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Indian stock market and companies daily report (February 21, 2014, Friday)
Indian Markets are expected to open flat to positive tracking the SGX Nifty which is trading flat and positive opening in other Asian indices.
US markets advanced higher on Thursday giving up early losses as the weak US economic data was blamed on unusually bad weather. The markets ignored a subdued manufacturing report from the Philadelphia Federal Reserve and troubling economic news from China and the focus was towards the major deal involving social networking giant Facebook and strong earnings from Tesla. The U.S. Labor Department revealed that initial jobless claims fell 3,000 to 336,000 for the week ended February 15 as against the unrevised no. of 339,000 in the previous week. Meanwhile, European markets gained after early losses and closed the session mixed, with U.K. and French markets posting modest gains while German markets lagged behind.
Indian markets fell sharply on Thursday with profit taking after four days of gains and weak global cues weighing on the markets. The benchmark S&P BSE Sensex ended the session down 0.9% at 20,537 whereas the broader CNX Nifty index fell by 1% to 6,091.
The trend deciding level for the day is 20,574 / 6,102 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 20,626 - 20,714 / 6,118 - 6,145 levels. However, if NIFTY trades below 20,574 / 6,1 02 levels for the first half-an-hour of trade then it may correct 20,485 - 20,433 / 6,076 - 6,060 levels.
Government releases telecom M&A norms
The department of telecommunications (DoT) on Thursday notified the guidelines for mergers and acquisitions (M&A). This needs cabinet approval. Key guidelines are as follows:
- A telecom company going for M&A with a rival will have to ensure the combined market share is below 50% both in the subscriber base and adjusted gross revenue (AGR). If the share exceeds in any of the 22 circles, it will get a year to reduce it.
- Acquirers of telecom companies holding 4.4MHz spectrum, allocated at old rate, will have to pay the difference between the initial amount and the market rate determined through the latest auction. The rate will remain valid for a year. Thereafter, the additional price calculated based on the prime lending rate of the State Bank of India will be added to determine the rate.
- The merged entity will be allowed to hold a maximum of 25% spectrum allocated in a service area and 50% in a particular band.
- In the case of CDMA spectrum (800-MHz band), the government has fixed the upper limit of the total spectrum holding at 1 0MHz.
- A merged entity will be allowed to hold a maximum of two blocks of 3G spectrum in a service area. This will check amalgamation of more than two 3G spectrum holding companies.
- Telecom firms can enter into M&As within the lock-in period that bars new entities from selling equity for three years. The lock-in condition bars telecom companies from transferring equities within three years of buying spectrum from an auction. The lock-in will apply in respect of new shares that might be issued in respect of the resultant company.
The rules, which would now potentially allow incumbent operators to acquire smaller rivals, or smaller operators to sign deals with each other, is expected to be viewed positively by an industry which necessitate consolidation. While these guidelines provide an exit route to companies who procured 3G or 4G spectrum in 2010 but have not rolled out, we expect genuine operator level consolidation will still take some time.
TCS to manage global IT infrastructure for Diageo
TCS has bagged a global IT infrastructure management deal from Diageo, a leading premium drinks maker. The financial details of the details have not been disclosed. The decision by Diageo to partner with TCS is the latest milestone in a programme to transform the way it provides IS services to around 36,000 employees, operating in 180 countries around the world. In the future, TCS would manage Diageo's global IT infrastructure, data centres and servers, in addition to providing service desk support to employees. This solution would provide flexibility and differentiation of services to meet market needs, allow for swift adoption of future technology trends, and an enhanced current self-serve capability to deliver an improved end user experience. We maintain our Buy rating on TCS with a target price of Rs.2,625.
Bharti Airtel to move Nigerian SC against lower court order
Bharti Airtel, which operates in 20 countries across Asia and Africa, yesterday said that it would move the Supreme Court of Nigeria against a February 14 judgment of the Court of Appeals, Lagos, which ruled in favour of Econet Wireless of Nigeria. Econet had claimed that it still held a 5% stake in Airtel Networks Ltd. It had also claimed that its right of first refusal had been violated during the sale of VMobile when Zain Telecom sold its Africa business to Bharti in 2010. For these, it had sought US$3bn from Bharti Airtel.
According to the judgment, Bharti Airtel had failed to set aside the ruling of a lower court on the disposal of some Econet shares. The Court of Appeals said Bharti Airtel should accept that Econet Wireless owned a 5% stake in Airtel Networks. Bharti Airtel will now lodge an appeal against the decision in the Supreme Court of Nigeria. Bharti Airtel states the judgment has no impact on the equity holding of Bharti Airtel or of other shareholders in Airtel Nigeria. The company stated that these shares, in any case, are held in an escrow account and do not affect Bharti Airtel's 79.06% in Airtel Nigeria. The dispute relates to a 2006 deal in which Celtel International had bought a 65% equity in Nigerian mobile operator VMobile. VMobile was later acquired by Kuwait-based Zain Telecom and Bharti Airtel bought Zain's Africa business in 2010 for ~US10bn. Econet owned a 5% equity in VMobile and claimed the first right of refusal for sale of VMobile shares. The dispute came to Bharti Airtel as part of its deal with Zain. We continue to remain watchful of the situation and recommend Neutral rating on the stock.
Economic and Political News
- Whistle-blower mechanism to check corporate scams: Sebi
- IMG to give some more time to 10 coal mines to seek clearances
- Odisha UMPP : PFC invites bids to select consultant for coal blocks development
- Cabinet nod to convert 7,200 km of state roads to highways
- Wipro, Agnik to offer connected car services
- Cipla to market MSD's HIV drug Rs.raltegravirRs. in India
- Govt, clears GlaxoSmithKline's Rs.6,400cr FDI proposal
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