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Wockhardt suffers on currency derivatives woes
24 Mar, 2008, 1747 hrs IST,Mandar Nimkar..........


MUMBAI: Wockhardt continued to face troubled times on the bourses, on reports it will suffer losses arising out of a volatile currency derivatives market.

The share Monday ended down 3.2 per cent at Rs 252.20, despite a clarification that “the company will neither incur any losses arising out of the volatile currency derivatives in the current quarter (ended March), nor will there be a situation of such losses to occur subsequently.”

The fifth largest drug maker by turnover, Wockhardt is one of several Indian companies that have incurred losses in the currency derivatives market, media reports had said last week.

The company has $300 million in external commercial borrowings, Euro 165 million leverage buyout debt, $108 million foreign currency convertible bonds and Rs 2.5 billion working capital loan.

In a recent release, Rajiv Gandhi, CFO, said that Wockhardt has not swapped its dollar/euro liabilities (totaling $700 million) into other currencies.

“The company uses rupee/dollar and rupee /euro forward cover as hedge. We have not used exotic currency options. The forex liability, more or less, offsets the foreign currency denominated operating cash flow. Hence, the company has not incurred any losses on forex transaction,” the note quoted Gandhi as saying.

“The cost of euro loan and dollar loan is 6 per cent. The loan repayment schedule of the company shows $26 million in 2008, $20 million and euro 28 million in 2009 and $175 million and euro 20 million in the year 2010.”

The US dollar has depreciated 9 per cent against the Indian currency from April 2007 to February 2008. Today the dollar was 40.25, up 15 paise from Wednesday but down from Rs 39.15 on Oct 2007.

Wockhardt generated about 49 per cent of revenue or Rs 3,748 million from European markets in the fourth quarter of 2007, around 15 per cent or Rs 1,147 million from the US, Rs 1,825 million or around 24 per cent from India and Rs 898 million or 12 per cent from rest of the world. The company follows calendar year for accounting.

“In the last one year there has been considerable currency fluctuation and hedging against such fluctuations is the normal practices of the corporate. Records of the last few years clearly demonstrate that there have been no losses incurred from the business related hedging activities,” Gandhi said.

“The company covers for 25 per cent of forex loans (plus interest cost) that are due in the next three years. Presently, the company is covered for 2008 and 2009 loan payments.”

Wockhardt shares lost around 23 per cent from Mar 3 to Mar 19 last week.

“Investors are already scared due to weakness in global financial markets and the high volatility. News about ICICI Bank suffering losses on mark-to-market margins and losses suffered by L&T arm in commodities derivatives prevented investors to hold positions in (Wockhardt) such a choppy markets,” said Ramesh Kuvare of DBM Wealth Management.

The Accounting Standard (AS) 30, which deals with a firm's mark-to-market losses from the derivative business, will only come into effect from 2011, but some experts said if the losses are on account of speculation and not genuine hedging, a company would need to book them.

“Taking a forward coverage to hedge against the high volatility will not affect the profitability at large, but speculating or betting against the volatility will definitely hit the margins of the company. In case of L&T they bet against the rising commodity prices, but in Wockhardt’s case they have merely hedged their currency exposure by taking forward positions to hoard any unforeseen volatility," said an analyst with a large brokerage.

Ctrl S to invest USD 250 mn in 4 new data centres

New Delhi, March 25: Hyderabad-based firm Ctrl S Data Centers on Tuesday said it is planning to invest 250 million dollars to open four data centres in the country in next 2-3 years.

"We are planning to open four data centres in Bangalore, Chennai, Delhi and Mumbai by 2010 which would entail an investment of 250 million dollars," Ctrl S Data Centers Chairman and Managing Director S Reddy said.

Ctrl S Data Centers is a data centre firm and data centres house computer systems and associated components, such as telecommunications and storage systems.

Currently, the company has a Tier-4 data centre in Hyderabad with a capacity of 1,000 racks.

All the existing data storage centres in India are tier-2 and tier-3, he said. The tier-4 facility is the highest category of data centres in the world and it costs 30 to 40 per cent higher than the other two categories of facilities.

With the new four data centres coming up in the country, the company expects to create a capacity of 20,000 racks.

The Asian Data Centre market would increase by a compound annual growth rate of 11.5 per cent over the period from 2006 to 2010 with India becoming the fastest growing market.

He said the data centre industry in the country is expected to grow many fold with nearly 1,700 square feet data centre space expected to be created in India by 2010.

