Business Daily from THE HINDU group of publications
Monday, Nov 23, 2009
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Business Daily from THE HINDU group of publications Monday, Nov 23, 2009 ePaper | Mobile/PDA Version | Audio | Blogs |
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Corporate Corporate - Bonus Announcements
Bhavana Acharya BL Research Bureau It is not just raw material costs or interest rates that pose a risk to India Inc’s earnings in the quarters ahead. Servicing an expanding equity base is also a big challenge, thanks to Qualified Institutional Placements, bonus issues and private placements which are bloating the equity base of companies. The September quarter numbers show that as many as one in four companies in the BSE 500 has witnessed an increase in its equity compared with the same quarter of 2008. Collectively, the companies increased their equity base by about 14 per cent. It is worth noting that 45 of the 112 companies that expanded equity over this period saw a decline in profits compared with last year. Expansion modeBonus offers were common with the 25 companies with the highest equity expansion. For instance, Jindal Steel declared a 5:1 bonus, Divi’s Labs, GMDC, United Phosphorous and others declared a 1:1 bonus. Warrant conversions and Qualified Institutional Placements too have been big contributors to expanding equity. Unitech, Opto Circuits and Sobha Developers were among the companies that opted for this route. Earnings declineIf the last one year is any indication, companies which increased their equity did not find it easy to grow profits. Around two out of every five companies that added equity posted declines in adjusted after-tax profits in the September 2009 quarter compared with the previous year. Indiabulls Real Estate issued shares under a QIP, increasing equity by about 56 per cent but profits declined 13 per cent for the September quarter. GAIL, which issued bonus shares in a 1:2 ratio, saw a 30 per cent fall in September 2009 profits over the year-ago figure. In fact, many of the companies that saw a big equity expansion due to bonus offers suffered profit declines. Of the companies that registered profit growth, quite a few have posted muted growth. Equity of Opto Circuits almost doubled, but profits increased by just 1 per cent in the September quarter. PSL saw a 26 per cent equity increase, but flat profit growth in the September quarter. Sector trendsThe pharmaceutical and IT sectors account for the maximum number of companies (10 each) to have expanded equity. The realty and banking sectors follow with seven companies each. Other sectors to have seen equity increases include infrastructure and construction, finance and steel. While the pharma and IT sectors expanded equity through bonus issues, private placements and bond conversions, the realty and construction sectors showed a preference towards QIPs. Tata Power raises $335 m through GDRs Axis Bank QIP, GDR issues priced at Rs 906.7 JSW Steel looks to raise $1 b Tata Motors raises $750 m to clear Jaguar bridge loan Indian cos opt for flexible GDR More Stories on : Corporate | Bonus Announcements | Private Placement | Stock Markets | Unitech Ltd
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