Stock Market

Companies on buyback rush to boost share price

2010-06-08T20:58:00.000-07:00

MUMBAI: A growing number of companies have been opting for a buyback of shares to support the price in the current phase of market volatility. While the trend is mostly evident among small- and medium-sized companies, the market also expects large-sized companies to join the buyback bandwagon, after FMCG major Hindustan Unilever (HUL) announced a similar move last week.

Apart from HUL, a few other companies such as Geodesic, Manaksia, FDC, Binani Cement, Jindal Poly, ARO Granite and Bright Brothers have either announced or are planning to consider share buyback. Analysts expect more companies to follow this route due to several advantages.

According to Angel Broking CMD Dinesh Thakkar, many companies may want to buyback their shares, but shareholders’ response remains a major concern. “Many companies are quoting much below intrinsic value of their shares and so any buyback offer at the current levels may not receive good response from the shareholders. They will not be able to realise true value from selling shares,” said Mr Thakkar.

Last week HUL said that it would consider buying back the shares from the market, at its board meeting on June 11. Buyback of shares helps raise promoters’ stake using company funds and the reduced equity base improves its earnings-per-share (EPS) in the subsequent years. All these factors keep shareholders confidence high in the company. However, many companies, in the past, could not purchase even a single share, as the market price rose beyond the maximum buyback price soon after they started the buyback.

For instance, Delhi-based Apollo Tyres had planned to buy back equity shares worth Rs 122 crore from the open market at a maximum price of Rs 25 a piece. However, it could not buy back any shares, because of the spurt in the market price immediately after the commencement of the buyback programme.

Other larger companies that have closed their buyback in the past few months include Provogue and Merck, among others. Provogue, which had announced Rs 50-crore buyback, utilised almost 25% of the offer buying close to 20 lakh shares. Merck, which came out with a Rs 45-crore offer, utilised almost 23% of the buyback limit or bought close to 2.6 lakh shares.

When a company buys back shares, it sends out a signal that the company has enough surplus cash to pay back to its shareholders at what it thinks is the true worth of the shares. There were many companies that had announced buyback last year, after share prices crashed more than 80% in most cases.

However, many stocks rose above the buyback price with a sharp recovery in the market, resulting in many companies discontinuing or deferring their plans.

Analysts say that a buyback does not result in much of the benefits for investors despite the offers being at a premium to the prevailing market price. For instance, in the case of Geodesic and Manaksia, the current market price is way below the maximum buyback price. Geodesic is trading at Rs 101, while the company has announced its maximum buyback price of Rs 150. Similarly, Manaksia is currently trading at Rs 110, while maximum buyback price at Rs 200.

The market has so far not taken the buyback offer very seriously, as the stock price continues to trade at a significant discount to the maximum buyback price. The end date for both of them is almost one year from hereon.

Apple iPad's international launch

2010-05-28T03:58:00.001-07:00

Apple Ipad is launched from today in Australia and major parts of Asia.
Have a look at these crazy pictures in which people are rallying to get one for themselves

