Fears of margin pressure hammer low-cap stock

Investors continue to sell shares of several mid-cap and small-cap companies despite denials by promoters of any margin funding pressure. As the broader market continues to fall in the absence of positive triggers, lenders are asking promoters to be ready to meet margin calls while brokers are turning cautious in margin funding clients. 

Shares of GTL fell 7% to close at 108 on the BSE , after hitting intra-day low of 93. It has lost about three-fourth of its value so far this year. GTL Infra ended the day 1% up at 16, after touching an intra-day low of 13. GTL Infra has lost about 63% so far this year amid speculation of bank debt and margin funding issues and concern that lenders sold GTL and GTL Infra shares pledged to borrow money. The company has denied the rumours. However, it has not explained any possible reason for the fall in its stock price and has requested the regulator to investigate the matter. 

S Kumars Nationwide lost 4% to close at 49. It has lost 44% this year. Orchid Chemicals, which gained 4% to close at 253, has lost 20% this year on similar fears. Officials from both the companies have denied any such sale and termed it as speculation. 

"There are question marks on certain companies. Investors should refrain from investing in such companies. It is always possible to see situation of promoter losing his control in a falling market like this. While pledging is not bad, one needs to look at the reason why the funds were raised and even regulators should make that disclosure mandatory," said Rajen Shah, chief investment officer, Angel Broking . He said that some companies have been unnecessarily targeted by this scare. Investors fear that many promoters face the risk of losing their pledged shares for failing to meet margin calls. In the past, Orchid Chemicals' Raghavendra Rao and Vijay Sheth of Great Offshore lost hold on their companies due to margin funding pressure. 

"The fall in shares is a matter of concern as some fall 4-5% even on a sale of few thousand shares. Many promoters are getting margin calls. Lenders are also becoming flexible as they know that it is more of an aberration in some cases," said Prakash Diwan , head of institutional equities, Networth Stock Broking. 

Broking firms are advising clients to square off positions if there is any possibility that they would be unable to sustain mark-to-market margin pressure. 

IT sector upbeat despite visa misuse controversy

Amid controversy over US visa misuse by leading Indian IT firms, the apex body of software firms, Nasscom, has sought to play down the issue saying this is nothing new as there may be differences over interpretation of visas.

"The visa issue is not something new and is just the old story being repeated. There are interpretational issues. There is a need for comprehensive reforms (in visa norms), something which President (Barack) Obama has also highlighted," Nasscom President Som Mittal told PTI.

Nasscom is deeply engaged in discussions with authorities to sort out such issues, he added. Infosys, the country's second largest software exporter,
has been in news on allegations of visa misuse.

After a lawsuit by a former employee, two more Infosys managers are believed to have submitted internal whistle-blower reports pointing to Indians on business visitor visas (B1) who were performing longer-term work not authorised under those visas.

B-1 visas are granted to business visitors coming to the US for short stays to attend meetings, conferences or training sessions, or to install specialised equipment.

H-1B visa, on the other hand, is a non-immigrant visa, which allows US employers to temporarily employ foreign workers in speciality occupations.

"There are issues at two levels -- policy and operational. We hope these get sorted out soon," Mittal said. Asked if these were impacting the reputation of the Indian IT industry, Mittal said, "This creates uncertainty and that impacts the industry."

Agrees N Chandrasekaran, Managing Director and CEO of TCS . "The visa issue is not something new; the rejection rate has been running high for almost all through the last several months so it's something that we are trying to grapple with,"Chandrasekaran told a news channel.

He added that Nasscom and individual companies have been in talks with the consulates.

"Nasscom and the individual companies or talking to the consulates to come to a common understanding and interpretation so that this can be put behind but having said that the overall environment looks good," Chandrasekaran said.

The pressure seems to be mounting for the Indian IT firms as a US senator has written to the US Secretary of State and Secretary of Homeland Security, requesting that their respective departments review the B-1 business visa programme and investigate the manner in which it is being utilised by
companies, including Infosys.

