-Board, Valecha Engineering, PG Foils, Atul Auto, Ucal Fuel, Excel
Industries, D-Link India, Elnet Technologies, Punjab Chemicals, Excel
Cropcare, Panjon, and Hindustan Organic Chemicals (HOCL) rose between 5% to
20%. The market was range bound today. Select front liners/scrips of
prominent companies like car major Maruti Udyog, private sector bank HDFC
Bank, State Bank of India, L&T, Bajaj Auto, Reliance Industries, Punjab
National Bank, TVS Motor, Hotel Leelaventure, Eicher Motor, Bata India, Dr
Reddy’s Laboratories, Mahindra & Mahindra, India Cements, Gail India and
IPCL edged higher.

EIH gained 2.4% to Rs 462 extending the continued uptrend in the counter


26,339 shares changed hands in the counter on BSE by the first half of the
trading session. The stock has been on a roll since late July 2005 after the
company reported robust Q1 June 2005 results. From Rs 381.15 on 26 July
2005, the stock has gained 21.1% in a short while to the current Rs 462. The
boom in the hotel industry, with rising room rates and increasing
occupancies, has aided the surge in the counter in the past one year. The
stock has galloped from a level of Rs 223-Rs 228 in July-August 2004. EIH
reported a net profit of Rs 17.06 crore for Q1 June 2005 as against a net
loss of Rs 4.69 crore in Q1 June 2004. Net sales rose 32% to Rs 140.27 crore
(Rs 106.30 crore). In fact, the performance of EIH like most hotels is
expected to improve substantially in the second half of the financial year.
Tourist arrivals usually increase after the monsoons in September and remain
steady up to March, and the second half of the year is always much better
for the hotel industry than the first half of the year. EIH largely caters
to the business segment. The hotels are operated under two well-known
brands - 'The Oberoi' in the five-star category and 'Trident' in the budget
category. EIH has entered into a strategic alliance with Hilton
International. As per the alliance, EIH will continue to manage all hotels
and will undertake domestic marketing promotion and reservations in India.
Hilton International will be responsible for international marketing,
promotion and reservations through the Hilton global network.

Sterling Biotech jumped 13.6% to Rs 169.55 on huge volume of 1.22 crore shares on BSE.


The company’s announcement that it has issued $ 140 million in Foreign
Currency Convertible Bonds (FCCBs) supported the stock. Ahead of the FCCB
issue, the stock spurted on huge volume. From Rs 124.15 on 31 August 2005,
the stock had risen 24% in just two trading sessions to Rs 154.25 on 2
September 2005. It had slipped to Rs 149.20 by 8 September 2005. Volumes in
the stock had witnessed an intermittent surge since 22 August 2005. The
daily volumes in the stock on BSE during the period 1 September 2005 to 8
September 2005 hovered at between 11.6 lakh shares and 2 crore shares a day
on BSE. Sterling Biotech said the new FCCBs carry a 0.50% coupon payable
annually with an YTM of 6.45%, and are redeemable after five years and 1 day
from the closing date (expected to be 29 September 2005). The bonds are
convertible into equity shares of the company at any time after 9 November
2005 at a conversion price of Rs 184.8694 per share, which represents a
premium of about 24% to the last traded price on BSE on 8 September 2005.
The bonds are expected to be listed on the Singapore Stock Exchange.
Further, the lead manager has an option to subscribe for up to an additional
$ 35 million principal amount of bonds. Sterling Biotech reported a 53.6%
growth in net profit for Q1 ended 30 June 2005 to Rs 26.64 crore (Rs 17.34
crore). Net sales during the quarter rose 22.7% to Rs 120.03 crore (Rs 97.80
crore). Sterling Biotech is Asia's largest pharmaceutical gelatin
manufacturer. It is a leading player in India with a market share of around
60%. Earlier, it acquired Rallis India's gelatin business for Rs 47 crore in
an all-cash deal. The company’s products find usage in the making of hard
and soft capsules, vitamin encapsulation, blood plasma expander and tablet
binding in the pharmaceutical industry.

Spicejet takes off as Temasek to take equity stake


Spicejet gained 3.8% to Rs 104.60 after the company announced on Thursday
that a prominent international investor Temasek Holdings has decided to
invest in the equity capital of the budget airline. 8.9 lakh shares were
traded in the counter on BSE by mid-morning trade. The stock had dropped
5.6% on Thursday to Rs 100.75 following the announcement that hit the market
in mid-morning trade. After a solid rally in three trading sessions between
31 August 2005 to 2 September 2005, the stock pared gains later. In the past
few days (since late August 2005), volumes in the stock have proved
substantial. The daily volumes on BSE since 31 August 2005 were in the range
of 21 lakh shares and 81 lakh shares. Spicejet on Thursday said that, on the
invitation of its board of directors, Singapore-based MacRitchie Investments
(a wholly owned subsidiary of Temasek Holdings) and Istithmar – a UAE based
private equity firm, have agreed to invest a sum of $ 20m in the equity
capital of the company. This investment will be made as per the pricing
formula laid down by Sebi, Spicejet said. Temasek has been eyeing the Indian
aviation space for some time now. In addition, the company has stated that
it is receiving very positive response for its proposed Foreign Convertible
Currency Bond (FCCB) issue. The issue is expected to be completed shortly,
Spicejet said. Spicejet operates in six markets - Delhi, Mumbai, Ahmedabad,
Goa, Pune and Bangalore - utilising the Boeing B737-800, a new generation
aircraft with an all economy configuration of 189 seats. Spicejet recently
launched late night flights between Mumbai and Delhi, thrice a week, with
fares starting at Rs 1,599. The low-cost airline plans to operate such late
night flights to more destinations when more aircraft are added to its
fleet.

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