Stocks Extend Rebound From Nine-Month Low; Oil, Won Strengthen

2010-05-28T03:56:00.000-07:00

Stocks advanced for a third day, led by emerging markets, extending the rebound from a nine-month low. Oil rallied above $75 a barrel and the South Korean won strengthened.
The MSCI Emerging Markets Index rose 1.8 percent as of 9:36 a.m. in London, poised for the biggest three-day rally in a year. The MSCI World Index, a gauge of equities in 24 developed nations, added 0.7 percent. Futures on the Standard & Poor’s 500 Index advanced 0.1 percent. Crude increased for a third day. South Korea’s won gained 2.4 percent against the dollar and the euro strengthened 0.5 percent against the dollar.
This week’s advances in stocks and commodities pared a rout in May that’s the deepest since October 2008, the month after the collapse of Lehman Brothers Holdings Inc. U.S. consumer spending probably rose in April for a seventh consecutive month as incomes improved, economists said before a Commerce Department report scheduled for later today.
“I’m an optimist,” James Bevan, chief investment officer at CCLA Investment Management, said in a Bloomberg Television interview. “The economic fundamentals are rather better than some suspect and that’s certainly coming through in terms of the corporate earnings numbers. Companies are demonstrating better profits than many people had dared anticipate.”
The Stoxx Europe 600 Index rose 0.4 percent as Travis Perkins Plc rallied. The owner of Wickes home-improvement stores surged 8.3 percent after offering to buy BSS Group Plc to create the U.K.’s largest plumbing and heating materials chain.
BP Declines
BP Plc slid 1.9 percent after Europe’s second-largest oil company said the “top kill” procedure to plug a leaking well in the Gulf of Mexico may last another 24 to 48 hours. The MSCI Asia Pacific Index climbed for a third day, surging 1.5 percent.
The MSCI emerging-markets index headed for its highest closing level in eight days. South Korea’s Kospi Index advanced 1 percent as foreign investors added to stock holdings for the first time in 10 days and a central bank report showed manufacturers’ confidence stayed near a seven-year high. The nation’s equities and currency tumbled earlier this week amid mounting tension with North Korea over the sinking of one of the South’s warships. The ruble in Russia, the world’s largest energy exporter, strengthened 1.1 percent versus the dollar.
The euro rose for a second day against the dollar, strengthening 0.5 percent to $1.2430. It appreciated 0.8 percent compared with the yen, which declined against all 16 of its most-traded counterparts. The U.S. Dollar Index, which tracks the currency against six trading partners, slid 0.2 percent.
U.S. Futures
Futures on the S&P 500 rose 0.2 percent before reports on U.S. personal spending, business activity and consumer confidence. Spending probably increased in April for a seventh consecutive month as incomes improved, economists said before a report due at 8:30 a.m. in Washington.
Other data today may show the Institute for Supply Management-Chicago Inc.’s business barometer, due at 9:45 a.m., fell to 61 from a five-year high of 63.8 in April. At 9:55 a.m., a report from Thomson Reuters/University of Michigan may show its consumer sentiment index climbed to 73.3 this month from 72.2 in April.
Crude oil for July delivery gained 1.4 percent to $75.61 a barrel in New York trading. Copper for delivery in three months was 0.1 percent higher at $6,992 a metric ton on the London Metal Exchange. Aluminum and zinc also rose. Gold for immediate delivery added 0.2 percent to $1,214.90 an ounce, rising for a fifth consecutive day.
Bonds Rise
Government bonds rose, with the yield on the 10-year Treasury falling four basis points to 3.33 percent. The yield on the German bund, Europe’s benchmark government security, also dropped three basis points, to 2.69 percent.
The cost of protecting against a default on European corporate bonds fell, with the Markit iTraxx Crossover Index of credit-default swaps on 50 mostly junk-rated companies declining 13.1 basis points to 547.1, according to Markit Group Ltd. Contracts tied to Greece’s government debt dropped 15.5 basis points to 670.5, after climbing as high as 941 on May 6 at the height of the country’s debt crisis, CMA DataVision prices show.
Credit markets froze this month, with global companies selling the smallest amount of bonds in a decade, according to data compiled by Bloomberg. Borrowers issued $61.1 billion of notes in currencies from dollars to yen, a third of April’s tally and the least since December 2000. The extra yield investors demand to hold the securities instead of benchmark government debt widened 44 basis points to 193, Bank of America Merrill Lynch index data show, the biggest increase since the aftermath of Lehman Brothers Holdings Inc.’s collapse.

25 stock picks from 25 great investors

2010-05-28T03:43:00.000-07:00

View of 25 money managers with gold-standard track records and their single best stock pick each.
Starting with Qualcom here's the list of fortune top 25 stock picks for the 2010.
Click here for the list and if you have any other stock you think should be on the list let me know.

Hero Honda to pay 4,000% dividend

2010-04-21T10:47:00.000-07:00

NEW DELHI: Hero Honda declared its highest dividend yet on Tuesday, and held out the possibility of another payout next month, part of the company' spush to reward shareholders as it celebrates its silver jubilee this year.
The world’s largest two-wheeler maker by volumes will pay a 4,000% interim dividend of Rs 80 on each share of Rs 2 face value, which in percentage terms is the highest payout by an Indian company to date.
The Munjal family-controlled Hero Group and Japan’s Honda Motor Co, owners of 26% each in the company, will gain nearly Rs 486 crore each after the payout. The interim dividend will result in an outgo of Rs 1,869 crore. A second board meet on April 19 would decide on another dividend from this year’s profits, said Hero Honda CFO Ravi Sud.
In the last 3-4 years, we have accumulated quite a bit of cash, and ... the board thought this is the right time to take care of shareholders,” said Mr Sud.
Hero Honda had cash reserves of Rs 5,400 crore as of today, helped by strong sales and tight capital management. The company hopes to close the year to March 31 with sales of 4.5 million two-wheelers. Its net profit rose 78.3% to Rs 535.77 crore for the quarter ended December 2009 from a year ago.
Hero Honda invested Rs 350 crore this year to expand production capacity and on new products. It is also building a new plant. “With high level of profitability and high EBIDTA margins, cash will continue to accumulate unless the payout ratio is increased substantially,” said Mr Sud.
Shares in the firm closed nearly 2% down at Rs 1,966.70 on Tuesday. Analysts said news of the dividend was discounted by the market. Investors were expecting a big payout from Hero Honda, as it’s a cash-rich company and treasury returns have not been good in recent months, said Vaishali Jajoo, analyst with Angel Broking in Mumbai.
Hero Honda is known for its double-digit dividends, but its latest interim dividend payout is around four times the final dividend payouts of each of the previous five years. The company paid Rs 20 dividend on every Rs 2 share in 2004-05 and 2005-06. It paid Rs 17, 19 and 20 respectively in the next three years.
The company has set April 15 as the record date for paying the special dividend, it told NSE. That means shareholders will receive the dividend from April 22.
Also see Companies paying the highest dividend in the last 6 years

20 top performing stocks of 2009

2010-04-21T09:55:00.000-07:00

Thou the world has seen recession like never before and stock market dipping too low with more than 300 banks losing money in USA alone, there are still stocks that amazed its shareholders by giving them surprising returns. Here's the list of 20 top performing stocks which fortune 500 has listed. Hope they will keep this steady.
20 top-performing stocks

Nepse soon allowing brokers to operate outside valley.

