NEW YORK: Insurer American International Group Inc struggled for survival a day after a financial tsunami swept away investment bank Lehman Brothers and forced the sale of rival Merrill Lynch in the biggest financial industry shake-up since the Great Depression.
AIG scrambled for a financial lifeline on Monday after investment bank Lehman Brothers Holdings Inc failed to find a rescuer and Merrill Lynch & Co Inc agreed to be taken over by Bank of America Corp.
The US Federal Reserve has hired investment bank Morgan Stanley to review options for AIG -- which has lost some 92 percent of its value so far this year -- a person familiar with the situation said Monday.
AIG's precipitous stock decline has led ratings agencies to threaten downgrades that could force it to post more collateral and nullify insurance contracts, possibly setting in motion a chain reaction that could threaten its survival.
In an ominous sign, two ratings agencies went ahead with downgrades after the market closed on Monday.
"AIG seems to be the next guy on the chopping block," said Tom Sowanick, chief investment officer at Clearbrook Financial LLC in Princeton, New Jersey.
Again seeking a private solution to Wall Street's woes, the Fed had asked JPMorgan Chase & Co and Goldman Sachs Group Inc to explore arranging $70 billion to $75 billion in loans to support AIG, among other financing options, another person familiar with the situation said.
Fearing a financial meltdown, the US presidential candidates sparred Monday over who could best restore the system's health, with Republican John McCain pledging reform and Democrat Barack Obama saying hands-off Republican policies were the problem.
US stocks tumbled across the board, with the Dow Jones industrial average dropping 504 points as Wall Street had its worst day since markets reopened after the September 11 attacks.
There was speculation that Wall Street's worsening meltdown could prompt the Fed to ac
Tuesday, September 16, 2008
indian stocks aafecting from lehman bankruptcy
lehman Brothers has filed for Chapter 11 bankruptcy after Barclays and Bank of America abandoned talks to buy the company. Following the news, the IT space felt a fair bit of pressure. With Lehman Brothers filing for bankruptcy and Bank of America taking over Merrill Lynch; the key question would be - do these companies have significant exposure to the Banking, Financial Services and Insurance (BFSI) space and what would be the impact?
As has been observed in the previous three-four quarters, every time there is a client-specific issue, it shows up on the financials in the next one-two quarters.
Lehman Brothers, which has filed for bankruptcy, seems to have very little outsourcing done as of now and the exposure remains with Wipro and Tata Consultancy Services (TCS). Wipro has given a statement that Lehman Brothers is not such a significant client and they are not worried about it. Extrapolating what Wipro has said, TCS may not see much of the impact.
But one needs to watch out for what happens with Merrill Lynch because Merrill Lynch was a significant client for both Satyam and TCS. The one which is going to suffer from Merrill Lynch’s takeover is going to be Satyam because it was a significant top client for them. Where TCS gains over Satyam is it has in relationship with the acquiring company Bank of America, which gets more outsourced work. Infosys and Bank of America have a very steady relationship. So Infosys maybe one of the gainers.
S Mahalingam, CFO, TCS has said that the company has a very steady-state relationship with both Merrill Lynch and Bank of America. So he is expecting no impact coming from this part of work at least.
HCL Technologies has done a little bit of work for Lehman Brothers but the management has clarified that it is over and they are not going to be impacted by it. EDS does a lot of work for Bank of America globally. So one needs to wait and watch of what kind of shape this takes and whether any work pours down to Mphasis.
When one puts all of this together, there is some loss but given that most of our top five companies have over 40-45% exposure to BFSI space, then mood is worried and concerned right now. Everybody is calling their relationship manager and trying to figure out what is happening officially because normally there is a two-three months' time, by when the impact actually flows down to the offshoring vendors.
As has been observed in the previous three-four quarters, every time there is a client-specific issue, it shows up on the financials in the next one-two quarters.
Lehman Brothers, which has filed for bankruptcy, seems to have very little outsourcing done as of now and the exposure remains with Wipro and Tata Consultancy Services (TCS). Wipro has given a statement that Lehman Brothers is not such a significant client and they are not worried about it. Extrapolating what Wipro has said, TCS may not see much of the impact.
