Gold hedging outside India will give liquidity: Titan

The Reserve Bank of India (RBI) has given approval to Titan  for hedging of gold on international exchanges.

Speaking on the development, its CFO S Subramanian said the move will provide the company a better liquidity and longer duration contracts at international exchanges.

He said the company had applied to RBI sometime back requesting the move.

“Earlier, we had the gold-on-lease scheme under which hedging was a very natural phenomenon. We used to fix our gold rate at the rate of the sale, and therefore, we did not have any exposure to gold rate risk at all. Unfortunately, after the gold-on-lease scheme was suspended by the RBI because of the measures they wanted to take on gold imports, we were left to hedge only with the commodity exchanges in India,” he told CNBC-TV18’s Latha Venkatesh and Sonia Shenoy.

He said the problem was that commodity exchanges have a very low liquidity, adding that the company was not witnessing any premium in terms of hedging in local commodities.

“Now (post approval)… for all the gold that we are buying, we will be able to hedge ourselves through the authorised banks in India, both on the gold front which might be on the commodity exchange internationally, and on the USD-INR rate in India. So, we would be able to hopefully take longer contracts. We don’t need to roll them over very frequently and that would be very beneficial for us,” Subramanian said.

International future prices are at a premium and thus will help reduce costs for Titan, said a Motilal Oswal report.

Motilal Oswal retains ‘neutral’ rating on Titan with a revised target price of Rs 258.

“Despite emerging regulatory stability, we are not upgrading our rating as we believe jewellery demand is still subdued given the weak discretionary spending environment,” it said.

Below is the interview of S Subramanian, CFO, Titan with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.

Sonia: If you could just tell us what this approval from the RBI for gold hedging could actually mean for you in terms of better liquidity as well as lower interest cost?

Subramanian: We had applied to the RBI quite some time back basically because earlier we had the gold on lease scheme under which hedging was a very natural phenomenon. We used to fix our gold rate at the rate of the sale and therefore we did not have any exposure to gold rate risk at all. Unfortunately, after the gold on lease scheme was suspended by the RBI because of the measures they wanted to take on gold imports. We were left to hedge only with the commodity exchanges in India.

The problem with the commodity exchange in India is that the liquidity has been very low. We do no have contracts for five to six months because our average stock holding period would be around five months and therefore we had the issue of having frequently rollover the contract that we took and there was also the issue with the total quantity gold that we could hedge in the local commodity exchange because of the overall volumes in the commodity exchange.

Therefore, we had requested RBI for approval to hedge gold outside India. We also therefore wanted to get the US dollar INR because gold is a dollar denominated asset so we need to also hedge the dollar INR part. So, we had requested them to hedge ourselves both outside India and in India for the dollar INR through our banks. The idea was that, we duplicate in a way what we used to do with the gold on lease scheme. So, the good part is now that we have got that approval.

Now what that means to us is that for all the gold that we are buying we will be able to hedge ourselves through the authorised banks in India both on the gold front which might be on the commodity exchange internationally and on the USD-INR rate in India. So, we would be able to hopefully take longer contracts. We don’t need to roll them over very frequently and that would be very beneficial for us.

Latha: So what should investors take from this? How much of margin pressure did you face when the lease scheme was stopped and will all that be won backed by this hedging?

Subramanian: I won’t say fully won backed but the major issues we had was – we had started borrowing because we don’t have gold on lease now. Today borrowing at sub 10 percent but the point is we used to be incurring not more then 3 percent or so earlier when we had the gold on lease scheme.

With this we have, debt is at higher rate but normally when you hedge your gold, you are selling gold forward and you tend to get a premium – its like selling dollar forward and therefore get a premium. The problem has been that in the local commodity exchange there has been no premium – we have been going at a discount because of the very low volumes traded in the commodity exchange.

Hopefully with this when we go and do our hedging outside India – because there should not be a problem with volumes – you should possibly get some premium back and that would effectively bring down the interest cost while it might be different item the idea is it might effectively bring it down.

