Reaction to eco data, auto sales to dictate market trend: experts

Trading in Indian markets this week would likely be marked by reaction to subdued economic growth data for December quarter, overseas investment trends and global cues, experts have said.

Besides, auto stocks will be in focus amid February sales data trickling in. Maruti Suzuki, Mahindra & Mahindra and Tata Motors sales declined in February, companies said on Saturday.

Investors' propensity to book profits is also a concern after the Sensex last week gained 419.37 points -- the best since the week ending November 29, 2013.

The economy grew below expectations at 4.7 per cent in October-December. Growth in the key infrastructure sector slowed to 1.6 per cent in January. Separate data showed fiscal deficit in the 10 months through January 2014 overshot revised estimates of Rs 5.24 lakh crore for this fiscal.

"The reaction to fiscal deficit data and GDP numbers will have to be watched out for on Monday," said Jayant Manglik, President-Retail Distribution, Religare Securities.

Jignesh Chaudhary, Head of Research, Veracity Broking Services said, "The weak GDP data declared late Friday evening would be point of concern during this week's trading."

"The technical Indicators are suggesting a bullish trend for the equity markets...BSE Sensex is expected to trade in the range of 20,850 to 21,500 and the CNX Nifty in the range of 6,150 to 6350," he added.

FII flows in secondary market revived last week and it remains to be seen whether funds keep on coming in this week as well, said a Mumbai-based broker.

Markit Economics will unveil HSBC India February Manufacturing PMI on Monday, which may also be a factor determining trade on the first day of the week.

Results of a monthly survey on the performance of India's services sector for February would come out on Wednesday.

"Going ahead, the markets would continue to follow developments on the political scene and geopolitical developments in Ukraine," said Sanjeev Zarbade, Vice President - Private Client Group Research, Kotak Securities.

Globally, China Manufacturing PMI will come out on Monday. A meeting of China's lawmakers to set economic policy and growth targets also begins next week.

In Europe, a policy meeting on Thursday of the Governing Council of the European Central Bank will be keenly watched for interest rate cues.

Kamal Ki Roti

Etihad gets Sebi showcause for takeover code violation

In a new twist to the Jet-Etihad saga, the Securities and Exchange Board of India has served a notice to Etihad Airways for alleged violation of the takeover code regulations while acquiring 24% stake in Jet Airways.

Sources close to the development said the Abu Dhabi-based airline, in its reply, will have to address the issues raised by the market regulator, failing which it will have to make an offer to buy the entire 25% public holding in Jet through an open offer.

The notice was issued to Etihad earlier this week by Sebi, the sources said.

Etihad, Sebi and Jet didn't respond to an email query on the issue.

As per Sebi's takeover code regulations, an open offer is triggered in multiple ways, including when an entity acquires 25% stake in a listed firm and or if it acquires 'control' over it.

In this case, the market regulator could have initiated enforcement proceedings based on a view that the Abu Dhabi-based carrier is gaining control in the Indian carrier.

“The deal initially went to Sebi which had sanitised the contract agreements to ensure that there is no control related issue and based on that it had given a go-ahead. One has to see whether the assessment by the Competition Commission of India has made Sebi rethink or is it that they now see that the element of control still operates and hence, they see an open offer trigger,”said Ramesh Vaidyanathan, managing partner, Advaya Legal.

Sebi's latest action will further complicate matters for both the carriers, who are already battling lawsuits related to the deal.

Also, the open offer, if successful, might also clash with the foreign direct investment (FDI) norms as well as Sebi's minimum public float requirement.

The FDI norms allow a foreign airline to hold up to 49% stake in a domestic airline.

Etihad has secured Foreign Investment Promotion Board (FIPB) approval to purchase 24% equity stake in Jet Airways.

In case Sebi passes an order requiring Etihad to make an open offer it will have to approach the Foreign Investment Promotion Board again for acquiring additional shares.

Also, the additional shares acquired through the open offer will take the promoter holding in Jet Airways beyond 75%, the maximum a promoter can hold in a listed firm.

Currently, Jet-- which has a 51% stake-- together with Etihad own 75% stake in the company.

Shares of Jet are currently trading at Rs 216 over 70% below compared to Etihad's acquisition price of Rs 754.7.

"If post an open offer, the promoters' holding exceeds the 75% limit, then the they will again have to bring it below 75% within one year,” said RS Loona, managing partner, Alliance Corporate Lawyers, a corporate law firm.

Loona said issue of show cause doesn't necessarily mean that Sebi will issue an adverse order. “If the noticee is able to explain why further Sebi action is not called for as the acquisition was within the rules, Sebi may not issue further directions,” he said.

Vaidyanathan said if Sebi passed an order solely based on the CCI observation, it is likely that the could be set aside by the court.

Interestingly, Sebi, in a communication to the ministry of finance, in September, had stated that agreement between Jet and Etihad doesn't result in change of control and hence won't attract the takeover code. However, the market regulator had put caveat stating that if any other regulator takes a view that Etihad is acquiring control over in Jet, the two entities would be deemed person acting in concert (PAC).

Sebi's latest action possibly could be guided by Competition Commission of India's (CCI) observations on the deal, where it had stated that the two entities are gaining 'joint control'.

