199224190 capital market pdf india

6 7Jan 06 – 19, 2014 CAPITAL MARKET

StockWatchStockWatchStockWatch

Watch list

The following are fundamentally strong companies identified by Capital Market analysts. The list is constantly reviewed and updated,adding scrips with upward potential and removing those that have, in our opinion, exhausted their run.

COMPANY IND. PRICE (Rs) TTM TTM P/ENO. 30-12-2013 YEAR EPS (Rs)

COMPANY IND. PRICE (Rs) TTM TTM P/ENO. 30-12-2013 YEAR EPS (Rs)

Ador Welding 41 133 201309 11.6 11.5

Apcotex Industri 106 121 201309 13.3 9.1

Astral Poly 75 338 201309 12.3 27.6

B H E L 39 179 201309 21.7 8.2

Bajaj Auto 8 1900 201309 108.0 17.6

Bajaj Electric 36 221 201309 0.1 2455.6

Bajaj Fin. 50 1551 201309 133.9 11.6

Balmer Lawrie 108 311 201309 51.4 6.1

BASF India 22 654 201309 32.7 20.0

Bayer Crop Sci. 68 1732 201309 73.0 23.7

Bharat Forge 17 323 201309 11.9 27.2

Bosch 10 10232 201309 265.5 38.5

Britannia Inds. 54 920 201309 25.9 35.5

Carborundum Uni. 1 145 201309 3.8 38.3

Castrol India 22 316 201309 7.3 43.1

Cipla 70 400 201309 18.3 21.9

Clariant Chemica 22 622 201309 36.3 17.1

CMC 26 1631 201309 74.8 21.8

Container Corpn. 106 702 201309 48.8 14.4

Corporation Bank 11 261 201309 62.9 4.2

CRISIL 106 1144 201309 28.0 40.8

D B Corp 47 290 201309 15.1 19.2

Engineers India 45 167 201309 15.6 10.7

Ent.Network 47 320 201309 16.4 19.5

Eros Intl.Media 47 171 201309 8.3 20.7

Esab India 41 462 201309 23.8 19.4

Essel Propack 62 51 201309 3.5 14.7

Everest Inds. 20 155 201309 13.8 11.3

Exide Inds. 10 121 201309 6.2 19.5

Fag Bearings 13 1595 201309 70.2 22.7

Federal Bank 12 83 201309 8.9 9.3

Foseco India 22 512 201309 30.9 16.6

G M D C 59 120 201309 13.5 8.9

Gateway Distr. 106 140 201309 4.4 31.9

Godrej Consumer 65 854 201309 15.8 54.1

Goodyear India 105 369 201309 35.9 10.3

Grasim Inds 95 2700 201309 102.4 26.4

Greaves Cotton 46 67 201309 5.0 13.4

Grindwell Norton 1 258 201309 16.5 15.6

Guj Apollo Inds 44 106 201309 11.2 9.5

H D F C 51 796 201309 32.9 24.2

H T Media 47 76 201309 6.1 12.4

HCL Technologies 27 1248 201309 59.3 21.1

HDFC Bank 12 670 201309 31.6 21.2

Hikal 71 461 201309 21.3 21.7

Honeywell Auto 43 2681 201309 86.7 30.9

HSIL 21 105 201309 9.4 11.2

IL&FS Transport 45 136 201309 12.5 10.9

Indian Hume Pipe 20 125 201309 7.4 16.9

Infosys 27 3502 201309 160.3 21.8

ING Vysya Bank 12 601 201309 36.4 16.5

Ingersoll-Rand 25 415 201309 22.8 18.2

Intl. Travel Hse 104 161 201309 21.5 7.5

J & K Bank 12 1433 201309 237.2 6.0

Jyoti Structures 102 29 201309 8.1 3.6

Kalpataru Power 102 88 201309 9.7 9.0

Kirl.Pneumatic 25 391 201309 32.3 12.1

KPIT Tech. 28 175 201309 5.4 32.2

KSB Pumps 78 266 201309 19.7 13.5

Lak. Mach. Works 92 2772 201309 112.6 24.6

Larsen & Toubro 45 1064 201309 47.3 22.5

LIC Housing Fin. 51 217 201309 23.2 9.3

M & M 7 950 201309 57.3 16.6

M M Forgings 17 93 201309 21.2 4.4

Manjushree Tech. 62 160 201309 17.2 9.3

Maruti Suzuki 6 1777 201309 91.3 19.5

McNally Bharat 45 59 201309 8.7 6.8

Monsanto India 68 807 201309 55.1 14.7

Motherson Sumi 10 185 201309 5.6 33.2

MPS 77 224 201309 19.4 11.6

MRF 105 19269 201309 1892.0 10.2

Munjal Showa 10 70 201309 16.6 4.2

Navneet Educat. 77 60 201309 4.6 13.1

Paper Products 62 74 201309 7.7 9.6

Power Grid Corpn 76 99 201309 9.8 10.1

PTC India 101 65 201309 5.1 12.7

PTC India Fin 50 13 201309 1.9 6.8

Punjab Natl.Bank 11 625 201309 119.3 5.2

Rallis India 67 175 201309 6.2 28.4

Reliance Inds. 80 885 201309 63.9 13.9

S B T 11 422 201309 107.8 3.9

SKF India 13 672 201309 30.6 22.0

South Ind.Bank 12 20 201309 3.7 5.4

St Bk of India 11 1763 201309 180.3 9.8

Sundaram Finance 50 610 201309 39.8 15.3

Sundram Fasten. 48 49 201309 4.9 10.1

Supreme Inds. 75 429 201309 21.3 20.2

Swaraj Engines 46 632 201309 46.5 13.6

T.V. Today Netw. 47 113 201309 7.7 14.8

Tata Global 89 160 201309 4.0 39.8

TCS 27 2158 201309 78.1 27.6

Tech Mahindra 27 1846 201309 66.9 27.6

Thermax 44 694 201309 22.2 31.3

TVS Motor Co. 9 79 201309 4.2 18.8

TVS Srichakra 105 279 201309 31.8 8.8

Va Tech Wabag 44 552 201309 34.3 16.1

Vesuvius India 81 459 201309 34.2 13.4

V-Guard Inds. 39 469 201309 18.9 24.8

VST Till. Tract. 7 648 201309 74.6 8.7

WABCO India 10 2046 201309 63.0 32.5

Whirlpool India 36 213 201309 8.0 26.8

Wim Plast 75 400 201309 49.6 8.1

Wipro 27 552 201309 22.9 24.2

Yes Bank 12 369 201309 41.0 9.0

TTM: Trailing 12 months. Note: This issue MM forgings replace IDFC

6 8 Jan 06 – 19, 2014 CAPITAL MARKET

StockWatch

Ador Welding

Weld roundedThe leading welding player will be a key beneficiaryof the pick-up in the investment cycle

M J J A S O N D85

98

111

124

137

01Apr2013

30Dec

2013

Capital expenditure has been budgetedat about Rs 33.00 crore in the fiscal endingMarch 2014 (FY 2014), mainly forconsumables, equipment and R&D; produc-tion equipment to balance lines for achiev-ing capacity production levels; production-related equipment to improve in-processquality and deviation control towards six-sigma levels; analytical instruments forequipment R&D; and new sales offices andadditional plots of land.

Sales grew 6% to Rs 91.64 crore but

the operating profit margin declined to9.5% from 10.6% and operating profit5% to Rs 8.69 crore in the quarter endedSeptember 2013 over a year ago. Profitafter tax (PAT), however, rose 13% toRs 4.66 crore. Due to the adverse June2013 quarter, sales slipped 6% to Rs160.25 crore and PAT 27% to Rs 6.28crore in the six months ended September2013 over a year ago.

AWL is focusing on increasing marketshare in FY 2014. This will mainly be ful-filled through offering new products in theexisting and new markets and increasingthe share of existing products in new andexisting markets.

The key strategic differentiator is thetotal solutions-rendering approach. In-troduction of a new range of productsand CNC cutting machines along withthe launch of automation technologyaided by game-changing process technol-ogy, Plasma Mig, from Plasma LaserTechnologies, its overseas subsidiary,will bolster its position as the most in-novative and preferred partner for theIndian customer.

The strategy is to focus on the bottomof the pyramid with a new range of prod-ucts and services should give a boost to mar-ket share, aided by the largest R&D set-upin the Indian welding industry in the privatesector. This helps it to have the fastest timeto market its products.

The welding industry and, in turn,AWL will grow as investment cycle picksup in future. The industry caters to a widerange of industrial segments such as trans-

portation (auto and ship building),oil and gas pipelines, platforms andrigs and fabrication of structures forpower station of railways, mines, ir-rigation and such other basic indus-tries. Hence, pick-up in industrial ac-tivity in any of these segments willhelp the company.

AWL had debt of only Rs 1.7crore as against net worth of Rs 185crore end March 2013. It has beenpaying Rs 6 per share dividend ev-ery year for the past four years. Weexpect the company to register salesof Rs 369.14 crore and net profit Rs17.77 crore in FY 2014. On equityof Rs 13.60 crore and face value ofRs 10 per share, EPS works out toRs 13.1. The share price trades atRs 133. P/E is 10. �

Ador Welding (AWL) develops, manufac-tures and sells welding and cutting prod-ucts (consumables and equipment and au-tomation). The total solutions provideroffers up-to-date suite of welding andcutting consumables, power sources andaccessories besides a full package of softskills and knowledge development forwelding and fabrication. Large invest-ments have been made in the project en-gineering business.

At least 100 industries are involved inwelding-related projects. Major projectsin diversified sectors such as steel, power,chemicals and railways promise a lot ofgrowth for the welding industry in India.The domestic welding market will exten-sively need stainless steel solid and fluxcored arc welding wires and other specialconsumables. Similarly, potential for weld-ing equipment and low-cost and high-endautomation aids to speed up welding pro-ductivity will provide many opportuni-ties for growth.

AWL has undertaken a specific actionplan to improve the volume of the equip-ment business, where adequate infrastruc-ture is available to facilitate growth. Spe-cial products developed by the companyare now offered to customers for criticalapplications of fabrication in the oiland gas, power, and equipment fabri-cation sectors, with technical deliv-ery conditions (TDCs).

Special products developed in FY2013 and offered with TDCs to cus-tomers in the oil and gas, power andequipment fabrication sectors’ werewell accepted due to the quality assur-ance practices followed. Quality labsare regularly upgraded to provide strin-gent performance certification de-manded for new welding applicationsin the growing infra sector.

The extensive manufacturing foot-print and large manufacturing capaci-ties will help AWL to be ready to meetthe demand of any geographic segmentsand, importantly, the demand upswingsin the shortest possible time.

Ador Welding: Financials

0903(12) 1003(12) 1103(12) 1203(12) 1303(12) 1403(12P)

Sales 225.3 261.51 295.2 340.91 364.17 369.14

OPM (%) 16.3 17.6 15.8 11.1 9.9 9.0

OP 36.68 45.96 46.68 37.94 36.19 33.18

Other inc. 0.89 3.86 2.21 3.51 3.61 5.47

PBIDT 37.57 49.82 48.89 41.45 39.80 38.65

Interest 1.98 0.57 0.55 0.88 0.82 1.07

PBDT 35.59 49.25 48.34 40.57 38.99 37.58

Dep. 13.28 13.11 12.63 12.45 12.34 12.43

PBT 22.31 36.14 35.71 28.12 26.65 25.15

Total Tax 10.15 10.54 10.02 7.23 7.57 7.38

PAT 12.16 25.60 25.69 20.89 19.08 17.77

EPS (Rs) * 8.9 18.8 18.9 15.4 14.0 13.1

* On current equity of Rs 13.60 crore. Face Value: Rs 10. (P): Projections.Figures in Rs crore.Source: Capitaline Databases

Focused on increasing the pie

Ador Welding is focusing on increasingmarket share by offering new productsand entering new markets in thecurrent fiscal ending March 2014


EconomyPulse

Key economic events in 2013

Shaking off the paralysisAhead of general elections, the UPA-II government cleared a slew of reforms, particularly in the second half of the calendar year

EconomyPulse

January 2013 � Direct Benefit Transfer scheme rolled out in 20 districts on 01 January 2013

� Fourteenth Finance Commission formed under Dr Y V Reddy asked to submit report by October 2014

� Railways hiked passenger fare rates across the board — first major hike in decade

� Implementation of General Anti-Avoidance Rules extended by two more years to April 2016

� Oil marketing companies allowed to make regular small diesel price hikes until sales losses are wiped out

� Quota of subsidized domestic LPG cylinders increased from six to nine cylinders

� Foreign institutional investors’ investment limits in government securities and corporate bonds hiked by US$ 5billion each, raising the total cap to US$ 75 billion

� Reserve Bank of India (RBI) cut repo rate and cash reserve ratio (CRR) by 25 basis points (bps) each to 7.75% and4%, high inflation expectations and current account deficit remained constraints on action

February � Cabinet Committee of Economic Affairs (CCEA) gave ‘in-principle’ nod for coal pool pricing mechanism

� Cabinet approved quadrupling the authorized capital of Nabard to Rs 20000 crore

� T S Vijayan, former LIC chief, took over as Chairman of the Insurance Regulatory & Development Authority of India

� RBI finalised guidelines for new banks in the private sector, while allowing broking and real estate firms to apply

� Railway Budget 2013-14 announced fuel-linked adjustment for freight rates to be implemented from 01 April 2013

� Central Statistics Office estimated FY 2013 GDP growth at a decade low level of 5%

� Cabinet approved special purpose vehicle, TAPI, for the Turkmenistan-Afghanistan-Pakistan-India gas pipeline project

� In Union Budget 2013-14, the finance minister stuck to the fiscal consolidation roadmap by planning to reducefiscal deficit to 4.8% of GDP in the fiscal ending March 2014 (FY 2014) and to 3% in FY 2017

March � RBI reduced repo rate by 25 bps to 7.50%, while indicating little headroom for more action

� Government-appointed panel suggested a single regulator for the financial sector, excluding banking

� Cabinet cleared amendments to the National Food Security Bill, proposing uniform 5-kg foodgrains per household

April � CCEA approved proposal to abolish the levy-sugar mechanism

� International Monetary Fund (IMF) lowered India’s growth forecast to 5.7% for FY 2013 from 5.9% in January

� Cabinet approved 8% dearness allowance hike for Central government staff and dearness relief to pensioners from72% to 80% effective January 2013