Titan Company stock price

On February 28, 2014, at 12:49 hrs Titan Company was quoting at Rs 242.35, down Rs 3, or 1.22 percent. The 52-week high of the share was Rs 302.00 and the 52-week low was Rs 200.00.

The company’s trailing 12-month (TTM) EPS was at Rs 8.11 per share as per the quarter ended December 2013. The stock’s price-to-earnings (P/E) ratio was 29.88. The latest book value of the company is Rs 22.13 per share. At current value, the price-to-book value of the company is 10.95.

PE, VC funds show interest in Indian e-tailing

With an aim to tap the “huge opportunity” in the Indian e-commerce space and be a part of its growth story, a host of global players and private equity funds have been showing interest in the sector of late.

The latest case in point is Snapdeal.

On Thursday, US-based online retailer eBay led a group of investors, including Kalaari Capital, Nexus Venture Partners, Bessemer Venture Partners, Intel Capital and Saama Capital to invest USD 133.77 million (about Rs 830 crore) in the New Delhi-based Snapdeal.

According to media reports, this may hike US giants stake in the Indian online retailing company to 20 percent.

A recent CRISIL Research report pegs the online retailing to grow at a whopping 50-55 percent and becoming a Rs 50,000-crore industry by 2016.

Last year in April, Snapdeal had raised USD 50 million from E-Bay-led group of investors.

E-tailer Flipkart raised USD 360 million, over two rounds, last year. It raised USD 200 million in July 2013 through host of investors, like Tiger Global Management, Accel India Venture Fund, Iconiq Capital, MIH Holdings, Morgan Stanley and others. Three months later, in October 2013, it again raised USD 160 million.

Bangalore-based fashion portal Myntra raised about Rs 300 crore (USD 50 million) led by Premji Invest, Tiger Global, Accel Partners in February 2014. It had raised USD 25 million in May 2013. The company had said the funding was meant to strengthen its technology infrastructure and fund its growth initiatives.

In November 2013, Sequoia Capital and Info Edge   (which owns Naukri.com) had put in USD 36.78 million into Zomato Media for an undisclosed stake.

This week, Mumbai-based infant and baby products portal Hopscotch secured USD 2 million from Singapore-based LionRock Capital, with participation from a group individuals including Nisa Godrej of Godrej Group, Skype co-founder Toivo Annus and Diapers.com, VCCircle.com, quoting The Times of India report, said.

BJP’s Prime Ministerial candidate Narendra Modi has been batting for e-commerce. Speaking at the All India Traders Convention in Delhi on Thursday he said that traders should not worry about online trade and retailers must think of online retail as an opportunity.

Info Edge stock price

On February 28, 2014, at 12:42 hrs Info Edge India was quoting at Rs 653.00, up Rs 16.00, or 2.51 percent. The 52-week high of the share was Rs 707.00 and the 52-week low was Rs 285.00.

The company’s trailing 12-month (TTM) EPS was at Rs 9.27 per share as per the quarter ended December 2013. The stock’s price-to-earnings (P/E) ratio was 70.44. The latest book value of the company is Rs 60.95 per share. At current value, the price-to-book value of the company is 10.71.

FTIL to dilute 24% in MCX; forms panel to oversee recast

Jignesh Shah-promoted Financial Technologies (FTIL) today appointed a committee to oversee its restructuring plan, which includes divesting up to 24 percent stake in the Multi-Commodities Exchange (MCX). At a meeting, the board appointed a panel to propose and oversee a restructuring plan for FTIL in its efforts to charter a new growth path, a company release said. The board, however, did not discuss the forensic audit conducted by PwC on MCX, it said. The forensic audit was conducted after an order by the commodities regulator FMC.

The committee comprises two independent directors Venkat Chary and S Rajendran, legal advisor Berjis Desai and whole- time director Dewang Neralla, the release said. The recast plan will include exploring the possibility of identifying a strategic partner who will help drive growth and look for territories beyond financial markets, it said. The plan will also include FTIL divesting up to 24 percent in MCX in the long-term interest of both FTIL and MCX.

