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Future Enterprises standalone net profit rises 615.37% in the June 2016 quarter

Future Enterprises standalone net profit rises 615.37% in the June 2016 quarter

Sep 14,2016

Net profit of Future Enterprises rose 615.37% to Rs 315.48 crore in the quarter ended June 2016 as against Rs 44.10 crore during the previous quarter ended June 2015. Sales declined 67.64% to Rs 921.19 crore in the quarter ended June 2016 as against Rs 2846.84 crore during the previous quarter ended June 2015.

ParticularsQuarter Ended
n++Jun. 2016Jun. 2015% Var.
Sales921.192846.84-68
OPM %24.969.91-
PBDT295.07184.1360
PBT142.3249.92185
NP315.4844.10615

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Asia Pacific Market: Stocks mixed ahead of Fed remarks
Aug 24,2016

Asia Pacific share market were narrowly mixed on Wednesday, 24 August 2016, with Tokyo gaining slightly on a weaker yen and Shanghai taking a breather with investors looking ahead to remarks at the end of the week from the U.S. Fed chief.

Attention turns to an annual meeting of central bankers in Jackson Hole, Wyoming, later this week with investors focused on a speech by Fed Chair Janet Yellen on Friday that may confirm and elaborate on recent hawkish statements on the need for a interest rate hike before the end of the year from fellow policymakers.

Among Asian bourses

Nikkei ups 0.6% as yen pause

The Japan share market recouped just enough to yesterday losses, thanks to buybacks of large-cap mainstay issues that reflected a pause in the yens advance against the dollar. The 225-issue Nikkei stock average advanced 99.94 points, or 0.61%, to end at 16597.30 on the Tokyo Stock Exchange. The Topix index of all first-section issues grew 9.15 points, or 0.71%, to close at 1306.71. Rising stocks outnumbered declining ones on the Tokyo Stock Exchange by 1287 to 617 and 153 ended unchanged. The Nikkei Volatility, which measures the implied volatility of Nikkei 225 options, was up 1.16% to 22.59.

Softbank Group surged 2.46%, after JP Morgan Securities raised its investment rating and stock price target for the mobile phone carrier. Peers KDDI and NTT Docomo were downbeat. The weaker yen gave a lift to automakers Toyota and Nissan, and electronics makers Sony and Canon.

Screen Holdings Co. was the biggest gainer on the Nikkei 225, advancing 7.8%, after Mizuho Financial Group Inc. raised its target price on the stock by 14%, citing improving margins.

Honda Motor Co. added 0.8% following a Nikkei newspaper report that it will raise output capacity for hybrid motors in October.

Furniture shop operator Nitori Holdings Co. lost 5.6% after reporting a slowdown in monthly sales growth. Clothing chain operator Shimamura Co. dropped 8.1% after same-store sales in August slumped 5.5% on the year.

ASX200 clings to gain

Australian share market finished session tad higher, as gain in materials, property trusts, and financials stocks were just enough to offset losses in a number of index heavyweights including Wesfarmers and Telstra. At close of trade, the benchmark S&P/ASX 200 index advanced 7.90 points, or 0.14%, to 5561.70. The broader All Ordinaries added 6.50 points, or 0.12%, to 5653.60.

Ardent Leisure was the biggest winner on the ASX 200, surging 14% after unveiling a 32% rise in annual profit, thanks to rising numbers of Chinese visitors to its theme parks. Sirtex Medical and Spotless Group also posted healthy gains after reporting results.

Qantas, Australias biggest airline, pleased investors by declaring its first dividend in seven years and posting a record profit. Even though the result fell slightly short of expectations and challenges remain, especially in the domestic market, the stock added 1.5%, as the airline flagged further share buybacks.

Telstra was the biggest drag on the benchmark index, losing 3.5% as the telecom traded ex-dividend. Retail and resources conglomerate Wesfarmers was another bluechip weighing heavily on the market, losing 2.2% after recording its worst net profit in 15 years. Other stocks that sold off following earnings reports included A2 Milk, Boral, McMillan Shakespeare and Blackmores.

Aconex lost 6.3%, as the construction software maker on Tuesday reported a 50% rise in revenue and an operating profit of A$13.6 million, which came in slightly below the lofty expectations of the analyst crowd. Both Credit Suisse and Deutsche cut their recommendations by one notch and are now neutral on the stock, mainly due to its high valuation after soaring more than 40% this year.

