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Mumbai: The past three months between August and October have not seen a single company raising money through qualified institutional placement (QIP). The number of companies opting for fund raising through QIP route has also dropped 83.29% between April and October this year over the same period last fiscal, due to volatile market conditions, with only nine firms raising a total of around Rs 5,596.14 crore in the past seven months.

Shares prices of eight of these nine companies are also currently trading significantly below their QIP issue price.

In the last three months between August and October, not a single listed company has tapped the QIP route, according to data available with market-tracker Prime Database. Last time this happened was in 2016, when no issue came out in March and April. A similar sentiment was witnessed in 2013-14, the year before the 2014 general elections, when only six companies raised Rs 9,402 crore cumulatively through QIP, according to the database.

Last fiscal, around 51 companies had raised Rs 57,523.76 crore through QIPs, with 20 companies raising around Rs 33,501.83 crore between April and October, 2017. Pranav Haldea, managing director, Prime Database Group, said QIP is a “bull market product”.

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According to him, throughout this year, the market has been fairly volatile, which has resulted in lesser number of QIPs getting launched.

QIP is meant for fresh capital raising by firms. However, for the last three-four years, a trend is visible where not much fresh capital was raised by companies for investment, setting up additional capacities, etc, he added.

Last fiscal, a total of 10 banks came up with QIPs, including the Rs 15,000 crore issue by State Bank of India in June 2017. Other banks were Punjab National Bank, Federal Bank, Bank of Maharashtra, Dena Bank, Syndicate Bank, Union Bank among others. 
Apart from HDFC Bank, no other bank raised capital through QIP in the current fiscal.

Haldea said “PSU banks have taken a beating and thus are reluctant to launch their QIPs in such times”.

A K Prabhakar, head-research, IDBI Capital, said that only a few indices have hold in the market in the past six months, while most stocks have seen a decline. In QIP, foreign investors are largely interested, but in the past six months there had been a significant outflow of foreign funds “One cannot dilute stake when foreign investors are not interested,” he said.

Haldea said that due to volatile markets, one has also seen lesser interest from institutional investors, especially foreign portfolio investors (FPIs).

This year so far, foreign portfolio investors (FIIs) have sold equities worth $4.4 billion in the domestic market. Except one company, the share price of all other companies, which raised money through QIP, are currently trading below their issue price.

Ugro Capital Ltd, which raised Rs 113 crore at an issue price of Rs 140 per share, has seen a 42% jump in its share price. Its shares closed on BSE on Tuesday at Rs 199.65 per scrip.

On the other hand, HDFC Bank raised Rs 2,774.99 crore at an issue price of Rs 2,160 per equity share in July. Its shares closed at Rs 1,929.20 per scrip on Tuesday on BSE, 11.96% lower than its issue price.

In September this year, Kwality Ltd, which was dragged to the National Company Law Tribunal (NCLT) by KKR India Financial Services for Rs 1,200 crore default, tried to raise around Rs 80 crore of capital through QIP. The issue opened on September 14 with a floor price of Rs 21.20 per share, but failed to generate investor interest. The QIP was withdrawn, as per a regulatory filing made by the company on September 21. Kwality’s shares closed at Rs 8.51 apiece on BSE on Tuesday.

In April, Kolkata-based Magma Fincorp raised Rs 500 crore through QIP at an issue price of Rs 155 per share. On Tuesday, its share closed at Rs 109.60 per scrip on BSE, 29.29% lower than its issue price.

Bangalore-based Gokaldas Exports Ltd, too, raised Rs 69 crore in April at an issue price of Rs 90 per share, while its shares are currently trading at Rs 75.65 apiece, a fall of 15.94%.

In May, four companies tapped the QIP route. Ganesha Ecosphere Ltd raised Rs 100 crore at an issue price of Rs 377 per share. The shares closed at Rs 278.40 per scrip on BSE, 26.15% below its issue price. Minda Corporation Ltd raised Rs 310.69 crore at an issue price of Rs 173.47 per share. Currently, its shares are trading 24% below its issue price at Rs 131.60 apiece.

This article was first published in DNA Money:<a href="https://www.dnaindia.com/business/report-qualified-institutional-placements-drop-to-a-trickle-in-choppy-markets-2685439">&nbsp;QIPs drop to a trickle this year</a>

&nbsp;

The past three months between August and October have not seen a single company raising money through qualified institutional placement (QIP).


QIP, 'a bull market product', plunges in 2018

Volatile markets are spoiling the listing of the companies on the bourses with three companies debuting at a discount to their issue price. On Wednesday, Garden Reach Shipbuilders and Engineers closed at a discount of 10.93% at Rs 105.10 a piece, compared to its issue price of Rs 118 on BSE. On National Stock Exchange, it closed at a discount of 13% at Rs 102.65 per scrip.

The shipbuilder’s Rs 345 crore IPO was subscribed 1.02% on the final day, after being extended for three days till October 1 due to a tepid response. The price band was also revised from Rs 115-118 to Rs 114-118 a piece. The offer for sale by the government was a part of its divestment plan.

The Kolkata-headquartered public sector defence company caters to the requirements of the Indian Coast Guard and Indian Navy. As on July 31, its aggregate order book was Rs 20,313.6 crore, comprising gross order value in the shipbuilding segment, engineering segment and the engine segment of Rs 20,029.42 crore, Rs 85.17 crore, and Rs 199 crore, respectively. The revenue of the company has seen a decline between 2014-15 and 2017-18, while its pre-tax profits remained almost flat during the period.

According to an analyst, PSU companies are unlikely to garner investor interest due to poor returns. Barring a few, almost all PSUs have underperformed with investors losing money.

