Corporate
Wyeth Lederle: Take a shot
WHILE the near-term prospects for capital appreciation are not exactly bright (barring the eventuality of a relaxation in the Drug Price Control framework), shareholders of Wyeth Lederle can stay invested from a medium-to-long term perspective. The possi
bility of improvement in the revenue stream and profitability, and the ongoing consolidation in the pharmaceutical industry offer some scope for gains.
Indian Shaving Products -- Emerging from the 7 o'clock shadow
WITH what could be a significant restructuring exercise in the offing, the Indian Shaving Products stock should remain an integral part of the portfolio of its shareholders. The company is a leading player in the shaving products business and its parent
also has strong brands in other consumer product areas. Thanks to the backing of a strong parent _ Gillette Inc, US _ and a near-monopoly status in the rapidly-growing premium end of the shaving products market, Indian Shaving Products has always been a
blue-eyed boy among FMCG companies.
Pfizer: Lots of vitamins, yet...
PFIZER has reported a sharp growth in income and profits for 1998-99 (the company's financial year is from December to November). In spite of the notable performance, the share price has remained stuck at around Rs. 1,200. The market sentiment for the st
ock appears to be still affected by the publicity surrounding the decision of Pfizer Corp. to set up a wholly-owned subsidiary in India. Investors may avoid taking fresh exposures till the sentiment about the company improves.
Rolling settlements -- Onward thrust with big stocks
THE rolling settlement system is coming up for review at a meeting of the SEBI Committee set up for the specific purpose on February 8, 2000. The universe of 10 stocks for rolling settlement that is now in place is likely to be expanded.
Information Technology
IN FOCUS
WIPRO, Infosys and Zee Telefilms _ three stocks which have been in the limelight in the last two years. In this period, the accretion to shareholder wealth has been of a kind never seen before in the Indian capital market. Between them, the stocks have a
dded almost Rs. 2,00,000 crores in incremental market capitalisation.
MARKETS _ A CENTURY IN RETROSPECT: Internet trading
FROM Wall Street, Shanghai, Tokyo, Frankfurt, and Sydney, to Seoul, the global securities industry is waking up to the realities of `online trading' (also called `Internet trading').
MARKETS _ A CENTURY IN RETROSPECT: Bourses go `for profit' to survive online competition
TRADITIONAL stock exchanges perceive a threat to their existence. Advancements in `technology' and `innovation' have created alternative stock exchanges (also known as the electronic communication networks or ECNs) that are forcing the brick-and-mortar b
ourses, such as the New York Stock Exchange (NYSE) and the London Stock Exchange (LSE), to start the process of change.
Investment World
Shelter long-term savings from current taxation
THE mutual fund industry has placed a simple one-point agenda before the Finance Minister, Mr. Yashwant SInha, as he sits down to frame the Budget proposals for the coming fiscal. It would like the Minister to simply look to the US for what he can do to
help the mutual fund industry. Not that the Minister needs any exhortation to look to the US for inspiration in policy formulation. For some years now, wisdom from the West, the US in particular, has formed the bedrock of policy formulation. That apart,
what exactly would the industry like the Finance Minister to do and where does the US come in?
SAIL: No smooth sail
THE fixed deposit programme of Steel Authority of India (SAIL) is open for investment. It offers two schemes _ fixed and cumulative. While the tenure for both the schemes is one, two and three years, the fixed deposit scheme offers interest rates of 10.5
per cent, 11 per cent and 12 per cent and the cumulative scheme yields of 10.90 per cent, 11.45 per cent and 12.56 per cent respectively.
A look at the specialists
WITH EXPANDING consumerism and the market's increasing shift towards value-added products, the prospects for the specialty chemicals industry appears bright. However, considering the extent of competition and the challenges facing the industry, it appear
s that only those which satisfy certain criteria would emerge winners. Technology base, product range, customer relationship, supply chain management, cost management, product innovation are just some of the key factors. Going by the success criteria, it
appears that the multinationals are better investment bets compared to the Indian companies. Companies such as Clariant India, Ciba Specialties, Colour-Chem, Nalco Chemicals and ICI could form part of the broad sample.
MARKETS IN JANUARY
AFTER beginning the year 2000 with a bang, most of the global stock markets fell sharply in January. The markets witnessed severe volatility during the month with many prominent indices touching a new-yearly high. Of the 27 key indices tracked by Busines
s Line, only seven managed to remain in the positive territory.