China Market falls as hopes for policy easing fade

Mainland China stock market closed lower, dragged down by financial and property shares amid receding expectations of aggressive monetary easing. The CSI300 index, which tracks the largest listed companies trading in Shanghai and Shenzhen, fell 0.36% to 3329.86 points. The Shanghai Composite Index closed down 0.12% at 3085.88 points while the Shenzhen Composite index closed up 0.31% at 2030.28 points.

Chinas central bank on Wednesday injected cash into money markets through 14-day reverse repurchase agreements for the first time since February, trimming the prospect of more liquidity injections expectations of further aggressive monetary easing.

The property shares finished lower with subindex losing 1.55%. China Vanke Co was among the top losers, which dropped 2.87%. The financial subindex was down 0.73%.

Hong Kong Market drops 0.77%

The Hong Kong stock declined, as profit booking triggered on fear recent gains were excessive relative to earnings prospects, with Chinese banks leading declines. The benchmark Hang Seng Index dropped 178.15 points, or 0.77%, to 22820.78 points. The Hang Seng China Enterprises Index, benchmark measure of performance of mainland China enterprises, declined 79.90 points, or 0.83%, to 9507.09. Turnover increased to HK$62 billion from HK$60.8 billion on Tuesday.

Galaxy Entertainment (00027) slid 3%, becoming worst blue-chip lower ahead of its earnings report tomorrow. Want Want (00151) jumped 3% to HK$5.06, becoming the top blue-chip gainer today, as Macquarie Research said the worst for the company is over, and maintained its outperform rating, with a higher target price of HK$6.7.

ICBC, Chinas largest lender, slid 2% after a momentum indicator rose to levels only seen during one period in the past five years, while China Construction Bank Corp. lost 0.9%. Both have erased their 2016 losses as they jumped at least 10% this month.

China Overseas Land & Investment fell 1.1% after China Merchants Securities analyst John So downgraded his recommendation on the stock. China Vanke Co. lost 0.5% after S&P Global Ratings lowered the outlook on the developers corporate ratings to negative from stable.

Henderson Land (00012) fell 1% after it reported interim earnings of HK$8.6 billion, representing a 13% decline. JP Morgan recommended an underweight while Deutsche Bank rated it a buy. New World (00017) and CK Property (01113) fell 1.5% and 2% to HK$9.75 and HK$54.7.

Sensex settles above 28,000 mark

Indian benchmark indices registered small gains in a lacklustre trading session. The barometer index, the S&P BSE Sensex, rose 69.73 points or 0.25% to settle at 28,059.94. The Nifty 50 index rose 17.70 points or 0.21% to settle at 8,650.30.

Maruti Suzuki India edged higher on reports that a foreign brokerage has upgraded its rating on the stock to buy from outperform with target price of Rs 5,850 per share. Aurobindo Pharma surged after the company announced strong Q1 results. Indian Oil Corporation moved higher after the company said that its board of directors will consider issue of bonus shares along with Q1 June 2016 results on 29 August 2016.

Index heavyweight and software major Infosys nudged higher on reports that the company may get about $60 million (Rs 400 crore) in incremental revenue over the third and fourth quarters of the current financial year (FY 2017) as part of the Rs 1380 crore Goods Services and Tax Network (GSTN) project. Idea Cellular edged lower after the company denied reports that it was in merger talks with Vodafone India.

Welspun India tumbled on reports that Wal-Mart Stores Inc. is reviewing Welspuns cotton certification records following Target Corp.s decision to snap ties with the Indian textile maker over a cotton supply dispute.

Elsewhere in the Asia Pacific region: New Zealands NZX50 rose 0.1% to 7416.09. South Koreas KOSPI index declined 0.3% to 2043.76. Taiwans Taiex index fell 0.2% to 9017.38. Malaysias KLCI was down 0.1% to 1682.06. Singapores Straits Times index rose 0.7% to 2869.57. Indonesias Jakarta Composite index dropped 0.24% to 5403.99.

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Murshidabad Gets Jangipur Mega Food Park Running
Aug 24,2016

After a long gap, people of Murshidabad saw the promise made by the Centre during the UPA government in 2008 being kept by the NDA government in 2016. Murshidabad, West Bengal was allotted Jangipur Mega Food Park in year 2008 to benefit poor farmers and people of North 24 Paragans, Birbhum, Malda, and Bardwan but the project could not see the light of the day till 2016.