He said in a volatile market, it is better to invest in stocks with proven track record than to go for new companies, where there is a risk of negative returns.

Earlier this week, Aavas Financiers made a weak debut on BSE as its scrip got listed at 7.7% discount to its issue price of Rs 821 on BSE.

The Rs 1,734-crore initial public offer was subscribed 97% at a price band of Rs 818 to Rs 821 per share. The IPO was open from September 25 to 27.

Last month, state-owned railway engineering and construction company Ircon International also had a tepid stock market debut where it shares were listed at at Rs 415.30, about 12.5% discount to its issue price of Rs 475 a piece, despite the Rs 467 crore IPO being subscribed 9.9 times. The shares were listed at Rs 412 per share, about 13.2% discount to the issue price on NSE. The share sale was held on September 17-19 with a price band of Rs 470-475 per share.

In a recent interview to DNA Money, Motilal Oswal, CMD, Motilal Oswal Financial Services had said that the IPO markets are “unpredictable” and “volatile”, and it will take time for IPOs to revise prices. According to him, it is not a good time to invest in IPOs, and the primary market will see momentum once the overall markets finds stability.

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“Many good company IPOs are below their issue prices. IPO means people want good returns, but it is not happening,” he had said.

Source: DNA Money

The shipbuilder’s Rs 345 crore IPO was subscribed 1.02% on the final day, after being extended for three days till October 1 due to a tepid response. The price band was also revised from Rs 115-118 to Rs 114-118 a piece. The offer for sale by the government was a part of its divestment plan.


Big setback for Garden Reach Shipbuilders as stock markets spoil debut

Motilal Oswal, chairman and managing director, Motilal Oswal Financial Services, feels India Inc’s earnings estimates are quite positive and the corporates will build upon the positive trend in the second quarter of the current fiscal. According to him, there will be some serious headwinds from oil marketing companies’ (OMCs) profitability while PSU banking sector will stage a comeback. He feels the earnings numbers for March 2019 will be better than March 2018.

“Good companies with stable fundamentals of corporate growth, backed by great managements, are expected to grow by 15-20% annually, while cyclical companies such as agri-commodities or stock brokerages will remain volatile,” Oswal said. He expects the manufacturing sector, led by automobiles, white goods to have a higher teen growth and FMCG to have higher single-digit growth. Export-oriented sectors such as technology and pharma, on the back of sharp rupee depreciation, will be in limelight, he said, adding, companies with less volatility will attract higher price multiples.

Source: DNA Money

Motilal Oswal, chairman and managing director, Motilal Oswal Financial Services, feels India Inc’s earnings estimates are quite positive and the corporates will build upon the positive trend in the second quarter of the current fiscal.


Good news! Motilal Oswal says India Inc earnings set to zoom  

The government’s move to pull the troubled lender Infrastructure Leasing &amp; Financial Services Ltd (IL&amp;FS) out of the financial muddle may have boosted investor sentiments, but it may take a while for an actual recovery to happen.&nbsp;

According to a banking expert and analysts, non-banking financial companies (NBFC) stocks will be under pressure due to higher valuations. With banks cutting fresh lines of credit, there will be acute liquidity issues, hitting the NBFCs.

A K Prabhakar, head-research, IDBI Capital, said there may be a temporary recovery in NBFC space, but it may not be sustainable because of other factors such as rising interest rates.

Investors have also realised that there are risks with these stocks, so they will rather invest in government securities and bonds instead of putting it into NBFCs. The liquidity crisis will remain till the markets pulls back, which normally takes six months to one year, he said.

“Most NBFCs/housing finance companies, which have borrowed from commercial papers, or NCDs, to meet their obligation, may have to stop lending and meet their commitments. There will not be any fresh fund inflow now and ratings of NBFCs should not come down, for which they have to meet their commitment,” Prabhakar said.

There will be a slowdown in lending or they may put a temporary stop since a default can impact ratings, he said. “At this crisis, they will try to meet their commitment. With no growth, there will be margin impact, hence the correction.”

“At this crisis, they will try to meet their commitment. With no growth, there will be margin impact, hence the correction,” Prabhakar said.

Rahul Shah, VP-equity advisory group, Motilal Oswal Financial Services, concurred. He said the biggest problem for NBFCs is lower pace of growth or no growth, hence valuations are likely to come down further.

“They may look at slowing down lending to address their future obligations. Growth will not come at this point and most NBFCs have corrected 32-40%. The stocks may stay at this level or could decline from here. If they default, their ratings will be severely impacted. Hence, they would look to sacrifice growth to meet obligations.”

On Monday, benchmark indices Sensex and Nifty ended a three day-long losing streak after the government announced that the earlier Board of IL&amp;FS will be replaced with a new one headed by banker Uday Kotak.

The Sensex closed 299 points, or 0.83%, higher at 36526.14 on Monday on the bailout news, while Nifty 50 rose 77.85 points, or 0.71%, to close at 11008.3.According to Prabhakar, though the government was able to avoid a major crisis, multiple other global factors, including crude prices, weakening rupee, impacting the markets.

“IL&amp;FS issue did not turn into a contagion. That is why recovery has come, but it does not mean we will see a rally,” he said, adding that this recovery is likely for a couple days but may not sustain for long. As long as Nifty is not breaching 10800, there is some recovery expected, he said.

Shah said the markets may correct only 2-3%, but there will be a sector rotation. Financials are still likely to take a beating of 5-6%. People may discount some banking stocks as there is a slower growth expected in retail credit while the focus would be on those banks, such as ICICI Bank, Axis Bank and SBI, which are lending to corporates, he said.