The committee may consider divestment of FTIL’s investment in other exchanges as a part of the restructuring. The panel will appoint an investment bank of repute to conduct a transparent bidding process for the divestments as well as identifying strategic partners for FTIL. Anil Singhvi, founder and CEO of Ican Advisors, has been appointed as corporate financial adviser to FTIL, it said. The committee has been given time up to 120 days to carry out the recast plan.

Meanwhile, MCX said it has received an interim report from the FMC and same was placed before the board last week. The board desired that the report be discussed with PwC before coming out with suggestions on actionable points. The MCX audit committee has since interacted with PwC team. This is an interim report on which certain additional inputs have been sought by the audit committee and a final report is still awaited, the commodity bourse said. Once the final report is submitted by PWC, the same will be deliberated upon by the audit committee and the board and outcome will be communicated to stock exchanges, it said. However, it has been learnt MCX has decided to dump the PwC report and appoint Deloitte to get a fresh forensic audit done. When contacted PwC said it is not aware of any such development, while Deloitte declined to comment, citing client confidentiality.

Financial Tech stock price

On February 24, 2014, Financial Technologies closed at Rs 322.70, down Rs 3, or 0.92 percent. The 52-week high of the share was Rs 944.00 and the 52-week low was Rs 102.05.

The company’s trailing 12-month (TTM) EPS was at Rs 50.03 per share as per the quarter ended December 2013. The stock’s price-to-earnings (P/E) ratio was 6.45. The latest book value of the company is Rs 580.93 per share. At current value, the price-to-book value of the company is 0.56. RELATED NEWS

Sahara: SC issues non-bailable warrant against Subrata Roy

The Supreme Court on Wednesday slapped a non-bailable warrant against Sahara chief Subrata Roy for not appearing for a hearing despite summons. Roy cited his mother’s illness for his non-appearance.

Roy had yesterday applied for exemption from appearance but the appeal had been turned down.

The apex court today pulled up the Sahara counsel for Roy’s non-appearance and said “the arms of this court are long” while issuing the non-bailable warrant, and asking the investigative agencies to make sure he is present on March 4, the date of the next hearing.

“On Tuesday we had refused your plea for exemption from personal appearance,” the bench told Sahara’s counsel Ram Jethmalani. “We will issue the non bailable warrant. This is the Supreme Court of the land. If other directors can appear, why can’t you?” it said, referring to the presence of three other Sahara directors who were present.

Sahara is embroiled in a bitter legal battle with Securities and Exchange Board of India over a Rs 20,000-crore optionally fully convertible debenture (OFCD) issue, in which the regulator wanted the firm to refund proceeds to investors.

The regulator had barred two of Sahara’s real estate companies from issuing the debenture issue, citing lack of adequate disclosures and wanted the firm to return funds it had raised.

The case has been highly acrimonious: the group has taken out full-page ads accusing SEBI of being a ‘sarkari gunda’ (goon) even as the case was on, defying the apex court’s order of complying with the regulator’s requests for more information on refunds, drawing rebuke from the court for contempt and having the chief’s passport impounded and properties attached.

Legal experts, however, were divided on when and if the Sahara chief would be arrested.

“The police will have to execute the warrant and arrest him,” corporate lawyer HP Ranina told CNBC-TV18. “He will have to be behind bars and on March 4, he will be brought before the Supreme Court and the court could then release him on bail.”

But the warrant can play out in several ways, criminal lawyer Majeed Memon said. “This could result in Roy’s immediate arrest who could be kept in detention till March 4. But if the Sahara counsel applies for stay of the warrant on humanitarian grounds, a stay could be granted on assurance that he will appear on March 4 without fail,” he said. “

Roy may be an important corporate leader but he is not above the law,” former attorney general Soli Sorabjee said. “He has to face the consequences for defying the court.”

Suzlon seeks shareholders’ nod for Rs 3-cr pay to Tanti

Wind turbine maker Suzlon Energy   will seek shareholders’ approval for re-appointment of Tulsi Tanti as managing director of the company with an annual salary of Rs 3 crore.

The company would also seek nod for preferential issue of shares certain entities and promoters.