� Railways entered one-billion tonne select club in freight movement, joining the Chinese, Russian and USA railways

� Economic Survey 2012-13 projected GDP growth at 6.1-6.7% for FY 2014

� India Meteorological Department predicted southwest monsoon rainfall 2013 to be normal

May � RBI cut repo rate by 25 bps to 7.25%, leaving CRR unchanged at 4%

� Government announced first-ever issuance of inflation-indexed bonds for institutional investors

� S&P warned a one-in-three chance of a rating downgrade in 12 months if government failed to pursue reforms

� Government set an export target of US$325 billion for FY 2014

June � Cabinet approved the Real Estate Regulation and Development Bill, enabling the setting up of a regulator

� Fitch Ratings revised India’s outlook to ‘Stable’ from ‘Negative’ on government steps to contain budget deficit andimprove investment climate

� Citing high food inflation and weak rupee, RBI decided to leave key policy rates unchanged


EconomyPulse

� US Federal Reserve indicated a gradual end to the monetary stimulus package

� Cabinet gave permission for setting up of an independent regulator for the coal sector

� Commodities Transaction Tax at a rate of 0.01% was decided to be levied from 01 July 2013

� CCEA approved the gas-pricing formula of the C Rangarajan panel, to be applicable from 01 April 2014

� RBI received about 26 application to set up banks in the private sector

July � Prime Minister’s Project Monitoring Group cleared stalled power projects for want of coal worth Rs 52000 crore

� Cabinet gave in-principle approval to the proposal for bringing a legislation for a Civil Aviation Authority

� Foreign direct investment limits hiked in a host of sectors with 100% for telecom and asset reconstruction companies

� RBI announced liquidity tightening measures to curb rupee volatility

� National Spot Exchange suspended trade in most of its forward contracts and deferred payments on client trades

� RBI left interest rate unchanged, while cutting growth forecast to 5.5% for FY 2014 from 5.7% earlier

August � Government raised import duty on gold and silver to 10% each from 8% and 6%

� Cabinet approved the proposal for setting up of the Tax Administration Reform Commission

� Parliament gave its nod for the Companies Bill, which will come into effect from 01 April 2014

� Lok Sabha passed the Food Security Bill and Land Acquisition, Rehabilitation and Resettlement Bill

� On 28 August 2013, the Indian rupee hit an all-time low of 68.80 against the US dollar

September � Raghuram Rajan took over as the 23rd Governor of RBI, and announced a series of measures to support the rupee

� RBI raised repo rate from 7.25% to 7.50% to tame inflation, despite weak economic growth

� Economic Advisory Council to Prime Minister projected India’s GDP growth at 5.3% for FY 2014

� RBI nominated three-member panel headed by Dr Bimal Jalan to scrutinise applications for new bank licenses

� Production target for foodgrains set at 259 million tonnes for FY 2014

� World Economic Forum ranked India at 59th in global competitiveness, down three places from last year

� Seventh Pay Commission to submit report in two years and to be implemented from 1 January 2016

October � Asian Development Bank lowered India’s growth forecast to 4.7% for FY 2014 from 6% in April

� Railways extended the fuel adjustment component for rate decision in the passenger segment

� IMF lowered India’s growth projection to 3.8% in FY 2014, sharply lower than 5.6% in July

� World Bank revised downwards India’s growth forecast to 4.7% from FY 2014 from 6.1% projected in April

� Railway formed a High Speed Rail Corporation, which will evaluate ways to implement high-speed train projects

� RBI raised repo rate by 25 bps to 7.75% to anchor inflationary expectation

November ·� India opened the first public sector bank focused on catering to the financial needs of women

� S&P warned rating cut if new Union government after 2014 election fails to provide a credible plan to boost growth

� OCED projected India’s GDP growth at 3.4% for FY 2014, 5.1% for FY 2015, and 5.7% for FY 2016

December � India agreed to a four-year peace clause, allowing to do away with food subsidy caps at WTO’s Bali meeting

� Parliament passed the Lokpal Bill, opening the doors for setting up of anti-corruption watchdogs

� CCEA approved Rs 6600 crore interest-free loans for sugar mills to pay cane price arrears

� United Nations lowered India’s growth forecast for 2013 to 4.8%, while warning that emerging markets should beprepared to deal with the impact of US Federal Reserve’s quantitative easing programme

� RBI maintained status quo on policy rates, while hinting at rate hike if inflation does not ease

Compiled by Vijay Ghutukade


OffFocus

Antiquated laws

Past expiry dateSexuality, freedom of expression, vehicle inspection, atheism,suicide are still subjects of prejudice

Take, for example, the much discussedSection 377 of the IPC, which criminalisingmost form of human sexual activity regard-less of sexual orientation. At the same time,the same IPC grants immunity to spousesfor rape. So fast forward to 2013 and wehave a curious situation in the world’s larg-est democracy: if you happen to be a manand you love another, you get put awayfrom 10 years to life. But if you are a rapist,you can basically walk away scot-free.

Section 497 of the IPC cannot be ig-nored either. The section punishes adulteryin this day and age. But the wrath of the lawonly falls on men, not women. Interestingly,even with Section 377 intact, there are nolaws in India that protect men against rapeand abuse. Rape laws in India are not gen-der-neutral.

Of course, the proponents of keepingthings just the same would argue that thereare reasons why these laws exist in the firstplace. But that is another debate. The focusshould really be whether human sexualityshould fall within the ambits of penal pro-visions in the first place. Perhaps the time

The world was a very different place in the1860s. Slavery had just been abolished inthe United States. Victor Hugo had publishedhis ‘Les Miserables’. Dickens had done thesame to ‘Great Expectations’. It was in timeslike these that India was getting its first pe-nal code. The Indian Penal Code (IPC) wasdrafted in 1860 and came into force in 1862.Introduced as a measure to give the countrya uniform legal code for British-administeredareas, it is applied today not only in Indiabut also many other parts of South andSouth-East Asia.

Sections 299 to 377 of the IPC dealwith offences affecting the human body.The recent verdict of the Supreme Court(SC) on Section 377 has opened up debateabout how ancient laws continue to dog usin the present day. The SC judgement haseffectively criminalised 7-10% of India’sgay, lesbian, bisexual and transgenderpopulation. The United Progressive Alli-ance (UPA) II government has filed a revi-sion petition. The curious nature of theselaws in the present day can have ‘inter-esting’ consequences.

has come to separate criminal actions fromacts of consent.

Almost every country in the world hasabsurd laws. But in India the laws are alsoseverely antiquated. Even though the tele-graph has met its end in the country, theIndian Telegraph Act of 1885 is still aliveand kicking. This law gives the Central gov-ernment authority over India’s communica-tion network including phones, faxes andother modern communication devices. It alsohappens to be the law that allows the gov-ernment to tap or snoop on communicationsbetween citizens. The fact that this law onceput the cricket World Cup distribution ontelevision in peril is well known. Interest-ingly, the SC has held the Indian TelegraphAct inadequate for broadcasting.

In India, the legal age for allowing alco-hol consumption is decided on a state-to-state basis. Some states prescribe 25 years,others 18 years. This would basically meanthat a man is old enough to get married butnot allowed to have a drink on his specialday. It is also strange that Indian lawrecognises people above the age of 18 asadults. In the Wardha district of Maharashtra,the legal drinking age is 30, which is the high-est anywhere in the world.

Some states such as Gujarat andMizoram outright ban consumption of al-cohol. Maharashtra actually enforces a per-mit system and requires residents to go to agovernment civil hospital to obtain permis-sion to drink alcohol. In Punjab, women bylaw are prohibited to be a part of any estab-lishment that serves alcohol. So much forgender equality. In fact, these laws makecriminals out of many young people with-out providing much of a deterrent againstalcohol abuse. So any young person whoactually wants counselling or wants to giveup alcohol may actually risk arrest by com-ing out as an underage drinker.

A law with potential for severe abuse isthe anti-blasphemy law. In India, the pres-ervation of law and order comes at a cost.Anyone who tries to spread rationalistthoughts or questions superstition can facestiff penalties. Interestingly, while mostnews of the misuse of this anti-blasphemylaw comes from our neighbour Pakistan,there are instances of people being impli-cated in India, too. Section 295 A of the IPCdeals with deliberate and malicious acts in-tending to outrage religious feelings of anyclass by insulting its religion and religiousbeliefs. This effectively makes it illegal to

OffFocus


OffFocus

criticise any religious practice whatsoeverof any faith.

In 2012, a case against Sanal Edamaruku,the President of Rationalist International,was brought forward under this law inMumbai. Edamaruku has since then beengiven asylum by the government of Finland.It is quite understandable that, with a his-tory of religious violence and riots, the gov-ernment in India is keen to keep this law.Irrespective of the need to maintain har-mony, the suppression of the speech of ra-tionalists and atheists seems deplorable in amodern functioning democracy.

Section 66A of Information Technology(IT) Act, 2000, is not a dated piece of legis-lation. But its constitutional validity is nowbeing challenged in courts. This sectionstates that any person who sends by meansof a computer resource or communicationdevice any information that is grossly of-fensive or has a menacing character can bepunished with imprisonment for a maximumterm of three years, besides imposing ap-propriate fine. With such broadgeneralisation, this act has the ability to turnanyone on Facebook or Twitter into a crimi-nal if they post or tweet without giving care-ful consideration to their words.

In September 2012, Chandigarh policearrested a girl who was the winner of a na-tional bravery award for allegedly posting‘abusive’ comments on the city’s trafficpolice Facebook page. This section is sobroad and sweeping that its misuse hasprompted the government to make changesthat include only allowing very senior po-lice officers to file charges under this sec-tion. However, these changes are like put-ting lipstick on a pig. Effectively, what Sec-tion 66A does is strip away free speech onthe Internet.

People who attempt to kill themselvesusually are in a lot of pain, emotionally, psy-chologically or, sometimes, even physically.Surviving suicide in India can be even morepainful. Attempt to suicide is a punishableoffence under Section 309 of the IPC. In2011, the SC had asked parliament to deletethis law. The SC said: “The time has comewhen it should be deleted by parliament asit has become anachronistic. A person at-tempts suicide in depression and, hence, heneeds help, rather than punishment.” Imag-ine subjecting someone who has just gonethrough a major life trauma to a jail cell.People who are vulnerable need support oftheir families, friends and counselling. Isola-

tion and incarceration is what the law has tooffer at the moment.

Some regulation and laws can be sostrange that they are outright hilarious.Andhra Pradesh (AP) has a post of a motorvehicle inspector. According to the AndhraPradesh Public Service Commission website,some of the grounds for disqualification as avehicle inspector are “colour blindness,squint or any morbid conditions of the eyesor lids of either eye, knock knees, pigeonchest, flat foot, varicose veins, hammer toes,fractured limbs and decayed teeth.” Whywould tooth decay be a problem for a ve-hicle inspector could only be explained bypowers-that-be. Anyone wanting to be avehicle inspector in AP should probablybrush their teeth twice a day.

It is common knowledge that to enterthe armed forces the candidate should passcertain height and weight requirements. Whatmany people may not know is that the In-dian Air Force stipulates that to be a pilot aperson should have the minimum leg lengthof 99 cm and maximum of 120 cm. Whywould a pilot need a particular length of legsis weird and perplexing, especially after theair force prescribes a minimum overall lengthof 157 cm for all candidates.

The aim of lawmakers should be to enactlaws that reflect the needs of current society.Parliament is the body that should do thisjob. It has somehow failed to revoke lawsthat are absurd. Some laws such as Section377 are so politically volatile that the govern-ment does not even want to venture into theparliamentary route. Sometimes, these lawsare left intact to protect the moral fibre of thecountry. Other times, the government isscared to usher in reform because it is afraid itmight cause law and order issues. Cost thatthese laws extract are very real.

Corruption is an endemic problem in In-dia and the potential of misuse of stringentprovisions of the IPC is real. These laws,created during the time of Queen Victoria,reflect a Victorian British morality. Even theUnited Kingdom has moved beyond thosetimes now. Recently, Queen Elizabeth II par-doned Alan Turing, the father of computingand a codebreaker par excellence. It was hiswork that led to Britain winning the SecondWorld War. He was prosecuted under Section377-like laws and ended up killing himself.When the people who gave us these lawshave given up on them, it is obvious that thetime has come for us to think about becominga modern vibrant democracy as well.

Laws must never persecute people fortheir morals or their way of life. Over thelast years, personal freedom in India hassuffered erosion, whether it is the IT Act orSection 377. We cannot have laws in thiscountry that are contrary to our constitu-tion that guarantees us these freedoms. Ev-eryone has the right to pursue happiness.While many moralists will continue to makearguments that the conduct of individualshas an overall impact on society, the truth isthat none of them would like their own per-sonal freedoms curtailed. Without the free-dom all we have is a colonial legacy in theform of a penal code.

Chipping away the Constitution and itsprovisions can never be an option for a mod-ern India. It is the only thing that separatesus from British Raj. The time has come for achange. But, more importantly, the time hascome for the parliament to legislate effec-tively. This can only be done if quality workis done in legislative chambers without dis-ruption and discord. Now the only questionis who is going to bell these regressive laws?