Jet Airways-Etihad Deal: A Turbulent Journey

January 3, 2013: Jet Airways says it is in talks with Etihad for potential stake sale

April 24, 2013: The Jet board approves 24% stake sale to Etihad

May 24, 2013: Shareholders of the company give green signal to deal at EGM

May 30, 2013: Jet's promoter Tail Winds offloads 5% stake in the company to comply with 25% minimum public shareholding requirement. Promoter stake in Jet falls from 80% to 75%

July 10. 2013: The department of economic affairs writes to Sebi seeking its observation on the deal. Regulator reportedly expresses concerns over the deal structure

September 25, 2013: Sebi writes to DEA stating that prima facie the revised deal doesn't result in change of control and the two entities won't be treated as persons acting in concert. It however, states, if any other regulatory agency takes a view that Etihad is acquiring control over Jet, Sebi too will consider the entities as PACs. Sebi also asks Jet promoters to divest 6% stake prior to allotting shares to Etihad.

November 12, 2013: The Competition Commission of India approves the deal.

November 20, 2013: Jet allots 27.2 million shares to Etihad

November 26, 2013: CCI makes an observation that Etihad and Jet are gaining 'joint control' through the deal.

February 2014: Sebi issues show cause notice to Etihad for violation of takeover code regulations

HCL Plan to Invest Rs.1,000 Crore In Healthcare

In its first diversification outside the core business of technology, HCL group today announced its entry intohealthcare. The group plans to invest Rs 1,000 crore over the next five years into the venture, which will operate through a countrywide network of out-patient multi-speciality clinics named HCL Avitas. The arm is also in talks with hospital chains to partner for tertiary care.

Funded through HCL Corporation – which is the holding company of HCL Technologies and HCL Infosystems Ltd, the venture has kick started operations by acquiring two branches of Bharat Family Clinic in the national capital region. Apart from technology, the promoters also have presence in the education sector through Shiv Nadar University and School. However, these are not-for-profit institutions which are operated through the Shiv Nadar Foundation.

HCL Avitas clinics plans to offer value added services such as personalised relationship managers and electronic medical records to its patients. The clinics will also provide related services such as diagnostics, pharmacy, even radiology services in-house. The venture is targeting mainly urban middle class population comprising corporate employees, small and medium enterprises and small businessmen and traders.

HCL Healthcare Vice Chairman Shikhar Malhotra told Business Standard that the concept borrowed from the West and collaboration with the Johns Hopkins Medicine International will help in implementing such concepts in India. “Here a patient, beyond doctor’s care will be handled by a team of specialist, which includes a healthcare coordinator who essentially plays a relationship manager. So this is a unique patient centric approach.” He added though the company will initially focus on expansion of these clinics, in the long run it may also foray into secondary and tertiary care to build its own hospitals.

Of late, healthcare has attracted many corporate groups including BK Modi’s Spice Global, who are looking at this area as a de-risking strategy. According to industry estimates, the domestic healthcare sector is poised to grow to $100 billion by the year 2015 and further to $275.6 billion by 2020. The industry was estimated at $40 billion in 2010.

While HCL founder Chairman Shiv Nadar is on the board of the healthcare company, Nadar’s daughter Roshni who is married to Malhotra will not be involved with the venture. Last November, Nadar had committed an additional Rs 3,000 crore over the next five years to expand the foundation’s education ventures, which are overseen by Roshni. The foundation, set up in 1994, has already invested over Rs 1,800 crore till March 2013.

The company plans to initially expand its healthcare arm in northern India. The venture has so far got 125 people on board, which includes both clinical as well as non-clinical staff. “We intend to provide a continuum of care to our patients, so right now we will actually partner with some of the best hospital networks in India. So there is a referral mechanism going into these hospitals. Discussions are going on around this,” Malhotra said.

NSEL to liquidate assets of Mohan India, Vimla Devi

The beleaguered National Spot Exchange Ltd (NSEL) has decided to invoke the default clause agreed upon with defaulters Mohan India Group and Vimla Devi Agrotech in the settlement agreement signed recently. NSEL is looking at legal options to liquidate securities of the companies.

"In an attempt to accelerate recovery, the NSEL has started the process of liquidation of the attached assets of the defaulting borrowers. The process was initiated as the defaulters had not paid in line with the schedule. Hence, to ensure the process did not reach a stalemate, the NSEL took the liquidation route," said an NSEL official. As a first step, the assets of Mohan India Group, one of the biggest defaulters, and Vimla will be liquidated, he added.

Mohan India Group (dues of Rs 922 crore) has agreed to a settlement of Rs 771 crore, but paid Rs 23.9 crore. According to the agreement, the group was to pay Rs 120 crore till January 30.

The NSEL has listed two properties of Mohan India, a Civil Lines bungalow on 13,000 square metres in Delhi and 900 acres in Bikaner, to be put on block. It has written to the income-tax department in Delhi to release Rs 59 crore from Mohan India in line with the Maharashtra Protection of Interest of Depositors court order dated January 8.

Vimla has paid Rs 800,000 against a total outstanding of Rs 14.02 crore, leaving a balance of Rs 13.94 crore. The NSEL will be liquidating the company's soya bean plant in Kota of Rs 14 crore. The NSEL is also mulling similar action against Swastik Overseas, with a total outstanding of Rs 95.33 crore. The Economic Offences Wing of the Mumbai police and an NSEL team have completed the confirming party agreement with five farmers having 90 acres in Modasa belonging to Swastik.