`Consolidation efforts have started in India'_ Dr. Annoottam Ghosh, Chief Executive (Performance Chemicals), ICI India
THE last two years have been hectic for the global specialty chemicals industry. Restructuring, globalisation, consolidation, and mergers and acquisitions have all impacted the industry. Though the pressures of the global restructuring are yet to be full
y felt in India, consolidation efforts are on as the domestic companies face intense competition both locally and from imports. They are trying hard to find niche markets and to improve the demand prospects. Dr. Annoottam Ghosh, Chief Executive (Performa
nce Chemicals), ICI India, explained to Business Line the various aspects of the industry.
Specialty chemicals -- Superior products and processes, the winning equation
THE MARKET'S interest for value sectors that began last April however never really took off in a big way, mainly because of the sluggish revival of the economy and industrial production. Consequently, value sectors, comprising commodity manufacturers and
companies in economically-sensitive businesses which generally command low price earnings multiples (because of the high business risk) and are expected to perform well in a reviving economy, failed in the stock market after posting gains in the April-J
une 1999 quarter.
Portfolio toppers score over MFs
AT LAST, investors seem to be giving the thumbs-up to passive investing, with mutual funds increasingly finding a place in most individual portfolios. And the funds never had it so good. The recent surge in investment flows into equity schemes is testimo
ny to investor acceptance of mutual funds. Endorsing this are the incredible performance of equity schemes of mutual funds in 1999, when returns in excess of 100 per cent were normal by industry standards.
Calcutta Steel Company
THE fact that Calcutta Steel Company has not been operational for the last nine years, coupled with the infrequent trading in the stock, makes this open offer a good exit opportunity.
PUBLIC OFFERS
TELESYS Software is making a public offer to finance the expansion of its software development facilities. The offer has been priced at Rs. 5 per share. The cost of the project has been estimated at Rs. 14.46 crores with the financing to be made entirely
with equity. Promoters are contributing Rs. 5.99 crores while the public issue for Rs. 7.50 crores would account for the rest. Post-issue, the paid-up equity capital would stand at Rs. 10 crores.
Pentagon Global Solutions
PENTAGON Global Solutions is in the business of providing computer education services and other education products in the area of office services. The company operates owned and franchisee education centers for this purpose in Tamil Nadu. Its experience
in software services and software products is limited.
Avantel Softech: At a stiff price Score : Average
AVANTEL Softech is making a public offer to establish a software development centre in Hyderabad. It is also setting up a subsidiary in the US at a cost of Rs. 3.5 crores. The total cost of the project works out to Rs. 9.90 crores, which is to be finance
d with an equity portion of Rs. 8.90 crores and a term loan component of Rs. 1 crore. The public offer at Rs. 50 per share accounts for Rs. 6.70 crores, with promoters investing the rest.
They are bankable still
GIVEN the level of liquidity, competition for business on the lending side and a general preference on the part of the government and the RBI for lower interest rates, bank FD rates continue to rule soft. This has led to a marked drop in the deposits in
the banking system.
Info, time lags and other problems
TIMELY information is key to any active investment strategy. While it is not easy for a lay investor to access information on mutual fund portfolios, it is not an insurmountable hurdle. Information on mutual fund portfolios is now generally available on
the Internet. Newspapers, too, routinely publish information on the top holdings of most equity schemes. With some research, investors can indeed gather data on the top exposures of various schemes.
Debt schemes: Taking a tip
AS IN equity schemes, investment allocation in debt schemes could also provide interesting pointers to investors. But the required disclosures are made only by a few funds. Even if the disclosures were uniform, the opportunities to benefit from such sign
als are limited.
Stick to the main players
IN 1999, the top holdings in most mutual fund equity schemes were from such sectors as software, telecom and entertainment. The runaway growth in stock prices largely drove the outperformance of the portfolios toppers over the mutual fund itself. Such st
ocks included Zee Telefilms, Mastek, Satyam Computers and Infosys Technologies.
Spreads on banking deposits may decline
AFTER maintaining silence for a considerable period of time since the small savings rate cut, the RBI Governor, Mr. Bimal Jalan, finally voiced his opinion on the interest rate scenario. For two days in a row, the RBI Governor said that interest rates mu
st decline. However, he admitted that there are structural rigidities that make it difficult to lower interest rates.