— Shivdeep Singh

To be a pilot, the minimum leg length required is 99 cm and maximum 120 cm


SectorSpecificSectorSpecific

SS&P BSE Sensex 3550477.01 21193.58 21194 / 20612 21326 / 17906 2.31 3.79 7.43 12.28 9.68 5.81

S&P BSE 200 6108091.36 2530.88 2531 / 2451 2531 / 2101 3.10 4.62 9.27 11.64 5.14 2.21

S&P BSE 500 6710445.20 7826.15 7826 / 7565 7826 / 6477 3.34 4.90 9.95 11.91 3.96 0.62

TCS 422873.54 2158.95 2159 / 2003 2218 / 1250 7.79 8.77 10.88 45.01 72.70 89.37

Reliance Inds. 283929.94 878.70 896 / 839 923 / 767 1.78 4.86 4.58 5.81 7.41 -16.72

ITC 255602.46 322.10 322 / 313 376 / 274 2.24 2.56 -7.68 -0.23 11.57 89.97

O N G C 249862.79 292.05 292 / 274 341 / 244 4.12 0.85 6.39 -8.89 12.59 -10.15

Infosys 204558.64 3562.25 3562 / 3374 3562 / 2212 5.58 8.09 18.49 43.82 55.77 5.43

Coal India 178721.41 282.95 287 / 279 366 / 250 -0.21 6.63 -7.85 -1.39 -20.05 -7.83

S&P BSE Mid-Cap 993126.25 6663.76 6664 / 6303 7336 / 5224 5.73 7.08 18.53 14.25 -5.31 -12.48

Motherson Sumi 16500.35 187.10 201 / 187 201 / 117 -1.33 -2.70 22.42 42.82 42.17 127.37

Eicher Motors 13440.58 4976.15 5068 / 4783 5142 / 2545 1.94 10.92 40.61 50.33 80.46 315.68

Aurobindo Pharma 11381.55 390.85 403 / 310 403 / 131 26.14 34.96 94.45 121.19 106.09 51.21

ING Vysya Bank 11333.99 603.00 608 / 557 662 / 410 4.44 3.88 18.25 0.79 16.12 66.41

Emami 11008.37 484.95 485 / 460 519 / 377 4.12 2.44 -0.67 3.42 23.51 76.56

Britannia Inds. 10977.82 915.20 915 / 875 948 / 465 2.85 4.49 18.05 38.91 85.77 131.90

S&P BSE Small-Cap 355250.48 6516.08 6516 / 6131 7657 / 5101 6.28 8.71 18.54 17.04 -11.00 -30.49

Delta Corp 2377.28 104.45 107 / 97 107 / 41 7.85 14.22 64.23 106.22 38.99 5.56

Kajaria Ceramics 2336.04 309.00 309 / 284 309 / 179 8.33 25.10 24.75 29.59 30.68 333.38

Repco Home Fin 2206.06 354.90 355 / 320 355 / 161 10.91 19.49 47.38 63.70 - -

BF Utilities 2132.87 566.35 571 / 413 571 / 124 37.16 71.93 313.24 219.61 69.01 -37.69

Thomas Cook (I) 2131.46 86.05 88 / 79 88 / 49 8.10 10.32 49.39 51.76 48.23 39.69

Vaibhav Global 2125.58 661.35 696 / 417 696 / 94 58.45 69.06 200.14 309.38 476.09 2762.99

S&P BSE IT Sector 944981.27 9144.98 9145 / 8557 9145 / 5615 6.87 10.16 16.72 47.29 62.76 36.27

TCS 422873.54 2158.95 2159 / 2003 2218 / 1250 7.79 8.77 10.88 45.01 72.70 89.37

Infosys 204558.64 3562.25 3562 / 3374 3562 / 2212 5.58 8.09 18.49 43.82 55.77 5.43

Wipro 136928.32 555.40 555 / 518 555 / 326 7.02 18.20 16.89 59.87 43.81 14.50

HCL Technologies 87307.33 1249.30 1249 / 1173 1249 / 619 5.69 18.10 16.66 57.20 99.81 176.03

Tech Mahindra 43392.71 1861.15 1861 / 1691 1861 / 910 10.06 10.14 42.49 73.10 102.25 167.75

Oracle Fin.Serv. 27874.95 3314.50 3315 / 3076 3375 / 2410 7.76 8.41 8.47 24.16 3.63 44.00

S&P BSE FMCG Sector 587449.79 6549.15 6549 / 6370 7548 / 5620 2.32 0.87 -5.44 1.79 10.70 83.22

ITC 255602.46 322.10 322 / 313 376 / 274 2.24 2.56 -7.68 -0.23 11.57 89.97

Hind. Unilever 123019.50 568.85 569 / 555 719 / 433 1.40 -2.64 -8.38 -3.42 9.78 92.05

Nestle India 51469.48 5338.05 5490 / 4929 5791 / 4453 8.31 -2.05 4.72 8.58 7.91 44.72

United Spirits 36868.77 2536.90 2671 / 2507 2797 / 1755 0.30 -4.28 -3.20 13.98 33.60 77.34

Dabur India 30054.39 172.35 174 / 165 183 / 126 3.98 4.20 1.38 12.24 34.91 71.83

Godrej Consumer 28833.58 847.05 847 / 804 953 / 705 3.31 -1.38 1.83 7.41 16.37 117.86

S&P BSE Capital Goods 246417.85 10285.01 10285 / 9852 11148 / 6899 4.39 8.69 29.56 17.43 -5.23 -32.27

Larsen & Toubro 99795.78 1077.65 1094 / 1050 1146 / 695 2.68 7.06 31.83 19.71 0.10 -17.10

B H E L 42404.67 173.25 175 / 154 244 / 102 11.88 18.34 20.35 6.26 -23.39 -62.29

Siemens 23625.45 663.45 670 / 620 692 / 419 6.94 11.39 38.22 25.14 -0.27 -18.23

A B B 14592.49 688.65 691 / 655 725 / 450 4.65 8.56 25.03 18.49 -0.51 -14.25

Havells India 10009.32 801.90 803 / 731 808 / 594 9.65 6.48 26.62 12.71 27.38 99.90

Thermax 8294.03 696.10 696 / 653 696 / 534 2.05 9.03 18.04 15.83 13.23 -16.93

S&P BSE Healthcare 385918.43 9987.85 9988 / 9411 9988 / 7808 6.13 6.39 5.44 15.50 22.65 50.86

Sun Pharma.Inds. 119197.56 575.50 583 / 557 645 / 350 0.77 0.96 -2.42 18.23 54.26 140.44

Dr Reddy’s Labs 42843.09 2518.70 2540 / 2401 2540 / 1738 4.82 3.83 4.45 16.38 37.87 48.70

Lup in 40613.69 906.05 920 / 870 938 / 579 4.17 6.03 6.17 17.45 47.53 99.61

Cipla 32497.38 404.75 405 / 377 441 / 361 7.13 5.93 -6.56 4.38 -2.61 9.64

Glaxosmit Pharma 25058.07 2958.45 2958 / 2468 2958 / 2033 19.85 23.63 22.58 26.94 40.30 32.66

Ranbaxy Labs. 19646.71 463.65 467 / 418 519 / 263 9.29 10.24 38.84 45.99 -7.44 -19.25

S&P BSE PSU 1321290.96 5893.91 5894 / 5640 7862 / 4908 3.34 4.13 5.96 -1.00 -18.45 -36.48

O N G C 249862.79 292.05 292 / 274 341 / 244 4.12 0.85 6.39 -8.89 12.59 -10.15

Coal India 178721.41 282.95 287 / 279 366 / 250 -0.21 6.63 -7.85 -1.39 -20.05 -7.83

MARKET CLOSE FORTNIGHT 52-WEEK VARIATION OVER (%)

CAP PRICE HIGH / LOW HIGH / LOW FORTNIGHT MONTHLY QUARTERLY HALF YEARLY YEARLY 3-YEAR

(Rs cr) (Rs) (Rs) (Rs)

The year closes on a high noteThe market closed the last fortnight ended 27 December 2013 of the calender year 2013 on a rousing note. The S&P BSE Sensex, the keybarometer, rose over 2%, the S&P BSE Mid-Cap index nearly 6%, and the S&P BSE Small-Cap index over 6%. All the sectoral indices on theBSE ended in green. Shares in the IT and pharmaceuticals sectors continued to be in demand on recuperating global economy and a weakrupee. The high-beta realty shares surged as recent firmness in equities fortified investors' risk appetite. The BSE Realty index spurted 8.5%.


SectorSpecific

Only top six index constituent by market cap taken. Stock prices adjusted for stock-splits, bonus and rights issues, and dividends if any.

MARKET CLOSE FORTNIGHT 52-WEEK VARIATION OVER (%)

CAP PRICE HIGH / LOW HIGH / LOW FORTNIGHT MONTHLY QUARTERLY HALF YEARLY YEARLY 3-YEAR

(Rs cr) (Rs) (Rs) (Rs)

St Bk of India 121066.47 1769.90 1770 / 1719 2539 / 1475 1.51 0.34 7.81 -7.51 -25.91 -35.68

NTPC 113251.39 137.35 138 / 135 164 / 125 -0.22 -6.34 -7.07 -2.21 -11.64 -30.19

NMDC 56259.09 141.90 142 / 135 169 / 95 2.75 13.38 12.75 40.77 -11.34 -46.93

I O C L 51654.64 212.75 213 / 197 349 / 192 6.43 6.56 0.69 -4.72 -18.46 -39.94

S&P BSE BANKEX 647231.75 13073.59 13074 / 12661 15214 / 9871 0.80 5.07 15.86 1.75 -8.78 0.52

HDFC Bank 160270.58 669.30 690 / 653 724 / 561 -3.05 2.36 9.77 3.56 -1.48 51.26

ICICI Bank 127907.06 1107.90 1108 / 1064 1233 / 784 2.07 6.30 19.99 7.29 -2.60 -1.44

St Bk of India 121066.47 1769.90 1770 / 1719 2539 / 1475 1.51 0.34 7.81 -7.51 -25.91 -35.68

Axis Bank 60685.76 1293.25 1298 / 1240 1533 / 783 4.30 15.46 25.43 1.58 -5.21 -1.72

Kotak Mah. Bank 56718.75 737.45 757 / 722 798 / 600 -2.61 -1.25 8.08 4.70 13.57 65.14

Bank of Baroda 27629.31 651.65 660 / 638 889 / 445 -1.30 6.33 30.11 14.98 -24.22 -26.33

S&P BSE Auto 410962.88 12308.04 12385 / 11944 12466 / 9688 2.27 0.37 10.27 18.43 8.48 22.99

Tata Motors 119458.34 371.15 375 / 367 400 / 255 0.24 -7.04 9.21 37.72 19.92 42.68

M & M 59404.71 964.55 969 / 928 1005 / 767 1.74 2.48 14.26 3.24 3.60 27.18

Bajaj Auto 55993.10 1935.00 1990 / 1867 2214 / 1674 1.44 -0.63 -2.87 5.34 -9.36 33.01

Maruti Suzuki 53631.28 1775.40 1810 / 1692 1810 / 1236 4.95 7.09 29.80 16.68 19.81 27.31

Hero Motocorp 41673.40 2086.80 2163 / 2041 2203 / 1437 1.06 1.71 1.88 26.27 11.67 7.85

Bosch 32774.38 10437.70 10614 / 8799 10614 / 8051 18.25 21.89 15.32 20.49 14.52 68.20

S&P BSE Metal 506653.50 9917.78 9928 / 9621 11405 / 6467 3.08 8.26 15.58 33.92 -9.63 -41.86

Coal India 178721.41 282.95 287 / 279 366 / 250 -0.21 6.63 -7.85 -1.39 -20.05 -7.83

Sesa Sterlite 59649.76 201.20 205 / 192 207 / 124 4.90 15.47 10.01 45.64 4.68 -37.04

NMDC 56259.09 141.90 142 / 135 169 / 95 2.75 13.38 12.75 40.77 -11.34 -46.93

Hind.Zinc 56238.74 133.10 135 / 128 142 / 97 4.15 4.27 1.68 37.08 -1.66 4.93

Tata Steel 41179.30 424.00 425 / 409 442 / 199 2.07 7.41 47.30 60.45 -1.60 -36.11

S A I L 29636.55 71.75 72 / 69 100 / 38 4.06 6.93 40.27 47.79 -19.56 -59.53

S&P BSE Oil&Gas 777978.96 8775.27 8828 / 8381 9696 / 7785 2.47 3.63 4.94 1.91 5.56 -17.28

Reliance Inds. 283929.94 878.70 896 / 839 923 / 767 1.78 4.86 4.58 5.81 7.41 -16.72

O N G C 249862.79 292.05 292 / 274 341 / 244 4.12 0.85 6.39 -8.89 12.59 -10.15

Cairn India 61975.50 324.35 328 / 318 344 / 272 0.50 0.12 2.14 12.62 2.61 -2.10

I O C L 51654.64 212.75 213 / 197 349 / 192 6.43 6.56 0.69 -4.72 -18.46 -39.94

GAIL (India) 43191.74 340.50 342 / 334 388 / 283 0.96 3.50 4.32 13.96 -2.11 -33.38

Oil India 29112.73 484.30 484 / 455 603 / 416 6.02 2.52 6.72 -15.48 5.48 -13.38

S&P BSE IPO 53757.33 1522.06 1526 / 1404 1980 / 1075 7.91 6.63 21.13 10.65 -18.14 -20.05

Bharti Infra. 31809.41 168.40 177 / 168 213 / 130 -2.69 6.55 5.61 12.08 - -

Just Dial 9708.20 1385.50 1386 / 1140 1389 / 605 19.30 15.55 64.22 120.22 - -

Multi Comm. Exc. 2304.95 451.95 473 / 385 1484 / 243 13.61 -4.33 12.38 -40.23 -69.29 -

Repco Home Fin 2206.06 354.90 355 / 320 355 / 161 10.91 19.49 47.38 63.70 - -

Credit Analysis 2099.46 723.95 787 / 721 938 / 448 0.11 5.70 26.80 20.77 -22.54 -

NBCC 1869.60 155.80 156 / 135 192 / 102 12.57 18.08 37.88 16.10 -5.14 -

S&P BSE Greenex 1900512.13 1710.88 1711 / 1671 1734 / 1421 2.32 2.94 7.76 13.47 6.22 -

ITC 255602.46 322.10 322 / 313 376 / 274 2.24 2.56 -7.68 -0.23 11.57 89.97

Infosys 204558.64 3562.25 3562 / 3374 3562 / 2212 5.58 8.09 18.49 43.82 55.77 5.43

Bharti Airtel 131434.51 328.80 329 / 314 367 / 271 2.41 2.18 1.14 16.97 3.19 -3.75

Hind. Unilever 123019.50 568.85 569 / 555 719 / 433 1.40 -2.64 -8.38 -3.42 9.78 92.05

H D F C 122962.46 788.60 807 / 776 928 / 654 -2.28 -2.38 0.75 -5.79 -4.71 13.34

Tata Motors 119458.34 371.15 375 / 367 400 / 255 0.24 -7.04 9.21 37.72 19.92 42.68

S&P BSE Power 382622.05 1694.04 1694 / 1621 2038 / 1355 4.07 6.60 9.51 8.74 -13.99 -42.04

NTPC 113251.39 137.35 138 / 135 164 / 125 -0.22 -6.34 -7.07 -2.21 -11.64 -30.19

Power Grid Corpn 46204.71 99.80 100 / 97 116 / 91 2.41 8.30 0.91 -6.25 -12.19 3.15

B H E L 42404.67 173.25 175 / 154 244 / 102 11.88 18.34 20.35 6.26 -23.39 -62.29

NHPC Ltd 24232.46 19.70 20 / 18 29 / 15 9.14 10.99 -0.76 10.99 -22.90 -29.89

Siemens 23625.45 663.45 670 / 620 692 / 419 6.94 11.39 38.22 25.14 -0.27 -18.23

Tata Power Co. 21262.98 89.60 91 / 86 112 / 71 3.05 15.54 9.74 10.07 -17.50 -31.68

S&P BSE Realty Index 70109.59 1454.02 1454 / 1333 2311 / 1151 8.52 10.38 21.64 -0.85 -30.28 -46.98

DLF 30498.42 171.20 171 / 151 286 / 122 13.53 16.11 29.89 -2.84 -23.91 -39.85

Oberoi Realty 7562.42 230.40 234 / 211 316 / 157 9.09 23.34 38.42 20.03 -21.67 -12.01

Prestige Estates 5822.25 166.35 166 / 152 189 / 109 8.23 12.63 35.80 11.64 -6.12 1.59

Unitech 4081.43 15.60 16 / 15 40 / 15 1.63 -0.64 -4.00 -21.80 -53.71 -74.74

Godrej Propert. 3338.27 167.55 168 / 162 309 / 161 2.23 -2.67 -3.08 -32.37 -43.69 -39.68

Phoenix Mills 3315.62 228.90 229 / 219 285 / 188 2.78 3.18 -3.44 -9.70 -7.35 1.98


PostIPO

2012 (FY 2012) and 51% in FY 2013, itholds about 73.5 million tones (mt) of re-serves and resources of manganese ore. Outof this, about 44% are proven. The totallease area held is 1,802.97 hectares. Out ofthis, 39% land is in Maharashtra and 61% inMP. The reserves expected to last for over40 years based on current production rate.

