SBI pays Rs 1,924 cr advance tax in July-Sept

Source :Reuters / Mumbai September 15, 2010, 15:15 IST

State Bank of India, the country's largest lender, has paid Rs 1,924 crore as advance tax for the July-September quarter, an income tax department source said on Wednesday

.

The firm had paid an advance tax of Rs 1,832 crore a year ago, the source said.

TCS inks multi-year deal with US retailer

Source : BL MUMBAI: Sep 15,2010: PTI:13.15

Tata Consultancy Services has entered into a multi-year deal with North American grocery retailer SUPERVALU for a full services engagement.

Following the agreement, over 600 SUPERVALU India stores will become a part of the IT major, TCS said in a filing to the Bombay Stock Exchange on Wednesday.

The company, however, did not disclose the financial details of the transaction.

The full services deal will drive operational efficiencies for SUPERVALU through the integration of IT, BPO and infrastructure services, the filing added.

“The engagement with SUPERVALU reinforces our leadership as the long-term IT partner best equipped to help global corporations transform their business using our full services capabilities and domain knowledge,” the TCS CEO and MD, Mr N. Chandrasekaran, said.

Shares of the company were trading at Rs 904.55, up 1.16 per cent on BSE over the previous close. — PTI

Reliance group stocks stay out of the rally

Source :M.V.S. Santosh Kumar :BL Research Bureau:Sep 15,2010

Counters rule much below their January 2008 highs.

With the Sensex closing above the 19,300 mark for the first time in two years, it is just 9 per cent short of its all-time high clocked in January 2008.

However, stocks in the Reliance pack are anywhere between 35 and 82.8 per cent below their January 2008 highs.

The ADAG (Anil Dhirubai Ambani) group's Reliance Natural Resources (RNRL), Reliance Communication (RCom) and Reliance Mediaworks have been the key laggards, languishing 80 per cent or more below their January 2008 values.

Reliance Power which got listed in February 2008 is down 27 per cent from its IPO offer price, after adjusting for bonuses issued. Even the index bellwether - Reliance Industries Ltd - has not led the charge this time round and trades 35 per cent below its January 2008 level, despite gaining 5.7 per cent in the last 10 days.

Retail favourites

The underperformance from the Reliance stocks in this rally may have been a big blow for the retail investors, as the stocks from the group have the largest retail shareholder base in the listed space. While these stocks made money for investors during the previous rallies, this time around they have disappointed.

With more than 40 lakh shareholders, Reliance Power had the highest number of retail shareholder base as of March 2008 followed by RNRL. This equation has changed over the last 27 months with Reliance Industries displacing Reliance Power as the company with the largest shareholding, the merger with Reliance Petroleum expanding the base.

RPower, RNRL, RCom, RIL, Reliance Infra and Reliance Cap are among the companies with the largest number of retail investors as per the latest shareholding pattern.

While there wasn't much to cheer about for the investors who have held on to the Reliance stocks since January 2008, the ones who entered in March 2009 lows have seen positive returns of 12 per cent to 176 per cent. However, from March lows too, five out of eight Reliance group stocks have under-performed the Sensex. The ones to under-perform were RCom, RNRL, RIL, Reliance Power and Reliance Mediaworks.

Game changers for India Inc

SOURCE : Richard Rekhy : FC :Sep 14 2010

I do not believe you can do today’s job with yesterday’s methods and be in business tomorrow. — Nelson Jackson

India is at the threshold of major regulatory cha nges. A country that is culturally unique today, also finds itself in a unique position from an economic governance perspective. No other country in the world today is facing a sweeping transformation of the foundations that govern the corporate business world along with retaining a robust level of economic growth.


 “Fortunate” is how I would like to think each one of us is, to be witnessing these moments, when history is being created in India. Our country’s economic legislation is at a very critical phase, where we are modernising four of the big and most critical legislations and regulations that will change the way corporate India will function. 


A new Direct Taxes Code (DTC), goods and services tax (GST), international financial reporting standards (IFRS) and the Companies Bill 2009 — India Inc is about to get a makeover. Once these regulations are put in place, it will make corporate India relevant to take on an ever-changing world.

Yet change is never easy and India Inc may be facing its biggest ever challenge in dealing with so many changes at one time. But challenge is meant to rouse, not discourage and this is the kind of change that must be welcomed and embraced. When an attempt is being made to make India investor friendly, increase governance, harmonise and simplify tax structures, reduce overall tax rates and improve financial reporting standards, India Inc must support the regulators in making these changes.

The world is not just flat, it is also very dynamic. India has to respond by opening its doors and creating an environment wh ere the world not just wants to come here for economic gain but also learns to trust us and our governance systems. 