2009-12-10T22:39:00.000-08:00

Nepal Stock Exchange (Nepse) is soon allowing the stock brokers to operate outside the Kathmandu Valley by permitting them to open their branch office there. "We have already initiated works to let the brokers operate outside the Valley," Tanka Paneru, chairman of Nepse, told myrepublica.com. To start with, Nepse is planning to allow the existing 23 stock brokers to operate in at least one city outside the Valley.
Once opened, it will enable the investors outside the Valley to buy and sell shares at the secondary market from the local level. It will also free the investors from the need to come to Kathmandu for transaction of shares, thereby supporting the expansion of the market. Nepse took the decision to this effect as per the on requests made by the Stock Brokers´ Association. It had recently formed a committee to finalize the procedures to recommend for the smooth execution of the plan. "We are close to finalizing the guidelines for selecting brokers and steer their operations outside the Valley," said Paneru, adding that the guidelines will be finalized within the next few days.
Stock brokers then can open branches outside the Valley by just acquiring approval of Securities Board of Nepal (SEBON). NEPSE hopes that its new plan, once implemented, will drastically raise the number of investors in the secondary market. Brokers too said the induction of new investors will render the volume of existing stock in the market nominal. Despite these advantages, Nepse had so far refrained from allowing brokers to go out of the Valley, citing technical reasons.
Nepse, meanwhile, has not yet taken any step to recommence induction of new stock brokers in the market even though the court allowed it to move ahead with the process. Nepse officials maintained that they have not yet received a copy of court´s verdict to start the process. Two years ago, Nepse had initiated the process to add 27 new stock brokers. But the process was halted in the wake of Constituent Assembly polls, investigation by Commission for Investigation of Abuse of Authority (CIAA) and filing of a case against the process at the court. "We will recommence the process as soon as we get the copy of court´s decision," said Paneru.
A total of 334 companies had lodged application at the Nepse, seeking permission to operate as stock brokers. Of them, NEPSE had approved the files of 316 companies. However, the disruption of the process to induct new stock brokers has left number of stock brokers low at 23 from 32 of the past, while the number of listed companies has soared to 165 from 60 over the last 19 years. This has created problems for some 1.5 million investors who have put their money on shares..

40% of Sensex cos give over 100% returns

2009-10-13T01:20:00.000-07:00

Stock prices of close to half of the companies that are part of the Sensex more than doubled in the first half of the financial year (April 1-September 30, 2009). All these companies outperformed the Sensex which gained 78% during the same period.

As per an ETIG study, 40% of the Sensex companies generated returns of 100% or more in the first half of the current fiscal. The top five performers among the Sensex pack include automotive giant Tata Motors (228%), diversified infrastructure firm Jaiprakash Associates (182%), country’s largest private sector bank ICICI Bank (172%), India’s largest real estate firm DLF (162%) and engineering and construction major Larsen & Toubro (150%).

Share price of other companies such as Tata Steel, Hindalco Industries, Wipro, Reliance Infrastructure, Mahindra & Mahindra, Maruti Suzuki and Sterlite Industries (India) also doubled during the same period.

Expectations of better corporate performance led to sharp uptick in stock market valuations since March. This triggered huge money inflow from foreign institutional investors (FII), besides domestic investors returning to the stock market.

Says Amitabh Chakraborty, president (equity) at Religare Capital, “The market is likely to remain volatile in the coming months due to events like announcement of credit policy and corporate results. Further, for the next year, consumption pattern in the US, which is going to become clear in December , is likely to define market trend for the next year.”

Amongst sectors, infrastructure, steel and automobiles have outperformed the Sensex. Although ICICI Bank was among the major gainers, overall banking and FMCG scrips underperformed in the market rally over the last six months.

Says Sarabjit Kour Nangra, VP-research, Angel Commodities, “The outperformance of the automobiles sector is due to better numbers posted by these companies in terms of sales. Moreover, increasing thrust on infrastructure, led to reasonable rally in the infrastructure space as well.” She added the stock market is unlikely to witness correction in the near term, but can see consolidation.

Sensex, Nifty hit 10-month highs as bourses progress rapidly

2009-06-06T01:03:00.000-07:00

MUMBAI: Indian bourses progressed rapidly with key indices -- Sensex and Nifty -- hitting nearly ten-month highs as investors were heartened by new UPA Government's economic agenda, unveiled by President Pratibha Patil in the week under review.

The markets achieved new highs in sustained volatility and the Sensex closed past the 15,000-psychological level for the first time since September 2, 2008.

Accentuated interest of investors in second-line stocks pushed up the Smallcap and Midcap indices by a whopping 7.88 per cent and 6.98 per cent, respectively, outperforming the bellwether Sensex.

In the week to June 6, the 30-stock BSE barometer ended the week at 15,103.55, a net rise of 478.30 points, or 3.27 per cent, over the week.

Investors were virtually confident that the economic reforms will get a strong push in the first year in the light of a political stability in the country.

Addressing Parliament on June 4, Patil disclosed that the Government would focus on revival in economy which has already showed signs of recovery with a good expansion in the manufacturing activity in May 2009.

Patil said the government will focus on reforms in financial and infrastructure sectors as also disinvestment of public sector undertakings while sticking to fiscal prudence.

India's infrastructure sector output grew 4.3 per cent in April, indicating a gradual economic recovery.

Inflation, too, remained low at 0.48 per cent for the week ended May 23.

