Realty cheers the markets

Wed, 9 Mar 09:30 am

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Asian markets have opened the day on a mixed note. Benchmark indices in Japan (up 1.0%), Indonesia (up 0.7%) and Hong Kong (up 0.6%) are trading in the green. However, markets in Singapore (down 0.2%) and China (down 0.1%) are trading in the red. The Indian stock markets have opened the day on a positive note. Realty and banking stocks are the leading gainers.

The BSE-Sensex is trading higher by around 92 points (0.5%), while the NSE-Nifty is up by around 28 points (0.5%). Midcap and small cap stocks are trading in the positive as well, with the BSE Midcap and BSE Small cap indices up by about 0.6% each. The rupee is trading at 44.99 to the US dollar.

FMCG stocks stocks have opened the day on a good note. Tata Global Beverages, Hindustan Unilever and Marico Products are the leading gainers. FMCG major, Dabur India is in the acquisition mode. The company has stated that it plans acquisitions in the personal as well as in the healthcare space to fuel revenue growth in FY12. The company has set an ambitious revenue target of Rs 50 bn for FY12. The acquisitions would be made to achieve this revenue target. The company is eyeing acquisitions in both domestic as well as in the international markets. The size of acquisition would range between Rs 500 m to Rs 5,000 m depending upon the brand being acquired. In 2010, the company had made two acquisitions. The first one was of US based Namaste group for US$ 100 m. The second was of the Turkish personal care firm Hobi Kozmetik for US$ 69 m. The company's management has however cautioned against the rising input prices. To offset a part of this increase, the company has hiked its prices for some of its products in the recent past.

Auto stocks have opened the day on a firm note with Bajaj Auto, Tata Motors, M&M and Amtek Auto trading firm. However, the stock of Hero Honda is facing selling pressure. The Munjal family owned Hero Group will pay its Japanese joint venture partner Honda Motor Rs 38.3 bn to acquire a 26% stake in Hero Honda. The transaction has been done at a valuation of Rs 740 per share. This is less than half the current stock price of the two-wheeler major. The acquisition will end the 27 year old joint venture between the two companies. The Hero Group has also signed definitive agreements with two private equity firms to raise around Rs 37 bn through issue of fresh shares of Hero Investment Private Ltd (HIPL). HIPL is promoter's investment company. Through the acquisition of Honda Motor's 26% stake in Hero Honda, its total holding in Hero Honda will increase to 43.33%

The PE firms will acquire around 28% stake of HIPL. This will give them a holding of a little over 12% in Hero Honda. The money raised from these PE firms will be used to retire short-term debts.