NSEL crisis: Over 30 brokers under regulatory scanner

 
As the NSEL crisis deepens, role of at least 32 brokerage firms has come under the scanner for allegedly charging high transaction charges and providing portfolio management and margin funding services to their clients in violation of regulations.

These brokers were apparently working as Carrying and Forward (C&F) agents as well for National Spot Exchange Ltd (NSEL) without checking the veracity of commodities lying in the warehouses, and kept investors in the dark about non-availability of commodities on which their clients were taking positions.

Margin funding is when brokers arrange to finance investors' purchases and charge money for such loans.

According to sources, various regulators including Sebi and FMC are looking into the role of these brokers, who were registered in both stocks and commodities markets.

Among the 32 brokers, 14 are from Gujarat, seven from Rajasthan and others are from states like Maharashtra, Delhi, Andhra Pradesh and Punjab.

These brokers, with a large outstanding on NSEL, were charging Rs 25 per lakh of transaction from their clients.

The regulators have received complaints that margin funding happened with the broking firms and their associates financing 80-90 per cent of exposure on NSEL, while balance was paid by high networth clients (HNIs), sources said.

The brokers were apparently charging Rs 100 per lakh as brokerage and additional commission for providing margin funding.

These stock brokers have come under regulatory scanner for inducing HNIs and other investors to trade on the spot market commodity exchange with promise of high returns.

They allegedly mis-sold the commodities forward contracts on NSEL to to their investors as lucrative investment products garnering fully secure returns of up to 18 per cent under portfolio management services.

The spot commodity bourse, promoted by Jignesh Shah-led Financial Technologies (FTIL), has been facing problems in settling Rs 5,600 crore dues of 148 member brokers, representing 13,000 investor clients, after it suspended trading on July 31 after government directions.

NSEL has so far settled about Rs 244 crore against about Rs 5,600 crore dues to 13,000 investors.

Earlier this week, police had attached properties of Shah, also a Director of NSEL and three others.

Besides Shah, properties of Joseph Massey, also a Director at the now defunct spot Exchange, and two others were attached by Mumbai Police's Economic Offences Wing (EOW) which is investigating the scam that came to light in late July.

Wipro to log out of PC manufacturing business

 
After HCL Infosystems, another IT firm Wipro has decided to shut down its manufacturing of computers and servers due to the changing market scenario and consumer preferences.

Azim Premji-led Wipro, the country's third largest software services player, said it will re-deploy all the affected employees in the company.

However, the company will continue to have a presence in the hardware business offering solutions in large integrated deals.

"After evaluating the changing market scenario and customer needs, Wipro has decided to strengthen its position as system integrator (SI) and increase its focus on IT solutions and services," Wipro said in a statement.

As a consequence, the company will discontinue manufacturing of Wipro branded desktops, laptops and servers, it added.

Last month, HCL Infosystems said it will phase-off its manufacturing business in the next few years to improve margins and increase organisational efficiency.

Instead, HCL Infosystems will instead focus on strengthening its services and distribution verticals.

Revenues for PC makers have been under pressure for some time now as newer devices like tablets and phablets are finding more takers.

Also, over the last few years, most PC makers in the country have incurred losses due to the rupee's fluctuation against other currencies, especially the US dollar.

This has hurt the PC business in India as it is low-margin and almost 90-95 per cent of the components are imported.

Wipro will, however, be present in the PC market by providing suitable brands as a part of its solutions offerings in large integrated deals, it said.

"Our vision is to strengthen our position as a leading SI. Manufacturing our own PCs was not giving us a competitive differentiation in our SI solution offering," Wipro Infotech Senior VP and Head Soumitro Ghosh said.

Vodafone to invest $3 billion over 2 years in India

 
Notwithstanding its nearly Rs 12,000 crore tax dispute with the government, Vodafone plans to invest $3 billion in the next two years that will be deployed for network expansion in rural areas.

Vodafone global CEO Vittorio Colao, however, declined to go into the details of the "positive" meeting he had with Finance Minister P Chidambaram on Tuesday on the tax issue.

"I am grateful to the Finance Minister for giving me time to meet him. It is good to have a dialogue between an enterprise and the policy maker. It is positive," Colao said, but he parried a question whether Vodafone would be willing to pay up around Rs 11,200 crore income tax demand.

He said Vodafone was incredibly positive about India not only from the business point of view but otherwise too.

Colao said in the next two years, Vodafone will invest $3 billion in India.

"Our organic or real investment into the country is a significant $3 billion in two years... is the right decision," he said making it clear that the tax dispute with the government is in no way upsetting their plans for India.

He said he believed in India and also the data in it.

After Germany, India is a priority market for Vodafone for long-term investments in technology and data, he added.

He said the proposed $3 billion investment excludes spectrum fee the company has to pay.