But one needs to watch out for what happens with Merrill Lynch because Merrill Lynch was a significant client for both Satyam and TCS. The one which is going to suffer from Merrill Lynch’s takeover is going to be Satyam because it was a significant top client for them. Where TCS gains over Satyam is it has in relationship with the acquiring company Bank of America, which gets more outsourced work. Infosys and Bank of America have a very steady relationship. So Infosys maybe one of the gainers.
S Mahalingam, CFO, TCS has said that the company has a very steady-state relationship with both Merrill Lynch and Bank of America. So he is expecting no impact coming from this part of work at least.
HCL Technologies has done a little bit of work for Lehman Brothers but the management has clarified that it is over and they are not going to be impacted by it. EDS does a lot of work for Bank of America globally. So one needs to wait and watch of what kind of shape this takes and whether any work pours down to Mphasis.
When one puts all of this together, there is some loss but given that most of our top five companies have over 40-45% exposure to BFSI space, then mood is worried and concerned right now. Everybody is calling their relationship manager and trying to figure out what is happening officially because normally there is a two-three months' time, by when the impact actually flows down to the offshoring vendors.
Wednesday, September 10, 2008
sensex @ 10000 by december end
HONG KONG: Patrick Shum, chief strategist, Karl Thomson Securities, said the Sensex may drop to 10,000 by the end of the year.
At what levels, in terms of price correction, does India become good on a valuation basis to look at?
Shum: I guess at the end of this year, the Sensex may drop to 10,000 points. I think at that level, it is a good time for buying. Before that, I suggest investors should be more patient and wait for the correction.
What is your worst-case scenario for inflation and interest rates now?
Shum: Inflation is over 12% - so it is higher than the economic growth, and we can see in India that the economy is under stagflation. The central bank will have less flexibility to implement their policys... so uncertainty will affect investment sentiment.
What is the flow of money from the FII side into Asia? Are they looking at equities in emerging markets?
Shum: Most of the equity markets is still facing pressure because a strong US dollar means money is returning to the US. So, in the near term or the rest of this year, money flow to Asian markets will be low, and the equities markets will face certain pressure.
You said India is probably heading towards stagflation? Is that correct?
Shum: I think investors, for the rest of this year, should hold more cash and increase their cash holding... I can see more downside in the coming months.
From an economic stand point, I didn't catch the word stagflation. What is that?
Shum: In economic terms, you can see the sub-prime crisis in the US, and in the European market, we can see negative GDP growth. So, in economic terms, I think the global economy will slow down.. so it's not a good time for investments.
What accounts for the rally that we saw in Indian equities all through July? We were one of the outperformers ...
Shum: I think in the near-term, the Indian market will underperform but in the long- term, let's say 1-2 years, I think India will outperform because the fundamentals are still good... in the near-term, strong inflation will erode consumers' purchasing power. I think the valuation of the Indian market is relatively higher than other markets...
I think the market will become weaker because inflation is still there, and I think because of strong oil prices and food prices, inflation pressure will increase and the central bank may raise interest rates again.
Sunday, September 7, 2008
NSG meet approves nuclear waiver for India
The 45-nation Nuclear Suppliers Group (NSG) has approved a US plan to engage in nuclear trade with India. Following the green signal by the NSG that will cement the Indo-US Civil Nuclear Deal, India has finally come out of the 34-year old nuclear apartheid.
The approval came after almost three days of meeting in Vienna on Saturday. The NSG meet was called to minimise any damage to the Non-Proliferation Treaty, which India has not joined.
now the nuclear deal is signed the
stocks that are benefited from nuclear deal
companies like L&T, BHEL, NTPC, Areva T&D, Alstom Projects, Rolta, HCC, ABB, Crompton Greaves, Siemens stand to gain.
L&T has done engineering, procurement and construction projects for nuke power plants. It is currently working on the 2,000 MW Kudankulam nuclear project. The company will get into mainstream nuclear projects if the deal goes through. L&T�s talks with Toshibha failed. It entered into a recent tie-up with Mitsubishi for super critical boilers. The Mitsubishi technology would be used for Nuclear Power Corp. L&T may leverage its relationship with Mitsubishi for its other nuclear business.