Source: DNA Money

The government’s move to pull the troubled lender Infrastructure Leasing &amp; Financial Services Ltd (IL&amp;FS) out of the financial muddle may have boosted investor sentiments, but it may take a while for an actual recovery to happen.&nbsp;

&nbsp;


Big worry for India! Liquidity crisis may stay for months even after IL&FS rescue  

Amid liquidity concerns of NBFCs, the initial public offering (IPO) of housing finance firm Aavas Financiers Ltd opened on a tepid note on Monday. Till 5 pm on day 1, the issue received bids for 6,58,368 shares or 4.45% of the 14,785,027 equity shares offered. The IPO comes at a time when the market is volatile over the past few trading sessions and stocks of almost all non-banking finance companies are undergoing a correction.

Aavas Financiers, formerly known as AU Housing Finance, is a Jaipur-based affordable housing finance company, serving low and middle-income self-employed customers in semi-urban and rural areas in India.

Generally, most of the IPOs see lukewarm subscription on the opening day as investors tend to pick up shares later on.

Aavas has fixed its price band at Rs 818-821, aiming to raise up to Rs 1,734 crore at the upper end of the price band. On Monday, the housing finance company has got orders of Rs 520.22 crore from 34 anchor investors at the upper end of the price, or Rs 821 per equity share.

A K Prabhakar, head of research, IDBI Capital Markets, said the cost of funds in the NBFC space is high. The stocks were overvalued and have seen a correction of 30-35% on an average in the past two weeks. Given the current market condition, as per Prabhakar, some of the better-known stocks with a proven track record are also available at a cheaper price.

“Investors can buy better-known names at a good valuation now,” he said, adding that Aavas is available at an expensive valuation.

Stockbroking firm Prabhudas Lilladher in a research note has advised investors to “avoid” the issue. The high capital adequacy (61%) will not only depress return on equity (RoE) in near-term (current RoE at 11%) but elevated valuations would require high growth to improve ratios and justify valuations.

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On the other hand, Motilal Oswal Securities in its research note said at the higher end of the price band, Aavas is valued at 4.1x 1QFY19 post IPO book value.

Source: DNA Money&nbsp;

Aavas Financiers, formerly known as AU Housing Finance, is a Jaipur-based affordable housing finance company, serving low and middle-income self-employed customers in semi-urban and rural areas in India.&nbsp;Generally, most of the IPOs see lukewarm subscription on the opening day as investors tend to pick up shares later on.


As NBFCs fight liquidity crisis, Aavas Financiers IPO opens to tepid response

Williamson Magor Group company McLeod Russel India Ltd has announced its fourth tranche of the asset sale. The plantation company has signed the agreement with two Kolkata-based non-tea firms to sell a total of six tea estates in the Dooars and Assam for a total consideration of Rs 232.32 crore.

With this, the company will be able to raise around Rs 795.52 crore through its sale of 22 tea estates spread across the Dooars and Assam with an annual yield of about 23.77 million kilogram (mkg). The company initially had a target to raise Rs 500-600 crore through asset sale to pare down its debt.

McLeod Russel had a debt of around Rs 1,000 crore prior to the asset sale.

In a regulatory filing late Saturday evening on BSE, McLeod Russel said it has signed a non-binding agreement with Saffron Enclave Pvt Ltd for selling off its four assets— Addabarie, Dirai, Rajmai and Mahakali Tea Estate— for Rs 180.7 crore.

The tea gardens are in Sonitpur, Sibsagar, Dibrugarh and Tinsukia districts of Assam, with a total annual yield of around 5.07 mkg, and sold at a valuation of Rs 356 per kg. Sameer Agarwal of IndusInd Bank has advised McLeod Russel on the deal with Saffron Enclave.

The directors of Saffron Enclave Ankit Saraiya and Avantika Gupta are non-executive directors of publicly-listed Techno Electric and Engineering Co Ltd and other Techno Group companies.

Both Saraiya and Gupta are also on board of privately-held Simran Wind Project Ltd, the company in which Techno Electric is getting merged into.

McLeod Russel has also signed a memorandum of understanding with Civil Engineers Enterprises Pvt Ltd, owned by Shyamalendu Ghosal and family, to sell off Chuapara and Jainti Tea Estate in the Dooars for a total sum of Rs 51.62 crore. The Jainti Tea Estate also includes Chuniajhora Tea Estate, produce of which is processed at Jainti tea garden. The total production from these two gardens is 2.5 mkg, implying the gardens were sold at a valuation of Rs 207 per kg.

Interestingly, both Civil Engineers and Saffron Enclave are non-tea companies with a major interest in construction and engineering. Williamson Magor Group, too, has an engineering interest McNally Bharat Engineering, and the group is looking to bring in a strategic investor for the debt-ridden engineering firm, chairman Aditya Khaitan told DNA Money.

Meanwhile, McLeod Russel has been looking to trim its tea assets in Assam and the Dooars. Khaitan, the company’s vice-chairman and managing director, during its annual general meeting (AGM) last month said that the company may exit 10-20 million kg in terms of tea gardens where the yield is low.

The company has taken shareholders’ approval in its AGM to sell additional tea estates after it sold 12 tea gardens to M K Shah Exports Ltd and Luxmi Tea Co Pvt Ltd. According to the company, shareholders approval is required in case of a sale, lease or otherwise requisite disposal of certain tea estates having value in excess of 20% but not exceeding 35% of the value of its fixed assets.

“We have achieved our target of asset sale. There is no further asset lined up,” Kamal Baheti, whole-time director and chief financial officer of McLeod Russel said.

