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Friday, August 29, 2014

IVRCL eyes selling assets, raising equity
[Editor: The article below says that half its current order book of Rs.20,000 crore is from the lucrative water segment, such as water treatment and irrigation. IVRCL Ltd (Rs.18.10) expects growth of around 15% a year. “If the next two quarters will see consolidation, the next fiscal would be a turnaround year,” said Reddy, Chief Financial Officer of IVRCL. Meanwhile the government on Wednesday, 27 August 2014, took a decision to allow the Ministry of Road Transport and Highways to decide on mode of delivery and amendments in Model Concession Agreement in respect of national highways projects for expediting of implementation of road infrastructure projects in the country. A strong buy is recommended, with a price target of Rs.37-39, for 6-9 months perspective]
Hyderabad/Chennai. August 28:  Infrastructure company IVRCL, once a stock market favourite, is now struggling to script a comeback.

The company had to go for corporate debt restructuring in January this year after debt piled up in the wake of cost overruns and delays in project execution. IVRCL’s total debt stood at Rs.7,680 crore as on March 31.

As part of a turnaround plan, the company is now considering selling operational assets, raising equity, and taking up projects that require lower capital infusion.

“The liquidity position has begun to improve. The next two quarters will be a phase of consolidation,” says R Balarami Reddy, Chief Financial Officer of IVRCL

Execution held up

Stalled execution of some projects due to delays in receiving Government clearances was one of the factors that derailed the company.

Road projects such as Sion-Panvel and Goa-Karnataka, irrigation projects in Andhra Pradesh, rural electrification in Kerala are among those delayed in 2011. The company’s execution rate, which used to be 40 per cent of the order book a year, fell to 26-28 per cent in 2011-12.

IVRCL also had to contend with delayed payments from clients. The debtors’ cycle stretched from 115 days in 2011-12 to 147 days now. Audit reports drew attention towards the receivables worth Rs.157 crore, considered good (even as collection was pending for a prolonged period) in the 2011-12 report, which ballooned to Rs.937 crore by June 2014.

Cost overruns in projects due to higher costs of raw materials such as cement, bitumen, labour, and steel over the years also cut into profitability. This was exacerbated by the lack of price escalation clauses on many contracts. Operating profit margin collapsed, sinking from 11 per cent in 2010-11 to 1 per cent in 2013-14 on a consolidated basis.

The company’s revenue, which grew 14 per cent on a standalone basis in December 2010 quarter, fell by 17 per cent in the June 2014 quarter, though numbers are not strictly comparable due to demergers and reconsolidation.

Restructuring

The debt-equity ratio leaped from 1.6 times (consolidated) in 2011-12 to 3.8 times by 2013-14. In the period, companies also had to contend with an increase in interest rates from 8 per cent to 12-13 per cent, says CFO Reddy. Interest cost as a percentage of sales reached 15.9 per cent in 2013-14, while interest cover slipped below 1 time. Consolidated net losses mounted from Rs.240 crore (adjusted) in 2012-13 to ₹882 crore last fiscal.

“Having a strong order book and a good portfolio, we were able to manage the situation for about 18 months. However, thereafter, we began to feel the heat. Then we had to knock at the CDR (corporate debt restructure) cell as lenders were not extending necessary funds for projects and were also encashing bank guarantees,” adds Reddy.

The CDR process was finalised in July. The package comes with a 28-month moratorium and an interest rate of 11.25 per cent.

Of the company’s total debt, the holding company debt of Rs.3,850 crore has been restructured, saving about Rs.850 crore in interest payments for two years.

IVRCL paid out Rs.789 crore in interest last fiscal. In addition, IVRCL received Rs.215 crore in cash credit and Rs.175 crore of priority debt.

IVRCL has also signed agreements to divest stake in three road projects – Salem Tollways, Kumarapalyam Tollways and Chengapally Tollways – to Tata Realty. This can ease up equity of around Rs.600 crore and free debt worth Rs1,200 crore.

Another road project (Jalandhar to Amritsar) is on the block as is its Chennai desalination plant. All are loss-making projects and contribute less than 10 per cent of consolidated revenue.

The company also has a land bank of around 1,700 acres, which it can monetise if needed. A rights/ QIP issue of Rs.300 crore is also being planned. These moves can eventually bring the debt-equity ratio down to around 2 times.