The stock was listed at Rs 551, a hugepremium of 47%. However, in quick time,the scrip lost the initial euphoria. In May

2011, it plunged below its IPO price. Sincethen, it has failed to bounce back, the vola-tile financial and operational performance isa matter of concern for the market. Out ofthe last four financial years, turnover, vol-ume of production, and profit declined inFY 2010 and FY 2012.

Moil increased prices of manganese oreby about 19% in FY 2013. However, vola-tility in prices of manganese ore remains akey threat. Low- and medium-grade man-ganese ore is available in India. Thus, thecountry imports high-grade ore for blend-ing. Import is a direct threat to the com-pany, which can put pressure on the bot-tom line. The country imported 2.33 mt ofmanganese ore in FY 2013. Indeed, India isa net importer of manganese.

Moil was set up in 1896 as Central Prov-ince Prospecting Syndicate, which was laterrenamed as Central Provinces ManganeseOre Company (CPMO), a British companyincorporated in the UK. In 1962, as a resultof an agreement, the assets of CPMO weretaken over by the Central government andMoil was formed.

As the mines are old, full mechanizationis not possible. Further, the cost of produc-tion increases with deposits reaching deeperhorizons. This is another challenge for thecompany, which has two wind farms of 4.8MW and 15.2 MW situated in districtDewas in MP.

Cash-rich Moil’s return on equity(ROE) is on a decline at the present level of16.6% in FY 2013 and 18% in FY 2012 from75.3% in FY 2008, 62.2% in FY 2009 and31.1% in FY 2010. One of the reasons is thehigh cash component on the balance sheet.Cash stood at Rs 2276.7 crore end FY 2013.This is 82% of the net worth and 57% of themarket cap of Rs 3984.1 crore as on 10 De-cember 2013. It either needs to deploy thiscash effectively or else return it to the share-holders to improve the ROE.

With zero-debt over the last one decade,dividend of 55%, or Rs 5.5 per share, in-cluding interim dividend of Rs 2 per sharewas paid in FY 2013. The dividend payoutratio works out to 22.1%.

Plans are in place to deploy cash forcapital expenditure, which is expected tobe around Rs 1021 by FY 2017: aroundRs 207 crore in the current in the Rs 400crore and next fiscal. Despite these invest-ment plans, the company is likely to re-main cash-rich owing to the strong oper-ating cash flow.

Moil

Digging out of troubleDespite plans to expend its cash pile, the future of the manganeseore producers depends on the revival of the user steel industryThe initial public offering (IPO) of Moil hasproved grossly disappointing to the share-holders across the broad. The public offerhad received an overwhelming response,with oversubscription of more than 56 times.The retail category was oversubscribed 32times, non-institutional portion 142 times,and institutional segment 49 times.

Moil came out with an IPO in Novem-ber 2010. The three promoters of MOIL —the Central government and state govern-ments of Maharashtra and Madhya Pradesh(MP) — offered their equity shares in thepublic offering. The promoters together hold80% stake in the company. The Central gov-ernment has 71.57% equity, while the gov-ernment of Maharashtra owned 4.62% andMP 3.81% end September 2013.

The equity shares were offered at Rs375 including premium of Rs 365 per share.At the market price of Rs 237.15 on 10December 2013, the Moil stock has lost overone-third in valuation. The stock, however,has recovered from an all-time low of Rs182.4 in August 2013, close to its book value(BV) of Rs 164.6 per share.

There were several reasons for the over-zealous response to the IPO. The PSUmines manganese ore. Producing 42% of thecountry’s output in the fiscal ended March

PostIPO

Losing value

The Moil stock was listed at Rs 551, apremium of 47% over its offer price. InMay 2011, it plunged below its IPOprice and has failed to bounce back

M J J A S O N D78

89

100

111

122

MOIL

BSE Sensex

01Apr2013

27Dec

2013

Base=100 as on 01 April 2013FV of Moil Rs 10

Relative performance ofMoil v BSE Sensex


PostIPO

Likewise, significant investments fordevelopment of existing mines have beenplanned. For this purpose, various projecthave been taken up or proposed. These in-clude sinking of high speed vertical shaft atthe Balaghat and Ukwa mines in MadhyaPradesh, sinking of vertical shafts at Chikla,in Mansar and Gumgaon in Maharashtra,and deepening of the vertical shaft atBalaghat and Chikla mines. The Balaghatmine is the largest, with a depth of 309meters from the surface.

A number of mining projects are beingexecuted to increase capacity of the existingmines and to sustain the existing productionlevel. Production target is 1.5 mt by FY 2017and 2.2 mt by FY 2021. Production was1.07 mt in FY 2012 and 1.14 mt in FY 2013.

Further, a prospecting license has beenreceived for an area of 597.44 hectares indistricts of Nagpur and Bhandara from thegovernment of Maharashtra out of the re-served area of 814.71 hectares. It will helpto expand its existing mines. There is a pos-sibility of opening up of a minimum fourmines in this area, which will boost produc-tion going forward.

Called Sail & Moil Ferro Alloys Pvt Ltd,the equal joint venture (JV) with Steel Au-thority of India (Sail) for setting up of ferroalloys plant with capacity of 1.06 lakhtonnes at Nandini in Chhattisgarh will com-prise 31,000 tonnes of ferro manganese and75,000 tonnes of silico manganese.

Another equal JV with RashtriyaIspat Nigam, Rinmoil Ferro AlloysPvt Ltd, will be putting up a ferroalloy plant, with capacity of 57,000tonnes comprising 20,000 tonnes offerro manganese and 37,000 tonnesof silico manganese at Bobbili inAndhra Pradesh. Both these JVs arefacing delays in implementation.These JVs will emerge as captiveconsumers for manganese ore pro-duced by Moil.

Besides, acquisition opportunitiesare being scouted outside the country.To exploit manganese ore and othermetalliferrous minerals, the hunt is onfor properties to lease or buy from for-eign countries directly or under specialpurpose vehicle and JVs.

Also, the option of setting up man-ganese-based value-addition projects isbeing explored. Thus, a lot depends onthe execution of these plans to effec-tively use surplus cash. This, in turn,

will decide its future on the trading floor. Ofcourse, the demand environment for manga-nese ore needs to improve in the domesticand international markets.

In the memorandum of understandingsigned with the government, productiontarget of 11.25 lakh tonnes, sales target ofRs 835 crore, and net profit target of Rs323 crore have been set for the medium tolong term. But it all boils down to the out-look of the steel industry. Manganese isan integral part of production of steel,which improves quality of steel in termsof strength, hardness, durability and cor-

Maharashtra has given prospecting licences

Shareholders’ pain

Cash-rich Moil’s return on equity declined to 16.6%in FY 2013 from 31.1% in FY 2010

FY 2013 FY 2012 FY 2011 FY 2010 FY 2009

Equity (Rs cr) 168.0 168.0 168.0 168.0 28.0

Networth (Rs cr) 2765.6 2441.3 2128.2 1677.3 1,320.8

Sales (Rs cr) 975.0 905.6 1145.3 972.3 1,284.8

Other Income (Rs cr) 235.2 203.3 145.4 129.9 123.2

Profit (Rs cr) 431.7 410.7 588.0 466.3 664.2

Cash Profit (Rs cr) 464.7 440.6 620.5 491.6 688.4

Book Value (Rs) 164.6 145.3 126.6 99.8 4717.3

EPS (Rs.) 24.8 23.6 33.8 26.8 2,289.9

Dividend (%) 55.0 50.0 70.0 56.0 475.0

Payout (%) 22.1 21.1 20.6 20.8 20.7

Debt-Equity 0 0 0 0 0

ROCE (%) 23.7 25.8 45.6 47.2 94.3

RONW (%) 16.5 18.0 30.9 31.1 62.2

Source: Capitaline Databases

rosion resistance. Globally, over 90% ofmanganese is utilised in thedesulphurisation and strengthening ofsteel. Thus, the fortune of this industry istied up with that of the steel sector, whichis cyclical in nature.

The domestic economy plunged to adecade-low, with economic growth of mere5% in FY 2013. The current fiscal is goingto be no different. The investment cycleshould revive to give a boost to the steelindustry. In turn, this means, the demandfor manganese ore is expected to remainsubdued. However, the medium- to long-term prospects look good with thecountry’s per capita consumption of crudesteel continues to be pathetically low at 60kilograms (kg) compared with the globalaverage of 219.6 kg.

Currently, India is the fourth largest pro-ducer of crude steel globally compared withthe eighth position in calendar year (CY)2003. India is projected to move to secondposition by FY 2015. This is expected tolargely driven by higher economic growthand spending on infrastructure. This is a gi-gantic opportunity for cash-rich Moil. How-ever, the company has to execute its expan-sion plans to benefit from the expected surgein demand for steel.

OutlookSixteen mutual fund houses held 0.92%equity stake end 30 September 2013. This

is a marginal decline. A year ago, 19mutual fund houses had an equitystake of 1%. However, mutual fundholding has come down drasticallycompared with the holding immedi-ately after the IPO. A total of 35mutual fund houses owned 1.8% eq-uity on 31 December 2013.

Profitability margin is high, withnet profit margin (NPM) of 44.3% inFY 2013 as against 45.3% in FY 2012and 51.3% in FY 2011. The companyexpects to clock NPM of 39% in thecurrent fiscal.

The high cash component in com-parison with the market cap could beone compelling reasons for investorsto explore the Moil stock for invest-ment. The cash per share works out toRs 135, which is over 50% of the cur-rent market price. The high cash onthe balance sheet can provide down-side support to the stock.

— S Khedekar

ApnaMoney

77Jan 06 - 19, 2014 CAPITAL MARKET

Taxation

Signs of the new ageThere may not be need for digital signatures to file ITR as theIT department is looking at giving electronic Pin to taxpayersWith the advent of computerisation, incometax return can be submitted online usingdigital signature certificate (DSC). A digi-tal signature authenticates electronic docu-ments just as a handwritten signature vali-dates printed documents. This signaturecannot be forged.

The recipient of a digitally-signed mes-sage can verify that the message originatedfrom the person whose signature is attachedto the document and that the message hasnot been altered either intentionally or acci-dentally since it was signed. Also, the signerof a document cannot later disown it byclaiming that the signature was forged. Inother words, digital signatures assure therecipient of a digital message of both theidentity of the sender and the integrity ofthe message.

A digital signature is issued by a Certi-fication Authority (CA) and is signed withthe CA’s private key. A digital signature typi-cally contains the owner’s public key, theowner’s name, expiration date of the publickey, the name of the issuer (the CA that is-sued the digital ID), serial number of thedigital signature, and the digital signatureof the issuer. Digital signatures deploy thepublic key infrastructure (PKI) technology.

E-filing is now mandatory for individu-als and Hindu undivided families whose ac-

count have to be audited under Section 44ABof the Income Tax Act, 1961. For companies,e-filing with digital signature is mandatory.For non-auditable cases, DSC is not manda-tory. If the DSC is used for income tax return(ITR), the ITR will be treated as legally filedimmediately after uploading. If a taxpayerdoes not have a DSC, he can still file the re-turn electronically. But a signed copy of ITR-V has to be sent to Centralised ProcessingCentre, Post Bag No.1, Electronic City PostOffice, Bangalore- 560100, within 120 days.After receiving the signed copy of ITR-V, theCPC return will be treated as legally filed andwill be processed.

DSC should be of class II or III only,

and issued by the Controller of CertifyingAuthority-approved certifying agencies inIndia. There are a total of eight CAsauthorised by the CCA to issue DSCs. Aperson who already has the specified classII or III DSC for any other application canuse it for filing the ITR and is not requiredto obtain a fresh permanent account num-ber (Pan)-embedded DSC. Fresh Pan-em-bedded DSC is required when the existingDSC has expired or revoked.

DSCs are typically issued with one- ortwo-year validity. It includes the cost ofmedium (a USB modem, which is a one-time cost), the cost of issuance of digital sig-nature and the renewal cost after the periodof validity. The issuance cost of each CAvaries and is market driven.

A taxpayer has to first register his DSCon the e-filing website, either during regis-tration or post login. Once DSC is regis-tered, the taxpayer has to use the same DSCwhile uploading the ITR.

A DSC cannot be registered by multipleusers. The DSC registered has to belong tothe assessee and should have his Pan and e-mail ID encrypted. The only exception tothis rule is that an authorised signatory (prin-cipal contact) for an organisation shouldregister his own DSC to e-file for theorganisation. The same DSC can be usedfor personal e-filing, too.