In June, the company agreed to sell eight tea estates to M K Shah Exports for Rs 331 crore and four tea garden to Luxmi Tea for Rs 141 crore. Last week, it signed an agreement with Goodricke Group Ltd to sell two tea gardens in Assam with a combined yield of 2.5 mkg for Rs 91.2 crore.

Source: DNA Money

Williamson Magor Group company McLeod Russel India Ltd has announced its fourth tranche of the asset sale. The plantation company has signed the agreement with two Kolkata-based non-tea firms to sell a total of six tea estates in the Dooars and Assam for a total consideration of Rs 232.32 crore.

&nbsp;


McLeod Russel asset sale: With Rs 1000 cr debt, firm to sell 6 more tea estates for Rs 232.32 cr

Williamson Magor Group plantation company McLeod Russel India has reached an agreement to sell two tea estates in Assam to Goodricke Group and one of its subsidiary companies for a combined Rs 91.25 crore.

In a regulatory filing on BSE on Monday, McLeod Russel said that it has decided to “dispose of the estates and bearer plants and other assets” of Harchurah Tea Estate to UK-based Camellia Plc-owned Goodricke Group and Bargang Tea Estate to Amgoorie India Ltd, a subsidiary of Goodricke Group.

DNA Money on September 6 reported that McLeod Russel is in talks with Goodricke Group to sell at least two gardens with a production of about three million kg.

Atul Asthana, managing director and chief executive of Goodricke Group, said the total yield of the two gardens is 2.5 million kg. Harchurah, which is the smaller of the two with an average annual production of 0.8 million kg, was sold at a valuation of Rs360 per kg, while Bargang was valued at Rs 350 per kg, Asthana said, adding that the gardens are in “good condition”. The deal would also see around 3,500 workers being added to Goodrick Group.

The Kolkata-headquartered plantation company, with assets in Dooars, Darjeeling and Assam, was looking to acquire one or two gardens in Assam for long but the prices were not “viable”. 
McLeod Russel, on the other hand, is keen to trim down assets in Assam and Dooars, with the vice-chairman and managing director Aditya Khaitan saying during its annual general meeting last month that the company may exit 10-20 million kg in terms of tea gardens where the yield is low. 
The contribution of Bargang Tea Estate to McLeod’s total turnover in the last fiscal was Rs 35 crore, or 2.21%, while the same for Harchurah was Rs 24 crore, or 1.52%.

“Instead of investing more in such gardens to raise their yield, which is increasingly turning difficult due to the adverse weather, we have decided to get out of those,” Khaitan had said.

By the end of this fiscal,&nbsp; the company is looking to bring down its debt by Rs 500-600 crore, which was Rs 1,000 crore as on March 31, through sale of its assets.

However, two persons familiar with the development at McLeod Russel said that the company was approached by a number of tea companies in the past three years.

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The Williamson Magor group has been looking to sell some of its core and non-core asset to revive the group’s engineering company McNally Bharat Engineering, which is under insolvency process.

Source: DNA Money

McLeod Russel said that it has decided to “dispose of the estates and bearer plants and other assets” of Harchurah Tea Estate to UK-based Camellia Plc-owned Goodricke Group and Bargang Tea Estate to Amgoorie India Ltd, a subsidiary of Goodricke Group.


Williamson Magor Group firm McLeod Russel to sell 2 tea estates in Assam to Goodricke Group

Public sector lender United Bank of India’s share sale to employees has failed to receive sufficient support and managed to garner just 61% subscription even after two extensions.

In a regulatory filing on September 13, the bank said it has allotted 29.2 million new equity shares of face value of Rs 10 each at an issue price of Rs 10.55 per share under the employee share purchase scheme (ESPS). The Kolkata-headquartered bank was able to mop up Rs 30.8 crore against its target of Rs 50 crore, at a subscription rate of 61%.

Shares issued under the scheme are locked in for a year. The share price of the bank tanked over 39% from December 2017, when the sale was approved by the bank’s Board, to July when the pricing of ESPS was announced.

The issue price was fixed at a discount of 5% on “the average of the weekly high and low of the closing prices of equity shares” of the bank “during the two weeks preceding the date of offer”, United Bank had said in its regulatory filing on July 25.

On Friday, the bank’s shares closed at Rs 11.45 each on BSE, 0.09% lower than the previous close.

Due to tepid response among its employees over ESPS, the deadline of the scheme was extended twice — on August 13 and August 20 - before it closed on August 31. The public sector bank (PSB) was looking to raise Rs 50.47 crore from 14,541 bank employees who cumulatively were offered 47.8 million of new equity shares.

The bank had offered around 20,000 shares each to its two whole-time directors (MD and CEO and executive director) who were to shell out Rs 2.11 lakh each to fully purchase it. While 55 general managers and deputy general managers were offered 10,000 shares each, 530 assistant general managers and chief managers were offered 7,500 shares, whereas the same for 2,986 senior managers and managers was 5,000 shares each.

Around 4,379 officers were offered 4,000 shares per head and 4,242 staff were to be issued 2,000 shares each. Around 2,347 sub-staff, which include housekeeper and full-time sanitary workers, were offered 1,000 shares each for Rs 10,550.

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In a first for public sector banks, in December 2017, the Boards of United Bank and Allahabad Bank had approved allotment of shares up to 50 million to their employees - from chief executives to peons, in line with the finance ministry’s in-principle approval to public sector lenders to offer stock options to its employees.

In December, United Bank’s shares were trading at Rs 17.4-18 per scrip and the bank was looking to raise around Rs 85 crore that time. Interestingly, the share price of the bank has dropped 39.2% year to date till July 30.

Meanwhile, Allahabad Bank went ahead with the share allotment in February, which was subscribed 87.6%.

