Indian Markets Tuesday Wrap-Up: Punj Lloyd In Hunt for Funds

Despite the indices opening on a firm note, they witnessed significant volatility till noon. Thereafter, intense buying activity led the indices to surge upwards. The Sensex closed higher by around 180 points, while the Nifty closed higher by around 45 points. Stocks from the mid-cap and small-cap indices also ended in positive territory. Stocks from the realty and auto sectors led the pack of gainers today. Rupee closed at 48.42 against the US dollar. While Asian markets closed in the positive, the European indices are currently trading firm.

Engineering stocks ended firm led by Engineers India, Voltas and Praj Industries. The board of engineering & construction major, Punj Lloyd has approached its members through a postal ballot for doubling its borrowing limits from the present Rs 25 bn to Rs 50 bn. As per the company, the last approval to raise limits was way back in FY04, when the company had an order back log of Rs 20.4 bn. At present, the company has an order backlog of Rs 216.7 bn and is looking to expand its borrowing capacity. This is a positive development for the firm as it will help finance the execution of its backlog. However, the ongoing liquidity crisis might hinder its ability to raise the required funds at this juncture.

Telecom stocks ended firm led by Idea Cellular, Reliance Communications and Bharti Airtel. Reliance Communications (RCOM) has repurchased 250 zero-coupon foreign currency convertible bonds, each of US$ 100,000, at approximately Rs 1.2 bn (US$ 25 m). This amounts to a discount of 52.5% of the original value. In another development, the company has raised a fresh line of credit of US$ 1.5 bn from certain international export development banks for the rollout of its national GSM services. As per a leading business daily, this is the largest debt mobilisation by an Indian telecom company in the past two years. It is believed that RCOM has raised money at LIBOR (London Inter Bank Offer Rate) plus 150 basis points. It may be noted that these rates are lower than those offered by commercial banks at around 10% to 11%.

The government has decided to control sugar exports from next year. This will be done through a release order mechanism, under which participants need to seek permission from the food ministry for exporting the same. With sugar production below expectations for the current year and expected to be lower next year too, the government is taking these measures to keep the prices under check. Sugar realisations touched Rs 17 per kg during last couple of months as compared to Rs 13 per kg witnessed during the same period last year.

In the meanwhile, Suzlon Energy has upped its stake in REpower and now holds 73.71% in it. This is part of the company’s move to acquire Martifier Group’s stake in REpower. This transaction has been broken down into three tranches - Euro 65 m in December 2008, Euro 30 m in April 2009 and Euro 175 m in May 2009. On completion of the same, Suzlon will hold nearly 91% stake in the company.