It was a result of the genuine efforts made by the Minister of Food Processing Industries Smt. Harsimrat Kaur Badal to ensure that revival of Jangipur Mega Food Park takes place so that gigantic critical food processing infrastructure is made available to the poor farmers of this backward belt of West Bengal that Jangipur Mega Food Park could see the light of the day. The Honble President of India, Shri Pranab Mukherjee has inaugurated Jangipur Mega Food Park today in the august presence of Honble Governor of West Bengal Shri Keshari Nath Tripathi. n++The Mega Food Park to leverage an additional investment of about Rs. 250 crore in food processing units in the Park, generate a turnover of about Rs. 500 Crore annually and is expected to provide direct and indirect employment to 6000 people at CPC & PPCs and benefit about 25000-30000 farmers in the catchment areas.n++ Said Smt. Harsimrat Kaur Badal.

Speaking on the occasion, Smt. Badal said that n++Connecting farmers with food processing infrastructure and creating markets are her primary goals so that farmers get remunerative price of their produce. Modern infrastructure at Jangipur, Murshidabad will benefit farmers and growers of North 24 Paragans, Birbhum, Malda, and Bardwan and would benefit processors and consumers and will give big boost to the growth of the food processing sector in West Bengal. Mega Food Park at Jangipur has been set up with the project cost of Rs. 132.71 Crore approximately and in an area of 82.11 acre with a grant of Rs. 50.00 crore provided by my ministry.n++

The food park is having the facilities of fully operational industrial sheds for SMEs, developed industrial plots for lease to food processing units and facilities of 8000 MT Warehouse, 5000 MT Multi Crop Cold Storage, 10000 MT Potato Cold Storage, IQF & Pulping line of 1.5 ton per hour each, 3000 MT Deep Freeze and Quality control lab. The Park also has a common administrative building for office and other uses by the entrepreneurs, Dormitory and Row Houses. 6 Primary Processing Centres (PPCs) at Kandi, Sheikhpara, Barasat, Siuri, Gour Road and Katwawill provide facilities for primary processing and storage near the farms.

Under the visionary guidance of Honble Prime Minister Shri Narendra Modi, Ministry of Food Processing Industries is focusing on boosting the food processing industry so that agriculture sector grows exponentially and becomes a major contributor towards doubling the farmers income and therefore food processing is the major thrust area of Make in India initiative.

Under the stewardship of Smt. Harsimrat Kaur Badal, Ministry of Food Processing Industries has been able to successfully create an environment that is smooth, transparent and conducive for the growth of food processing sector in the country. For the first time government has allowed 100% Foreign Direct Investment in Retail of Swadeshi Food that is produced and manufactured in India which is going to spur growth of food processing in India. n++India is a most resilient food economy as a result of which India is going to become the Food Factory of the World by 2022 and our government has put food processing infrastructure on an automatic seamless growth mode. Development of Mega Food Parks in remote areas in India are our first priority. She further added that Time is not far when India shall witness its 6 lakh villages connected with Mega Food Park Processing Unitsn++ Said Smt. Badal.

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Cyient gains as board to consider special dividend
Aug 24,2016

The announcement was made during market hours today, 24 August 2016.

Meanwhile, the S&P BSE Sensex was up 62.54 points or 0.22% at 28,052.75

On BSE, so far 20,000 shares were traded in the counter as against average daily volume of 4,357 shares in the past one quarter. The stock hit a high of Rs 538.90 and a low of Rs 510 so far during the day. The stock had hit a record high of Rs 641 on 15 October 2015. The stock had hit a 52-week low of Rs 370.50 on 12 February 2016. The stock had outperformed the market over the past 30 days till 23 August 2016, rising 5.65% compared with Sensexs 0.37% fall. The scrip, however, outperformed the market in past one quarter, outperforming 10.16% as against Sensexs 8.15% rise.

The mid-cap company has equity capital of Rs 56.27 crore. Face value per share is Rs 5.

Cyients consolidated net profit rose 11.97% to Rs 73.97 crore on 0.06% fall in total income to Rs 841.20 crore in Q1 June 2016 over Q4 March 2015.

Cyient provides engineering solutions, process, network and content engineering to major organizations worldwide.

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Universal Starch Chem Allied appoints director
Aug 24,2016

Universal Starch Chem Allied announced that the Board in their meeting held on 13 August 2016 has decided to appoint Hansarani Vaghela as the Whole-time Director (Business Development).