These are among the resolutions for which Suzlon would seek shareholders’ green signal through a postal ballot.

Suzlon is seeking approval to re-appoint Tanti as managing director for a period of three years starting from April 1, 2014.

Besides an annual salary of Rs 3 crore, Tanti would also be eligible for various “perquisites” including medical benefits for self and family, according to the postal ballot notice.

Further, the firm would seek approval from shareholders to increase its borrowing limit to Rs 20,000 crore from Rs 10,000 crore.

Another resolution is for authorising Suzlon board to “create a charge in whatsoever manner on the company’s current assets, present and future, in favour of banks, financialinstitutions, bodies corporate, other entities, person or persons who may provide such credit facilities to the company”.

Suzlon reported a consolidated net loss of Rs 1,075.25 crore in the latest December quarter. In the year-ago period, the same was at Rs 1,154.53 crore. These figures are after share in associate’s profit and minority interest.

In the third quarter of current fiscal (2013 December quarter), the wind turbine maker raked in total income of Rs 5,052.20 crore compared to Rs 4,047.71 crore in the same period a year ago.

At the end of December quarter, the group’s order book stood at 5.5 GW (gigawatts), translating to around Rs 47,393 crore (or USD 7.7 billion) in value.

Suzlon Energy stock price

On February 26, 2014, at 11:11 hrs Suzlon Energy was quoting at Rs 10.25, up Rs 0.02, or 0.20 percent. The 52-week high of the share was Rs 25.30 and the 52-week low was Rs 5.72.

The latest book value of the company is Rs 9.72 per share. At current value, the price-to-book value of the company was 1.05.

Many big US corporations pay very little in taxes: Study

Many of the most profitable US corporations paid little or no federal income tax from 2008 to 2012, according to a five-year study issued on Tuesday by a left-leaning tax activist group.

Citizens for Tax Justice looked at 288 profitable Fortune 500 companies and said that 26 of them – including Boeing Co , General Electric Co and Verizon Communications Inc – paid no federal income tax in the five-year period.

The group also said that 111 of the 288 companies paid no federal income tax in at least one of the five years measured.

In a reflection of how the tax code’s complexity leaves many issues open to question, corporations sometimes dispute the way Citizens for Tax Justice calculates its numbers.

Some of the companies singled out took exception to the findings. GE spokesman Seth Martin said: “For each year cited by Citizens for Tax Justice, GE paid income taxes in the US, as well as billions in other state, local and federal taxes in the US”

He added, “CTJ inaccurately uses the current tax provision – a book accounting number – to make definitive statements about our U.S. income taxes. This is not the same as the cash income tax that we pay for a given year.”

A key player in Washington’s tax debate, Citizens for Tax Justice regularly issues studies making similar findings about corporate taxes. US lawmakers often cite them in criticizing the tax code as too complex and riddled with loopholes.

Despite complaints about it from across the political spectrum, the tax code seldom changes. It has not been thoroughly overhauled in 27 years. Congress is unlikely to do that in 2014, said Senate Republican Leader Mitch McConnell.

“I have no hope for that happening this year,” he told reporters at the US Capitol on Tuesday, blaming lawmakers’ stubborn fiscal gridlock on Democrats seeking tax increases.

Republican Representative Dave Camp, who heads the top tax-writing committee in the House of Representatives, is slated to unveil tax reform draft legislation on Wednesday, though it is widely expected to sit on the shelf with previous such drafts.

One of the main obstacles to reform is the abundance of tax breaks in the code that benefit corporations and individuals, lowering the effective tax rates of both and giving them ample reason to resist tax changes that would harm their interests.

“Corporate lobbyists incessantly claim that our corporate tax rate is too high, and that it’s not ‘competitive’ with the rest of the world,” said Robert McIntyre, director of Citizens for Tax Justice and the study’s lead author.

“Our new report shows that both of these claims are false,” he said, contending that most large corporations pay nowhere near the statutory 35-percent US corporate income tax rate due to tax breaks that lower their effective tax rates.

“And far too many aren’t paying U.S. taxes at all. Most multinationals are paying lower tax rates here in the United States than they pay on their foreign operations,” he said.

