Fundamentals January 17, 2013

Nik’s Diary

The Indian market opened flat to positive mirroring positive opening of most of the Asian markets.US markets turned in a relatively lackluster performance during trading yesterday, extending a recent sideways move. The worries about the global economy stemmed from news that the World Bank cut its forecast for global economic growth in 2013 to 2.4% from the earlier forecast of 3.0%. However, the negative sentiment was partly offset by the release of a report by the Federal Reserve showing a bigger than expected increase in US industrial production in the month of December to 0.3% (estimate – 0.2%). Indian markets fell sharply yesterday, with rate-sensitive auto, banking and realty stocks leading the way, after RBI Governor Subbarao said there is no room for stimulus on both monetary and fiscal side. 

GSM subscribers down 6.62mn  to 657.1mn in December 2012

Indian GSM telecom operators, including Bharti Airtel BSE -0.81 %, Vodafone and Idea, lost more than 6 million subscribers in December last year, bringing down the user base to 657.16 million, industry body COAI said today. Total subscriber base at the end of November 2011 stood at 663.78 million users. The top three operators -- Bharti Airtel, Vodafone and Idea Cellular BSE -4.21 % -- which account for over 67 per cent of the GSM market lost over 5 million users in December, data released by Cellular Operators Association of India (COAI) said. Except Uninor, which added 9,18,552 users, not even a single operator added any new subscriber during December last year. Bharti Airtel, which is the industry leader with a 27.68 per cent market share, lost 1.70 million users to take its subscriber base to 181.91 million, it said. Vodafone and Idea Cellular lost 3.29 million users and 1.97 million users, respectively. At the end of December 2012, Vodafone's subscriber base stood at 147.48 million, while that of Idea Cellular was at 113.95 million, COAI said. Aircel lost 1.98 million users in December, which squeezed its user base to 63.35 million, while Videocon lost 3,71,953 subscribers pulling down its base to 3.64 million in the reported month. State-run operator BSNL did not add a single subscriber in December and had a 14.79 per cent share in the GSM market with 97.17 million subscribers. Another government-run firm MTNL BSE -2.93 % lost 2,253 users, taking its user base to 5.12 million at the end of December 2012. Source: Economic Times

Axis Bank picks advisors for upto US $1bn share sale 

Axis Bank Ltd(AXBK.NS) has picked JPMorgan Chase & Co(JPM.N) and Citigroup Inc(C.N) for a share sale to raise up to $1 billion, three sources with direct knowledge of the deal said on Wednesday. Axis Bank’s share offering to institutional investors is likely to be launched in two to three weeks depending on market conditions, two of the sources said, declining to be named as the details of the deal are not public yet.Proceeds from the offering will be used to boost the bank’s balance sheet, the sources said, adding Axis Bank’s investment banking unit, Axis Capital, is also one of the advisors on the deal. Axis Bank passed an enabling resolution to raise $1 billion through equity in December. The bank will take a decision on fund raising in “due course of time,” its executive director Somnath Sengupta told reporters on a conference call after its earnings report on Tuesday, without giving details. Sengupta could not immediately be reached for comment on Wednesday.Source: Firstpost

Diageo-USL deal hits CCI hurdle

Fair trade regulator Competition Commission of India ( CCI) is believed to have expressed reservations over Diageo’s proposed Rs 11,166-crore purchase of a majority stake in UB Group's United Spirits Ltd USL), as it has found certain clauses of the deal to be based on probabilities and not definitive in nature. CCI, whose approval is necessary for all major mergers and acquisitions involving Indian companies, is the second regulator after market watchdog Sebi to express its reservations over this deal. CCI is not comfortable with the deal terms that provide for the existing promoters of USL giving a preferential treatment to Diageo, if it fails to get the required number of shares from public shareholders through an open offer, sources close to the development said. The anti-trust regulator has asked the companies to rework the ambiguous parts, sources said. Adding that CCI might even send back the application, if the companies fail to satisfy its concerns. At the same time, Sebi (Securities and Exchange Board of India) has also expressed reservations about the preferential allotment of shares to acquirers if the open offer fails to elicit desired response from non-promoter shareholders.Source: Business Standard