The broader 50-share Nifty of the National Stock Exchange advanced by 137.95 points, or 3.10 per cent, to end the week at 4,586.90 from its previous weekend's close.

Foreign Institutional Investors, the principal market moving factor, remained consistent net buyers in equity. Hence, the capital inflows in equity stood at $427 million in the initial four days of the week

Analysts said the market is strongly bullish and may witness a pre-Budget rally. The full Budget is likely to be presented on July 3 by Finance Minister Pranab Mukherjee.

Sectorial indices such as the BSE Consumet Durables Index soared by about ten per cent and the BSE Capital Goods index by 8.40 per cent.

The trading volume for the week was high at Rs 1,30,005 crore on the NSE and Rs 45,288 crore on the BSE compared to Rs 1,11,845 crore and Rs 36,674 crore respectively.

Sensex jumps 14.1% on week; best in 17 years

2009-05-23T02:48:00.000-07:00

MUMBAI: The BSE Sensex rose 1.1 per cent on Friday and took gains for the week to 14.1 per cent, its most in 17 years, buoyed by hopes for pro-market reforms after the ruling coalition won general election last weekend.

Manmohan Singh was sworn in as the prime minister for a second term, along with his new cabinet and the outlook for the market would depend on how quickly they are able to push asset sales in state firms, ease rules for foreign investment and boost sagging growth.

Some analysts believe the market is overbought after it leapt more than 17 per cent at the start of the week following the unexpectedly easy election win. The BSE index has risen 73 per cent from a 2009 low in early March and has climbed for 11 weeks in a row in the longest winning streak in four years.

"Valuations have become high, but people are buying because they may be left out otherwise," D.D. Sharma, vice president at Anand Rathi Securities, said.

The BSE index ended up 150.61 points at 13,887.15, with gainers and losers evenly matched. Trading was choppy with the index falling 0.9 per cent at one stage.

Brokerages and investment houses polled by Reuters expected the benchmark to reach 15,750 by the end of December, gaining another 13 per cent.

"There are so many desperate buyers because nobody is betting on the market going down. You will see people buying at every dip from now," Sharma said.

Energy giant Reliance Industries, private-sector lender ICICI Bank and infrastructure firm Larsen & Toubro led the market higher after a lower start.

Reliance, which has the biggest weight in the main index, rose 3.1 per cent to 2,183.10 rupees, while private-sector lender ICICI gained 4.5 per cent to 702.80 rupees.

Larsen & Toubro climbed 4.7 per cent to 1,301.40 rupees

The market has largely been powered by foreign funds, which have pumped about $5 billion into the market in the past two months, including more than $1 billion in this week.

Outsourcers Tata Consultancy and Wipro, which get most of their revenue from overseas, fell about 2 per cent as the rupee climbed past 47 to a dollar to its highest since December.

Asian shares eased after a drop on Wall Street overnight on fears the United States, with its increasing budget deficit and weakened economy could lose its AAA rating.

Japan's Nikkei dropped 0.4 per cent, while MSCI's measure of other Asian markets edged down 0.02 per cent.

European shares were higher after falling more than 2 per cent in the previous session. The FTSEurofirst 300 index of top European shares was up 0.4 per cent at 1117 GMT.

Investors reap Rs 10,000 cr every second in today's trade

2009-05-19T13:19:00.000-07:00

MUMBAI: Turning stock market into a money- making machine, the investors added well in excess of Rs 10,000 crore in every second of trade today--a frenzy they must have wished continued beyond just a minute.

However, the hopes are still not dashed completely as Dalal Street is pinning on another spectacular performance tomorrow with an eye on 15,000-points milestone for Sensex, even if it does not match today's historic gain of 2,111 points.

During 60 seconds of trade today -- first for 30 seconds at the opening and then another 30 seconds after trade resumed at 1155 hours -- investors' wealth measured in terms of total market capitalisation of all the listed companies grew by about Rs 6,50,000 crore. This is the biggest ever gain in the history of stock market, not only in India, but possibly in the entire world.

This sharp surge, the best ever post-polls performance of stock market in India, comes in sharp contrast to a huge loss suffered after the last general elections in 2004.

Election results had been announced during trading hours on May 13, 2004 and Sensex had ended up 0.8 per cent after highly volatile trade, but lost over 300 points the next day. In following trading session on May 17, 2004 Sensex plunged 11.1 per cent, its biggest drop in 12 years.

The Sensex had lost over 894 points in the two days after the election results were out in May 2004.

Meanwhile, today the total investors' wealth, measured in terms of combined market-cap of all the listed companies, has increased by over Rs 6,56,477 crore in a minute -- in the first 30 seconds and then after resumption trading in the afternoon -- to Rs 44,63,420.97 crore.

The 30-share Bombay Stock Exchange Sensex zoomed 1,305.97 points at 13,479.39, hitting the upper circuit with seconds of opening of trade, following which trading was halted for two hours. After trading was resumed the Sensex soared 806 points at 14,284.21 following which trading was halted for the day.

Further, the 30 Sensex companies, which account for over 47 per cent of the total market-cap of all the companies, saw their combined market valuation rise by over Rs 3.16 lakh crore today.