The decision was opposed by a section of officers’ and workers’ unions, as they argued it will lead to dilution of government stake in the two Public Sector Banks. However, the largest union representing officers lobby had offered support to the scheme, saying it will allow employees to be a stakeholder in the bank as a “separate investor class”.

The government shareholding at the end of the scheme stood at 92.25% against 93.15% as of June, 2018.

According to a former senior executive of the bank, who did not wish to be identified, the bank’s share price is under constant pressure as it is struggling with resolutions over piling non-performing assets (NPAs) and is under the prompt corrective action.

“Employees apprehensions are not entirely misplaced as the scheme comes with a lock-in of one year,” the executive said, adding that the lack of confidence among employees, however, may pose a challenge for the bank’s further capital raising plans.

United Bank managing director and chief executive officer Pawan Bajaj had recently said in an event in Kolkata that the bank is looking for a capital infusion of around Rs 1,500 crore and will approach the central government for it.

“First, we will approach the Centre and then explore alternatives such as employee stock option plan (ESOP),” he said recently.

To check deteriorating asset quality and to bring down non-performing assets, the bank has allowed its corporate loan book to shrink by around Rs. 6,000 crore to Rs 26,000 crore till March 31 and was looking to cap its corporate loans to a single borrower at Rs 150 crore, Bajaj had said earlier.

Shares issued under the scheme are locked in for a year. The share price of the bank tanked over 39% from December 2017, when the sale was approved by the bank’s Board, to July when the pricing of ESPS was announced.


United Bank of India share sale to employees flops, gets just 61% subscription 

McLeod Russel India Ltd is gearing up for its third tranche of asset sale in Assam. The development comes weeks after the vice-chairman and managing director the largest plantation company, Aditya Khaitan, talked about the “need to feel dispassionate” about its own tea estates.

The company is in the advanced stage of discussion with Goodricke Group Ltd for selling of at least two gardens with a production of about three to five million kilogram, according to two people familiar with the development who spoke on the condition of anonymity.

When contacted, McLeod Russel chief financial officer Kamal Baheti told DNA Money that nothing has been finalised on the next round of asset sale with any prospective buyer. The company, however, has recently announced its intent to sell more assets in the country.&nbsp;Goodricke Group managing director and chief executive Atul Asthana did not comment when contacted.

According to people closely tracking the development, the deal could be worked out at a valuation of Rs 340-350 per kg, the same valuation at which McLeod has agreed to sell 12 gardens to M K Shah Exports Ltd and Luxmi Tea Co Pvt Ltd recently. McLeod is looking to pare its debt and it would rake in Rs 472 crore from its asset sale to M K Shah and Luxmi. As of 31 March, 2018, it had a debt of about Rs 1,000 crore.

The deal is expected to be announced next week, the persons quoted above said.

In the recent annual general meeting of Goodricke Group in Kolkata, Asthana said the company is looking to increase output in Assam by acquiring one or two gardens with at least two million kg annual production.

Goodricke, part of the UK-based Camellia Plc, has been looking to acquire gardens in Assam for the past two to three years but only “at a viable price”, Goodricke’s former MD and present vice-chairman Arun Singh had said earlier. Camellia Plc currently has 65 tea gardens globally.

Last year, Goodricke acquired packet tea brands of Godfrey Phillip India Ltd for Rs 20 crore to push its packet tea business.

McLeod Russel recently took the shareholders’ approval to sell more tea estates. According to the company, shareholders approval is required in case of a sale, lease or otherwise requisite disposal of certain tea estates having value in excess of 20% but not exceeding 35% of the value of its fixed assets.

During the annual general meeting earlier last month, Khaitan said his company may exit 10-20 million kg in terms of tea gardens, which it will eventually add by sourcing from small tea growers in the next two-three years.

Of its 55 tea gardens, the company is in the process of identifying those where the yield is low.&nbsp;“Instead of investing more in such gardens to raise their yield, which is increasingly turning difficult due to the weather turning adverse, we have decided to get out of those,” he has said.

The recent wage increase in Assam and West Bengal has been a point of concern for the organised tea industry, which could even lead to exit or winding up of some small players. The operating profit for most tea companies is expected to be under stress as the prices of tea have not moved up in line with the increase in wage cost.

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Prior to the wage revision, several names of potential buyers for McLeod Russel’s gardens were doing the rounds. However, many of them are now going slow to understand the “viability” of an acquisition.

Source: DNA Money

&nbsp;

Deal for two gardens, at likely valuation of Rs.340-350 per kg, may be announced next week&nbsp; &nbsp;


McLeod Russel asset sale: Goodricke Group may bag 2 gardens

Public sector lender United Bank of India is getting a cold response for its ongoing Employee Share Purchase Scheme despite extending the deadline twice, as employees are concerned over the declining share price.

According to a bank employee, who wish not to be quoted, subscription worth around Rs 15 crore was recorded till August 20 against a target of raising up to Rs 50 crore at an issue price of Rs 10.55 per share. It is just 30% of the targeted mop-up. The bank has 14,541 employees, according to its annual report for 2017-18.

In a first for public sector banks, in December 2017, Boards of United Bank and Allahabad Bank had approved allotment of shares up to 50 million to their employees – from chief executives to peons. The decision was opposed by a section of officers' and workers' unions, as they argued it will lead to dilution of government stake in the two PSBs.

In December, UBI's shares were trading at Rs 17.4-18 per scrip and the bank was looking to raise around Rs 85 crore that time. Allahabad Bank went ahead with the share allotment in February, which was subscribed 87.6%. United Bank went slow on the scheme and has floated around 47.8 million shares. It opened the issue on July 30, 2018 for subscription. Interestingly, the share price of the bank has dropped 39.2% year to date till July 30, and 28.18% since February.