BHEL supplies up to 500 MW of equipment to Nuclear Power Corp. It is looking for a tie up manufacturing equipment of up to 700 MW & 1500 MW. The company has been in talks with Alstom, GE Energy, Russia's LMZ and Siemens. It has an existing tie-up with Siemens for nuclear technology.
The company is in talks with Nuclear Power Corporation of India. It is looking at setting up 2000 MW nuclear plant. He is In talks with GE Energy for technology and fuel. NTPC is looking at the project to be operational by 2012-2013.
The company already makes nuclear reactors and rotors. Its parent company is a world leader in conventional nuclear projects. It makes turbines for nuclear power stations. It supplies steam turbines to over 30% of nuke power stations globally.
The Rolta-Stone and Webster joint venture competent provides reactor-building technology. It will leverage on its partner's core competency. Stone & Webster's parent has 20% in Westinghouse Electric, a nuclear reactor maker.
Gammon has undertaken turnkey construction for nuclear projects.
HCC has constructed four of seven nuclear power projects in India. It is an EPC contractor for nuclear projects.
ABB makes components for power projects. Its parent company�s exposure includes new
nuclear power plants, systems and components. The parent company�s exposure includes fuel services, waste management and decommissioning.
Crompton Greaves works with Nuclear Power Corporation of India. It has completed a switchyard for nuclear project.
Walchandnagar Industries makes critical equipment for India's nuclear power facilities.
Siemens has a marginal exposure through its parent company.
Reliance Energy plans to invest additional Rs 12,000 crore in nuclear power capacity. It plans to install 2000 MW of nuclear power capacity.
Tata Power has tied up with some major nuclear equipment suppliers like Areva. It already has a relationship with Toshiba; it will leverage on it.
The approval came after almost three days of meeting in Vienna on Saturday. The NSG meet was called to minimise any damage to the Non-Proliferation Treaty, which India has not joined.
now the nuclear deal is signed the
stocks that are benefited from nuclear deal
companies like L&T, BHEL, NTPC, Areva T&D, Alstom Projects, Rolta, HCC, ABB, Crompton Greaves, Siemens stand to gain.
L&T
L&T has done engineering, procurement and construction projects for nuke power plants. It is currently working on the 2,000 MW Kudankulam nuclear project. The company will get into mainstream nuclear projects if the deal goes through. L&T�s talks with Toshibha failed. It entered into a recent tie-up with Mitsubishi for super critical boilers. The Mitsubishi technology would be used for Nuclear Power Corp. L&T may leverage its relationship with Mitsubishi for its other nuclear business.
BHEL
BHEL supplies up to 500 MW of equipment to Nuclear Power Corp. It is looking for a tie up manufacturing equipment of up to 700 MW & 1500 MW. The company has been in talks with Alstom, GE Energy, Russia's LMZ and Siemens. It has an existing tie-up with Siemens for nuclear technology.
NTPC
The company is in talks with Nuclear Power Corporation of India. It is looking at setting up 2000 MW nuclear plant. He is In talks with GE Energy for technology and fuel. NTPC is looking at the project to be operational by 2012-2013.
Areva T&D
Areva T&D is looking at a plant for uranium mining and recycling. The plant would be set up after nod from Nuclear Power Corp.
Alstom Projects
The company already makes nuclear reactors and rotors. Its parent company is a world leader in conventional nuclear projects. It makes turbines for nuclear power stations. It supplies steam turbines to over 30% of nuke power stations globally.
Rolta
The Rolta-Stone and Webster joint venture competent provides reactor-building technology. It will leverage on its partner's core competency. Stone & Webster's parent has 20% in Westinghouse Electric, a nuclear reactor maker.
Gammon has undertaken turnkey construction for nuclear projects.
HCC
HCC has constructed four of seven nuclear power projects in India. It is an EPC contractor for nuclear projects.
ABB
ABB makes components for power projects. Its parent company�s exposure includes new
nuclear power plants, systems and components. The parent company�s exposure includes fuel services, waste management and decommissioning.
Crompton Greaves
Crompton Greaves works with Nuclear Power Corporation of India. It has completed a switchyard for nuclear project.
Walchandnagar Industries makes critical equipment for India's nuclear power facilities.
Siemens has a marginal exposure through its parent company.
Reliance Energy plans to invest additional Rs 12,000 crore in nuclear power capacity. It plans to install 2000 MW of nuclear power capacity.
