Tuesday, September 13, 2005

Hindalco may be in focus on rights issue proposal

Hindalco Industries may see action after the company said its board will
meet on 20 September 2005 to consider raising finance through various
options including the proposal to issue shares to the existing shareholders
of the company on rights basis. The fund raising would be to finance its
huge capital expenditure programme estimated at Rs 25,000 crore.
Engineers India may slip after the company denied rumours that the company
may consider a bonus issue or a special dividend. `It is hereby informed
that the board of directors of the company may meet at the end of this month
but as on date there is no proposal or agenda item for consideration of a
bonus issue or a special dividend’, Engineering India informed National
Stock Exchange. Shah Alloys may gain further ground after the company
announced a liberal 1:1 bonus issue.
Reliance Energy may edge higher on reports that Maharashtra state government
has finalised bids by the power utility for group captive power plants at
Butibori near Nagpur and at Thane-Belapur near Mumbai.
ONGC may lose ground on media reports that it has withdrawn from the race to
acquire Canadian gas major EnCana Corp’s oil and pipeline assets in Ecuador
(Latin America). China National Petroleum Corporation has bagged the assets
for $ 1.42 billion.
Reliance Industries may see action after Innovene Inc - petrochemical
subsidiary of oil giant BP Plc said late on Monday it was planning a US
initial public offering (IPO) to raise $1 billion. The decision to go ahead
with IPO plans may force the hand of Reliance Industries (RIL) which has
been linked to a possible bid for BP's olefins and derivatives arm.
Shriram Transport Finance Company may edge higher after the company said its
board will meet on 20 September 2005 to consider issue of equity
shares/warrants by way of preferential allotments/GDRs/ADRs/FCCBs and/or
domestic public/rights offerings.
Shriram Investments may move higher after the company said its board will
meet on 20 September 2005 to consider further issue of equity shares /
warrants by way of preferential allotments. Twenty-First Century Printers
may edge higher after the company said it has set up an additional factory
in Uttaranchal.
Cubex Tubings may advance after the company said it has received orders
worth a total Rs 3.10 crore from NTPC and Siemens for supply of condenser
tubes under competitive bidding.
Dalmia Cements Bharat may gain further ground after the company said its
board will meet on 20 September 2005 to to consider stock split and increase
in authorised share capital of the company. Dolphin Offshore Enterprises
(India) may edge higher after the company said it has decided to set up of
an operating base in the Middle East to take advantage of opportunities
available in that region. The company’s board also approved capital
expenditure of Rs 150 crore for the acquisition of vessels and diving
equipments, etc. This will be financed by a combination of debt and equity.
Roopa Industries may edge higher after the company’s board approved a
10-for1- stock split.
Union Bank of India may move higher after the state-run bank said it is
coming out with an issue of Unsecured Redeemable Non-Convertible
Subordinated Bonds on Private placement basis aggregating Rs 400 crore. Opto
Circuits may edge higher after company confirmed media reports it is eyeing
overseas acquisitions. The company said it is talks with two companies for
acquisition in Europe and USA. The talks are in different stages and the
company will make necessary disclosures as and when the deals are completed.

Market may hold steady

The market may remain steady today with data showing a further surge in
inflow from local mutual funds. A further decline in global crude oil price
may also support domestic bourses. The domestic liquidity (with high
networth individuals, corporates and traders) may be affected over the next
two days ahead of the deadline of 15 September 2005 for the payment of the
second installment of advance income tax. Though FIIs resumed buying on
Monday (12 September 2005), their volume registered a slowdown and this may
cause nervousness on the bourses. The daily FII turnover (the total of gross
purchases and gross sales) declined to Rs 1,617.50 crore on 12 September
2005 compared to a turnover of between Rs 2,134 crore to Rs 3,332 crore
recorded in the preceding two trading sessions on 8 September 2005 and 9
September 2005. There has been an intermittent slowdown in FII volumes since
5 September 2005.
FIIs put in a net Rs 167.60 crore on 12 September as compared to an outflow
of Rs 50 crore in the preceding trading session on 9 September. Meanwhile,
past three days have witnessed a marked increase in inflow from local mutual
funds. Local funds pumped in a net Rs 316.07 crore on 12 September. The
inflow came on the top of an inflow of Rs 183.31 crore on 8 September and Rs
284.71 crore on 9 September.
As per latest data released by the Association of Mutual Funds in India
(AMFI), there was a robust collection in August by new equity schemes. New
equity schemes collected Rs 3,912 crore in August 2005. But there was a net
outflow from existing equity schemes to the tune of Rs 463 crore in August
2005. The net outflow was result of collection of Rs 3,543 crore and
redemption of Rs 4,006 crore.
US stocks fell on Tuesday amid corporate profit concerns related to the
impact of Hurricane Katrina with the Dow shedding 0.8 percent -- its biggest
percentage decline in nearly a month. Tech stocks fell 0.51 percent.US light
crude lost 23 cents to $63.11 a barrel in U.S. trade, extending Monday's
74-cent drop, on signs that high prices were starting to curb demand growth.