Sensex creates History; two upper circuits in one day

2009-05-19T13:14:00.000-07:00

MUMBAI: Markets have stopped trading for the day as the benchmarks hit another upper circuit Monday as soon as the trade resumed after 2 hour
break. Investors are euphoric after the United Progressive Alliance emerged victorious in the 2009 general elections. ( Watch )

Bombay Stock Exchange’s Sensex was locked at 14272.62 up 2099.21 points or 17.24 per cent. National Stock Exchange’s Nifty was locked at 4308.05, up 636.40 points or 17.33 per cent. According to media reports turnover including cash and F&O was less than Rs 1000 crore.

Marketmen are upbeat given the fact that there will be no interference by the Left Parties and other regional parties in day-to-day functioning of the government and less number of allies will lead to a stable government which will run its course of five years.

BHEL (32.72%), Larsen & Toubro (29.53%), DLF (25.82%), ICICI Bank (25.30%) and HDFC (23.46%) were the top Sensex gainers.

Amongst the sectoral indices, BSE Realty Index was up 25.37 per cent, BSE Capital Goods Index gained 23.47 per cent, BSE Bankex moved 20.27 per cent higher and BSE Oil&gas Index advanced 19.57 per cent.

Market breadth was positinve on the BSE with 833 advances and 11 declines.

The new government which is likely to be sworn in by Friday is expected to come-out with full budget within 45 days of resuming office, according to media reports.
Reforms in the banking sector, divestment of public sector undertakings, infrastructure, retail sector and insurance sector is likely to top the priority list.

Sensex had opened 10.73 per cent or 1305.97 points higher at 13479.39 points to 12011.10. National Stock Exchange’s Nifty was locked at 4203.30, higher by 14.48 per cent or 531.65 points.

Toyota cuts annual production goal to 7-year low.

2009-05-12T23:56:00.000-07:00

TOKYO: Toyota Motor Corp. said on Wednesday it will cut vehicle production 28 per cent this year to its lowest level in seven years.

The world's largest automaker, struggling as sales fall across the globe, says it aims to produce 6.68 million vehicles in 2009, down from 9.24 million in 2008. ``We expect the severe conditions to continue this year,'' said Toyota spokeswoman Ryoko Nishinohara. Toyota has already said it expects the current fiscal year through March 2010 to be its worst ever financially, forecasting a net loss of 550 billion yen ($5.7 billion). The carmaker has struggled to keep up with falling demand, especially in the U.S. and Europe. It has suspended production at factories, cut temporary workers in Japan and offered buyouts to American workers.

Toyota has not closed any factories and retains the capacity to make up to 10 million vehicles per year. But the annual production cut is the latest indicator of how quickly its fortunes have turned. Prior to the financial crisis and the global credit crunch, sales were soaring. The maker of popular cars such as the Camry and the Prius hybrid overtook GM last year as the world's largest automaker by annual sales.

In the fiscal year that ended in March 2008, it booked a record profit of 1.72 trillion yen. But sales suffered as the global economic slump set in, and a year later it had a net loss of 436.94 billion yen. Toyota has reacted by picking a member of the founding family, Akio Toyoda, to become its president and lead a turnaround. He will replace current president Katsuaki Watanabe in June. On Tuesday, Toyota said it would suspend several lines at an engine factory in Japan. The company said it will stop three of 11 production lines at Kamigo, its main engine factory in central Aichi prefecture, to adjust for its lower vehicle output. In late trade Wednesday, the company's shares were down 2.7 per cent at 3,640 yen in Tokyo, while the benchmark Nikkei 225 stock average was up 0.6 per cent.

Suzlon raises $47 mn from stake sale: Report

2009-05-12T23:54:00.000-07:00

MUMBAI: The founders of Suzlon Energy Ltd raised $47 million by selling 30 million shares, or 2 percent stake, at Rs 77 each on Tuesday, two sources with knowledge of the deal said.

The deal was done within hours of opening on Tuesday evening, they said. Citigroup was the sole bookrunner for the deal. Shares in Suzlon, which the market values at around $2.5 billion, have risen 29.8 percent in 2009 compared to a 26 percent rise in the benchmark index. The stock had tumbled 83.9 percent in 2008, hit by quality woes, tight liquidity and a plunge in the broader market.

How much is Satyam's stock actually worth?

2009-01-07T07:35:00.000-08:00

MUMBAI: In possibly the biggest single day fall for a stock, Satyam Computer Services lost 77 per cent to end at Rs 40.25 on NSE. The stock’s woes began in December after the company’s promoters made a $1.6-billion bid for Maytas Properties and Maytas Infrastructure promoted by Chairman B. Ramalinga Raju's son.

However, adverse market reaction, which saw the company’s ADR take a knock of 54.5% to $5.70, made the company call off the proposed acquisition. At the time, Chairman Raju evinced surprise saying he was “surprised by the market reaction to this decision even though we were quite positive about the merits of the acquisition.”

Raju, in fact, today (Jan 7, 2009) took the stock market and the business community by surprise, after he tendered his resignation and admitted in a letter to the board that Satyam’s balance sheet was cash and bank balances as on Sep 30, 2008 was inflated to the extent of Rs 5,040 crore (as against Rs 5,361 reflected in the books).

