Stocks In Action: November 29, 2012

GMR Infrastructure has received a major setback in wake of the Government of Maldives terminating the contract awarded to it for upgrading Male Airport at a cost of USD 530 million. The company has a 77:23 joint venture with Malaysia Airport Holdings for this project. It was to upgrade, maintain and operate the existing airport, as well as build a new terminal by 2014. The management of GMR Infrastructure has stated that “this unlawful and premature notice on the pretext of a concession agreement is void and therefore will be challenged by the company before the competent forums.” On the back of this news one may see volatility with a negative bias in the share price of GMR Infrastructure in today’s trading session.

Cash-strapped Suzlon Energy finally has something to cheer about since the company’s debt restructuring package is now in the pipeline. According to media reports, the company’s lenders are close to firming up a restructuring package for loans worth about Rs 10,000 crore doled out to the financially stressed Suzlon Energy. The meeting of the bankers and the management would probably take place early next month. Some of the proposed terms would include infusion of Rs 250 crore by the promoters and the restructured debt to carry 11 per cent rate compared to most of the existing loans which are at the rate of around 13 to 15 per cent. Some of the banks like State Bank of India, IDBI Bank, Bank of Baroda, Punjab National Bank, etc have had significant exposure in the company. On the back of this news one may see volatility with positive bias in the shares of Suzlon Energy and some of its lenders (banks) in today’s trading session.

According to Business Standard, Delhi-based multiplex major PVR announced on Tuesday that it was in in talks with Cinemax for a possible takeover. Cinemax India operates 39 properties with 138 screens. One of the dominant players in Mumbai, it operates 14 locations with 45 screens in and around Mumbai. At present PVR operates 210 screens across India, including IMAX in Bangalore. The company has aggressive plans to increase the count to 500 screens. On the back of this news one may see volatility in the share price of PVR and Cinemax in today’s trading session.

According to Economic Times, state-owned Indian Oil Corporation (IOC) today said it is planning a Rs 30,000-crore refinery on the west coast in Gujarat or Maharashtra as part of its plans to raise the refining capacity to 100 million tonnes. The company has been offered land by Adani Group at Mundra in Gujarat as well as by Shapoorji Pallonji Group in Saurashtra. IOC has plans to raise its refining capacity to 100 million tonnes by 2021-22. For the 12th Five Year Plan ending March 31, 2017 the company plans to invest Rs 56,200 crore. Of this a major addition of around Rs 27,159 crore is planned to be spent in expanding its refining capacity. On the back of this news one may see volatility with a positive bias in the share price of Indian Oil Corporation in today’s trading session.

To expand its global footprint, Apollo Tyres is planning to invest around Rs 5,500 crore in the next five years. The expansion will include setting up two new plants in South East Asia and Eastern Europe. Further, according to media reports, the company will be converting its Kalamassery plant in Kerala into a dedicated unit for the production of off-highway tyres (OHTs) and also would be hiking the production capacity by 1.5 million units a year, thereby taking the total capacity to 7.5 million at its factory in The Netherlands. On the back of this news one may see volatility with a positive bias in the share price of Apollo Tyres in today’s trading session.

According to media reports, Pratip Chaudhuri, chairman of State Bank of India, is expected to meet and have a discussion with the finance ministry over the much awaited rights issue plan of the bank. Last year the bank had planned a rights issue worth approximately Rs 20,000 crore but the government had denied it because of various issues with its own finances. With the rights issue news on the radar, one may see volatility in the share price of State Bank of India in today’s trading session.

Media reports are indicative of Telenor and Tata Teleservices being in talks of a merger. If the deal goes through, the newly formed entity would become the fourth-largest telecom services provider in India in terms of subscriber base. However, both the parties are reported to be waiting for the new guidelines to be set by the government. A set of fresh rules have been placed before the Union Cabinet for approval but there is no clarity about when the decision will be taken. On the back of this news the stock prices of Tata Teleservices are expected to be volatile today.

Securities & Exchange Commission (SEC) has slapped penalties on four Indian financial services firms, namely Ambit Capital, Edelweiss Financial Services, JM Financial Institutional Securities and Motilal Oswal Securities. According to media reports, the firms were providing brokerage services to US-based institutional investors without getting registered with it. The firms will have to shell out around Rs 17 lakhs, Rs 3.12 crore, Rs 2.43 crore and Rs 4.51 crore respectively as disgorgement or repayment of profits to regulators. One should note that Ambit Capital is an unlisted entity. However, the remaining three are listed ones and hence one may see volatility with a negative bias in their share prices in today’s trading session. From an analytical point of view, the cash outflow will approximately reduce the annual net profit by 2 to 5 per cent of the respective companies. The implications on the business front could be larger. However, one has to wait for the response of the management of these companies before making any predictions.