Sensex Opens Higher; Bharti Airtel & SBI Top Gainers

Mon, 11 Dec 09:30 am

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Asian shares are higher today as Chinese and Hong Kong shares show gains. The Shanghai Composite is up 0.55% while the Hang Seng is up 0.56%. The Nikkei 225 is trading up by 0.04%. US stocks ended higher on Friday as US employers added more jobs than expected in the month of November, cementing the case for an interest rate hike this week.

Back home, India share markets have opened the day on a strong note. The BSE Sensex is trading higher by 142 points while the NSE Nifty is trading higher by 37 points. The BSE Mid Cap index and BSE Small Cap index opened the day up by 0.5% & 0.4% respectively.

All sectoral indices have opened the day in green with realty stocks and bank stocks witnessing maximum buying interest. The rupee is trading at 64.46 to the US$.

Meanwhile, the first-even bitcoin future began trading Sunday as the increasingly popular virtual currency made its debut on a major US exchange. The futures contract that expires in January rose from US$15,460 to US$16,000 in its first hours of trading on the Chicago Board Options Exchange.

Bharti Airtel share price surged 2.4% on the reports that the telecom operator has signed an agreement with the department of telecom and the Universal Service Obligation Fund to provide mobile services in identified uncovered villages and national highways in Assam, Manipur, Mizoram, Nagaland, Sikkim, Tripura and Arunachal Pradesh.

Axis bank share price gained 1.4% after bank's shareholders approved mobilisation of Rs 116.3 billion through sale of shares and warrants to a group of investors, including Bain Capital and LIC.

Cement stocks opened the day on a mixed note with Ultratech Cement and JK Lakshmi Cement being the most active stocks in this space. As per an article in a leading financial daily, UltraTech Cement is setting up a 3.5-million-tonne greenfield cement plant at Pali in Rajasthan for Rs 18.5 billion.

This is the second greenfield project by the cement maker this year as it looks to capitalise on the government's focus on infrastructure and affordable housing.

Further, this plant is being set up in one of the fastest growing markets in the country and the highest cement consuming State in the North Zone. It will cater to the markets in Western Rajasthan where UltraTech does not have a significant presence.

With this expansion UltraTech will have a foot print across the country with 50 plant locations, alongwith 103 readymix concrete plants.

Earlier, the company had announced the setting up of a 3.5-million-tonne integrated cement plant at Dhar, Madhya Pradesh at a total cost of around Rs 26 billion.

Meanwhile, the Board of the company also approved a proposal for an increase in the investment limits by Registered Foreign Portfolio Investors (RFPIs) including Foreign Institutional Investors (FIIs).

The approval would result in raising the limit from the existing 30% of the paid-up equity share capital up to 40% of the paid-up equity share capital of the Cement major.

Speaking of the cement companies in India, if one were to go by the numbers as reported by Business Standard, the valuations of the Indian cement companies are obscenely expensive.

Cement Companies Increasing Leverage

Globally, cement makers are valued at 26x their latest annual earnings and 1.6x times their latest book value. The corresponding ratio for Chinese players is 23x and 0.95x respectively. On the other hand, Indian cement makers are valued at 48 times their net profit in the last financial year.

Here's what Tanushree Banerjee, Co-head of Research has to say about the sector:

• "There is no denying the performance of the cement companies have shown improvement off late. However, the current valuations certainly warrant a caution. For readers who are looking forward to commit their money in cement stocks should factor in realistic growth expectations.
  
  One would do better to look into long term growth for every cement company. And then judge whether the valuations are reasonable enough. If not, then it is best to stay away from the sector. "

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Ultratech Cement share price opened up by 1.3%.

Moving on to the news from the banking sector. As per an article in Livemint, Punjab National Bank (PNB), Syndicate Bank and Indian Bank are likely to launch their qualified institutional placement (QIP) offerings this month.

Collectively, these three state-owned lenders are targeting to raise around Rs 60-70 billion.

Reportedly, PNB is looking to raise up to Rs 50 billion through its QIP. They have completed their investor road shows and are ready to launch the offering as early as this week.

Meanwhile, Syndicate Bank and Indian Bank, too, have been meeting investors and are looking at launching QIPs soon. The two banks are looking to raise up to Rs 10 billion.

A buoyant secondary market, flush with domestic liquidity and the recently announced bank recapitalization plan announced by the central government have resulted in a rush of PSU bank QIPs. Already this month, Bank of Maharashtra and Union Bank of India have launched their QIPs.

This year, QIP fund-raising activity has been dominated by large issuances in the banking and financial services sector. Till November, 33 companies have raised Rs 457.6 billion.

Speaking of QIP route of equity raising, QIPs tend to be a faster way to raise capital as the dealing happens with a few investors - only institutions in this case. And this is why companies prefer this route - because of its convenience and fewer resource requirements compared to other methods of raising equity.

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