Turning around

This apart, once its existing five road projects are done, the company will shift entirely into simple construction contracts in roads, instead of taking them on as a developer (projects taken on as a developer call for heavy capital investments).

Plain construction contracts have short execution periods which will generate quicker cash flows and lower funding requirements. With the plain construction route to road expansion being taken up by the highways authorities, IVRCL could find several such projects coming its way.

Half the current order book of Rs.20,000 crore is also from the lucrative water segment, such as water treatment and irrigation.

The thrust now is also on this segment. Indeed, IVRCL has never had trouble securing fresh projects; from the start of this year, for example, it has won Rs.3,657 crore worth of projects.

The company expects growth of around 15 per cent a year.

“If the next two quarters will see consolidation, the next fiscal would be a turnaround year,” said Reddy.

This is part of a series on how companies are managing debt to gear for better times.

Wednesday, August 27, 2014

FTIL to 'highlight correct facts' of MCX-SX buyback to CBI
Photo: Business Standard
27 Aug, 2014: MUMBAI: Financial Technologies (India) or FTIL has clarified to the BSE that it would make a representation to CBI "highlighting the correct facts" with regard to the "alleged illegality" of the buyback arrangement between itself and a nationalised bank of MCX Stock Exchange's shares. 

CBI on Monday lodged an FIR against three serving officials and a former one of Sebi, and Jignesh Shah, promoter of FTIL — the erstwhile promoter of MCXSX — alleging that the promoters of the bourse had entered into a buyback arrangement with a nationalised bank, in violation of relevant rules, and "in connivance with Sebi officials, deliberately suppressed this material fact" while applying for an extension of recognition of MCX-SX, to conduct trade in currency derivatives in 2009. 

The FTIL stock closed down almost 5% at Rs 259 apiece on Tuesday. 

FTIL in its clarification pointed out that the Bombay High Court found "nothing illegal in the said buyback arrangement" while hearing a petition filed by MCX-SX against a Sebi order of 2010 declining to give it permission to operate as a full-fledged stock bourse, other than for offering currency derivatives. 

Further, at the time of the extension of recognition of MCXSX in the year 2009, "we understand that MCX-SX only sought time from Sebi for reducing the shareholding to comply with the applicable Sebi regulations. 

We understand that at that point of time, no statement/representation was made by MCX-SX to Sebi in its application for extension that it was in compliance with all the relevant Sebi regulations. Therefore, the question of concealing certain facts by the promoters of MCX-SX does not arise," said FTIL. 

It further added that as required by law, the application for renewal/extension of recognition was made by MCX-SX and not by its promoters (i.e. FTIL) or Jignesh Shah. 

Courtesy: The Economic Times
NSEL: Jignesh Shah’s fall from grace and why he will weather it
Photo: Live Mint
Aug 5, 2013: One question that has risen ever since troubles at National Spot Exchange emerged is: what will happen to Jignesh Shah and the empire he built on his entrepreneurial spirit?

Jignesh Shah's has been a story of both backward and forward integrations. He started off in the business of exchange technology, went on to set up exchanges, both commodities and equity, and also ventured into many related businesses.

The growth of his flagship company Financial Technologies (FT), which is also the holding company, has been envious.

Initially a technology services provider for stock exchanges, FT set up Multi Commodity Exchange, which went on to dominate the Indian commodity futures trading market.

Under a weak Forward Markets Commission, which did not have much power, commodity futures trading in India was thriving, with turnover running into trillions.

For FT, MCX was a money spinner. The exchange offered lower transaction charges as the technology that it used for trading came from its own parent company.

Shah spotted business opportunity around MCX and was quick to cash in on those.

He set up National Bulk Handling Corporation (NBHC), National Spot Exchange and even a real time market data provider TickerPlant.

Initially, NBHC set up warehouses for those commodities traded on MCX. Later on, it saw a bigger business opportunity by offering warehousing services to farmers and also started facilitating bank credit to farmers.

According to a report in Business Today magazine published in 2009, as a facilitator of farm credit, NBHC got two-way fee - 25 basis points from farmers and 25-75 bps from banks.

With the government allowing trades in warehousing receipts, it is not only NBHC that got a boost, but NSEL too got advantages.