Tata Power has tied up with some major nuclear equipment suppliers like Areva. It already has a relationship with Toshiba; it will leverage on it.
Saturday, September 6, 2008
Anand Rathi neutral on 20 Microns IPO
Anand Rathi Securities has come out with a research report on 20 Microns' IPO. It has given a neutral rating to the issue.
20 Microns will open for subscription on September 8, 2008 with its public issue of 43,50,632 Equity shares of Rs 10. The price band has been fixed at Rs 50-55. The issue will close on September 11, 2008.
Anand Rathi Securities' report on 20 Microns' IPO:
20ML is a multi-product company which helps to protect it from reductions in demand for any one product type.
20ML’s mining resources and plants are strategically located in the states of Rajasthan, Gujarat, and Tamil Nadu. The manufacturing units of the company are well connected with national - highways and railways which helps the company in reaching to its customers economically.
20ML’s implementation of business planning tools, focus on technical support, field coaching and constant evaluation of product knowledge and training has helped in improving effectiveness and field force productivity. Customer segmentation has also helped to sharpen the focus on its key customers.
A demand under the Central Excise Act to the tune of Rs 107.29 million if decided against the company will adversely affect the financial conditions and the business of operations of the company.
Out of the total issue proceeds (at higher end of price band) of Rs 239.28 million, the offer for sale is Rs 147.16 million and thus the company will be receiving only Rs 92.12 million.
20ML faces competition from unorganized sector whose costs are lower due to exemption from excise duty. The players in the unorganized sector change their formulations to absorb some of the cheaper ground material to lower their cost of production and in turn reducing their pricing. Thus 20ML may be forced to reduce the prices of its offerings and services, which may reduce its revenues and margins and/or decrease its market share, which would adversely affect the business operations of the company.
Valuation:-
At the price of Rs50-55, the issue is priced at 13.6x-15x its FY08 EPS of Rs3.68 and at 15.4x-17.0x its FY08 FDEPS of Rs3.2. On comparison with its established peers which are comparatively larger in size, 20ML appears expensive. Taking into account the valuation and considering the risks associated with the investment concerns cited above, We are NEUTRAL to the issue
20 Microns will open for subscription on September 8, 2008 with its public issue of 43,50,632 Equity shares of Rs 10. The price band has been fixed at Rs 50-55. The issue will close on September 11, 2008.
Anand Rathi Securities' report on 20 Microns' IPO:
20ML is a multi-product company which helps to protect it from reductions in demand for any one product type.
20ML’s mining resources and plants are strategically located in the states of Rajasthan, Gujarat, and Tamil Nadu. The manufacturing units of the company are well connected with national - highways and railways which helps the company in reaching to its customers economically.
20ML’s implementation of business planning tools, focus on technical support, field coaching and constant evaluation of product knowledge and training has helped in improving effectiveness and field force productivity. Customer segmentation has also helped to sharpen the focus on its key customers.
A demand under the Central Excise Act to the tune of Rs 107.29 million if decided against the company will adversely affect the financial conditions and the business of operations of the company.
Out of the total issue proceeds (at higher end of price band) of Rs 239.28 million, the offer for sale is Rs 147.16 million and thus the company will be receiving only Rs 92.12 million.
20ML faces competition from unorganized sector whose costs are lower due to exemption from excise duty. The players in the unorganized sector change their formulations to absorb some of the cheaper ground material to lower their cost of production and in turn reducing their pricing. Thus 20ML may be forced to reduce the prices of its offerings and services, which may reduce its revenues and margins and/or decrease its market share, which would adversely affect the business operations of the company.
Valuation:-
At the price of Rs50-55, the issue is priced at 13.6x-15x its FY08 EPS of Rs3.68 and at 15.4x-17.0x its FY08 FDEPS of Rs3.2. On comparison with its established peers which are comparatively larger in size, 20ML appears expensive. Taking into account the valuation and considering the risks associated with the investment concerns cited above, We are NEUTRAL to the issue
latest research
Radico Khaitan Ltd -
sazal sharetraders Research Team / Mumbai Sep 05, 2008 14:44
Radico has acquired a 36% stake in an Aurangabad-based distillery for a sum of Rs1.6bn.