We must therefore welcome the attempt to change the archaic Companies Act 1956 with the new Companies Law Bill 2009. It lays down the benchmark for corporate governance, encourages responsible self regulation, disclosures and accountability, articulates shareholders demo cracy and protects minority interest and aims to harmonise company law with other laws that govern companies operating in India.

At present, IFRS is presently being followed in more than 100 countries and by 2011 it is expected that more than 150 countries will require /permit/adopt the use of IFRS as a single comprehensive framework for financial reporting for the securities market ac ross the globe.


 This will enable better management of expectations of all stakeholders about impact on earnings and equity and the entire change process, whereby IFRS reporting can be embedded into the financial reporting processes and we will be globally aligned.

The adoption of IFRS may assist in significant improvement to the quality of existing financial reporting for potential investors; it will facilitate the future initial public offering (IPO) process within the nation as well as cross-border issues.


 In a recent survey of international companies operating in India, CEOs identified tax as one of the greatest challenges. In any international tax conference, India is hot topic and it is common to hear international tax professionals trying to come to terms with Indian taxation. Tax laws have had an organic growth with more than 4,500 amendments since the Act was enacted in 1961. 


Nothing short of a revolution in tax laws and in the way that they are administered will remedy the situation. While a revolution may not be possible, a revamp is possible and the two new tax regulations are attempting to do just that.

With a base of 35 million taxpayers and nearly 100 million PAN holders, the impact of the DTC cannot possibly be overemphasised. Some of the beneficial provisions of the existing Act continue to be grandfathered under the DTC, thereby de monstrating the government’s supportive intentions and effort to gain the taxpayers’ confidence in the tax system. India Inc has always yearned for a stable , simple, and modern tax regime.

Indirect tax, viewed as the boorish cousin of direct tax, is also undergoing a major ma keover and we hope that we will look forward to an urbane law. The GST will have a direct impact on how business is structured. 


GST should bring in a harmonised tax structure, unified tax base, and common rules and administrative procedures ac ross the nation. Simplification of tax procedures and transparency will encourage investments in the organised sector. 


This unified tax structure will help in eliminating disparity in taxing of goods and services and also aid the government in consolidating its financial position. Alongside a drastic improvement in tax compliance, GST aims to bring a seamless flow of credit across the value chain for inter-state trades, as well as in respect of taxes levied by multiple authorities.

There is no denying that each of these changes will come with a number of challenges. One thing is certain, the impact of these four major regulatory changes in conjunction with the takeover code and competition bill will make India Inc modern and vibrant.


However, companies will have to proactively gear up to respond to these opportunities and challenges. The game is changing; the question is whether modern India is ready to play!

I will conclude by quoting Hillary Rodham Clinton – “The challenges of change are always hard. It is important that we begin to unpack those challenges that confront this nation and realise 
that we each have a role that requires us to change and become more responsible for shaping our own future.”

Gold futures hit record high in India

Source :Reuters Sep 15 2010 , Mumbai

Gold futures in India struck a fresh record high of Rs 19,250 per 10grams
on Wednesday afternoon, tracking gains in overseas markets, 
breaching the earlier peak of Rs 19,230 struck on Tuesday.

The contract was trading at Rs 19,242 at 12:37 p.m.

Globally, gold was a touch softer, but was seen supported by speculation the U.S. Federal Reserve would soon announce more quantitative easing.

Some signs that the U.S. economic recovery would be stalling in recent weeks has triggered talk in financial markets of further easing.

That has hurt the dollar's exchange rate against other major currencies and helped boost gold -- also used as a hedge against inflation, which is often triggered by ultra-loose monetary policy.

"The jury is still out on the U.S. economy, where it goes from here and what the Fed does in response are the unknowns," a Europe-based gold trader said. "This leg has further to run, we'll see $1,300 before too long."

Spot gold surged more than two percent to a record $1,274.75 an ounce in the previous session, its biggest one-day gain in four months.

U.S. short-term rates remained steady at low levels on Tuesday, anchored by the Fed's determination to keep rates down, making gold attractive.

"Uncertainty in the market prompted investors to buy safe-haven gold, as speculation the Federal Reserve would turn to quantitative easing as early as November weighed on sentiment," ANZ said in a note.

"The dollar also took a hit against other currencies, encouraging investors to turn to alternative safe-haven assets."

Investor unease can be seen in the higher holdings of the SPDR Gold Trust.