Warehousing receipts are the receipts that farmers got while storing their produce in NBHC warehouses.

(Ironically, these are the very instruments that have come into focus in the present controversy involving NSEL. It has been found that the spot exchange, where short sales are not allowed, had actually permitted warehouse receipts trading, without checking whether the trader had the underlying commodity in the warehouse.)

NSEL thrived in a regulatory vaccum. While FMC regulated the futures market, the spot exchanges came under the state government. There was no clarity as to who regulated the spot markets. It was an exemption from the Union ministry of consumer affairs that enabled the NSEL to launch a product that had characteristics of forwards contract.

After launching NSEL, FT set up the real-time data platform even as plans were on to roll out a stock exchange. The data service had to be scaled down and the equity exchange, MCX SX, was launched after much delay because of Sebi's reservations and the legal battle that ensued.

According to the Business Today report, the vision behind all these moves was financial inclusion.

"FT's strategy is based on driving financial inclusion by reaching out to the bottom of the pyramid as this will drive future business," the report quotes Sanjeev Patkar, Director (Research), Dolat Capital, as saying.

Clearly, Shah aimed higher. As part of his strategy to take his business international, he started the Dubai Gold and Commodity Exchange (DGCX) in partnership with Dubai Multi-Commodities Centre (DMCC).

As the old adage goes, the higher you go, the steeper the fall.

The share prices of Financial Technologies fell a sharp 70 percent, in just two days after the troubles at NSEL emerged.

According to a report in the Business Standard, in the boom year of 2007-08, Financial Technologies was valued over Rs 13,000 crore. Now, it is down to just about Rs 700 crore.

According to an Economic Times report, Shah himself witnessed a wealth erosion of about Rs 1000 crore.

There are many theories-including conspiracy angles-about what resulted in the down fall.

Sudip Bandyopadhyay, managing director and chief executive officer of Destimoney Securities, sums up it all in a report in Mint.

"He (Shah) has probably bitten off more than he can chew."

According to him, Financial Technologies' troubles started with MCX-SX. "The problem started when the group tried to get into the stock exchange business," he has been quoted as saying in the report.

The BS report says trouble may be brewing at DGCX as DMCC has taken technology of Cinnober, another exchange technology provider, instead of FT's. It also says FT may be planning to sell off its 44 percent stake in DGCX.

But is it all over for Financial Technologies and Shah? Many are of the opinion it is not.

"I never quite liked his style. But he has that ability to come out of difficulties," PH Ravikumar, former CEO of NCDEX and once an arch rival of Shah, has been quoted as saying in the ET report.

Courtesy: Firstbiz
Share buyback arrangement was legal, says FTIL 
FTIL clarification in response to FIR registered by CBI
Mumbai, Aug 27 2014 Financial Technologies (India) Ltd. (FTIL) has said that the buyback arrangement for shares with shareholder banks of MCX Stock Exchange (MCX-SX) was declared legal by the Bombay high court while hearing the matter between the exchange and the capital markets regulator. 

The FTIL clarification was in response to the first information report (FIR) registered by the Central Bureau of Investigation (CBI) on Monday for alleged violations while granting extension to MCX-SX. According to CBI, the buyback agreement entered into with the banks was illegal. 

“The Bombay high court, in its order, (Page No. 145 Para VII) had ruled that “the buy-back agreement cannot be held to be illegal as found in the impugned order of the whole timer member of SEBI on the ground that they constitute forward contacts. Hence, the accusation of CBI does not hold ground,” said FTIL.

Courtesy: Live Mint

Financial Tech contests CBI charges
Photo: First Biz
[Editor: Mr.Jignesh Shah, was a non-executive director of NSEL and was not involved in its day-to-day operations. Mr.Shah's lawyer Mahesh Jethmalani has reportedly argued in court that Shah had no knowledge of the crisis, saying it was perpetrated by a clutch of NSEL employees and brokers, including Anjani Sinha, former chief executive of the commodity exchange. FTIL's net profit rose 57.93% to Rs.128.24 crore on 27.43% increase in total income to Rs.216.05 crore in Q1 June 2014 over Q1 June 2013. FTIL is among the global leaders in offering technology IP (Intellectual Property) and domain expertise to create and trade on next generation financial markets. It is a global leader in creating and operating next-generation tech centric financial exchanges]
MUMBAI, AUGUST 26:  Financial Technologies has contested CBI's charges of irregularities in grant of licence last year to its subsidiary MCX Stock Exchange. The CBI had accused Financial Technologies of entering into a buyback agreement with banks while reducing its stake to meet SEBI norms.