Mutual Funds
Shriram Mutual Fund -- SEBI takes a tough line
THE Securities and Exchange Board of India (SEBI) has directed that the sponsors of Shriram Mutual Fund to pay Rs. 25.62 lakhs with 15 per cent interest towards the corpus of the mutual fund schemes. The SEBI directive follows investigations that reveale
d irregularities in the acquisition of Videocon shares by the fund at the time of the payment crisis on the Bombay Stock Exchange in June 1998. The fund had purchased 1,20,600 shares at a price of Rs. 84 when the market price was Rs. 63. SEBI has directe
d the fund to pay the difference between the two prices with interest, as this is the loss to the mutual fund.
IDBI Index I-Nit: A good mimic
GIVEN that the Nifty is comprised of good quality companies where liquidity is not likely to become a problem, an index fund modeled on the Nifty should be in a position to offer reasonable capital appreciation over a three-five year timeframe. On this c
ount, the IDBI Index I-Nit appears to be a reasonable investment option for investment for a three-five year horizon. This is despite the fact that IDBI Mutual Fund has had an inconsistent track record of performance when it comes to its equity-oriented
schemes.
The Alliance'95 Fund -- On a roll
THE Alliance'95 Fund continues to be a good investment option for investors as it has still maintained its solid track of performance over the last five years. Despite a sizeable increase in the asset base and a portfolio that has more weightage towards
economically-sensitive stocks than at any time in the past, the fund appears well-poised to deliver healthy returns over a period of time.
SBI Magnum TaxGain -- Gains from well-timed exposures
MAGNUM TaxGain, an open-end tax-saving scheme from SBI Mutual Fund, was one of the top performing equity-oriented schemes over 1999. The scheme turned in a return of over 300 per cent over in past one year alone, its net asset value (NAV) moving from Rs.
10.58 per unit at end-December 1998 to Rs. 39.41 per unit by January 2000. This is after a dividend of 25 per cent paid out to its investors in December 1999.
Scrip Scan
Cummins India: Hold and generate returns
A HOLD strategy may be in order as far as Cummins India stock goes. As the stock price has moved up sharply in the recent months, fresh exposures from a long-term perspective may be contemplated by taking advantage of price weakness. It may benefit if th
e signs of economic recovery evident in fiscal 1999-2000 spill over into next year too. Cummins India has tended to do well if the overall trends in the economy are good, as it has been in fiscal 1999-2000.
FDC: Just the right formula
FDC now trades around Rs. 391, with a price earnings multiple (PEM) of about 20 times. Investors may consider buying the scrip, as the company may record significant profit growth in the next couple of years, following efforts to increase penetration of
its established brands.
Coming a`live'
THE stocks from the media industry have been on an uptick in the recent times. Two such stocks which have risen sharply in recent times are Gramophone Company of India and Crest Communications. Though the financials of these two companies do not exactly
justify the current stock valuation, the possibility of an improvement in their business prospects over the long-term make them worthwhile investment options, especially on any price declines. Existing shareholders can stay invested as there may be some
more upside potential.
Stocks
PSI Data Systems: Upbeat prospects
THE PSI Data Systems stock is currently trading at Rs. 1,818. Investors can take exposures in it at the current levels. Considering the support from a strong parent and its firm fundamentals, there is scope for fair appreciation in the medium term. PSI D
ata Systems is a subsidiary of Groupe Bull of France. The latter has a 51 per cent stake in the company.
Healthy prospects for Parke-Davis
THE stock of the pharmaceutical major, Parke-Davis, has been on an uptrend in the last few trading sessions. The stock has notched up a gain of around 10 per cent during the week to close at Rs. 416. It is likely to rule firm. Existing shareholders can s
tay invested.
The coming of dematerialisation
EVEN AS the European and American stock markets reckon with the changes brought about by the Internet and IT/telecom advances (see accompanying story), the Indian stock market has quickly moved to global standards.
Taxation
TAXTALK
THIS edition deals with exemptions claimed on losses from house-property rented out, tax implications of an ex gratia payment to a retiring employee, and the surcharge on the income-tax payable.
A tax-saving checklist
IT IS THAT time of the year again: Time to make good on your promises (to yourself) to make tax-saving investments. It has been a curious year as far as tax is concerned.