On July 25, in a regulatory filing, the Kolkata-headquartered bank said the issue was fixed at an issue price at a discount of 5% on "the average of the weekly high and low of the closing prices of equity shares" of the bank "during the two weeks preceding the date of offer". The earlier deadline of the scheme was August 13, which was extended to August 20 and now to August 31.

Another employee, who too did not wish to be quoted, said there are "some pressure at the ground level for participation" and mostly officers have subscribed so far. The subscription is a little below 50% till Tuesday, the employee said.

A former senior executive of the bank said employees' apprehensions are not entirely misplaced at a time when the bank is under the prompt corrective action and struggling with resolutions over piling non-performing assets, putting its share price under constant pressure.

The scheme, however, has found support from All India Banks' Officers Confederation, the largest officers' union. According to an official, the scheme allows employees to be a stakeholder in the bank as a separate investor class. 
Under the scheme, shares to be allotted are to be locked in for one year.

According to an employee quoted above, the bank will offer around 20,000 shares each to its managing director and CEO Pawan Bajaj and executive director, who will have to pay around Rs 2.1 lakh, if they choose to fully subscribe to the issue.

The general managers and deputy general managers will be offered 10,000 shares each for Rs 1.05 lakh each to fully purchase the shares on offer. Assistant general managers and chief managers will be offered to purchase 7,500 shares and the subsequent scales below will be offered 5,000 and 4,000 shares each. The clerical staff is being offered 2,000 shares each while for the sub-staff, the number of shares to be allotted is 1,000, which means the cleaning staffer has to pay up to Rs 10,550 if he has to fully purchase it. 
The managing director could not be reached for his comments.

In the June quarter, United Bank widened its net loss to Rs388.68 crore against Rs 211.46 crore in the year-ago period. Gross NPA increased to 22.73% in the first quarter of the current fiscal from 17.17% a year-ago. Net NPA increased to 15.17% in the June quarter from 11.10% in the corresponding period last fiscal.

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The government shareholding in the bank as on 30 June was 93.15%. As per Securities and Exchange Board of India norms, all public sector undertakings were mandated to bring down government shareholding to 75% by August 21.

Source: DNA Money

In a first for public sector banks, in December 2017, Boards of United Bank and Allahabad Bank had approved allotment of shares up to 50 million to their employees – from chief executives to peons. The decision was opposed by a section of officers' and workers' unions, as they argued it will lead to dilution of government stake in the two PSBs.


United Bank of India share sale virtually gets snubbed by employees

Recruitment 2018: Headcount addition for business process management (BPM) services provider Hinduja Global Solutions (HGS) Ltd will remain flat in this financial year owing to uncertainty in the telecom sector. The firm may hire around 1,000 employees over the next fiscal.

According to CEO Partha DeSarkar, the domestic CRM (customer relationship management) business, which accounts for 14% of Hinduja Global’s overall revenues, is struggling because of a drop in volumes from telecom clients. Around 70% of the company’s domestic CRM business comes from the telecom sector.

Since Reliance Jio Infocomm Ltd’s entry, the telecom industry is undergoing a data revolution. The sector has seen consolidation and the profitability has been affected due to lower margins and rising competition, resulting in high attrition.

DeSarkar said he does not see a large headcount addition in this financial year, and “on a net basis, the headcount will remain flat this year.” The company has to downsize its business due to drop in volume, he added.

The Bengaluru-based company, part of the multi-billion dollar conglomerate Hinduja Group, has a high attrition rate of 60%, according to DeSarkar.

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“That’s a large number and we are not happy with that, but it is driven by what is happening in the telecom space,” he said. As on June 30, HGS had 44,854 employees in seven countries.

However, over the next fiscal, Hinduja Global will see a capacity addition of around 1,000 employees at its two centres in Hyderabad (Telangana) and Jacksonville in Florida, DeSarkar said. The upcoming Jacksonville centre will cater to consumer electronics and healthcare clients.

Source: DNA Money

Recruitment 2018: Headcount addition for business process management (BPM) services provider Hinduja Global Solutions (HGS) Ltd will remain flat in this financial year owing to uncertainty in the telecom sector. The firm may hire around 1,000 employees over the next fiscal.


Recruitment 2018: This company all set to hire 1,000

The operating margins of the tea companies may be further hit with the cost of production rising by up to Rs 26 per kilogram due to the interim wage hike for Assam tea workers. For the last few years, most tea plantation companies have been reeling under stress and many fear that the wage hike will only add to their woes unless there is a price increase. Some small companies may even have to exit the business.

Wages comprise over 60% of the production cost for tea companies. The Assam government recently hiked daily tea wages by Rs 30 to Rs 167 per worker, effective retrospectively from March 1, 2018. This will see a proportionate increase in provident fund, gratuity and other cash benefits offered to the workers. Besides, the industry pays in kind for ration, medical, housing, firewood, etc. Nearly six lakh workers are employed with the tea industry in Assam and wages in tea gardens are paid on a weekly basis.

In Assam, the wage revision was due since January 1, 2018. Recently, the government of West Bengal too announced an interim wage hike of Rs 17.50 per day per worker for the Dooars and Darjeeling, which was implemented since January 2018. The earlier wage agreement for West Bengal expired in March 2017.

Traditionally, wages of tea workers were decided through bipartite agreement (trade unions and tea producers) in Assam and tripartite agreements (trade unions, state government and tea producers) in West Bengal. Wages are finalised for a period of three years, with a fixed increase rate annually. The impact of wage revision is usually highest in the first year. However, this time the Assam government directly intervened in the wage revision, ruling out any negotiation between unions and producers. The cost of production for Assam tea industry is likely to go up by Rs 525-780 crore, say experts. Organised industry in Assam produces around 300 million kg of tea annually.

