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MARKET NEWS HIGHLIGHTS MAR 9th, 2010

Corporate News : -

• Ahluwalia in talks for Rs.100 cr acquisition: Ahluwalia Contracts India is in acquisition talks for specialised construction firms, with a war-chest of up to Rs.100 crore, and hopes to sew up the deal by June. The firm sees a 25-30 per cent organic growth for next five years and acquisitions of up to Rs.100 crore could be funded from its internal resources. The company could also look for opportunities if a bigger firm suits its criteria. Ahluwalia Contracts is expecting new government orders of around Rs.500-600 crore for construction of specialised buildings like hospitals, hotels and education institutions by the end of March 2010. At present, the firm has government projects worth Rs.700-800 crore. As on Jan 31, the diversified construction firm’s pending order book was at Rs.3300 crore, while it had submitted bids for 150 crore rupees that are yet to be finalised. The cash-rich company is not looking to raise funds for now. It is also planning to foray into construction of power projects and is in discussion for pre-qualification with a number of players.

• Govt seeks to cut stake in SBI to 51%: The government sought parliamentary approval to cut its stake in top lender State Bank of India to 51 per cent from 55 per cent, seeking to raise $1.2 billion (Rs.5000 crore) at current market prices from the key reform move. The government had earlier said it would move to cut its holdings in staterun banks while retaining majority control, but has faced political and union opposition.

• Nagarjuna Construction bags Rs.1221 cr contract: Nagarjuna Construction Company secured new contracts aggregating to Rs.1221 crore. The first order is of two contracts valued at Rs.647 crore from Hyderabad Growth Corridor. In addition, it has secured three contracts worth Rs.358 crore from Maharashtra State Electricity Distribution. The first is from NTPC worth Rs.99 crore, another from IOC worth Rs.63 crore and the last from the Director of National Institute of Technology worth Rs.54 crore.

• Reliance MediaWorks ups open offer for Fame:
Reliance MediaWorks raised its open offer for cinema chain Fame India by 100,000 shares to meet a regulatory requirement. Reliance MediaWorks had in February made a competitive bid for a majority stake in Fame at Rs.83.40 a share, 63.5 per cent higher than an offer by Inox Leisure for 20 per cent equity at Rs 51 a share. Inox already holds 50.48 per cent in Fame. The company will make an open offer for 21.7 million shares, not 21.6 million shares that it had announced earlier. Reliance MediaWorks increased its offer size after it reported that it held about 100,000 shares less than what it had said in its previous public offer announcement on February 21.

• Suzuki raises Maruti stake,fuels talk of full control: Suzuki Motor has raised its stake in Maruti Suzuki to 55%,triggering speculation about the Japanese firms intentions for its Indian subsidiary and whether the move is part of a larger plan to take full control of the countrys top carmaker. Suzuki raised its stake in Maruti by 0.8% through secondary market purchases very recently. Suzuki was set to increase its stake further. Indian rules allow companies to make creeping acquisitions of up to 5% a year and any increase beyond 55% will require Suzuki to make an open offer for another 20%. However any change in the stakeholding will only come up before the board at the statutory board meeting scheduled for the third week of April. Maruti, which sells every second car in India, has established itself as the crown jewel in Suzukis global operations and is a rare bright spot for sales across the world. It already contributes nearly 80% of Suzukis profits and in volumes too, it has eclipsed its parents tally. Despite a flourish of global carmakers gnawing at its market share,India continues to be a lucrative market for Suzuki. Indeed, Maruti sold 96,650 cars in February, the 22% leap from a year ago its best monthly performance yet. Theres no reason why Suzuki would want (it) unless it has a larger game-plan lined up. After Suzuki, FIIs and LIC are the biggest stakeholders in Maruti, owning 22.21% and 11.22%,respectively. Marutis current market value is around $10 billion and if Suzuki were to fully delist the company, it would have to shell out nearly $5 billion at current prices. Maruti is looking to increase its capacity from 1 million units a year by up to 75% in the next five years.

Economy News:-

• India tea exports rise 41%: India’s tea exports rose 41 per cent in January 2010 as the global crop shortage accounted for higher demand for Indian teas abroad. Data released by the Tea Board showed, total exports in January stood at 17 million kg from 12.02 million kg a year ago. “This is a continuation of the situation prevailing for the last three months when the demands from various tea importing countries improved significantly as other tea exporting countries like Kenya and Sri Lanka are facing a huge production deficit,” S Patra, Joint Secretary, Indian Tea Association told. Though India’s total exports in 2009 fell 5.7 per cent to 191.5 million kg, the trend reversed in December, when they rose 36.9 per cent to 22.24 million kg for the month, he said. Meanwhile good post-monsoon rains in Southern India resulted in 25 per cent rise in India’s total tea production for the month of January to 27.1 million kg compared with 21.6 million kg a year earlier, Tea Board said. Total tea production in South India was higher by 60.25 per cent at 18.4 million kg as against 11.4 million kg a year ago. Tea production globally during 2009 fell to 1.84 billion kg from 1.89 billion kg during 2008, the Tea Board data showed. While India’s total tea production during January-December was down marginally at 978.9 million kg compared to 980.81 million kg a year earlier, production in Kenya and Sri Lanka during the same period fell more than 9 per cent, the data showed. India exports CTC (crushtear-curl) variety of tea mainly to Egypt, Pakistan and the UK and the premium orthodox variety of tea to Iraq, Iran and Russia.