Further, Satyam’s balance sheet carries an accrued interest of Rs 376 crore which is non-existent, an understated liability of Rs 1,230 crore on account of funds arranged by Raju, and an over stated debtors position of Rs 490 crore (against Rs 2,651 crore in the books)

The letter goes on to state that Satyam reported a revenue of Rs 2,700 crore and an operating margin of Rs 649 crore (24% of revenues) for the second quarter ended Sep 30, 2008, as against the actual revenues of Rs 2,112 crore and actual OPM of Rs 61 crore (3% of revenues). This resulted in artificial cash and bank balances going up by Rs 588 crore in the second quarter alone.

If one goes by the actual revenue and OPM figures, taking others as true, Satyam would have posted a loss instead of the reported profit after tax of Rs 537 crore for the September quarter. If one deducts the financial expenses and depreciation/amortization from the actual OPM of Rs 61 crore, it gives you a loss of Rs 5.87 crore, which translates to a negative EPS of Rs 0.08.

Investment bank CLSA has said that the value of Satyam stock in current conditions is about Rs 25-30. However, some analysts feel the stock is worthless as the scale of fraud is not yet known.

“The real value of the company can’t be determined at this point of time as what other figures are inflated should be known. Also, given the bleak economic conditions I don’t expect anybody will be interested acquiring the company. Hence, it is better one should exit or stay away,” said Ramesh Kumar, senior analyst at Global One.

In October of 2008, Satyam saw a high of Rs 325 and a low of Rs 220 and its market capitalization was Rs 20,534 crore. The MCap eroded significantly to Rs 11,465 crore by end December after Satyam announced the twin Maytas acquisition.

“It is one of the worst days for Indian investors. It has shaken investor confidence--both domestic and global. The biggest dent that this Satyam episode could create is the ‘trust’ of investors towards companies, auditors, and reported numbers by companies,” said Hitesh Agrawal- Head -Research -Angel Broking.

“We have discontinued coverage on the stock with immediate effect and would advise current investors to exit the stock and nonexistent investors to stay away,” he added.

Satyam Revelation Rocks Indian Markets

2009-01-07T07:31:00.000-08:00

Company's chair resigns, confessing to having falsified the company's accounts for several years in order to forestall a takeover.

B. Ramalinga Raju, chairman of the scandal-plagued Indian outsourcing specialist Satyam Computer Services, has resigned, confessing that he had conspired to cook the firm’s books for several years.

In a letter to Satyam’s board, which was released Wednesday morning to the stock exchanges and market regulator, the Securities and Exchange Board of India, Raju owned up to inflating the firm’s cash and bank balances by $1 billion and fudging the firm’s revenues and operating margin in the quarter that ended in September 2008. The actual operating margin was 3% ($12.5 million), on revenues of $434 million, as against the incorrectly reported operating margin of 24% ($133 million), on $554 million in revenues. Debts were overstated by $100 million, and liabilities understated by $253 million.

Admitting that the gap in the firm’s balance sheet was caused by inflated profits over several years, Raju stated that he was afraid Satyam’s poor performance would result in a takeover, which would expose the gap. “It was like riding a tiger, not knowing how to get off without being eaten,” his letter read, adding that neither the board nor any of the firm’s executives were party to the wrongdoing. He characterized an aborted deal to buy two construction companies controlled by his relatives, which had riled investors in December, as a last-ditch attempt to substitute fictitious assets with real ones.

The confession sent the stock of Satyam Computer Services (nyse: SAY - news - people ) plunging by 138.70 rupees ($2.84), or 77.5%, to 40.25 rupees (82 cents), and pulled down the BSE Sensex 30 index by 749.05 points, or 7.25%, Wednesday. SEBI Chairman C. B. Bhave termed the development one of “horrifying magnitude,” reported the Press Trust of India. He went on to say that the regulator would take legal action after conferring with the government. The New York Stock Exchange-listed Satyam could face action from the U.S. Securities and Exchange Commission as well.

Revelation of the accounting fraud has produced shock waves across India’s corporate world. “This is beyond the realms of my imagination. It’s a real shocker,“ said Rakesh Jhunjhunwala, chairman of the Mumbai investment firm Rare Enterprises. (Jhunjhunwala has no exposure to Satyam.)

“I just can’t believe this. It’s very difficult to digest,” acknowledged Shailesh Haribhakti, executive chairman of audit and consulting firm BDO Haribhakti in Mumbai.

Ganesh Natarajan, chairman of the software industry association Nasscom, sought to allay fears that the Satyam fiasco would further damage India’s export-oriented software sector, which has already been dented by the financial meltdown and recession in the United States, its biggest market. “ This is a firm-level issue and won’t affect the entire IT sector,” he said. “ But it does mean that corporate governance standards overall need to be relooked at with a microscope.”

According to Haribhakti, the biggest challenge emerging from the sorry saga is protecting the interests of Satyam’s minority shareholders and its 53,000 employees: “The credibility of Indian business is at stake.”

Jhunjhunwala felt that putting the rest of corporate India in the same league as Satyam would be unfair. “Satyam should be merged with either Infosys or Wipro which are companies that can be trusted,” he remarked.

2008 slump wipes out $17 tn in stock value: S&P

2009-01-06T11:12:00.000-08:00

The nightmarish stock market performance in 2008 erased some 17 trillion dollars in share value worldwide, a Standard & Poor's report said on Tuesday.

S&P's estimate is based the value of its Global Broad Market Indices, comprised of 46 major stock indexes around the world. Emerging market indexes fell 54.72 percent and developed markets dropped 42.72 percent for the year, according to S&P.