Even analysts like CLSA have raised concerns saying visa worries can impact margins. Despite the uncertainty, the industry remains confident.
"The order pipeline looks good and so, we are not reviewing our projection of a 16-18% annual growth this year," Mittal said.

Make public RBI advisory note issued to ICICI: CIC

The Central Information Commission has directed the Reserve Bank of India to disclose an advisory note it issued to ICICI Bank for alleged violation of any RBI guidelines or for contravention of the provisions of money laundering and foreign exchange acts.

The case relates to an RTI application filed by S S Vohra, who had sought to know details of such advisory notes issued by the apex bank to Patna and Hong Kong branches of ICICI Bank.

ICICI Bank has objected the disclosure of the information citing three exemption clauses of the RTI Act section 8(1) (a), (d) and (e).

These section exempt disclosure of information which can -- prejudicially affect the sovereignty and integrity of India, the security, strategic, scientific or economic interests of the state, relation with foreign state or lead to incitement of an offence, is related to trade secrets and commercial confidence and is held in fiduciary capacity.

During the hearing, Vohra said the Finance Minister had made a written statement in Parliament that Patna branch of ICICI Bank Limited had opened some fictitious accounts for alleged fraudsters for which an advisory note was issued to it in December 2007.

Chief Information Commissioner Satyananda Mishra said there was "no merit in the contention that the advisory note issued by the RBI to the Bank in the present case will, by any stretch of imagination, fall under exemption clauses" cited by the bank

Rejecting the claims of ICICI Bank that such information may be personal in nature to customers and is held in fiduciary capacity by it, Mishra said opening of fraudulent accounts in a commercial bank is a grave concern and a major setback to financial system of the country.

"It would be rather too audacious on the part of a bank to say that it will not divulge the details of such fraudsters and scammers because there happens to be bank-customer relationship which is fiduciary in nature," Mishra said in his order.

Mishra said fraudsters, who are part of illegal activities not only need to be penalised in accordance with law but their "fraudulent dealings must also be thrown split wide open in the daylight" to make others careful.

The Reserve Bank of India counsel submitted before CIC that during inspections, if RBI finds that some bank is not functioning in accordance with its guidelines and norms, then it exercises two options -- in cases of "extreme gravity" penalises the bank and in matters of "some concerns but not grave enough" it may issue an advisory to the bank.

Mishra opined that instead of protecting fraudsters under the Bank-Customer contract, each and every bank must proactively divulge details such as account number, account holder's name, PAN/TAN Cards used, address used etc in order to warn other entities not to be duped and uphold the principles of transparency, rule of law and the guidelines set out by the RBI itself.

ICICI Bank had earlier challenged the orders of the CIC to the RBI in this regard before the Bombay High Court which sent the matter back to transparency panel with directions that ICICI Bank should also be heard.

Lupin gets greedy, expects 14-15 launches this year

With a string of news coming from drug firm Lupin , the company further expects about 14 to 15 launches in the course of this year. Company’s CFO, S Ramesh tells CNBC-TV18 that the company has a pipeline of over 150 drugs that await approval for the American market from the US Food and Drug Administration (FDA).
Lupin had got a nod from the US health regulators yesterday to market generic levofloxacin tablets that are used for the treatment of bacterial infections, in the American market. “There is intense competition in the product. Though the revenues from this used to be priced at 1.3 billion; there has been tremendous price erosion in that drug,” said Ramesh. He said it is going to be a marginal product and believes there will be about six to sever players.
Lupin also partnered with Hyderabad-based Natco Pharma for a generic version of Lapatinib Ditosylate tablets of 250 mg strength, used for the treatment of breast cancer. “ Natco is the first to file for it and we are helping them to distribute in America . It would add to the bottom-line over a period of time,” he said.  Ramesh also revealed the drug would be worth USD 130 million.