Boeing spokesman Chaz Bickers said the aerospace manufacturer’s tax bills are largely deferred until it starts generating revenue from airplane sales. “We play by the rules. We pay our taxes,” he said, adding Boeing’s total effective tax rate for 2013 was 26.4 percent.

Verizon spokesman Bob Varettoni said the telecommunications group complies with all tax laws and pays its fair share of taxes. He said Verizon paid more than USD 2.9 billion in income taxes from 2008 to 2012.

Union Cabinet likely to approve 10% DA hike on Friday

The Union Cabinet is likely to approve hiking dearness allowance to 100 percent from existing 90 percent benefiting 50 lakh employees and 30 lakh pensioners in it meeting scheduled on Friday.

“The Union Cabinet will take a proposal to hike dearness allowance (DA) for its employees and dearness relief for its pensioners to 100 percent this Friday as per agenda listed for the meeting,” a source said.

This increase in the dearness allowance by the UPA-II government comes ahead of the imposition of the model code of conduct by the Election Commission.

The model code of conduct is likely to come into force with the announcement of the schedule for the forthcoming general elections in a week or so.

Also, it would be the second double-digit DA hike in a row.

The government had announced a hike of 10 percent to 90 percent in September last year, effective from July 1, 2013.

The hike in DA would be effective from the January 1 this year.

As per practice, the government uses Consumer Price Index-Industrial Workers data of the past 12 months to arrive at a quantum for the purpose of any DA hike. Thus, the retail inflation for industrial workers between January 1 to December 31, 2013 would be used to take a final call on the matter.

According to the provisional data released by government on January 31, the retail inflation for factory workers for the month of December stood at 9.13 percent. The revised retail inflation data for January would be released on February 28.

An official said that the preliminary assessment suggests that DA hike will not be less than 10 per cent and would be effective from January 1 this year.

Dr Reddy’s at new high, launches headache drug Sumatriptan

Shares of  Dr Reddy’s Labs hit a record high at Rs 2823, up around 2 percent in early tradeon Wednesday. Investors are excited about the company as it launched Sumatriptan injection USP in the US market.

“It is a therapeutic equivalent generic version of Imitrex Statdose Pen (sumatriptan succinate) and was launched in the US market on February 25 following approval by the United States Food & Drug Administration (USFDA),” it said in a statement.

Sumatriptan is used to treat symptoms of migraine headaches (severe, throbbing headaches that sometimes are accompanied by nausea and sensitivity to sound and light). The injection is an autoinjector system for subcutaneous use.

Macquarie estimates USD 1.1 billion of sales from the US in FY15. It has upgraded the drug major’s target price to Rs 3,325, driven by much higher US sales. The brokerage has also hiked its FY15e earnings per share (EPS) increased to Rs 160 versus Rs 156.

At 09:52 hrs, the stock was quoting at Rs 2,803.00, up Rs 29.10, or 1.05 percent on the BSE.

US market may fall 20%, see EMs breaking down: Asianomics

Chris Roberts of Asianomics feels he is better off not having any money in emerging markets because they have not made money for investors since 2010.

In an interview with CNBC-TV18’s Udayan Mukherjee, Roberts said emerging markets were in a sideway range right now and this is most likely to be followed by a break on the downside

Roberts sees signs of a cyclical downturn in the US stock markets. According to him, the US is going through a secular bear market and may fall over 20 percent. The consolation if any could be that this decline may be less vicious than the previous one. Yet, any downturn in the US will hurt emerging markets as well, he cautions.

In India, Roberts sees IT and pharma shares doing well.

Q: Is global equity set up portends signs of any bearish trend?

A: Our belief is still that the American stock market, which we all correlate to quite highly particularly in times of trouble, is going through a secular bear market which is long sidewise pattern, which typically last between 15 and 18 years. We do not think that pattern is ended. The risk this year is that we have a cyclical decline in America and if we do have that decline, it will be quite a large decline; I would guess something like 20-30 percent. We are still bullish on America, we are wary this year that the risk is, we have the beginning of a cyclical decline after what has been an extremely good five year run-up from the lows in 2009.