There may not be need for digital sig-natures to file ITR going forward. The ITdepartment is looking at giving electronicpersonal identification numbers to taxpayer,which will make electronic ITR filing ahassle-free task.

— Tushar Doctor

ApnaMoney

DSCs have one- to two-year validity


ApnaMoney Investment Strategy

comments could have long-term repercus-sions. An enterprise not following uniformaccounting polices is one such instance. Theauditors obviously cannot quantify the fi-nancial impact. But its certainly an impor-tant piece of information. Another examplewould be that of inadequate internal controlmechanism for a particular function or mul-tiple functions.

Investors tend to focus on items wherethe financial impact is visible such as non-provisioning and ignore comments where thefinancial impact is not given. This is not theright approach.

The statutory auditors of NHPC havequalified the books of accounts for the halfyear (H1) ended 30 September 2013 oncapitalisation on certain costs. The PSU hasincluded borrowing cost of Rs 572 crore andadministrative and other cost of Rs 205.1crore in capital work in progress (CWIP)incurred on the Subansiri lower hydro-elec-tric project in Assam. The work at the sitehas been interrupted. The Accounting Stan-dards (AS) require the expenditure incurredduring the interruption period to be chargedto the profit and loss account.

According to NHPC, technical and ad-ministrative work is going on at the site. Thus,the borrowing cost and administration andother general overheads have been capital-ised with adequate disclosure in the financial

statements. The company is reasonably con-fident that, based on past experience, thesecosts will be allowed to be included in thecapital cost of the project and, consequently,will be recoverable through tariff.

Further, based on the advise by the of-fice of Cag, the matter has been referred tothe Expert Advisory Committee of the In-stitute of the Chartered Accountants of In-dia (ICAI) for seeking opinion. Besides, theissue has also been referred to the Ministryof Corporate Affairs (MCA) through theMinistry of Power.

Further, the auditors have included mul-tiple matters in their audit report on the ac-counts for H1 ended 30 September 2013under, ‘Emphasis of matter’, without anyqualified opinion. The first instance is aboutcarryforward of cost incurred on survey andinvestigation of projects. As per NHPC, theprojects on which survey and investigationexpenditure has been incurred are still ac-tive. Therefore, the cost incurred has beencarried forward.

The second comment is about uncer-tainty of outcome of the claims and arbitra-tion proceedings and lawsuits filed byNHPC against contractors and others. Thesepotential liabilities have been treated as con-tingent liability. The company says it re-quires to disclose the uncertainty relating toany outflow of contingent liability in accor-dance with AS-29. It has made adequate dis-closures in the annual report.

Third, the auditors have drawn attentionto the treatment of expenditure incurred oncreation of assets not within the control ofNHPC, and generally tagged as ‘Enabling as-sets’. The effects of such expenditure is notbeen given in the books of accounts. In this

Investment Strategy

Public display of ireThe books of accounts of several navaratnas, maharatnas andmini ratnas have invited caustic comments from their auditorsThe Comptroller and Auditor General ofIndia (Cag), a statutory body set up by theCentral government, has made life miserablefor the United Progressive Alliance (UPA)II government. Cag is credited with unearth-ing two mega scams: the arbitrary alloca-tions of second-generation (2G) telecommu-nications spectrum and coal blocks. Boththese scams have rocked the government andthe magnitude has shocked the country.

As a result, policy making has come toa standstill, with the bureaucracy refusingto take decisions. The government machin-ery appears to be scared that their actionscould be questioned in future and result inwitch-hunt. Fed up, the prime minister andfinance minister have expressed displeasureat the functioning of Cag for the presentstate of affairs.

Cag also undertakes audit of Central pub-lic sector undertakings (PSUs). PSUs are scru-tinised by independent audit firms as well.Not only Cag but even statutory auditors ofthese companies have redflagged several in-stances of dodgy bookkeeping by these PSUs.

Capital Market scanned through thelatest annual audit reports and also the lim-ited review reports of select PSUs to checkwhat auditors have to say about their booksof accounts. Auditors’ qualifications maynot have an immediate impact on thefinancials of these PSUs. However, certain

ApnaMoney



regard, the PSU is reviewing its accountingpractice. There would be no material impacton profitability due to changed accountingpractice, if any, in future, as per the company.

Fourth, the auditors have also drawnattention to the damage to the 280-MWDhauliganga power station in Uttarakhanddue to floods, resulting in suspension ofoperations. The losses incurred includingconsequential losses and loss of profit areconsidered recoverable from the insurers bythe management.

The assets of the power station and lossof generation are covered under the megainsurance policy. However, losses beyondexcess, if any, are required to be borne byNHPC. The excess losses will be determinedafter receipt of the final survey report. Thisamount is not ascertainable at present. Res-toration work is underway. The companyreceived on-account payment of Rs 35 crorefrom the insurance company in October 2013as against the insurance claim.

Fifth, NHPC has not made any provi-sion for expenses for the Dibang hydro elec-tric project in Arunachal Pradesh. Clearancefor this project was rejected at the initialstage. However, a draft note for this projecthas been put up to the Cabinet Committeeof Investment (CCI). In October 2013, theMinistry of Environment & Forest gave itsrecommendation on the proposal of theMinistry of Power to approach the CCI forreviewing the decision. Considering this, thecompany has decided to wait for a final de-cision. Necessary provision will be made ifthe final outcome goes against it.

NHPC, India’s largest hydro power com-pany, reported consolidated profit of Rs2439.6 crore in the fiscal ended March 2013(FY 2013) and Rs 3025.6 crore in FY 2012.

The amount involved is significant forSteel Authority of India (Sail) as well.The statutory auditors gave expressedqualified opinion in their review report forthe period ended 30 September 2013. On acumulative basis, the company had not pro-vided for entry tax amounting to Rs 82.9crore in Uttar Pradesh, Rs 976.3 crore inChhatisgarh, and Rs 204.6 crore in Odishaon 30 September 2013.

Further, Sail has not made provision forincome tax demand of Rs 87.6 crore andclaims of Rs 253.8 crore by Damodar ValleyCorporation (DVC) for supply of power.The non-provisioning resulted in overstate-ment of profit by Rs 89.7 crore in the quar-ter and Rs 159.9 crore in H1 ended 30 Sep-

tember 2013. The country’s leading steelmaker reported consolidated profit of Rs2329.4 crore in FY 2013 and Rs 3593.5 crorein FY 2012.

Also, the auditors of Sail have drawnattention to multiple matters. For instance,sales to government agencies have beenrecognised on provisional contract prices.Sales of Rs 1846.9 crore for H1 ended 30September 2013 was recorded on provisionalcontract prices. Such sales on cumulativebasis stood at Rs 20090.6 crore end Sep-tember 2013.

Sail has made provision of Rs 1148.5crore towards wage revision to non-execu-tive employees. Fresh agreement is pend-ing. The agreement will be effective from 1January 2012. As the liability is providedon an estimated basis, the auditors are not ina position to comment about its adequacy.Of this total provision, Rs 408.9 crore wasfor the quarter and Rs 537.5 crore for H1ended 30 September 2013.

Further, the review report stated thatconsidering the assumptions provided bySail for salary escalation rates, the auditorswere unable to comment on the adequacy ofprovision for retirement employee benefitsbased on actuarial valuation in accordancewith the AS-15 on employee benefits.

MMTC is the worst among the PSUsby auditors’ qualifications. The auditorsseem to have poured red ink all over theirreport. The company is the country’s larg-est international trading company. A glanceat the audit report accompanying the annualaccounts for FY 2013 reveals several issues.First, is the many incorrect and unexplainedaccounting entries deliberately recorded inthe books at the Hyderabad regional office(RO) to suppress the actual sundry debtors

recoverable. The PSU conducted a specialaudit to ascertain the amount actually re-coverable. Based on this report, a provisionof Rs 228.8 crore was made towards un-recoverability of the amount from the con-cerned sundry debtor.

Second, acts of commission and omis-sion for recovery from debtors were noticedat MMTC’s Chennai RO. Based on the fi-nal report of the special audit, additionalprovision of Rs 15.5 crore was made in FY2013. The company had provided Rs 100.2crore in FY 2012.

Third, balances under sundry debtors,claims recoverable, loans and advances, sun-dry creditors and other liabilities in manycases have not been confirmed. Fourth, theRMS software is not reflecting correct in-ventory of Sanchi, a brand under which sil-verware products are sold, due to problemswith the package. The manual record hasnot been maintained.

In the annexure to the audit report, thestatutory auditors have advised MMTC tostrengthen the procedures of physical veri-fication of inventories followed by the man-agement. Also, they have recommendedstrengthening of the internal control systemfor purchase and sale of goods. Last, theauditors expressed the need to strengthenthe internal control mechanism for recon-ciliation of goods, risk management, andbooks of accounts at its Hyderabad RO.

Shipping Corporation of India’s (SCI)limited review report for the quarter ended30 September 2013 contains four issues.First, the accuracy of the exchange gain orloss recognised on revaluation as per AS-11remains unverifiable and unascertainable.This was due to bill-wise reconciliation oftransactions for customer reconciliation andadvance received from customers.

According to SCI, the issue arising per-tains to part payment received in rupees asagainst foreign currency invoices. The com-pany is trying to resolve the matter by mak-ing suitable changes in the foreign currencyinvoice booking system. It assessed the im-pact at the end of the quarter and necessaryentries have been passed.

Second, SCI has not carried out the ad-justment in discount rate as per AS-28. Fur-ther, it has not provided adequate informa-tion for adjustments to be carried out in dis-count rate and, thus, the impact is unascer-tainable. The company says it tested assetsfor impairment and computed the recover-able value for ships owned by it as per AS-

Sail has not provided for entry tax



28. The methodology adopted was consis-tent for the past three years. As per thecalculations, there was no impairment and,thus, no provision for impairment was made.

Third, the auditors have drawn atten-tion to the failure to correct material weak-nesses in the internal control systems of re-cording transactions of expenses. As perSCI, it booked slot-hire expenses of Rs 16.6crore in the September 2013 quarter for priorperiod as these were under negotiation andwere not booked during the relevant period.

Lastly, SCI has not received any amountfor rescindment of ship-building contractwith Rongcheng Shenfel Shipbuilding Com-pany, China, from ICBC Bank, China, asinvocation of bank guarantee. Hence, theoutcome of the transaction is uncertain.

Here is a brief history about this con-tract. SCI rescinded the shipbuilding con-tract for construction of a 3,500 twenty-foot equivalent unit container vessel in theSeptember 2013 quarter due to non-deliv-ery of the vessel within the contractual timeperiod. Consequently, the refundment guar-antee of US$ 21.3 million for advances paidto the shipyard and interest was invoked inSeptember 2013. The shipyard has resortedto arbitration. ICBC Bank, the bank issuingthe guarantee, informed SCI that it was with-holding the payment until the arbitrationaward is published, Subsequent to the Sep-tember 2013 quarter, SCI rescinded the ship-building contracts for two offshore vesselsdue to non-delivery of the vessel within thecontractual time period. The navratna PSUis the country’s largest shipping company.

NTPC, the country’s largest power pro-ducer, is sitting on hefty contingent liabili-ties. Its spat with Coal India (CIL) and itssubsidiaries lingers. The Ministry of Coalissued a notification in December 2011. Ac-cording to this notification, grading and pric-ing of non-coking coal was migrated fromuseful heat value to gross calorific value(GCV) from 1 January 2012. The coal-sup-ply agreements entered into by NTPC withCIL and its subsidiaries (coal companies) wererequired to be amended to incorporate ac-ceptable procedures for sample collection,preparation, testing and analysis to facilitatemigration. The amendments are still pending.

NTPC’s board of directors approvedpayment to coal companies based on the GCVand directed it to frame modalities for imple-mentation of the GCV-based grading system.Accordingly, modalities were framed toimplement joint sampling and testing of coal

at the mine end and future payments to coalcompanies. The modalities were communi-cated to coal companies by November 2012.Thereafter, NTPC released payments on thebasis of GCV. The PSU noticed variation inthe GCV of coal supplies received at powerstations. These variations were informed tocoal companies, which have not acceptedthem. NTPC has taken these issues with coalcompanies through the Ministry of Powerand the Ministry of Coal. The matter is pend-ing. In the meantime, the difference betweenthe amount billed by coal companies and theamount admitted by NTPC aggregating to Rs4065.1 crore on 30 September 2013 has beentreated as continent liability.

The statutory auditors of NTPC havedrawn attention to this matter without quali-fying its limited review report. The amountinvolved is significant considering the factthat the company reported profit of Rs12586.2 crore in FY 2013. Moreover, thiscontingent liability will keep on growingquarter after quarter unless the issue is ami-cably resolved between the two PSU giants.

Dredging Corporation of India (DCI)is one of the key promoters ofSethusamudram Corporation (SCL). SCL isa special purpose vehicle incorporated inDecember 2004 for developing theSethusamudram ship channel project. Itsother promoters include Tuticorin PortTrust, Ennore Port, Visakhapatnam PortTrust, Chennai Port Trust, Shipping Cor-poration of India, and Paradip Port Trust.DCI invested Rs 30 crore in the equity sharecapital of SCL. The dredging work at PalkStrait was suspended in July 2009. DCI hasnot made any provision towards diminu-tion in the value of its investment. The statu-tory auditors of DCI have red-flagged this

matter in their audit report for FY 2013.DCI has further exposure of Rs 426.4

crore to SCL. The company in June 2012 hadrequested the Ministry of Shipping to ap-point a sole arbitrator under the contract forrealisation of these outstanding dues. Thematter is under consideration of the govern-ment. The ministry in September 2013 con-stituted a committee to consider the outstand-ing dues payable by SCL. Considering thesedevelopments, no provision for doubtfuldebts has been made by the company. Theauditors have not made any comments aboutthese outstanding in their audit report for FY2013 and limited review reports. The miniratna company is into dredging activities.

In their review report for the period ended30 September 2013 on standalone accounts,the auditors of CIL have drawn attention tomultiple issues without qualifying the booksof accounts. The maharatna company is theworld’s largest coal mining company.

CIL has equity and loan exposure to itssubsidiary Eastern Coalfields (ECL), a fi-nancially sick company referred to the Boardof Industrial and Financial Reconstruction(BIFR). Despite this, the investment in ECLhas been considered at book value (BV) byCIL. The revival scheme for ECL has beenapproved by BIFR and vetted by the gov-ernment. On implementation of the revivalplan, ECL is on the path of recovery, ac-cording to CIL. Thus, no provision was con-sidered necessary at this juncture.