• Domestic car sales jump 33%, bikes 31% in Feb: Domestic passenger car sales jumped by 33.20 per cent to 1,53,845 units in February. According to the figures released by the Society of Indian Automobile Manufacturers (SIAM), motorcycle sales in the country during the month was also up was also up 30.72 per cent to 6,42,419 units from 4,91,451 units in the corresponding month last year. Total two-wheeler sales in February grew by 32.78 per cent to 8,37,653 units from 6,30,838 units in January 2009. Sale of commercial vehicles jumped by 87.11 per cent to 58,024 units from 31,011 units in the year-ago period, SIAM said. Total sales of vehicles across categories increased 34.98 per cent to 11,29,783 units in February against 8,37,017 units in the same month last year, it added.

• Garment exporters need interest subsidy on lines of handicrafts: The ministry of textiles has asked the government to extend the interest subsidy scheme for garments exports for another year as has been done for handicrafts, carpets and small & medium enterprises (SMEs). The government has in the Union Budget for 2010-11 proposed to extend the interest subvention scheme for one more year till March 31,2011, for select sectors like handicrafts, carpets, handlooms and SMEs. With a view to insulate the employment-oriented sectors like leather and textiles, including handlooms, handicrafts and carpets from the impact of demand slowdown, the government had earlier extended the interest subsidy scheme for concessional export finance in the last Budget till March 31,2010. Under the scheme, banks provide loans at 2% lower than the market rate to the sectors eligible for interest subvention. The Textiles Ministry recently wrote to the Finance Ministry for continuation of the subsidy to garment exports sector as well. The scheme is to expire on March 31,2010. “We have already taken up with the finance ministry the point relating to more provisioning of funds by it to the commerce ministry so that the requirements of the Indian garment manufacturers could be addressed through the Budget instruments of the commerce ministry”, secretary in the ministry of textiles Rita Menon said. The ministry is also taking up the matter with the commerce ministry, Mrs Menon added. The garments export,which had started declining in October 2008, had shown some initial signs of recovery in November 2009. But in December 2009, it again declined by over 11% to $ 862 million due to lower demand from the US and EU, which together account for 70% of Indias garments export. The apparel exports industry provides employment to about 3.5 million workers directly and another three million indirectly.

International News :-

• Kraft faces probe on Cadbury deal: Kraft Foods is being probed by the UK regulators over allegedly misleading investors and workers of British confectioner Cadbury, says a report. In January, Kraft said it would take over Cadbury in a cash-and-stock deal worth about 11.9 billion pounds. The Panel on Takeovers and Mergers is looking into comments Kraft executives made during the contentious takeover battle about Cadbury’s Somerdale candy factory in Keynsham, the report noted. According to the publication, Kraft officials had repeatedly said they believed the factory could be kept open. While Cadbury had said it would close the plant and move Somerdale’s 500 jobs to Poland. Last month, when it became clear that Kraft had won the takeover battle, the company reversed course and said it would close the plant by 2011. Kraft executives would be called later this month to give evidence in front of a parliamentary committee, which is holding hearings on the takeover.

• Shell, PetroChina bid $3 bn for Australia’s Arrow: Royal Dutch Shell and PetroChina jointly bid more than $3 billion for Australia’s Arrow Energy, marking a Chinese firm’s first foray in the country’s burgeoning coal-seam gas sector and sending Arrow’s shares soaring by nearly half. Arrow said that the bid from a company jointly owned by Shell and PetroChina would give shareholders A$4.45 in cash per share, plus a share in a new entity comprising Arrow’s international business. Shell confirmed it was in discussions to acquire Arrow’s domestic business. PetroChina said the bid was at an early stage and there was no timetable. Coal-seam gas is natural gas trapped in seams of coal. Arrow has reserves of 6,150 petajoules of coal-seam gas, the largest in Australia. The deal could come under scrutiny as Australia has had an uneasy relationship with Chinese investments after Rio Tinto scrapped a $19.5 billion deal with Chinalco last year and regulators said they preferred state-owned companies to keep their stakes in Australia’s top resource firms to no more than 15 percent. The relationship was further strained after China arrested four Rio Tinto staff last year on charges of bribery and stealing business secrets. This is not the first collaboration of PetroChina and Shell. The two started joint exploration of a shale-gas block in China last year. Arrow’s board recommended shareholders take no action on the offer, which is non-binding and conditional, and appointed Citi and UBS as financial advisers to evaluate the deal.

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