SAIL shortlists JPMorgan, Deutsche, four others for FPO

Source : PTI Sep 15 2010 , New Delhi

State-owned Steel Authority of India today said that six bankers, including JP 

Deutsche, four others shortlisted for managing the first phase of its upcoming Rs 8,000 crore FPO

"We have shortlisted six banks for our FPO. We have made them the offer, now they have to accept it," SAIL Chairman C S Verma told PTI.
He said SBI Capital, Enam Securities, Kotak Mahindra Capital and HSBC have also been shortlisted for managing the FPO, which is slated to hit the market in January or February, 2011.

Verma added that SAIL had not sought the Law Ministry's opinion as "there was no legal question involved" in the appointment of book runners and lead managers for the share sale.

Recent media reports suggested that bankers vying for the FPO had all offered to charge one-tenth of a paisa as their fee, which prompted SAIL to seek the Law Ministry's opinion on how to select the best candidate from the 17 firms that bid to manage the FPO.

The announcement comes after SAIL earlier this month said it will appoint up to six merchant bankers to advise it on the timing of the first tranche of its share sale.

The banks will manage the first phase of its 20 per cent share sale programme, under which the government plans to divest 5 per cent of its stake in the company, while the steel giant will issue additional shares equivalent to a 5 per cent stake.

Another 10 per cent stake will be sold under the second phase of the FPO, the timing of which will be decided later. The two-phase FPO may help raise a total of Rs 16,000 crore.

At present, the government holds a stake of a little over 85 per cent in SAIL and post-FPO, its equity in the company is expected to go down to about 69 per cent.

SAIL wants to part-fund its Rs 70,000 crore expansion programme with the proceeds from the share sale, while for the government, the stake dilution will help attain its disinvestment target of Rs 40,000 crore for this fiscal.

Shares of the company were trading at Rs 200.10 on the Bombay Stock Exchange today, up 0.08 per cent from the previous close.

Indosolar IPO almost fully subscribed hours before close

SOURCE: PTI Sep 15 2010 , New Delhi




Solar power equipment manufacturer Indosolar Ltd's Rs 357 crore initial public offer has been almost fully subscribed, hours before it closes today.

The issue has received bids for over 11 crore shares against the 12.31 crore equities on offer, thus getting subscribed 0.9 per cent, as per the latest data from the National Stock Exchange.

The company has entered the capital market with the aim of raising Rs 357 crore and has fixed the IPO price band at Rs 29 to Rs 32 per share. The issue, which opened on September 13, closes this evening.

The Noida-based entity is engaged in the manufacture of polycrystalline solar photo voltaic (SPV) cells from silicon wafers, which are used for converting sunlight directly into electricity through a process known as the photo-voltaic effect.

At present, the company has two SPV cell manufacturing lines with an aggregate annual manufacturing capacity of 160 MW.

Under the government's Special Incentive Package Scheme, the company is entitled to receive a 25 per cent capital subsidy on its investments.

It was granted in-principal approval for garnering the subsidy benefit in June last year by the Indian Ministry of Communication and Information Technology and submitted a formal application in March this year.

In addition, the company's manufacturing facility in Greater Noida has been granted 'Export-Oriented Unit' status and is eligible to enjoy certain benefits.

Enam Securities is the sole book running lead manager to the issue

What will these 10 firms do with Rs 22,572 cr cash pile?

Source : Rajesh Gajra, FC Research Bureau Sep 14 2010

Conventional wisdom is that it is good to have some cash in hand.....


But what can be said about companies sitting on heaps of idle cash that should be put back in business or otherwise productively used? Are cash-rich listed companies a better bet for investors than other companies? Are they sacrificing growth for conservatism? Does it indicate that a company generating big cash from existing lines of businesses are so bereft of ideas that they do not know what to with the surpluses?

An analysis by Financial Chronicle of the last annual results of listed companies brings out a mixed picture. It reveals that companies with the largest proportions of net cash to total assets were a diverse lot coming from different sectors. 

The 10 most cash-rich companies in descending order, were Engineers India (which is in engineering turnkey services), Alstom Projects India (electricals), Castrol India (lubricants), Akzo Nobel India (paints and varnishes), Glaxosmithkline Pharma (medicine), Glaxosmithkline Consumer Healthcare (food & dairy products), NMDC (minerals), Lakshmi Machine Works (textile machinery), Hindustan Unilever (fast moving consumer goods, or FMCG) and Ingersoll Rand (compressors and drilling equipment).

Eight of them had zero debt and the other two very low levels of it. “There could be a variety of reasons why a company is sitting on a lot of cash; an important reason could be that it is waiting for the right acquisition opportunity and so accumulating cash,” said Naresh Makhijani, executive director of tax and regulatory services at KPMG India.

Some of these companies had a significant market share in their respective industries. They were either backed by a strong brand or technological edge, giving them high profitability and hence the ability to generate significant cash flows.

