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1. Buy NIFTY Put Option Strike Price 2700 expring 26th Feb @ 37 and sell around 60
2. Buy WWIL Stock Option strike price 15 expiring 26th Feb @ 1.50 and target of 3

Pledging of Shares by TATA Group

Tata group firms Tata Teleservices (Maharashtra) Ltd, Tata Power Ltd and Tata Steel Ltd were among companies which disclosed on Monday that their founders had pledged shares to raise money, even as it became clear that at least some of the lenders have securitized the debt.

That would mean the shares may be sold in the market if the promoters default on payments or offer more shares as collateral, or so-called margin, to make up for the sharp fall in share prices.

Tata Teleservices (Maharashtra) revealed that its promoters had pledged 942.8 million shares, or 49.7% of its equity. The shares were worth Rs2,173.9 crore at Monday’s closing price on the Bombay Stock Exchange. Tata Steel said its founders had pledged 96.4 million shares, or 13.19% of the equity. The shares were worth Rs1,922.93 crore at Monday’s closing price. And Tata Power disclosed that its promoter Tata Sons Ltd, the holding company of the Tata group, had pledged 32.3 million shares, or 14.59% of the total equity. This was worth Rs2,173.23 crore at Monday’s prices. Several Tata firms have taken on debt to pay for overseas acquisitions.

The three Tata firms are among at least 100, many of them small and mid-sized, that have thus far declared that their founders or promoters have pledged their shares.

The disclosures are in line with a recent instruction from regulator Securities and Exchange Board of India (Sebi). Firms were continuing to make the disclosure till late Monday. At last count, the value of the pledged shares was Rs10,367.74 crore.

Typically, all such loans are given against collateral and, in a falling market, promoters need to pledge more shares to keep this intact.

In one such case, a mutual fund participating in a securitization programme sold part of the promoter’s stake in a large Indian drug maker in the open market, pulling down the stock significantly, an investment banker, who did not want to be identified, said. The promoter had originally taken loans from two lenders, pledging shares. The lenders, in turn, securitized the debt.

According to at least six investment bankers and mutual fund managers, none of whom wanted to be identified given the sensitive and confidential nature of such transactions, a few banks have securitized loans against shares through debentures and so-called pass through certificates (PTCs). Mutual funds cannot lend but can invest in debentures or PTCs, which are nothing but fixed-income securities.

“Typically banks do this (securitization) through creation of a special purpose vehicle and in case of a default, the shares can be sold,” said the CEO of a Mumbai-based mutual fund who did not want to be identified. Unlike lenders, who often have a long-term business relationship with the promoters, mutual funds can immediately sell the shares in case of a default.

Banks are also syndicating such loans to promoters. In a loan syndication, one bank issues the loan against shares in the first stage. In the second stage, it sells part of its exposure to other banks. Banks securitize and syndicate loans to free up their capital.

Under banking norms, for every Rs100 worth of loans, banks need Rs9 of capital. So, when the amount of loan that a bank takes on its own book goes down, the capital requirement too comes down.

Apart from Tata Steel and Tata Power, the only constituent of the National Stock Exchange’s 50-stock Nifty index to have revealed till late Monday that its promoters had pledged shares was Dr Reddy’s Laboratories Ltd. Promoters of the Hyderabad-based drug firm have pledged 6.9% of their shares. At Monday’s closing price, the value of this stake is Rs481 crore.

“Promoters of large firms, including one of India’s biggest conglomerates, have actively pledged shares but they may not make public announcements immediately,” said a senior executive at large foreign brokerage, a little before the Tata firms made their disclosure.

In a circular last week, Sebi made it mandatory for companies to disclose details of shares that had been pledged by promoters.

Sensecx Jumps 283

The benchmark stock indices gained close to three per cent on Monday following higher domestic GDP growth of 7.1 per cent forecast for the current fiscal. The Sensex closed 283 points up at 9,584 while the Nifty closed 77 points higher at 2,919.

“The revised GDP growth rate and the optimism in the overseas markets about the Obama package led to short covering of positions here by the financial institutions,” said Mr Amitabh Chakraborty, President (Equity), Religare Securities.

Expectations of concessions in the vote-on-account later this month also boosted sentiment. Reliance Industries gained more than 3 per cent, on expectations of tax concessions for the gas production from the KG basin.

FIIs were net buyers of equities for Rs 285 crore, and domestic institutional investors net sellers for Rs 46 crore.

The metal index gained the most – 4.41 per cent on expectations of a recovery in the Chinese economy.

EDSERV SOFTSYSTEMS LIMITED IPO
Symbol - Series
EDSERV EQ
Issue Period
Feb 05, 2009 to Feb 09, 2009
Issue Size
39,73,908 EQUITY SHARES
Issue Type
100% Book Building
Face Value
Rs. 10/-
Price Range
Rs. 55 To Rs. 60
Tick Size
Re. 1/-
Market Lot
100 Equity Shares
Minimum Order Quantity
100 Equity Shares
Maximum Subscription Amount for Retail Investor
Rs.100000
IPO Market Timings
10.00 a.m. to 5.00 p.m.
Book Running Lead Manager
Keynote Corporate Services Limited
Co Book Running Lead Manager
Ashika Capital Limited
Syndicate Member
Keynote Capitals Limited, Ashika Stock Broking Limited
Categories
FI, IC, VC, MF, FII, FVCI, SIDC, PF, PEF, MLA, BDFI, NIF, BC, IND, HUF, NRI ,EMP and OTH
No. of Cities with Bidding Centers
42
Name of the registrar
Karvy Computershare Private Limited
Address of the registrar
Karvy House,46, Avenue 4, Street No.1,Banjara Hills, Hyderabad - 500 034.
Contact person name number and Email id
Mr. M. Murali krishna, Tel: 91-040- 23312454,Fax: :91-040 -23311968,E-mail: edserv.ipo@karvy.com.