With more than 50 new telcos coming in India, there would be an explosion of data centres in the country.

Ctrl S Data Centers is promoted by the Rs 500-crore Pioneer Group along with IDBI and Och-Ziff a New York-based global Top 5 hedge fund.

Tata Motors stock choppy ahead of expected Ford deal

Mumbai, March 26: Shares in Indian vehicle maker Tata Motors reversed early gains in Wednesday morning trade in a choppy market, ahead of an expected deal to buy Ford Motor's premium Jaguar and Land Rover brands.

At 10:32 am (0502 GMT), the firm's shares were trading 0.6 percent down at Rs 676, after opening 1.5 percent up at Rs 690.

The main stock index was trading down 0.05 percent, or 8.86 points, at 16,208.63. The index had opened 0.32 percent higher and rose as much as 0.57 percent in early deals before falling up to 0.52 percent.

A source said on Tuesday Ford had agreed to sell its Jaguar and Land Rover brands to the Indian firm for more than USD 2 billion, while another source said the US automaker plans to publicly announce the deal in New York at 0800 EST on Wednesday.

Inflation close to 7% as govt gears up

New Delhi, March 28: With inflation moving toward seven per cent, the government has begun pulling out all stops to boost domestic supply situation by withdrawing incentives on export of at least 40 items, including steel, cement and non-basmati rice.

In a concerted action involving the ministries of Finance, Consumer Affairs and Agriculture, the Commerce Ministry withdrew or temporarily suspended the tax refund scheme - Duty Entitlement Pass Book - late last night.

"Total number of items on which DEPB benefits have been withdrawn would be running into about 40-50," Commerce Secretary G K Pillai told reporters here today. While the country was importing cement at zero duty, it has stopped the export incentives as a precautionary measure.

As for steel, he said: "When there is a shortage in the country and prices are high, why give export incentives."

Besides measures to discourage exports, the government is considering more fiscal steps to improve supplies and rein in inflation, he indicated.

Pillai said an empowered Group of Ministers would be meeting on April 2 to consider measures for maintaining adequate supply line in the face of global pressure on prices.

"The eGoM would be (reviewing) prices of rice, wheat and procurement of edible oil," he said.

Inflation, based on the Wholesale Price Index, has jumped way above the comfort level of 5 percent and touched 6.68 percent for the week ended March 15.

The government has already reduced duties on import of different varieties of palm oil and the duty cut on soya oil would be one of the options to be considered by the eGoM.

In one shot, the government has also raised the minimum export price for non-basmati rice from USD 650 per tonne to USD 1000.

Sensex up 355 pts, Closes at 16371

Mumbai, March 28: Snapping the losing streak of the past two days, the Bombay Stock Exchange benchmark Sensex gained over 355 points on Friday on revival of buying support in fundamentally strong stocks.

After losing nearly 202 points in the last two days, the 30-share Sensex recovered the lost ground today and added 355.73 points at 16,371.29.

Marketmen said a brisk fag-end buying pushed the index up sharply up. The Sensex touched the day`s high of 16,452.08 and a low of 15,884.45 points.

In similar fashion, wide-based National Stock Exchange index Nifty spurted by 111.75 points at 4,942.00, after touching a high of 4,970.80 and a low of 4,796.35 points.

Trading sentiment turned firm following reports of a rising trend in Asian stock markets, discounting a reversal trend in the US Dow Jones and Nasdaq.

A major push to the market came in from metal, capital goods, realty, oil and gas and it stocks.

Metal index surged the most by 800.21 points at 14,654.19, followed by capital goods index by 740.70 points at 14,455.44. Realty index gained 333.63 at 7984.92, oil and gas index by 306.63 points at 10,467.61 and it index by 178.28 points at 3758.30.

As the buying interest spilled over a wide front, small-cap sector index shot up by 375.20 points at 7901.98 and mid-cap sector index by 246.53 points at 6,522.79.

Govt suspends export subsidy on steel

New Delhi, March 27: As a measure to control inflation and boost domestic supplies, the government on Thursday suspended export subsidy under DEPB scheme on steel, while completely withdrawing the benefits on overseas sales of non-basmati rice.

While, the benefits under the Duty Entitlement Pass Book (DEPB) scheme have been temporarily removed for steel exports, these have been completely withdrawn for export of non-basmati rice, the directorate general of foreign trade said in a public notice today.