The losses, coming in a year that was the worst in many countries since the Great Depression, were moderated somewhat by a modest rebound in December, with 19 of the 21 emerging markets and 22 of the 25 developed markets posting gains during the month.

A glimmer of hope, that is how we can define December," says Howard Silverblatt, analyst at Standard & Poor's and author of the report. "As central banks race to reduce rates, add liquidity and shore up their local economy, markets remain cautiously optimistic as we move into 2009. However, as evident by the huge stockpiles of cash still on the sidelines, many world markets are taking a wait-and-see approach. The result is a continuance of extreme market volatility."

Among the worst performers in 2008 were the "BRIC" countries: Brazil (down 57.35 percent), Russia (73.67 percent), India (64.51 percent), and China (53.21 percent), according to S&P.

Morocco was the best performer among emerging market countries, limiting its loss to 15.85 percent. The second-best performer was Israel, with a loss of 34.68 percent.

In developed markets, Ireland was the worst with a loss of 69.94 percent, followed by Greece (66.50 percent) and Norway (66.07 percent).

S&P said its Japan index was the best among developed nations with a loss of 29.22 percent, followed by Switzerland (30.60 percent) and the United States (38.68 percent). The US market was the third "best" performer among developed markets and fifth best among all global equity markets.

Among various sectors, financials lost 53.77 percent and materials lost 52.9, representing the two worst industries
. The energy sector plunged 44.5 percent.

2008: Bad year for billionaires

2009-01-02T01:25:00.000-08:00

LONDON: The financial crisis caught up with Kirk Kerkorian, Robert Tchenguiz and Adolf Merckle in the last days of 2008, denting their reputations for being among the world's savviest, not merely richest, investors.
Ultra-wealthy people such as the three men -- a 91-year old US billionaire, a jet-setting London property tycoon and a media-shy German industrialist -- are often thought to be at the vanguard of financial innovation, private bankers say.

"They're losing big money and their wealth is disappearing quickly," said David Giampaolo, Chief Executive of Pi Capital, a London-based private equity investment boutique.
Rich investors often held large positions in specific companies or stocks, he said, and they had also often borrowed large amounts of money to boost returns. "At the time it didn't look irresponsible (but) now they've had double, triple whammy problems," he said.
Hedge funds, still dominated by private investors, are among the players worst hit by the credit crunch, with some analysts predicting their assets will shrink by as much as 80 percent. And the scandal around US financier Bernard Madoff -- accused of defrauding rich clients and charities of $50 billion -- is another example of how the very wealthy are not immune to the financial turmoil.

Kerkorian, best known for his ties to the ailing U.S. car industry, this week said he had sold off his remaining shares in Ford Motor Co, completing a retreat that cost him hundreds of millions of dollars.
Since October, the activist investor has been cutting his losses on a $1 billion investment in Ford that had lost most of its value, capping a two-year period during which he was involved with all three Detroit-based car companies.

Forbes magazine, which tracks the world's richest people, puts Kerkorian's worth at $11.2 billion from investments in casinos and other businesses. His losses made him one of the poorest performers on this year's list, it said. Iranian-born Tchenguiz draws most attention through newspapers citing his jet-set lifestyle, including an expensive house in an upmarket London district and a sumptuous Louis XIV-style party he is reported to have thrown for his 40th birthday. His Globe Tenanted Pub Co Ltd, which runs 424 leased pubs across the United Kingdom, said this week it would appoint an external adviser, after narrowly breaching its debt covenants -- early warning signs of financial trouble. And business publication The Estates Gazette in October said Tchenguiz had dropped off its list of the 500 wealthiest people in UK property after losing 1 billion pounds ($1.45 billion) when Icelandic bank Kaupthing collapsed.
Germany's Merckle, ranked by Forbes among the world's 100 richest people, was caught out by wrong-way bets on shares in Volkswagen AG (VOWG.DE), incurring massive losses. His investment vehicle VEM Vermoegensverwaltung said on Wednesday it would sign an agreement to obtain a bridge loan from banks as it worked on refinancing the group. Banking sources have told media that Merckle's losses were estimated at 400 million euros, forcing Merckle to hold talks on state guarantees from regional governments, although he ultimately opted out of such financing.
But Sebastian Dovey, whose company advises private banks as well as wealthy individuals, still sees a glimmer of hope. "There is a certain ghoulish interest in covering savage drops in fortunes among other billionaires," said Dovey, a partner at consultancy Scorpio Partnership. "Time will tell if these individuals have the skill for wealth re-creation. Most, we suspect, will," he said.