CMP Rs70
We met the management of Radico Khaitan and came back with a cautiously positive view on the company. Radico aims for a 5% volume growth in its flagship whisky brand ‘8PM’ in FY09 while overall IMFL sales is likely to increase by 12% yoy. ‘Magic Moments’, a vodka offering, is expected to double its sales in current year. A new launch is planned in the brown spirits segment even as on operating front the company braces for a rise in the cost of molasses, a key raw material. It has acquired 36% stake in a distillery in Aurangabad, which is likely to be commissioned by December 2008.
Click here for the company update on Radico Khaitan Ltd.
sazal sharetraders Research Team / Mumbai Sep 05, 2008 14:44
Radico has acquired a 36% stake in an Aurangabad-based distillery for a sum of Rs1.6bn.
CMP Rs70
We met the management of Radico Khaitan and came back with a cautiously positive view on the company. Radico aims for a 5% volume growth in its flagship whisky brand ‘8PM’ in FY09 while overall IMFL sales is likely to increase by 12% yoy. ‘Magic Moments’, a vodka offering, is expected to double its sales in current year. A new launch is planned in the brown spirits segment even as on operating front the company braces for a rise in the cost of molasses, a key raw material. It has acquired 36% stake in a distillery in Aurangabad, which is likely to be commissioned by December 2008.
Click here for the company update on Radico Khaitan Ltd.
Tuesday, September 2, 2008
ONGC can head upto Rs 1,250-1,300: ASHWANI Gujral
Technical Analyst, Ashwani Gujral is of view that Oil & Natural Gas Corporation, ONGC looks most positive that could be headed back to about Rs 1,250-1,300.
Gujral told CNBC-TV18, "I think crude has much further to go so in energy if I assume that you are talking about oil stocks, they at least have further 10-15%, I think Bharat Petroleum Corporation, BPCL could easily go up to Rs 360, Hindustan Petroleum Corporation, HPCL could trade back up to Rs 275-280 and Oil & Natural Gas Corporation (ONGC) looks most positive that could be headed back to about Rs 1,250-1,300."
Disclosures: It is safe to assume that analyst and his clients may have an investment interest in the stocks/sectors discussed.
Gujral told CNBC-TV18, "I think crude has much further to go so in energy if I assume that you are talking about oil stocks, they at least have further 10-15%, I think Bharat Petroleum Corporation, BPCL could easily go up to Rs 360, Hindustan Petroleum Corporation, HPCL could trade back up to Rs 275-280 and Oil & Natural Gas Corporation (ONGC) looks most positive that could be headed back to about Rs 1,250-1,300."
Disclosures: It is safe to assume that analyst and his clients may have an investment interest in the stocks/sectors discussed.
Shankar Sharma of First Global said that the overall trend in market is still down and the rally from 12,500-15,000 is over and done with. He feels that the sharp oil price correction is likely and India will be a big beneficiary from the same. According to him, India will benefit from fund reallocation in Emerging Markets, or EMs if crude cracks. He feels that the markets may slip to 10,000 levels this year or early next year and may then start moving up gradually over next three years. He sees the Sensex bottom within the 10,000-12,500 range. He believes that the market could double from lows but that may be short-lived.
According to him, valuations of BHEL, L&T is still expensive. He doubts further stellar returns from SBI and feels that the rally is over. RIL may drive the next leg of fall in the market and could test levels substantially below Rs 2,000 per share, he said. He doesn't see much downside for IT from current levels.
Sharma said, "Nothing has really changed. The GDP numbers have come in confirming our fears but this is just a recent set of numbers. We don't know what lies ahead. Overall the trend is down punctuated by the rallies we keep seeing. When I say bull market, I mean taking out the highs and continuing to the path of 25000 and beyond. Markets could reach 18000-19000 - that rally is still to be played out. So, markets can double from lows but that still won't be a bull market. It will coincide with crude having come off, some talk of political certainty because inflation has cooled off. That rally will propel markets close to 20,000 but I doubt if that will be so quick. Crude has to come off substantially at USD 80-85 per barrel. Our case is it will and may take 12 months to get to the USD 50 per barrel levels. Crude may rally 10-20% from its lows. When it hits USD 50 per barrel, you will see India begin to come back on its own."
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