Jagjeet Kandal, MD, Amalgamated Plantation Pvt Ltd (APPL), a Tata group company and the second largest bulk tea producer in the country, said that despite the cost of production rising, tea prices have remained subdued in the last four to five years.

"Markets have not reacted at all," he said, adding that the wage hike will hit the organised industry in a big way, raising cost of production by up to Rs 26. APPL, which is already reeling under losses, may see a hit of Rs 14-15 crore per annum on account of wage hike. With 25 gardens spread across Assam and the Dooars in West Bengal with an annual production of 42 million kg, APPL employs around 31,000 workers.

The recent wage hike will see APPL's production cost going up from Rs 205 per kg to Rs 240 per kg, whereas its average selling price is around Rs 180-185 per kg, Kandal said, adding that while the company is able to have certain profit margin on green leaves purchased from small tea growers, in its own gardens, it is incurring losses due to high production cost.

In its recent annual general meeting in June, APPL chairman Ranjit Barthakur had said the financial result of the company at net of taxes was at a negative of Rs 28.42 crore last fiscal.

Kandal said if prices don't react in tandem with the wage hike, there could be defaults in the industry, which may lead to the closure of some gardens.

Himanshu Shah, chairman, M K Shah Exports Ltd, echoed similar concerns. The company has recently signed an agreement to acquire eight tea estates in Assam from the Williamson Magor Group company McLeod Russel India Ltd, the largest bulk tea producer globally, for Rs 331 crore. McLeod, with around 65 tea estates in Assam, Vietnam and Africa, has been looking to pare its debt by Rs 400-500 crore through asset sale.

Shah said that though there had been an average price increase of Rs 12 per kg over last year, the wage increase will see the cost of production rising between Rs 15 and Rs 20, depending on the yields.

"Though we have factored in the wage hike while negotiating with the Magor, our margins will still have some impact," Shah said.

Vivek Goenka, president, Warren Tea Ltd, said discussions are going on with the Assam government to help the industry with ration and other items in order to compensate for the increase to some extent.

"Otherwise, such an increase will be unsustainable for most of the industry," Goenka added. In 2017-18, Warren Tea reported a net loss of Rs 7.89 crore.

In a recent report by Icra Ltd, Kaushik Das, vice president and sector head, corporate sector ratings, said that bulk tea players have already witnessed pressures on operating margins over the last few years, mainly driven by increased labour costs and inadequate increase in realisations.

"With this sharp increase of around 22% in cash wages, organised bulk tea players are likely to witness further contraction in operating margins, unless there is a commensurate rise in tea prices," Das said.

The operating margins of the tea companies may be further hit with the cost of production rising by up to Rs 26 per kilogram due to the interim wage hike for Assam tea workers.&nbsp;

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Wages set to turn tea plantations firms brew bitter

Innovation is brewing at Tata Global Beverages Ltd (TGBL), formerly Tata Tea Ltd, with evolving consumer preferences. The Tata Group company, which has been facing headwinds with higher tea commodity cost in North-East India, is depending on new launches and innovations to gain market share.

In India, the company has recently launched two new tea brands - Chakra Gold Activ+ and the Kanan Devan Duet - under the Tata Tea umbrella brand in southern region, whereas in the UK, it has launched products outside tea category.

Recently, it entered the squash category through the Tetley brand and has also launched Tetley Cold Infusions to cater to an evolving market which is seeing “a secular decline” in black tea category for a number of years.

During an analyst call with the TGBL management, Adil Ahmad, global chief marketing officer, said the whole portfolio in the UK, therefore, is changing more towards the non-black category.

Ajoy Misra, managing director and chief executive officer, said that for the first time Tetley has entered squashes, which is a large category in the UK and “nearly as big as tea as a category”.

Tata Global has reported a 6.55% decrease in its consolidated net profit at Rs 133.6 in the first quarter of the current fiscal due to an exceptional item of Rs 18.18 crore. Consolidated total income, on the other hand, grew 6.53% to Rs 1831.11 crore.

L Krishnakumar, executive director and group CFO, said that the exceptional items in the quarter were related to “redundancy and restructuring done in the international business”. In the previous year, there was a gain on disposals.

Misra said that company has “seen an improvement in operating performance” in June quarter across its businesses in India and abroad, supported by revenue growths across branded businesses.

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TGBL has reported a consolidated growth of 7% in its branded business in the quarter ended June 2018, whereas its non-branded business has faced headwinds, he added. The non-branded business includes Tata Coffee Ltd and other B2B businesses.

The quarter had seen the branded business in India growing at 6% led by a volume growth of 8%. Tetley green tea, the green tea brand has “gained 5.7% volume and 5.9% value in market share”.

Innovation is brewing at Tata Global Beverages Ltd (TGBL), formerly Tata Tea Ltd, with evolving consumer preferences. The Tata Group company, which has been facing headwinds with higher tea commodity cost in North-East India, is depending on new launches and innovations to gain market share.