Hopes of more overseas acquisitions keep Bharat Forge firm. Bharat Forge gained 2.3% to Rs 336.45 extending a recent uptrend in the stock.

Volumes were a decent 2.5 lakh shares on BSE by early afternoon trade. From
a recent low of Rs 315, the stock gained 4.3% in three trading sessions to
Rs 328.60 on 12 September 2005.
A bout of volatility was witnessed in the stock on BSE since mid-July 2005
after a 5-for-1 stock split was effected in the scrip on 20 July 2005. The
scrip plunged to a low of Rs 290.55 on 24 August 2005 from a lifetime
closing high of Rs 336.85 on 20 July 2005. The stock since bounced back from
that low but witnessed high volatility due to alternate bouts of buying and
selling. The market remains agog with expectations that Bharat Forge would
make more global acquisitions in the coming years. The company has already
made three overseas acquisitions in the past few years. Bharat Forge
chairman's letter to the shareholders, forwarded with the Annual Report of
2004-05, reads ''Your company is actively looking out for new acquisition
opportunities in important geographies where it believes it must have a
significant manufacturing presence''. Further, in the report under
management discussion and analysis, it is also stated that the company is
also actively exploring acquisition or greenfield opportunities in China,
North America etc. Recently, reacting to media reports that the company is
zeoring in on a European acquisition, Bharat Forge had clarified that the
company has been pursuing acquisition opportunities and it would share the
information with the public when any acquisition was concluded. Bharat Forge
’s last major acquisition was that of Federal Forge for $ 9.1 million.
Federal Forge is engaged in the design and manufacture of complex forged
steel components for the automotive industry. Bharat Forge said the
acquisition of Federal Forge will enhance its market presence in the US,
give it a strong foothold in the passenger car and light truck market in
that country, and will provide a manufacturing base close to some of its
largest customers.

CEAT surged 8% to Rs 102.30, and led the rally in tyre scrips

The stock rose on high volume of 15 lakh shares on BSE. JK Industries rose
6.7% to Rs 124.40, Goodyear India gained 5% to Rs 96.55, and Apollo Tyres
gained 1.6% to Rs 284. MRF rose slightly by 0.1% to Rs 3,082. Battered tyre
scrips had staged a rebound during early August 2005 to the middle of that
month primarily on the back of decline in prices of natural rubber –a key
input in the manufacture of tyres. These stocks turned range bound since
middle of August 2005. For instance, CEAT moved between Rs 87-to Rs 94 since
the middle of August 2005.
Analysts say that the outlook for the tyre industry remains strong. Robust
demand growth and lack of major capacity addition is enabling a return of
pricing power, analysts say. Improving road infrastructure (Golden
Quadrilateral Project, NSEW Corridor Project) would facilitate an increase
in road transportation. Therefore, the demand for tyres (both OEM and
replacement demand) would witness double-digit growth, going forward,
analysts feel. With no major capacity additions likely to come up in the
near future, manufacturers are likely to reach their maximum capacity
utilization levels soon. This would result in a supply squeeze in the tyre
industry and shift the bargaining power from consumers to manufacturers.
However, while the demand growth remains strong, the tyre industry continues
to plagued by increase in input costs. Nevertheless, frontline players are
on an expansion spree. Apollo Tyres has been consistently increasing its
tyre capacity from around 11,94,500 numbers in March 1993 to 68,88,640 nos
by March 2005. Its capacity has increased by 8% in FY 2001, 14% in FY 2002,
19% in FY 2003, 31% in FY 2004, and 27% in FY 2005 as well. Apollo Tyres has
plans to further expand its capacity, particularly in the passenger-car and
light truck radial-tyre categories in the near future. In the process, its
passenger-car radial capacity will increase to three lakh units per month,
while that of light truck radials will be enhanced to 0.5 lakh units per
month at its facility at Vadodara. Similarly, JK Industries has initiated a
Rs 160-crore expansion plan that will enhance its passenger-car radial tyre
capacity by 30% and truck radial tyre capacity by 50%. Capacity expansions
apart, the company is also open to acquisition of tyre manufacturing
facilities abroad, particularly in China, South America and South-East Asia.