Second, income of apex charges and in-terest from ECL has not been recognised. Fur-ther, interest income on loans and advancesfrom Bharat Coking Coal (BCCL) has beendeferred as it is still having accumulated losses.The subsidiary of CIL first approached BIFRin December 1995. In December 1997, BCCLcame out of the purview of BIFR. However,in FY 2010, its net worth turned negative andwas again referred to BIFR in 2001. CIL hastaken several steps to turnaround BCCL.These include providing financial support invarious forms. In March 2013, BCCL’s networth turned positive with CIL subscribingto 5% non-convertible cumulative redeem-able preference shares.

Last, fixed assets of the Dankuni coalcomplex in West Bengal leased to South East-ern Coalfields (SECL) for lease rent of Re 1per annum was shown in the balance sheet atwritten-down value or BV. As per the com-pany, the nominal income earning is a tempo-rary policy matter and actual worth of theassets including land is much higher than the

NTPC is sitting on helfty contingent liablities



BV. Thus, no provision was required. SECLis a wholly owned subsidiary of CIL.

Without qualifying the books of ac-counts, the statutory auditors of Power Fi-nance Corporation (PFC) have drawn at-tention to the presentation of foreign cur-rency monetary item translation differenceaccount (FCMITDA). The PSU had exer-cised the option under the amended AS-11on the effects of changes in foreign exchangerate to amortise the exchange differences onthe long-term foreign currency monetaryitems over their tenure. Rs 1243.6 crore wascarried forward in the FCMITDA and shownon the asset side of the balance sheet on 30September 2013.

As per the announcement by the ICAIin March 2013, the debit or credit balance inFCMITDA has to be shown on the equityand liabilities side of the balance sheet underthe head, ‘Reserve and surplus’, as a sepa-rate line item. PFC has requested for a clari-fication on the applicability of the ICAI’sannouncement from the MCA. The MCAresponded, explaining the rationale given bythe ICAI without stating whether the an-nouncement was recommendatory or man-datory. The matter has been taken up againwith MCA. In the meantime, FCMITDAcontinues to be shown on the assets side ofthe balance sheet. PFC is a financial institu-tion dedicated to power sector financing.

Neyveli Lignite Corporation has pro-visionally accounted tariff rate based on theprovisional order issued by the Central Elec-tricity Regulatory Commission (CERC) forthe Barsingsar thermal power station inRajasthan. The final power tariff rates fromCERC are still pending.

The revision in capacity charges ofpower tariff and transfer price of lignitefor energy charges of power tariff on ac-count of truing up to the actual, whereverand whenever applicable, will be consid-ered subject to approval by CERC. Thetruing-up charge is adjustments based onactuals as against projected.

Last, pending receipt of the CERC or-der, reduction in power sales of Rs 17.7 croreon account of deemed export benefit grantedby the government was not been given ef-fect by Neyveli. The auditors have drawnattention to these matters without qualify-ing their audit report for FY 2013. The PSUmines lignite and generates power.

The auditors of Bharat PetroleumCorporation (BPCL), a PSU oil refining andmarketing company, have drawn attention

speeding up exploration activities. Hence,PPCL feels it will able to generate profit in thecoming years. However, adopting a conserva-tive accounting approach, PPCL has stoppedrecognizing deferred tax assets from FY 2013.

The auditors of HPCL have drawn atten-tion to captialisation of net additional expen-diture by HPCL Mittal Energy (HMEL), aJV company. HMEL completed mechanicalcompletion of all the units and obtained ap-provals from relevant authorities. Its plantcommenced refining of crude oil in FY 2012and capitalised most of the units.

However, based on technical opinions,HMEL in FY 2013 realised that the plantwas under test-run due to high complexityinvolved in integrating the petrochemicalcomplex up to December 2012. After this,the plant started producing commerciallyfeasible quality and quantities of finishedgoods. Consequently, net additional expen-diture of Rs 2817.6 crore (including Rs 548.2crore up to 31 March 2012 under ‘Excep-tional items’) was capitalised in FY 2013.Further, depreciation charge of Rs 82.5 crorefor FY 2012 was netted with the charge inFY 2013.

Last, the recognition of minimum alter-nate tax (MAT) credit entitlements of Rs406.8 crore on 31 March 2013 of HPCLwas on the basis of cogent evidence that itwill be able to avail the credit in the speci-fied period.

Based on the High Court (HC) order, oiland gas exploration company Oil India haspaid the decreed amount of Rs 99 crore inFY 2013. This amount was owed to a con-tractor. The company’s appeal against thedecreed amount has been admitted by theHC and pending disposal. Oil India consid-ers the amount as recoverable and, thus, hasnot treated it as expense. The statutory au-ditors have commented on this treatmentwithout qualifying their audit report.

ConclusionSeveral of these PSUs are leaders in theirindustries. The government has honoredthem with tags such as navratna,maharatna, mini ratna and so on. It is es-sential to ensure their books of accounts arefree from auditors’ comments and qualifica-tions. Stock market regulator Securities Ex-change Board of India has expressed dis-comfort over qualified audit reports of listedcompanies on several occasions. It wouldbe better for it to start with PSUs.

— S Khedekar

to loss-making joint venture (JV) and aboutaccounting policies in their report for theconsolidated books of accounts for FY 2013.

The auditors of Bharat Oman Refineries(BORL), a JV company, have drawn atten-tion to the recognition of deferred tax assetsof Rs 697.8 crore. BORL is a equal JV be-tween BPCL and Oman Oil Company. TheJV commenced operations of its six million-tonne per annum (mtpa) grassroots refineryat Bina in Madhya Pradesh. As per BPCL,in view of the binding agreement entered intoby BORL for off-take of the products manu-factured by BORL’s refinery at prices deter-mined considering international prices, BORLis certainly going to turn around. Therefore,the deferred tax asset can be realised.

The consolidated accounts have beenprepared by BPCL in accordance with AS-21 on consolidated financial statement andAS-27 on financial reporting of interests inJVs. However, according to the auditors,BPCL has not used uniform accounting poli-cies nor has disclosed together with the pro-portions of items to which the different ac-counting policies have been applied.

The statutory auditors of HindustanPetroleum Corporation (HPCL), anothergovernment-owned oil refining and market-ing company, have relied on the estimatesand assumptions made by the company inarriving at recoverable value of assets basedon the desired margin.

Prize Petroleum Corporation (PPCL), awholly owned subsidiary of HPCL, hasrecognised deferred tax asset of Rs 10.5 crorein the earlier years. This was despite con-tinuous losses reported by PPCL. The PSUhad accumulated losses of Rs 35.1 crore ason 31 March 2013. HPCL has initiated vari-ous steps like acquisition of new assets and

BPCL has a loss-making JV


Mutual Fund scoreboard

Top five performers in different categories as on 30 December 2013

ApnaMoney

SCHEME/INDEX NAME N.A.V. CORPUS MAX. EXIT EXPENSE ABSOLUTE (%) CAGR (%)

(Rs) LATEST (Rs cr) LOAD (%) RATIO (%) 3 MON 6 MON 1 YEAR 3 YEARS 5 YEARS

Equity

Banking

ICICI Pru Banking & Financial Services (G) 22.04 257.71 1.00 2.91 19.98 4.95 -3.29 4.74 21.56Religare Invesco Banking Fund (G) 21.49 56.98 1.00 3.08 16.79 -2.23 -9.82 0.36 18.58Reliance Banking Fund - (G) 107.09 1450.18 1.00 2.37 22.79 -0.18 -10.67 -0.54 20.88Sundaram Fin Serv Opportunities (G) 18.35 135.18 1.00 2.77 20.16 -1.59 -12.16 -4.40 14.75Taurus Banking & Financial Services Fund (G) 11.68 7.41 1.00 2.89 16.33 -2.26 -13.03 NA NA

Diversified

Birla Sun Life India Opport Fund - B (G) 65.92 38.87 0.50 2.50 16.53 29.79 24.35 4.12 22.47Religare Invesco Equity Fund (G) 16.30 24.66 1.00 2.91 14.95 16.85 19.24 6.64 19.13Tata Ethical Fund - (G) 84.97 114.51 1.00 2.90 11.31 14.91 16.66 6.87 24.84ICICI Pru Dynamic Plan (G) 134.66 3566.93 1.00 2.24 14.51 23.03 16.13 6.61 21.34Taurus Ethical Fund - (G) 26.73 19.91 1.00 2.88 12.31 19.17 14.77 2.60 NA

Index

HDFC Index Fund-Sensex Plan 178.47 35.39 1.00 1.05 9.02 9.50 9.81 1.54 16.29Tata Index Fund - Sensex Plan (B) 17.19 5.50 0.00 0.81 8.98 9.22 9.69 2.14 NAReliance Index Fund - Sensex (G) 10.44 3.32 1.00 0.94 9.08 9.04 9.58 1.74 NALIC NOMURA MF Index - Sensex Advantage (G) 37.46 3.22 1.00 1.70 8.81 9.22 9.12 1.73 16.17LIC NOMURA MF Index Fund - Sensex Plan (G) 39.89 15.07 1.00 1.70 8.78 8.75 8.97 1.56 16.40

Infrastracture

Franklin Build India Fund (G) 14.34 57.97 1.00 2.89 13.49 13.47 6.30 3.99 NABirla Sun Life Infrast Fund - Plan A (G) 15.37 275.76 1.00 2.76 20.55 11.78 -3.88 -5.16 12.81LIC NOMURA MF Infrastructure Fund (G) 8.02 64.79 1.00 2.70 14.57 4.83 -3.88 -7.37 6.80Religare Invesco Infrastructure Fund (G) 7.32 24.52 1.00 2.86 19.02 9.25 -3.94 -5.77 8.00Tata Growing Economies Infrastructure-PlanB (G) 10.96 53.02 1.00 2.92 9.83 2.30 -5.08 -4.82 10.88

Tax

AXIS Long Term Equity Fund (G) 17.23 782.22 0.00 3.00 17.02 16.03 16.59 10.08 NAIDFC Tax Advantage (ELSS) Fund (G) 25.41 163.65 0.00 2.86 17.53 20.93 14.96 6.48 20.48Edelweiss ELSS Fund (G) 23.73 22.77 0.00 2.68 12.68 11.36 10.99 5.11 18.86HDFC Long Term Advantage Fund (G) 162.56 846.45 0.00 2.58 15.77 13.49 10.95 3.16 21.49ICICI Pru Tax Plan - (G) 173.81 1541.80 0.00 2.40 16.74 20.25 10.12 4.94 24.95Hybrid

Arbitrage Funds

ICICI Pru Equity - Arbitrage Fund (G) 17.23 298.45 0.50 0.94 2.54 4.85 10.01 9.22 7.59Reliance Arbitrage Advantage Fund (G) 13.34 1068.09 1.00 0.43 1.82 4.62 9.93 9.33 NAICICI Pru Blended - Plan A (G) 19.19 319.42 0.50 0.87 2.47 4.70 9.61 9.21 7.56Birla Sun Life Enhanced Arbitrage Fund (G) 13.43 308.29 0.00 1.64 1.88 3.99 9.59 7.87 NAKotak Equity Arbitrage Fund (G) 18.51 552.18 0.50 0.92 2.55 4.52 9.38 8.75 7.57

Balanced Funds

HDFC Children’s Gift Fund-Invt Plan (G) 57.01 417.38 3.00 2.56 13.46 15.02 13.07 10.10 24.10SBI Magnum Balanced Fund (G) 62.98 420.45 1.00 2.51 13.91 12.84 12.10 5.67 16.69JM Balanced Fund - (G) 27.58 6.81 1.00 2.88 10.51 11.08 11.37 4.61 13.46ICICI Pru Child Care Plan-Study Plan 38.46 36.89 1.00 1.49 7.19 9.45 11.33 9.58 12.61ICICI Pru Balanced Fund - (G) 61.82 599.91 1.00 2.80 11.59 12.14 11.17 9.35 18.34

Monthly Income Plans

Edelweiss Monthly Income Plan (G) 13.67 0.89 2.00 2.25 1.61 3.82 12.16 9.54 NASahara Classic Fund (G) 17.13 0.15 2.00 0.35 2.00 4.35 8.56 8.87 8.08LIC NOMURA MF Monthly Income Plan - (G) 38.24 85.39 1.00 2.20 2.84 4.79 8.55 5.31 7.54SBI Magnum MIP Floater (G) 16.68 7.56 1.00 2.45 2.75 4.67 8.29 7.75 8.22Peerless Income Plus Fund (G) 12.84 80.54 1.00 2.93 2.98 3.58 7.78 7.79 NA


ApnaMoney Mutual Fund

SCHEME/INDEX NAME N.A.V. CORPUS MAX. EXIT EXPENSE ABSOLUTE (%) CAGR (%)

(Rs) LATEST (Rs cr) LOAD (%) RATIO (%) 3 MON 6 MON 1 YEAR 3 YEARS 5 YEARS

Debt

Income Funds

Tata Dynamic Bond Fund - Plan A (G) 18.46 330.59 0.50 0.74 1.98 1.92 10.33 8.40 5.18

Birla Sun Life Medium Term Plan (G) 14.82 1817.70 2.00 1.50 2.97 3.43 10.27 10.20 NA

Tata Fixed Income Portfolio-Sch-C2 (G) 15.14 0.22 0.75 0.15 2.46 4.74 9.94 9.84 6.71

ICICI Pru Flexible Income Plan - Regular (G) 234.93 10044.60 0.00 0.52 2.50 4.84 9.66 9.48 7.99

Tata Fixed Income Portfolio-Sch-A3 (G) 15.16 3.49 0.25 0.15 2.17 4.73 9.46 9.59 7.42

Gilt Funds

Sundaram Gilt Fund - (G) 20.55 19.30 0.00 0.89 3.50 7.88 19.26 10.40 7.32

Religare Invesco Gilt - Short Duration (G) 1393.13 207.13 0.00 0.51 2.15 5.96 15.05 9.19 6.07

IDFC G Sec Fund - STP (G) 17.34 4.95 0.00 0.38 3.12 5.39 10.69 6.91 5.28

DSP BR Treasury Bill Fund (G) 25.50 867.00 0.00 0.50 2.17 6.07 10.07 8.27 6.22

Kotak Banking and PSU Debt Fund (G) 27.77 177.89 0.00 0.56 2.40 5.17 9.95 8.42 6.32