Daiichi Sankyo and Ranbaxy to leverage synergies in Thailand

Drug firm Ranbaxy Laboratories and its Japanese parent Daiichi Sankyo will integrate their business operations in Thailand as part of strategy to maximise synergies.Both the companies intend to integrate their business operations in Thailand to leverage and maximise the synergies of hybrid business model, which is expected to commence business on April 1, 2013, Ranbaxy said in a statement today. "The planned integration of operations will provide a strong foundation for future Daiichi Sankyo group expansion in Thailand," it added.The development would be mutually beneficial to Ranbaxy and Daiichi Sankyo as it is expected to enhance their competitiveness, the company said.As per the plan, Daiichi Sankyo and Ranbaxy would integrate the management of Daiichi Sankyo's subsidiary in Thailand, Daiichi Sankyo (Thailand) (DSTH) and Ranbaxy's Thailand subsidiary, Ranbaxy Unichem Co (RUCL). "The new representative of the proposed integrated entity will be Suthas Thongprasert, who presently heads DSTH," the company said. The pharmaceutical market in Thailand is the second largest among Asean countries, and DSTH, has built its presence mainly by targeting healthcare facilities through innovative harmaceuticals. The company was founded in 1994 and had sales of $13 million in FY2011.On the other hand, RUCL which markets generic medicines focusing on primary healthcare and pharmacies, was established in 1983 and had sales of $14 million in 2011.Ranbaxy became a part of the Daiichi Sankyo Group in 2008 after Japan's third largest drug-maker bought a majority stake for Rs 22,000 crore.Under the hybrid business model adopted by the two firms, Ranbaxy primarily focuses on generic medicine research both for itself and its parent firm, while the new drug discovery programme is undertaken taken up by Daiichi Sankyo.Shares of Ranbaxy were trading at Rs 499.30 on the BSE in afternoon trade, up 0.98% from its previous close. Source: Business Standard

RCom, Alcatel-Lucent sign billion dollar network managed services contract

 Alcatel-Lucent, the Franco-American communications equipment maker, has bagged a $1-billion deal from Reliance Communications Ltd (R-Com) to manage the latter’s network in eastern and southern India.The end-to-end network managed services contract, which will last till 2020, is expected to bring down costs at the flagship company of the Anil D. Ambani group.Other telecom companies in India have also outsourced the management of their networks. For instance, Idea Cellular entered into a three-year agreement last year with Ericsson to provide managed services in its five telecom circles. Similarly, Bharti Airtel has a managed services pact with Nokia Siemens Networks. As part of the agreement between the companies, Alcatel-Lucent will support both the wireless and the fixed line operations of R-Com. According to R-Com, this is the first converged wireless/fixed-line contract in India and one of only a handful in the world. Alcatel-Lucent will streamline the company’s operations, bringing together previously independent wireless and fixed-line teams to form a single network management organisation. It will also drive standardisation of the tools, processes and best practices at R-Com. The overseas company will also be responsible for network performance and service quality, with the goal of increasing customer satisfaction and retention, R-Com said in a press statement. R-Com added that it would also work closely with Alcatel-Lucent to identify opportunities to introduce services and expand existing businesses to realise the full potential of its network. Today’s contract will extend R-Com’s existing relationship with Alcatel-Lucent. Both had earlier entered into a joint venture in 2008 in which the Anil Ambani company held a 33 per cent equity stake. However, it was limited to wireless services only.“This (partnership) will enable Reliance Communications to take the lead in offering next generation telecom solutions that will meet and exceed the expectations of our customers, and help them to transit from voice-led use to a seamless data experience across multiple devices and platforms,” said Gurdeep Singh, R-Com’s chief executive officer (wireless business).R-Com added that the strategic agreement would enable it to assure high quality and consistent experience for customers regardless of the device or type of connection.Source: TelegraphIndia