Q: Have all markets tented to more or less fall inline with the US marketbecause you had a situation where the US has outperformed many other emerging markets dramatically. Could it be possible that other markets do well in the face of a declining US or is that just been wishful?

A: I would love to say yes but history says no. The problem is if the decline is very modest, if the decline was limited to 10 percent fall then I would probably bet that emerging markets would outperform during that – maybe they will fall 5 percent but when the fall becomes more meaningful, it is contagious. So, the problem is that if you have a decline of 20 percent or 25 percent then you can expect all these emerging markets to match that decline or exceed it by little bit. The only good bit of news in that situation based in the last few years is that there is no obvious sign of general over enthusiasm for markets in Asia, it has been stock specific, for example in India there has been a lot of enthusiasm for pharmaceutical and technology stocks.

Q: Where do you pick that 20-25 percent number for? Is it just the average decline of the last few major cyclical declines in the US?

A: The last significant decline was 50 percent. I do not think it is going to be as serious as that. It is based on what we have observed in this secular bear market that lasted long time, what we are expecting now at this stage of the cycle is to see a partial retracement of the gains from 2009. So, the S&P has gone from roughly 700 to 1,900 – that’s 1,200 points, so half of that 600 – that will be a sort of rule of thumb of the expectation, so something like that.

Q: What are the telltale signs of such a decline? What would you be watching out for to convince you that that process has started?

A: First thing that you see is that it loses momentum. So, it is still going up, but it is not as strong as it was. To complete that signal, you need to see momentum rollover and that is what we are waiting for now but these signals are slow. The last signal we had six years ago, so we have been waiting for this, not for six years but for the last two years we have been waiting – that was a window we thought would open that potential for the signal to start but we have not nervous because we know what we were waiting for.

The signal has not yet occurred. In the shorter term with any sort of work you do on the technical basis, the first sign of a problem is when you break a low which held before. So, the first low that we talk about now is the low in America recently which is 1,738 on the S&P, which was the low in January when we had 6 percent correction. So, that is the first levels, that is broken and that disturbs people, make them worry that there is a top forming in America. So, that would the first level to focus on.

Essar Energy rejects takeover bid by majority owner Ruias

Indian conglomerate Essar’s bid to take over its UK unit has been rejected by an independent committee set up by the subsidiary.

The committee was formed to consider the proposal from Essar Energy Plc’s biggest shareholder, the Ruia brothers, and to protect the interests of minority shareholders.

The panel unanimously concluded that, despite operational and Indian macro-economic challenges facing the business, a possible offer price of 70 pence per share clearly undervalues the London-listed oil and gas firm and its prospects.

The committee’s decision is viewed as a victory for minority shareholders, who felt the possible offer from Essar Global Fund Limited (EGFL) was “opportunistic.

” “The independent committee is unanimous in concluding that the current proposal from EGFL clearly undervalues the company and its long-term growth prospects. “The independent committee is fully committed to safeguarding the interests of minority shareholders,” Philip Aiken, chairman of the panel, said in a statement today.

The Ruias, whose Essar Global group owns 78 per cent of the shares in Essar Energy, had proposed on February 17 buying up the remainder stake. The indicative 70p a share offer valued Essar Energy at one-sixth its listing price in 2010.

The committee said that to supplement the advice it receives, Greenhill & Co. Has been appointed as additional financial adviser to JP Morgan Cazenove and that it was “fully committed to safeguarding” the interests of minority shareholders.

Investors in Essar Energy, which was listed on the London Stock Exchange in 2010 at 420p a share, had accused the Ruias of acting in a “cynical and opportunistic” manner by attempting to take the group private again.

Essar Energy shares traded at 63.60p at 1:05 pm local time, according to the company’s website.

Minority investors such as Henderson Global Investors and Standard Life were vocal about their displeasure with the proposed offer, which they felt undervalued the company.

The panel said there can be no certainty that any firm offer for the company will be made nor as to the terms on which such an offer might be made. RELATED NEWS