New order win pumps up Shakti Pumps

Shakti Pumps (India) surged 3% to Rs 152 after the company said it has
received an order worth $ 3 million from Swiss Motor Company, one of the
largest traders of pump sets in Europe.
27,909 shares changed hands in the counter on BSE by a little over one hour
of trade. The stock witnessed a sharp rally in the past few days. From a
recent low of Rs 107.50 on 26 August 2005, the stock climbed 37% to Rs
147.30 on 12 September 2005 on the eve of the announcement of the order win.
Strong order flows and some positive news saw the stock march up in the past
few months. From a level of Rs 30-35 in January 2005, the stock leaped up to
Rs 147.30 by 12 September 2005. Besides announcing a $ 3 million European
order win, Shakti Pumps also said that it is collaborating with the
Government of Canada and the Madhya Pradesh State Government for its
ambitious 'Gokul Gram' project, which involves the use of submersible pumps
that will result in state government savings of close to Rs 200 crore in
electricity costs. This pilot project is a joint effort by the Canadian
Government and the MP Government represented by Econoler International and
DISCOM respectively. In July 2005, Shakti Pumps said it successfully
launched its first 4" canned (encapsulated) raisin cooled energy efficient
motor. The company is the only manufacturer in India of this type of
product. The company will sell its newly developed energy efficient motor
with its pumps, which it exports to over 40 countries. The company expects
to achieve annual sales of Rs 50 crore from sale of this motor alone.
Meanwhile, Shakti Pumps is undertaking a major capacity expansion – to
increase capacity 10-fold. The plant entails setting up a fully-automated
unit at its Indore facilities at a cost of Rs 50 crore.

Mangalam Cement strengthens as plants resume normal production

Mangalam Cement edged higher for the second day in a row after the company
said both the units of the company have started normal production following
restoration of 100% power supply to these units. The stock was up 2.6% to Rs
87.20 by early trade. 24,339 shares changed hands in the stock on BSE. The
stock had risen 1.4% on Monday to Rs 84.95 following the company’s
announcement. The stock had lost ground since late August 2005 after the
company said that power cuts imposed by the Rajasthan government affected
production. From a recent high of Rs 93.45 on 29 August 2005, the stock
slipped to a low of Rs 83.75 on 9 September 2005. The stock had undergone a
strong phase in the past few days following a broad rally in cement sector
scrips, which was set off by firm cement prices. From a low of Rs 72.60 on 9
August 2005, the stock rose 28.7% to a recent high of Rs 93.45 on 29 August
2005. A rehabilitation package from BIFR (relief of Rs 151 crore) helped
Mangalam Cements achieve a turnaround in FY 2004 (year ended 30 September
2004). The company has an installed capacity of 1 million tonnes per annum.
Mangalam Cement caters to the northern region. The company’s main markets
are Rajasthan, Delhi, western Uttar Pradesh and Gujarat.

Andhra Cements leaps up

Andhra Cements jumped 10% to Rs 51.15 on reports in a section of the media
that JP Morgan is in talks with the promoters - the Duncan-Goenka group -
for picking up the promoters’ 15% stake in the ailing cement firm. 33,936
shares changed hands in the counter on BSE by the first few minutes of
trade. There has been a buzz in the market for some time now that a
strategic investor/some big names in the cement industry have been eyeing
the Duncan-Goenka group company. But no deal had been clinched so far. Amid
such rumours, the stock spurted in the past few months. From a level of Rs 7
to Rs 8.50 in September-October 2004, the stock galloped to an all time
closing high of Rs 46.50 by 12 September 2005. The Duncan-Goenka group has
embarked on an evaluation exercise for all its group companies and Andhra
Cements is included in that list. The strategy is to examine and identify
companies from which the group would exit. Andhra Cements has plants in
Vijayawada and Vishakapatnam, and markets its products under the trade name
'Durga'. Andhra Cements has a capacity of 1.4 million tonnes. The company
has asked the Industrial Development Bank of India to work out a roadmap for
retiring high debt. For Q1 June 2005, Andhra Cements reported a net loss of
Rs 4.19 crore as compared to a net loss of Rs 2.72 crore in Q1 June 2004.
Net sales declined 18% to Rs 30.30 crore (Rs 37.25 crore).

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