"First, India has an opportunity for growth because of population and other factors. We will be long-term players. I am happy we are here for long-term investment. I am not here for 4 years but for 20 years and more," Colao said.

To a question, he said the tax issue will not affect Vodafone's hiring plans and investment and developing network in India.

The British telecom major is facing a tax liability of over Rs 11,200 crore, along with interest, on its 2007 acquisition of Honk Kong-based Hutchison Whampoa's stake in India's telecom major, Hutchison Essar.

NTPC's tax-free bond issue oversubscribed 3.3 times

 
State-run power major, NTPC on Tuesday received an overwhelming response for its bond issue by garnering Rs 3,310 crore, much ahead of its scheduled closing.

"The issue was oversubscribed by 3.3 times. As against Rs 1,000 crore, NTPC has already collected about Rs 3,310 crore, Rs 2,310 crore above the base size," the company said in a statement.

The tax-free bond issue which opened on Monday was earlier scheduled to close on December 16 but will formally close Wednesday, a company official said.

This is the state-run company's first bond issue after a gap of over 20 years.

Under the offer, the company issued tax-free secured redeemable non-convertible bonds.

The base issue size aggregates to Rs 1,000 crore with an option to retain over-subscription up to Rs 750 crore for issuance of additional bonds, aggregating up to Rs 1,750 crore.

The funds raised through the issue would be utilised towards funding of capital expenditure and refinancing for meeting the debt requirement in ongoing projects.

The company in the statement said the QIB (Qualified Institutional Buyers) oversubscribed by 4.2 times, garnering Rs 423 crore against allocation of Rs 100 crore.

"Corporates contributed Rs 1,374 crore against allocation of Rs 250 crore, oversubscribed by 5.5 times," the statement said, adding that HNI (High Networth Individuals) also chipped in with Rs 851 crore against allocation of Rs 250 crore and over-subscription of 3.4 times.

The company, last month, filed a prospectus with the Registrar of Companies (RoC), Delhi and Haryana in connection with its proposed public issue of tax-free secured redeemable non-convertible bonds, NTPC said.

The lead managers to the issue are ICICI Securities, A K Capital Services, Axis Capital, SBI Capital Markets and Kotak Mahindra Capital Company.

Currently, NTPC has a capacity of nearly 42,000 MW and targets to add about 14,000 MW to its total capacity by the end of 2016-17.

Shares of NTPC closed at Rs 145.70 apiece, down 1.09 per cent on the BSE.

PowerGrid FPO subscribed 69% on first day

 
The follow-on-public offer (FPO) of PowerGrid Corporation of India (PGCIL) was subscribed 69 per cent on the opening day on Tuesday. Of the 78.70 crore shares offered for sale, total bids for 54.32 crore shares were received, as per the data available on the bourses.

As many as 72.98 lakh bids came at the cut off price of the issue.

The shares are being offered at a price band of Rs 85-90 apiece and the issue would remain open till December 5 for institutional buyers and December 6 for retail investors.

Shares of PGCIL closed at Rs 93.75, up 0.37 per cent on the BSE.

The sale of 78.70 crore shares, or 17 per cent stake, could fetch around Rs 7,083 crore at the upper end of the price band. The company may garner close to Rs 5,717 crore, while the government may receive around Rs 1,758 crore.

Last month the Cabinet had cleared the FPO of PGCIL, which will comprise 13 per cent fresh equity by the company and 4 per cent stake sale by the central government.

The government is selling 18.51 crore shares in PGCIL, while the company is issuing fresh 60.18 crore shares through the offer. Of the fresh shares, about 2.4 per cent will be reserved for the employees.

As much as 50 per cent of the net issue is allocated to Qualified Institutional Buyers (QIBs), 35 per cent for retail category and 15 per cent for High Network Investors (HNI).

Above 0.38 per cent of the issue is reserved for employees.

Retail category and employees shall be given a discount of 5 per cent on the issue price.

The government holding in the company will come down to 57.89 per cent from the present level of 69.42 per cent.

Citigroup, ICICI Securities, UBS, SBI Caps and Kotak Mahindra are merchant bankers for the FPO.

This is the second follow-on offering from PGCIL, which sold a 10 per cent stake along with a similar stake divested by the government in November 2010 at an issue price of Rs 90 a share.

The company hit the capital market with initial public offering in October 2007.

So far in the current fiscal, the government has raised over Rs 1,300 crore through minority stake sale in PSUs.

It has set a target of Rs 40,000 crore from disinvestment in current fiscal.

PowerGrid plans to utilise proceeds worth over Rs 5,700 crore from follow-on public offer, towards transmission projects and general corporate purposes.

Speaking to reporters, PowerGrid Chairman and Managing Director R N Nayak said the company intends to utilise the net proceeds of the offer to "meet the capital requirements for the implementation of certain identified transmission projects and general corporate purpose".