Short Term Income Funds

Birla Sun Life Short Term Opportunities (G) 20.02 1743.23 1.00 1.00 2.79 3.62 10.16 10.22 8.94

Taurus Short Term Income Fund (G) 2182.68 129.65 0.25 0.62 2.48 5.11 10.15 10.10 7.28

Sundaram Select Debt - STAP (G) 21.45 1461.94 0.75 0.84 2.29 3.61 9.97 11.12 7.63

Templeton india Low Duration Fund (Growth Plan) 13.61 1792.33 0.50 0.77 2.50 4.58 9.57 9.87 NA

Tata Short Term Bond Fund - (G) 23.04 458.31 0.50 1.22 2.52 3.56 9.17 9.00 6.71

Liquid Funds

Principal Retail Money Manager Fund (G) 1411.14 13.96 0.00 0.32 2.47 5.02 9.78 8.90 6.09

Religare Invesco Overnight Fund (G) 1474.57 14.33 0.00 2.13 2.10 4.57 9.78 8.51 6.25

Escorts Liquid Plan (G) 19.40 197.53 0.00 0.80 2.43 4.86 9.72 10.12 8.78

Morgan Stanley Liquid Fund (G) 1233.74 611.49 0.00 0.17 2.35 4.90 9.39 NA NA

SBI Magnum InstaCash - Cash Plan 2774.89 3398.31 0.10 0.16 2.37 4.83 9.32 9.12 7.51

Floating Rate Funds

SBI Magnum Floating Rate Plan-LTP (G) 19.15 99.61 0.50 0.73 2.56 5.58 10.12 9.76 7.88

UTI-Floating Rate Fund - STP (G) 2026.09 3338.50 0.00 0.49 2.31 4.94 9.80 8.98 7.65

Escorts Short Term Debt Fund (G) 18.92 8.13 0.00 1.00 2.57 4.53 9.44 10.30 8.91

Birla Sun Life Floating Rate - LTP - Retail(G) 216.35 1369.97 0.25 0.25 2.44 4.60 9.42 9.47 8.55

Tata Floater Fund (G) 1880.57 2052.94 0.00 0.22 2.43 4.68 9.41 9.41 7.93

Global Funds

FT India Feeder - Franklin U.S. Opportunities (G) 17.49 545.78 1.00 1.73 7.65 27.18 57.18 NA NA

ICICI Pru US Bluechip Equity Fund (G) 15.70 199.24 3.00 2.95 4.88 21.24 47.70 NA NA

DSP BR US Flexible Equity Fund (G) 15.01 112.49 1.00 2.07 9.19 21.17 45.97 NA NA

Birla Sun Life Inter Equity - Plan A (G) 16.16 91.46 0.00 2.94 6.80 18.91 35.90 19.57 18.27

DWS Global Thematic Offshore Fund (G) 13.17 10.69 1.00 1.66 6.21 19.62 32.90 15.21 16.07

Fund of Fund

IDFC All Seasons Bond Fund - Plan A (G) 19.12 6.13 0.50 0.73 1.75 3.93 8.08 8.07 4.59

FT India Life Stage FOF-50s + Floating Rate Pl (G) 23.94 42.99 0.25 0.79 4.17 5.01 7.68 7.25 9.99

IDFC Asset Allocation FoF - Conservative (G) 13.28 15.83 1.00 0.73 3.66 3.56 6.85 7.91 NA

ING Financial Planning - Cautious (G) 12.32 1.72 0.50 1.07 1.82 1.95 6.69 NA NA

Quantum Multi Asset Fund (G) 11.42 2.78 1.50 0.25 5.34 8.33 6.59 NA NA

Index

Sensex 21143.01 9.10 9.01 8.73 1.22 16.81

Nifty 6291.10 9.69 7.68 6.48 1.02 16.11

BSE 100 6311.69 10.28 8.78 5.67 0.88 16.74

BSE 200 2523.58 10.59 8.60 4.20 0.11 16.77

S&P CNX 500 4899.95 11.56 8.62 3.41 -0.03 16.28

Returns are calculated as per adjusted NAV price for the respective period ended 30 December 2013. Source: NAV India

Telefolio’s Top performers

(Past performance is not an indication of future trends)

Six months average Telefolio return is 12% compared to average BSE Sensex return of 7%

Scrip Rec. Rec. Cur. Price % SensexDate Price 20-12-12 Var Var(%)

Capita Telefolio

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subscribers can also access full research report backing the recommendations on http:\\www.telefolio.com.

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Track online top gainers and losers from the Telefolio scrips and decide to buy/sell based on the price movements. Set price levels as alerts and get Emails on set price levels to help you remind about buying/selling.

See all the upcoming Corporate actions (like board meetings, AGM dates, book closures, ex-bonus dates, ex-dividend, etc) of Telefolio companies scheduled in the next 30 days and choose to buy/sell based on these triggers.

Get live news (including stock exchange announce-ments) of all Telefolio companies and act on the news.

Trade based on price movement

Prepare yourself for upcoming corporate actions

Act on the news

React to the results

Analyse and keep updated

Select IPOs

Get results as soon as they are declared. Also read detailed Quarterly updates after each quarterly result to assess the financial progress of each Telefolio company to help you add/reduce accordingly.

For each Telefolio company research report, balance sheet and profit & loss account, corporate actions, directors' report and management discussion, quarterly results, quarterly updates, shareholding pattern, share price history and chart are given. AGM/Analyst Meet/Conferance Call reports are also given for select companies. This will help you do a detailed analysis as well as keep yourself fully updated with operational, financial and stock price performance of the Telefolio companies.

An IPO diary to keep you updated with scheduled IPOs as also our Rating on each important IPO.

Tracking operational, financial and stock price performance of the companies was never easier than this.

The market cannot be timed. But you can tame the market and come out trumps if you have the right information at the right time. To make informed decisions, you need to have all the information at your disposal at the click of a button. Invest in Telefolio and Telefolio Plus to reap the power of knowledge.

Scrip Rec. Rec. Cur. Price % SensexDate Price 20-12-13 Var Var(%)

Capita Telefolio beats

BSE Sensex by almost 200%

For complete list of companies visit http://www.telefolio.com

Not only make informed investment decision, but also keep yourself informed after investment

TVS Motor Co 30-Aug-13 31 64 106 13

VST Tillers Tractors 03-Jul-13 367 664 81 10

MindTree 10-Jul-13 858 1,527 78 9

Fiem Industries 18-Oct-13 206 340 65 1

TCS 18-Jan-13 1,351 2,120 57 5

Mah & Mah Fin. 19-Apr-13 201 314 56 11

KPIT Cummins Info 09-Jan-13 110 168 53 7

Suprajit Engg. 01-Oct-13 32 48 50 8

Tech Mahindra 21-Aug-13 1,236 1,844 49 18

AIA Engineering 13-Sep-13 318 474 49 7

Rallis India 22-Feb-13 121 177 46 9

Bayer CropScience 03-May-13 1,152 1,680 46 8

Bharat Forge 14-Aug-13 229 326 42 9

Kalpataru Power Tr. 26-Jul-13 63 89 41 7

Biocon 31-Jul-13 315 437 39 9

Essel Propack 25-Sep-13 37 51 38 6

Essel Propack 15-Feb-13 37 51 38 8

Entertain. Network 28-Aug-13 235 317 35 17

Va Tech Wabag 09-Aug-13 409 550 34 12

Goodyear India 29-May-13 266 357 34 5

Geometric 25-May-12 69 115 67 15

Company Rec. Date Rec. PricePrice 20/12/2013 % Var Sensex Var (%)

TVS Motor Co 30-Aug-13 31 64 106 13

VST Tillers Tractors 03-Jul-13 367 664 81 10

MindTree 10-Jul-13 858 1,527 78 9

Fiem Industries 18-Oct-13 206 340 65 1

TCS 18-Jan-13 1,351 2,120 57 5

Mah & Mah Fin. 19-Apr-13 201 314 56 11

KPIT Cummins Info 09-Jan-13 110 168 53 7

Suprajit Engg. 01-Oct-13 32 48 50 8

Tech Mahindra 21-Aug-13 1,236 1,844 49 18

AIA Engineering 13-Sep-13 318 474 49 7

Rallis India 22-Feb-13 121 177 46 9

Bayer CropScience 03-May-13 1,152 1,680 46 8

Bharat Forge 14-Aug-13 229 326 42 9

Kalpataru Power Tr. 26-Jul-13 63 89 41 7

Biocon 31-Jul-13 315 437 39 9

Essel Propack 25-Sep-13 37 51 38 6

Essel Propack 15-Feb-13 37 51 38 8

Entertain. Network 28-Aug-13 235 317 35 17

Va Tech Wabag 09-Aug-13 409 550 34 12

Goodyear India 29-May-13 266 357 34 5

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Money Matters

Is home-saverloan accounta good bet?

of the fund was quite good at that time. Isold the units a year ago as the fund wasnot able to beat the benchmark over oneyear. Today, the fund has bounced backand is beating the benchmark over theshort and long term. Should I reinvestin this fund again?

— francis_joyMutual funds are long-term investments.Their performance should be viewed overa longer horizon. The fund recently com-pleted 10 years. As per statistics, it wasable to beat the benchmark nine out of theten years. This shows the ability of thefund to generate the alpha for investors.The nature of the fund is such that it mayunderperform the benchmark in the shortterm as it decreases its equity exposure ifthe market enters the overvalued zone andinvests aggressively if the market is in anattractive zone.

The strategy of the fund has worked overthe long period of time. Thus, you may in-vest in this fund if you have a long-termhorizon. You also need to be patient andshould keep faith in the fund you have cho-sen. With its track record, the fund will gen-erate good return over the coming years ifthe equity market shows some strength.There are lots of close-ended new fundoffers (NFOs) in the market. Most ofthem have positioned themselves as valuefunds with mandatory dividend option.Should I prefer open-ended funds orclose-ended funds through NFOs?

— kirtika_raoInvesting through NFOs is a risky deci-sion, especially if it is a closed-ended fund.You do not have any past data to rely on.Thus, you will have to bet on the fundmanager and his past record if you are in-

ApnaMoney

I have a home-saver loan account with anationalised bank. I can deposit my sur-plus funds in this account and withdrawthem at will. The surplus amount yieldsme the same interest as the cost of theloan. The equated monthly instalmentstays the same but the period reducesdue to the surplus amount in this ac-count. I have more than Rs 10 lakhparked in this account, which I can in-vest elsewhere. The current rate of homeloan is 10.75%. Should I keep on hold-ing the amount in the home-saver loanaccount or should I invest the surplus ininstruments giving better return?

— kunal_raoThe home -saver loan account is a good placeto park temporary surplus. You should notlook at it as an investment option. Home loanis one of the cheapest sources of borrowingfor an individual. Considering the tax ben-efits under Sections 80 C and 24 of the In-come Tax Act, 1961, the effective cost of homeloan is even lower. Thus, closing this accountbefore tenure is not generally recommended.

But it also depends on the asset classyou wish to invest in. If you wish to takeexposure to equities, then investment in anequity mutual fund can fetch decent returnover a period of eight-10 years. It also of-fers good liquidity. Systematic saving in suchoptions helps investors to counter the vola-tility. Patient and disciplined investing in anactively-managed equity fund can generatebetter return over the post tax cost of yourhome loan.

On the other side, if you wish to investin traditional options such as fixed deposits(FDs), bonds and debentures, the post taxreturn may be lower than your cost of fundsif you choose a highly rated instrument. In-vestment in Public Provident Fund and fixedmaturity plans may not provide you therequired liquidity. Thus, you may keep thesurplus in the home-saver loan account ratherthan investing in fixed income options.I had invested in ICICI Pru Dynamic Planthree years ago. The past performance

...................................................................The queries have been answered keeping in mindthat the investors understand the risks involved invarious investment options discussed in the col-umn. Capital Market or the writer cannot be heldresponsible for any loss arising due to the invest-ment descision taken by investors based on thesolutions given. Readers may e-mail their queriesto: [email protected]

vesting in NFOs. Investing in a closed-ended fund will mean that you are lockingthe funds for a few years.

These funds have a mandatory dividendoption so that they can return the money toinvestors through hefty dividends if the fundmanager thinks that he has generated hand-some return and there are not many newopportunities available. Also, most of thefunds do not intend to convert to open-endedfunds once the lock-in period is over. Thisis a good sign as most fund houses haveopen-ended value funds in their portfolioand adding one more similar fund in theirbasket does not make much sense.

One advantage close-ended funds haveover open-ended funds is that the fund man-ager can invest with a clear horizon and doesnot have the pressure to perform every daylike a fund manager of an open-ended fund.

Investing in an open-ended fund comeswith some advantages. One, you have all pastdata on which you can bank on to check ifthe fund is a consistent performer. You haveliquidity at hand as units can be redeemed atwill anytime. So if you are convinced aboutthe objective of the fund, have confidence inthe fund manager and do not mind forgoingliquidity for a long period, then you can con-sider these NFOs. Otherwise, it is better toinvest in open-ended funds as you have theflexibility to redeem if you require money orif the fund does not perform well.

— Rahul Mantri

ApnaMoney

Close-ended equity funds have a larger horizon than open-ended ones

Unique Features: Alerts on all Corporate Actions like board meetings, dividends etc of the companies in your portfolio

Portfolio quantities and prices will be auto-adjusted for bonus, stock - splits.

View Portfolio 'As On 31-Mar-2005' & Price 'As On 31-Mar-2005' dates for tax purposes

View Portfolio quantities as on any date, but prices as on some other day

Maintain multiple portfolios, but get a unified view

If you are maintaining your portfolios currently in the free site of capitalmarket.com, you can easily import them into ApnaMoney (for trial period also)

Each portfolio will store the investments in stocks, funds, deposits, bonds, bullion, small savings and real estate

You can shift companies between portfolios

Stock prices and Fund NAV updated end of every day

Watchlists compare current price with 'spotted price'

Maintain Notes and Diaries on portfolio and watchlist companies

Price tickers for portfolios and watchlists

Apna Money makes it all very simple. You can get a break-up of short-term / long

term gains made over say, last 12 months.

Apna Money is a multi-portfolio, multi-asset, online portfolio Module.