Tatas spend $133 mn in advisory fees in last 2 years

New Delhi, March 28: Country's leading industrial conglomerate Tata group, which recently announced the acquisition of premium British car brands Jaguar and Land Rover, has spend a whopping USD 133 million in advisory fees related to various buyouts in the last two years.

According to data compiled by leading global financial information provider Dealogic, "the Tata group of companies has paid a total of 133 million dollars in advisory fees to banks advising on acquisitions since 2006".

The amount of USD 133 million assumes significance as the group has acquired as many as 56 businesses with a total volume of USD 20.6 billion in the last two years, accounting for 82 percent of their total merger and acquisition volume.

Since the year 2002, the Tata group has made as many as 106 acquisitions valued at USD 24.2 billion.

Tata's M&A activities are mostly outbound as only 13 percent of Tata Group' acquisitions have been domestic, that is targets based in India. The average acquisition size by the Tata Group is USD 284 million.

The recent acquisition of Jaguar Cars and Land Rover for USD 2.3 billion is the second largest acquisition by the group, following Tata Steel's acquisition of Anglo-Dutch steel maker Corus for USD 12.1 billion, essaying the largest overseas takeover by an Indian company.

Dealogic further added that the United Kingdom is the most targeted nation with a M&A volume of 16 billion dollars through seven deals, and this accounts for 82 percent of the total M&A acquisitions.

Satyam to continue investing in Malaysia

Kuala Lumpur, March 27: Satyam Services Ltd, a leading global consulting and Information Technology (IT) Services Provider, intends to continue investing in Malaysia amid changes in the political environment.

Its director and senior vice president for Asia Pacific, Middle East, India and Africa, Virender Aggarwal, said the company remained confident of the Malaysian economy going forward.

"We are committed to growing our presence in Malaysia by embarking on an aggressive expansion initiative," he told reporters here.

He said with the friendly business environment and attractive incentives, the company planned to make Malaysia as its largest software development hub outside India.

Satyam yesterday announced establishment of the Pega business process management Centre of Excellence (CoE) at its 2,000-seat Global Solutions Centre (GSC) at Cyberjaya.

The company has teamed up with us-based business software maker Pegasystems Inc to create the facility.

Satyam said it would leverage the capabilities of Pegasystems Smart BPM suite to drive business agility, grow revenue and improve productivity for its global customers.

It added that establishment of the CoE showed the company's commitment in making Malaysia a software development hub.

"Pega is one of our key practice partners and we are pleased to have them join our Malaysia GSC, a strategic part of our global delivery model," Aggarwal said.

He also said that Satyam has been leveraging on Malaysia's world-class infrastructure to build a pool of impressive it talents since 2001.

Nath for duty-free import of steel

New Delhi, March 28: Commerce and Industry Minister Kamal Nath on Friday said his ministry would recommend scrapping of import duty on steel, whose rising prices have contributed to a surge in inflation rate.

"We are going to recommend scrapping of import duty on steel... government is looking at a proposal to ban non-basmati rice export," he told reporters here, while terming rise in inflation as a matter of concern.

Headline inflation rate grew by 6.68 per cent for the week ended March 15, mainly on account of increase in prices of steel and food items.

Seeking to improve the supply situation in the domestic market, the Commerce and Industry Ministry late last night withdrew export incentives given to at least 40 items, including steel.

The withdrawal includes the tax refund scheme - Duty Entitlement Pass Book.

"Total number of items on which DEPB benefits have been withdrawn would be running into about 40-50," Commerce Secretary G K Pillai told reporters here earlier on Friday.

The government had also increased the Minimum Export Price on non-basmati rice to USD 1,000 a tonne to discourage exports and in turn increase availability of the food grain in the domestic market.

CBoP shareholders approve merger with HDFC

Mumbai, March 28: Centurion Bank of Punjab's shareholders on Friday approved the scheme of amalgamation with the private sector lender HDFC.

The shareholders approved the scheme of amalgamation today at the extraordinary general meeting, CBoP said in a filing to the Bombay Stock Exchange.

Subsequently, the bank would seek approval from the Reserve Bank of India to seal the transaction, the filing said.

On February 25, HDFC bank had approved a share swap ratio of 1:29 to take over CBoP. This means that for every 29 shares of CBoP, the CBoP shareholders would be offered one share of the leading housing lender.

HDFC bank is the country's second largest private sector lender after ICICI bank, while CBoP is the fourth largest bank. HDFC bank has about 746 branches Pan-India, while CBoP has 394.

Post merger the combined entity has a market capitalisation of about Rs 58,000 crore, based on their current market values.