See also:
BIGGEST BILLIONAIRE LOSER in 2008(SLIDE SHOW)
UK TOP LOSERS
USA TOP LOSERS (in Pictures)

Rise and fall of commodities gives hints for 2009

2009-01-01T10:48:00.000-08:00

- Just a year ago the debate about grain prices was simple: how high was high?
Huge global demand for grains, governments hoarding food, climate fears amid droughts, storms and floods -- basically every bullish factor one could imagine hit the markets.
The psychology of short supplies carried over to other commodities as well, especially industrial metals as China and India drew in a rapidly rising share of materials as their economies raced to modernize and transform.
The final element for the "perfect storm" sending commodities to stratospheric heights was the tsunami of Wall Street and other speculative money that, frustrated by stagnant stocks and bonds, finally bought into the commodities story.
The benchmark Reuters-Jefferies-CRB index .CRB of 19 commodity futures was at 358.71 on December 31, 2007, up 17 percent for the year. It jumped another 32 percent to hit record high of 473.97 on July 3, 2008.
Then, as investors blinked, it was over. The index started sliding and by early December fell to a 6-1/2-year low of 208.58 -- down 56 percent from the midsummer highs.
The global economic crisis tied to dried-up bank credit -- the lifeblood of all markets -- rocked Wall Street but also rolled over commodities, bursting bubbles right and left.
"A great start and an unexpected finish," said Rich Feltes, director of MF Global Research in Chicago.
Gold had soared past $1,000 an ounce. U.S. wheat prices had gone past $25 a bushel -- the previous record was $7.50 -- amid a 60-year low in U.S. wheat stocks. Midwest floods and a biofuels boom pushed corn above $7 a bushel, triple the average price for decades. In July, crude oil neared $150 a barrel.
"The main negative for all of these commodities is the demand side of the equation with the economic malaise," said Bill O'Neill, managing partner of Logic Advisors LLC and former head of commodities research at Merrill Lynch.
The question for the coming year? How low is low?
"As we head into 2009 I think an important question to ask is will that fund money come back?" MF Global's Feltes said.
"Commodities are not going to be a lead indicator," he said, pointing to gross domestic product instead. "The economy has to turn around first. There has to be fundamental justification for higher GDPs for improving commodity demand before investors feel comfortable coming back to commodities."
LIMPING ALONG - BUT KEEP AN EYE ON GRAINS?
In U.S. commodity markets, weekly data from the Commodity Futures Trading Commission has told the story of shell-shocked investors fleeing commodities or cashing out to secure funds.

Open interest in the CBOT's largest ag contract, corn, for example, had grown to 1.4 million contracts by spring. Today, the total is 800,000 contracts as commodity funds downsized to meet the global margin call that came as economies collapsed.
The credit contagion shows no signs of being solved any time soon, with the hopes of most investors pinned to the new policies and measures a Barack Obama administration says it will aggressively put in place starting in January.
How quickly that might spur economic growth and investor confidence is an open question. But among commodities, one place to keep an eye on may be grains. Several factors might make food and biofuels a trigger for a commodities recovery.
For one thing, the single biggest demand force in the recent commodities craze -- China -- is not going away. Neither is food or biofuels demand, although the latter may cool down.
"The theme we've had in the last half of this year was all about demand destruction," said Dan Basse, president of Chicago-based consultancy AgResources. "We're concerned about supply destruction starting mid to late winter and having a bull market in agriculture the last half of 2009."
Basse said supply destruction -- referring to lower global grain plantings -- was a key to watch. But so are biofuels.
Obama, from a top corn and soybean state, has promoted biofuels. But using food crops to produce them has been increasingly attacked by food inflation watchers and even environmentalists, saying it does little for global warming.
"Ethanol has been one of the big drivers of the bull market," Basse said.
Another factor that will have a huge influence over whether commodity prices recover is the value of the dollar. A weak dollar makes U.S. grain exports cheaper, for example.
"The U.S. dollar will continue at least early in the year to drive all commodity markets," said Bill Lapp, president of consultancy Advanced Economic Solutions.

10 stocks to buy now

2008-12-30T08:13:00.000-08:00

2008 saw the bearist market in decades. There are prediction of price going down in coming year too. Although it is down, fortune magazine has predicted these 10 stocks to be of value for the year 2009. What does these stocks which were sometime ago 4 times the value of current market price hold for investors? Lets have a look.

10 stocks to buy now

Best & Worst in Money 2008: Biggest fall from grace

2008-12-19T05:16:00.000-08:00

In 2008, many big names took big face plants. Since this is a blog about money, I ranked them based on how much they lost and how far they fell. As you can see, the method is not exactly scientific. Here are the five biggest falls from grace:
Richard Fuld, Lehman Brothers. The $639 billion bankruptcy is history's largest so far by a factor of at least six. And Fuld personally lost about $1 billion in his personal holdings of Lehman stock. And the repercussions of letting Lehman fail stretched from money market funds to Iceland. Ouch!
Jimmy Cayne, Bear Stearns CEO. Cayne lost plenty of his personal wealth when Bear Stearns stock stumbled. But at least shareholders were able to get out with something when JPMorgan Chase (NYSE: JPM) bought it.
Eliot Spitzer, New York governor. Spitzer destroyed his once promising political career by spending time with at least one woman other than his wife. He was trying to use his prosecution of Wall Street to boost his political career as Rudy Giuliani did. But his self-destructive urges got the better of him.
Sheldon Adelson, CEO, Las Vegas Sands (NYSE: LVS). Adelson, a colorful character who was a consulting client of mine, has lost $30 billion on paper thanks to his excessive debt load and a decline in gambling.
Jerry Yang, CEO, Yahoo! (NASDAQ: YHOO). Poor Jerry Yang suffered from delusions about his ability to revive his creation. He lost a chance to boost shareholder returns by selling to Microsoft Corp. (NASDAQ: MSFT) for $31 a share. With the stock at $11.51, he left big bucks on the table, and the board kicked him out of the big chair.
Let us know which one you would chose as the biggest fall of 2008.
Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.