The top 10 companies’ combined net cash position was Rs 22,572 crore, or 92.17 per cent of their aggregate total assets of Rs 24,490 crore. Their net sales during the last financial year were Rs 36,791 crore, not an insignificant amount when seen in the light of the Union government’s income. The government’s estimated revenue receipts were Rs 5,77,294 crore. Thus the 10 companies equalled 6.37 per cent of the government’s revenue.

Their aggregate net profit was Rs 7,652 crore, whereas the government had a negative profit (revenue deficit) of Rs 3,29,061 crore.

(There are listed companies that are steeped in high net debt too and tomorrow’s issue of FC will analyse them.)

Two of the 10 most cash-rich companies belonged to the government -- Engineers India and NMDC. Together these two had net cash of Rs 14,649 crore, accounting for 65 per cent of net cash of all the 10 companies put together. Their net assets totalled Rs 15,247 crore, or 63 per cent of the 10 companies’ aggregate.

Engineers India and NMDC, however, did not fare so well in terms of other indicators: Their combined net sales and net profit accounting for 22.43 per cent and 50.85 per cent, respectively, of the total of the 10 companies.

What defines a cash-rich company? Shanto Ghosh, executive director and principal economist at Deloitte, said, “Generally, if the percentage of debt to total assets is as high as say 10 per cent, it is considered to be a cash-rich company. But where the working capital requirement is very high and the runaround time is also high, this percentage will have to be really high, 25 per cent or more. For FMCG companies, for instance, many things have to be purchased from many vendors with cash and, therefore, their working capital requirement is very high.”

Dipen Shah, senior vice-president of private client group research at Kotak Securities, said, “If the net cash to total assets is 60-70 per cent or more it means the company is generating significant cash. It is a positive for investors in the company.”

Most of the sectors in which the top 10 companies operate did well in their last financial year. For instance, Glaxosmithkline Consumer Healthcare and Castrol India. Though not strictly FMCG in the conventional sense, Castrol is driven by consumer demand for branded lubricants, particularly in rural and semi-urban markets. So they can be called quasi-FMCG companies. They, along with Hindustan Unilever, represented the FMCG sector. Most FMCG companies saw a good pick-up in sales and reduction in inventories.

Alstom Projects India, which executes and services power plants, has been the beneficiary of heightened infrastructure spending in the past three years. As per its consolidated financials, the company’s net sales in 2008-09 and 2009-10 averaged Rs 2,165 crore, up 56.56 per cent from the preceding two years’ average of Rs 1,383 crore. 

According to an analyst at Religare Capital Markets, who did not want to be named as he was not authorised to comment, said, “Alstom is 50 per cent into consulting and 50 per cent into contracting. Consulting is a business that throws up a lot of cash and needs almost zero working capital. The contracting business does need some working capital but the margins are very high.”

FC contacted Engineers India, Alstom, Castrol India, Akzo Nobel India, Glaxosmithkline Pharma and Glaxosmithkline Consumer for comments but got no response.

According to analysts, while high net cash to total assets is a sign of strong financial health of a company, it could also mean it does not have growth opportunities or is not adequately deploying surplus cash in its existing business.

This can moderate profit growth in the future. “Companies in specific industries, for instance, can deliver a growth of 10-15 per cent only because the industry is growing at that pace. They may not invest significant cash,” said Shah.

Shah is quick to point out, however, that most large IT companies have a lot of cash in their balance sheets but this does not mean there are no avenues for further growth. “Large Indian IT companies do not give out all its cash as dividend. They invest significant sums every year back in expanding their business. Despite this, they are left with free cash flows,” he said.

In our analysis, Infosys Technologies was 17th among companies with high net cash to total assets proportions. Its ratio was 52.54 per cent. According to its consolidated financials for 2009-10, it had cash and cash equivalents of Rs 12,111 crore, a zero debt liability and total assets of Rs 23,049 crore.

In some cases of high net cash, the companies probably did not have fresh acquisition opportunities and could be building up cash for future acquisitions.

High net cash is useful to companies operating in sectors seeing tough times. Lakshmi Machine Works, for instance, was the eight largest company in the analysis having a net cash to total assets of 79.56 per cent. It had zero debt, a cash position of Rs 732 crore and total assets of Rs 920 crore. Its net sales had fallen in the last two financial years, 2008-09 and 2009-10. This forced it to cut dividend payout to 150 per cent each from 450 per cent in 2007-08 and 400 per cent in 2006-07. But it managed to keep its net cash position steady.

By and large, companies with high net cash to total asset ratios offer safe bets for investors. Investors need not cash out of such companies even if growth moderates for a few years. The market will factor in the high net cash position and there may not be any loss to the investor in such stocks.

(With inputs from Ritwik Mukherjee in Kolkata)