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ApnaMoney Tax Matters

88 Jan 06 - 19, 2014 CAPITAL MARKET

Tax Matters

Can deduction be claimed forfees to coaching classes?

parents have made payment, then deductionis allowed to both, subject to a maximumlimit, to the extent of the tuition fee actu-ally paid or Rs one lakh, whichever is lower.If the assessee has paid tuition fees for hisown studies or for his or her spouse’s stud-ies, he will not be eligible for deduction.

Deduction under this section is availableon payment basis. Fees may be related toany period. The fees should be paid to uni-versity, college, school or other educationalinstitution. No deduction is available for feespaid for private tuitions and coachingcourses for admission to professionalcourses such as chartered accountancy, costand works accountancy, chartered financialanalyst, company secretary or any other typeof courses not covered as the fee is not paidfor full-time education.

The university, college, school or othereducational institution must be situated inIndia though it can be affiliated to any for-eign institutes. In your case, the education

institution definition under service tax isrestrictive. Under the IT Act, these insti-tutes could fall under the category of ‘Othereducational institution claiming benefit un-der Sections 11, 12 and 13 of the IT Act’.Hence, deduction can be claimed, assum-ing the tuition fees are being paid by youfor your children.I am to get a large amount as gift from aperson who is not a relative. Hence, itwould be taxable in my hands. To avoidpaying tax, I intend to enter into agree-ment for sale of my capital asset and showthat amount as advance, which would beforfeited later on account of non-materialisation of transfer. What are thepros and cons in this type of planning?

—Drupad Kuldeepsingh, e-mail

Section 51 of Income Tax (IT) Act, 1961,says the capital asset was on previous oc-casion the subject matter of negotiation forits transfer, the advance or other money re-ceived and retained by the assessee for suchnegotiations is to be deducted from the costof acquisition, i.e., the cost for which theasset was acquired. The phrase ‘othermoney’ covers the deposit made by the pur-chaser for guaranteeing due performanceof the contracts and not forming partof consideration.

In the case Sunita N Shah (2005)(Mumbai) v Joint Commissioner of IncomeTax, it was held that Section 45 of the ITAct describes capital gain as any profit orgain arising from the transfer of capitalasset. The amount forfeited cannot be con-strued to be capital gain.

As transfer did not take place, the ad-vance money so forfeited has to be deductedfrom the cost of acquisition of such asset. Ifthe advance money forfeited is more thanthe cost of acquisition of the assets, the ex-cess amount is a capital receipt and not tax-able. The cost of acquisition will be takenas nil in such case.

However, it is recommended not to gofor any such tax evasion planning as thegovernment can amend that too retrospec-tively. Unnecessary exposing yourself to the

By T K Doctor & Zankhna P Mehta

I am paying tuition fees to an educationalinstitution, which is charging service tax.This institution is not recognised by anyuniversity or All-India Council for Tech-nical Education. This means it is treatedas a commercial coaching centre for ap-plication of service tax. Will such paymentgive me deduction under Section 80C ofthe Income Tax (IT) Act, 1961?

— Karshan Garchar, e-mail

Section 80C(2)(xvii) of the IT Act providesdeduction for tuition fees excluding any pay-ment towards any development fees, dona-tion or payment of similar nature. The feesshould have been paid at the time of admis-sion or thereafter to any university, college,school or other educational institution in In-dia. The purpose should be full-time educa-tion of any two children of the assessee.

Deduction for tuition fees is availableup to Rs one lakh. The limit of Rs one lakhis the total limit under Section 80C for alltype of savings, plus Section 80CCC (pen-sion policy) of the IT Act plus under Sec-tion 80CCD (contributory pension plan) ofthe IT Act. This means the aggregate amountof deduction under these sections cannotexceed Rs one lakh.

This deduction is available to the par-ent who has made the payment. If both the

No deduction is available for fees paid for private tuitionsand coaching courses for admission to professional coursessuch as CA as the fee is not for full-time education

ApnaMoney

ApnaMoney Tax Matters

89Jan 06 - 19, 2014 CAPITAL MARKET

The replies are only in the nature of guidelines. The taxcounsellors and the publication are not responsible forany decision taken by readers on the basis of the same.Readers may e-mail their queries on direct taxation to:[email protected]

...................................................................

Once the assessee is deemed to be in default, interest willbe levied at 1% per month from the date on which tax wasdeductible to the date on which tax is actually deducted

Mediclaim premium: No cash payment

income tax department could lead to greatconsequences and litigation.I am karta of my Hindu undivided family(HUF) consisting of myself, my wife andmy daughter, who got married a year ago.The Mediclaim premium for three of uscomes to abut Rs 14500. Will our HUFget full deduction under Section 80D ofthe Income Tax (IT) Act, 1961, or propor-tionately only for myself and my wife?

— Ramu Pasuvonti, e-mail

Section 80D of the IT Act says deduction isavailable to individual or HUF. Deductionis allowed for the amount paid towardsMediclaim insurance premium on the healthof any of the assessee’s family member. Thededuction is also allowed for any contribu-tion made to a Central government healthscheme (CGHS) from assessment year 2011-12 (financial year 2010-11) and for any pay-ment made on account of preventive healthcheck-up of any family member.

Such payment can be made by anymode other than cash. However, for pre-ventive health check-up, payment has to bemade by any mode, i.e., payment by cashis also allowed.

Deduction for Mediclaim or contributionto a CGHS can be availed up to Rs 15000 inaggregate. Deduction for preventive healthcheck-up is restricted to Rs 5000 and totaldeduction (Mediclaim CGHS and healthcheck- up) is restricted to Rs 15000. Addi-tional deduction of Rs 5000 is allowed if theinsurance is on health of a senior citizen, i.e.,total deduction is restricted to Rs 20000.

An HUF can consist of a very large num-ber of members including female members aswell as distant blood relatives in the male line.However, out of this, coparceners are onlythose who are within three degrees in linealdescendent from the common male ancestorunder the Mitakshara system of HUF.

With the introduction of Hindu Succes-sion (Amendment) Act, 2005, both daugh-ter and, in the case of pre-deceased daugh-ter, her children are eligible for a share inthe family asset on partition.

Birth of a male or female in HUF makeshim or her a coparcener of the HUF. Allchildren on birth automatically becomemembers of the HUF. Daughter have thesame rights and liabilities in a coparcenaryproperty as a son. On marriage, wife be-comes a member of her husband’s jointfamily and also continues as a coparcenerof her father’s family. A female child re-

mains a member even after marriage andcan be a coparcener.

Hence, your HUF will get full deduc-tion of Rs 14500 under Section 80D of theIT Act as a daughter continues to be mem-ber of her father’s HUF even after marriage.On 3 March 2014, I will complete 60 yearsand become senior citizen. My Hindu un-divided family (HUF) paid Mediclaimpremium of Rs 21000 on 15 October 2013.Will the HUF get deduction of Rs 20000?

— Karthik Cheekatla, e-mail

Section 80D of the Income Tax (IT) Act,1961, says premium paid by an individualor HUF under a medical insurance schemeof the general insurance corporation ap-proved by the Central government, Centralgovernment health scheme or any other in-surer approved by the Insurance RegulatoryDevelopment Authority is entitled for de-duction up to Rs 15000. For an individual,deduction upto Rs 5000 is allowed foramount paid towards preventive healthcheck-up of his and his family in additionto Rs 15000.

Further, Section 80D of the IT Act alsoprovides that, for Mediclaim premium, pay-ment should be made by any mode otherthan cash. However, if insurance is on thehealth of a senior citizen, Rs 20000 is thelimit for deduction under Section 80D (4)of the IT Act.

Explanation to Section 80D(4) clarifies‘senior citizen’ for the purpose of Section80D as an individual resident in India who

has attained of 60 years or more at any timeduring the previous year. Therefore, theHUF will get deduction of Rs 20000 as theinsured completed 60 years on 3 March2014 (assessment year 2014-15 or financialyear 2013-14).Our private limited company deductedtax under Section 194 I of the Income Tax(IT) Act, 1961, on 14 May 2013 for rentpaid of Rs 600000 (tax deduction at sourceor TDS: Rs 60000). The tax was depos-ited on 18 June 2013 with governmentalong with interest of 1.5% for one monthi.e., 7 June (due date) till the date of pay-ment. Is my working correct?

— Thotapelly Kedar, e-mail

Section 201(1) of the IT Act says any per-son or the principal officer, in case of a com-pany, who is responsible for TDS is asses-see in default if the person responsible todeduct tax fails to deduct tax at sourcewholly or partly and after deducting the taxfails to pay the same as per the IT Act.

Further, as per Section 201(1A), of theIT Act, once the assessee is deemed to bein default under Section 201(1), interest isto be levied at the rate of 1% per month orpart thereof from the date on which tax wasdeductible to the date on which tax is ac-tually deducted and 1.5% per month or partthereof from the date on which tax wasactually deducted to the date on which taxis actually paid.

In your case, interest of Rs 1800 (1.5%x 2 months x Rs 60000) is to be levied. Donot be under the wrong impression that in-terest under Section 201(1A) is to be calcu-lated from the due date till the date of pay-ment. Interest is to be calculated from thedate on which tax was actually deducted.

Further, interest under Section 201(1A)is to be paid before furnishing the statementunder Section 200(3) of the IT Act (quar-terly TDS return).

9 0 Jan 06 - 19, 2014 CAPITAL MARKET

MM Forgings

Forging aheadRecovery in global economies augurs well for this export-oriented companyMM Forgings makes and exports closed dieforgings. The company has the expertise inforging a wide variety of components in-cluding a battery of 10 hammers with ca-pacity ranging from 0.75 tonne to six tonnes.It has both friction drop hammers (belt type)and air hammers. Hammers are used to pro-duce jobs with difficult profiles and lowervolumes. The product line also includes abattery of forging presses in the range of1,600 tonnes to 4,000 tonnes. All the pressesare equipped with Induction billet heatersand infrared pyrometers for accurate tem-perature control.

The machining facility, which adds valueto forged components, is equipped withstate-of-the-art CNC lathes as well as verti-cal and horizontal machining centres. Spe-cial purpose machines are used to optimiseproduction costs, wherever necessary. Postmachining heat treatment such as inductionhardening and case carburizing is also per-formed. Steel forgings are produced in raw,semi-machined and fully machined stages invarious grades of carbon, alloy, micro-alloyand stainless steels in the weight range of0.20 kg to 60 kg.

Manufacturing facilities are atthree locations, well connected byroad to the nearest sea port. Thus,there is the strategic advantage ofbeing able to ship from two majorports (Chennai and Tuticorin),both equidistant from the manufac-turing plants.

The forging requirement of al-most all sections of industry are ca-tered to. Besides auto, the productsare used to make various critical com-ponents in the tractor, earth-moving,power, material handling, oil, rail-ways, and core engineering indus-tries. There is no dependency on anyone of the several large customers inthe domestic market. The strategy isto build exports and diversify thedomestic customer base.

Most of the forgings are ex-ported to North America and Eu-rope to major original equipmentmanufacturer and tier 1 companies.

CapitalineCorner

http:/ /www.telefol io.com

FOR MORE DETAILS ON PAGE 85

and crossed Rs 250 crore for the first timein the fiscal ended March 2013 (FY 2013).One of the largest exporters of forgings fromIndia has received 23 consecutive annualawards from The Engineering Exports Pro-motion Council since 1989.

The systematic augmentation of manu-facturing capacity, with a strong bias to-wards value addition, has been a vital partof the growth strategy. Nearly Rs 200 crorehas been invested in the last decade to in-crease capacity from 10,000 tonnes to38,000 tonnes. The overall expansion hasbeen in incremental steps, causing no strainon financial or human resources. Capitalexpenditure was Rs 29.02 crore inFY 2013. Machining capacity has beensubstantially increased. This approach hashelped to rapidly respond to any surgein demand.

Sales rose 10% to Rs 201.85 crore andthe operating profit margin 170 basis pointsto 18.5% from 16.8%, taking operatingprofit up 21% to Rs 37.35 crore in the sixmonths ended September 2013 over a yearago. Profit after tax grew 20% to Rs 14.45crore after accelerated growth in provision

for depreciation and extraordinaryincome of Rs 1.61 crore.

In future, the demand for MMForgings’s forged and machined com-ponents is expected to strengthen onaccount of recovery in global econo-mies leading to higher sales of auto-mobiles and auto components. Thisincrease in demand is expected toboost utilisation of capacity createdin the last three years, thereby im-proving the margin.

Book value (BV) was solid Rs142.6 end March 2013 and shouldcross Rs 160 by March 2014. Theshare trades at Rs 92. Price/BVcomes to 0.6 times expected FY2014 end BV.

We expect MM Forgings to reg-ister sales of Rs 402.93 crore and netprofit Rs 28.32 crore in FY 2014. Onequity of Rs 12.07 crore and face valueof Rs 10 per share, adjusted EPSworks out to Rs 22.4. P/E is 4.1. �

MM Forgings: Financials

1003(12) 1103(12) 1203(12) 1303(12) 1403(12P)

Sales 164.43 272.12 350.23 361.12 402.93

OPM (%) 17.2 19.6 17.3 16.0 17.2

OP 28.26 53.34 60.45 57.78 69.21

Other inc. 1.14 0.34 0.12 0.51 1.38

PBIDT 29.40 53.68 60.58 58.29 70.59

Interest 6.16 5.62 6.15 7.14 7.63

PBDT 23.23 48.06 54.43 51.15 62.96

Dep. 11.60 19.81 23.09 21.13 29.78

PBT 11.63 28.25 31.34 30.02 33.18

EO 0.00 0.00 0.00 0.00 1.61

PBT after EO 11.62 28.25 31.34 30.02 34.79

Total Tax 1.20 8.04 11.82 5.57 6.46

PAT 10.42 20.21 19.52 24.45 28.32

EPS (Rs)- Basic 8.6 16.7 16.2 20.3 22.4

* Annualised on current equity of Rs 12.07 crore. Face Value: Rs 10.(P): Projections. EO: Extraordinary items. Figures in Rs crore.EPS excludes EO and relevant tax.Source: Capitaline Databases

Eyeing higher value addition

Over 70% of MM Forgings's sales comefrom exports to North American andEurope. Machining capacity has beenincreased to improve the margin

Share price on BSE in Rs

Exports of the largest exporter of steelforgings from southern India stood at Rs253.96 crore, accounting for 72.5% of sales,

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