FTIL has quoted the Bombay High Court order to clarify that the “buy-back agreement cannot be held illegal as found in the impugned order of the Whole Time Member of SEBI on the ground that they constitute forward contacts.” Hence, the accusation of CBI does not hold ground, said the company.

Promoter not liable
On the CBI indictment for not disclosing the buyback agreement to the regulator at the time of application seeking extension of the MCX-SX licence, FTIL said the application was filed by the exchange and not by the promoter-company. Therefore, the promoter is not liable for the matter, it said.

MCX-SX was set up by FTIL and its commodity exchange arm MCX and began functioning as a full-fledged stock exchange last year after a prolonged battle with SEBI.

On Monday, CBI filed FIRs against three serving SEBI officials Muralidhar Rao, Executive Director; Vishakha More, Assistant General Manager and Rajesh Dangeti, Deputy General Manager. It also filed an FIR against former Executive Director JN Gupta besides FTIL promoter Jignesh Shah for alleged irregularities aimed at obtaining a licence to operate the stock exchange.

Courtesy: The Hindu Businessline

Monday, August 25, 2014

MCX SX cancels Financial Technologies warrants
[Editor: Today the shares of Financial Technologies Ltd were recommended as a buy at Rs.277-278, for a target of Rs.320-325, in the short term. On the other hand the shares of Allied Digital Services Ltd (Rs.19.40) are buzzing, as the company is the hot favourite to win the mega, Rs.1000 Cr (please clarify the exact value of the tenders from your sources), Mumbai-CCTV-project. The project, announced to enhance security in the city after the 26/11 terror attacks, aims at installing 6,000 CCTV cameras in the city (14 cameras per sq km)]
MUMBAI, AUG 25:  MCX Stock Exchange has extinguished warrants held by Financial Technologies and transferred Rs. 56.25 crore non-refundable interest free deposit issued against the warranted to the capital reserve.

The development will increase the exchange networth to Rs. 160 crore from Rs. 110 crore and help meet SEBI minimum networth criteria of Rs. 100 crore.

The decision to cancel the warrants was taken by the board after perusing legal opinion on the SEBI order dated March 19 and Securities Appellate Tribunal order dated July 9 regarding the warrants held by Financial Technologies.

Earlier this year, the exchange shifted MCX and FTIL from “Promoter Category” to “Public Category”.

Meanwhile, the Comptroller and Auditor General of India has informed that it has concluded the supplementary audit of the financial statements of MCX-SX for the year ended March, 2014 and has mentioned that nothing significant had come to their notice which would give rise to any further comment or supplement to the Auditors’ Report, said MCX-SX in a statement.

The Exchange has shifted its corporate office to its new premises at Bandra Kurla Complex in Mumbai.

Saurabh Sarkar, Managing Director, MCX SX stated that “We are poised for a complete turnaround in the next few months. The recent developments will improve the sentiments of potential investors and restore the faith of the market participants on the turnaround of our exchange.”

Courtesy: The Hindu Business Line

Thursday, August 21, 2014

WINNING STROKES: THINK DIFFERENT
Pix Transmission Ltd recommended yesterday around Rs.49-49.5 today touched Rs.54, before closing at Rs.52.60. The next targets seems to be Rs.59-60. 
Resurgere Mines and Minerals Ltd today hit another buyer freeze at Rs.1.63. The investors were asked to lap up the scrip on all declines. 
IVRCL Ltd today closed flat at Rs.18.85. The company should be doing well in the short to medium term. The investors are suggested to accumulate it on all declines. 
Allied Digital Services Ltd today hit the buyer freeze at Rs.18.50. Yesterday, some positive news regarding the mega-Pune project was revealed in this blog. 
PVP Ventures Ltd today fell by more than 4%. The scrip will not rise till the Potluri Vara Prasad and his family stops looting the company, in broad day light. 
FIIs and DIIs were Net Buyers