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Tea, coffee, ...squashes! See what Tata Global Beverages is up to 

<div>A one-time fee for distribution in the US has become a drag on the profitability of Eight O’Clock Company, a coffee company owned by Tata Coffee Ltd, a subsidiary of Tata Global Beverages Ltd. During an analyst call, Tata Coffee MD and CEO Sanjiv Sarin said the impact on Ebitda is “a necessary one” and is largely driven by a listing requirement in the trade in the US for distribution.</div>

<div>&nbsp;</div>

<div>“The temporary hit has happened,” said Sarin, without disclosing the quantum of the listing fee.</div>

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<div>In 2017, Tata Coffee through Eight O’ Clock Coffee (EOC) had signed an agreement with Keurig Green Mountain, Inc for manufacturing, sale, licensing and distribution of EOC coffee in K-cup pods for use in Keurig brewers. Keurig had agreed to pay royalty on the sale of EOC K-cup pods in certain channels and EOC agreed to pay co-packing fee to Keurig in certain other channels, as per a regulatory disclosure in March 2017.</div>

<div>&nbsp;</div>

<div>K Venkataramanan, executive director - finance, and CFO, while addressing the analyst call, said, “The new arrangement is kind of settling down”.</div>

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<div>EOC, held through company’s overseas subsidiary Consolidated Coffee, posted higher sales with a total income of $39.64 million in June quarter of this fiscal compared to $28.86 million in the year-ago period.</div>

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<div>The consolidated pre-tax profit for the quarter under review was lower at Rs 41 crore as against Rs 63 crore in the same period last year partially due to one-time exceptional expenses in the US operation, a recent press release said.</div>

<div>&nbsp;</div>

<div>Meanwhile, profits of Tata Coffee were also impacted due to lower realisation from its tea and pepper segments. The company reported a consolidated net profit of Rs 31.22 crore in Q1FY19, a decline of 30.4% over the same period last fiscal.</div>

<div>&nbsp;</div>

<div>Sarin said that pepper has been a focus area and a “strategic growth driver”.</div>

<div>&nbsp;</div>

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<div>According to him, the overall domestic production of pepper has exceeded by around 14% and Vietnamese pepper was trading at a significant discount to Indian origin pepper.</div>

<div>&nbsp;</div>

<div>However, despite the minimum import price restriction of Rs 500 per kg, pepper prices have dipped from Rs 403 a kg at the beginning of the quarter to Rs 372 per kg at the end of the quarter, he said, adding that the market price drop has been quite steep and “has severely impacted profits”.</div>

<div>&nbsp;</div>

<div>Tata Coffee announced its first quarter result on July 26. In a press release, the company had said the plantation segment has reported revenue of Rs.73 crore in the first quarter of the current fiscal as against Rs 74 crore in the year-ago period.</div>

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<div>The operating profit was Rs 5 crore in Q1FY19 as against Rs.18 crore in the corresponding period on the back of lower tea and pepper realisations.</div>

<div>&nbsp;</div>

<div>Source: DNA Money</div>

A one-time fee for distribution in the US has become a drag on the profitability of Eight O’Clock Company, a coffee company owned by Tata Coffee Ltd, a subsidiary of Tata Global Beverages Ltd.

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Tata Coffee at sixes and sevens over Eight O'Clock Company in the US 

In place of two leaves and a bud, a tea garden in Assam has found a golden bud. In an all-time record for pan-India tea auction system, a hand-made gold tips speciality tea from Assam fetched a price of Rs 39,001 per kg on Tuesday at Guwahati tea auction centre.

In sale 30, Guwahati-based Sourabh Tea Traders Pvt Ltd bought two kg of Manohari Gold tea for its clients in Ahmedabad, Delhi and Kolkata.

Manufactured by Manohari Tea Estate at Dibrugarh, Manohari Gold, which is made only from the bud, has a unique colour and taste. Gold teas are a latest addition to the list of speciality teas and last year Donyi Polo tea estate in Arunachal Pradesh sold around 2.5 kg of golden needle grade for Rs 18,801 per kg.

Rajan Lohia, owner of Manohari Tea Estate, said a lot of effort is put to make this kind of tea and it took around 20 days to produce one kg of gold tips.

“It looks like pieces of pure gold,” Lohia said. The tea was manufactured under the supervision of tea expert C K Parashar, who had been associated with the company for a long time.

The phenomenal price shows that quality has no end and tea lovers are ready to pay any price for innovative and boutique quality of tea, Lohia said.

The teas were purchased by M L Maheswari of Sourabh Tea Traders, who said one kg will be dispatched to Ahmedabad for one of his clients who runs a tea boutique. The remaining lot will be dispatched equally to two clients in Delhi and Kolkata, for corporate gifting purpose. The produce is entirely for the domestic market, Maheswari said.

According to Lohia, there are many tea lovers in India now and speciality teas have a greater demand at Guwahati auction.

An officer of tea broking firm Contemporary Brokers Pvt Ltd said Maheswari is one of the oldest tea buyers in Guwahati and had earlier purchased such expensive speciality teas for his clients. Last year, Contemporary sold the entire lot of Donyi Polo handcrafted golden needle at the then record price of Rs 18,801 per kg.

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J Kalyansundaram, secretary general, Calcutta Tea Traders Association, said this price is a record for all auction centres in India. According to him, Donyi Polo also sold 1.99 kg of silver needle white tea for Rs 17,001 per kg at Guwahati Tea Auction Centre in June.

Manohari tea estate has a total production of 3 lakh kg, of which 800 kg is specaility tea that includes yellow tea, white tea and golden needle. His company Suntok Tea Co Llp, which owns two gardens Suntok and Manohari, has started manufacturing speciality teas since last year.

The company acquired the two gardens in 2015 with Suntok tea estate producing around 700,000 kg of crush-tear-curl (CTC) and orthodox tea.

Source: DNA Money

In place of two leaves and a bud, a tea garden in Assam has found a golden bud. In an all-time record for pan-India tea auction system, a hand-made gold tips&nbsp;speciality tea from Assam fetched a price of Rs 39,001 per kg on Tuesday at Guwahati tea auction&nbsp;centre.

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Soumonty Kanungo