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Nava Bharat Ventures drops on dismal Q1 outcome
Aug 24,2016

The result was announced during market hours today, 24 August 2016.

Meanwhile, the BSE Sensex was up 63.06 points, or 0.23%, to 28,053.27.

More than normal volumes were witnessed on the counter. On BSE, so far 2.68 lakh shares were traded in the counter, compared with an average volume of 94,696 shares in the past one quarter. The stock hit a high of Rs 256.90 and a low of Rs 230.30 so far during the day.

Nava Bharat Ventures operates in the business verticals of power generation, mining, ferro alloys and agri-business with multi-national operations spread over India, South East Asia and Africa.

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MOIL gains after executing mining lease in Madhya Pradesh
Aug 24,2016

The announcement was made after market hours yesterday, 23 August 2016.

Meanwhile, the S&P BSE Sensex was up 92.54 points or 0.33% at 28,082.75.

High volumes were witnessed on the counter. On BSE, so far 49,222 shares were traded in the counter as against average daily volume of 16,838 shares in the past one quarter. The stock hit a high of Rs 269.90 so far during the day, which is also a 52-week high for the stock. The stock hit a low of Rs 253.50 so far during the day. The stock had hit a record low of Rs 180.10 on 12 February 2016. The stock had outperformed the market over the past one month till 23 August 2016, gaining 4.75% compared with 0.67% rise in the Sensex. The scrip had, however, underperformed the market in past one quarter, rising 9.85% as against Sensexs 10.94% rise.

The mid-cap company has equity capital of Rs 168 crore. Face value per share is Rs 10.

MOIL announced that it has executed mining lease over 76.409 hectares of land granted by Government of Madhya Pradesh in the village Bharweli-Awalajhari, Tehsil & District Balaghat of Madhya Pradesh. MOIL had announced on 25 July 2016 about receiving approval from the Government of Madhya Pradesh for mining lease of over 76.409 hectare land in Bharveli-Awalajhari village of MP.

MOILs net profit declined 79.1% to Rs 21.38 crore on 29.9% growth in net sales to Rs 209.62 crore in Q4 March 2016 over Q4 March 2015.

MOIL produces and sells different grades of manganese ore. Government of India holds 71.57% stake in MOIL (as per the shareholding pattern as on 30 June 2016).

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Tata Power Company gains as generation capacity rises in Q1
Aug 24,2016

The announcement was made during market hours today, 24 August 2016.

Meanwhile, the S&P BSE Sensex was up 84.32 points, or 0.3%, to 28,074.53

On BSE, so far 6.96 lakh shares were traded in the counter, compared with average daily volume of 4.92 lakh shares in the past one quarter. The stock hit a high of Rs 76.45 and a low of Rs 74 so far during the day. The stock had hit 52-week high of Rs 79.20 on 22 August 2016. The stock had hit 52-week low of Rs 55 on 12 February 2016. The stock had outperformed the market over the past 30 days till 23 August 2016, rising 3.89% compared with Sensexs 0.37% fall. The scrip, however, underperformed the market in past one quarter, underperforming 2.26% as against Sensexs 8.15% rise.

The large-cap company has equity capital of Rs 270.46 crore. Face value per share is Re 1.

Tata Power Companys standalone generation stood at 3,163 million units (MUs) in Q1 June 2016. Total consolidated generation stood at 11,122 MUs in Q1 June 2016. The company has a significant presence in the clean energy space with a gross installed capacity of 1,996 MW.

Shares of Tata Power Company dropped 3.24% to Rs 74.75 after the company announced weak Q1 result during trading hours yesterday, 23 August 2016. Tata Power Companys consolidated net profit fell 76.09% to Rs 72.49 crore on 7.14% decline in total income to Rs 6790.58 crore in Q1 June 2016 over Q1 June 2015.

Tata Power Company is Indias largest integrated power company with a growing international presence. The company has presence in all the segments of the power sector viz. fuel security and logistics, generation (thermal, hydro, solar and wind), transmission, distribution and trading.

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Hong Kong Market drops 0.77%
Aug 24,2016

The Hong Kong stock declined on Wednesday, 24 August 2016, as profit booking triggered on fear recent gains were excessive relative to earnings prospects, with Chinese banks leading declines. The benchmark Hang Seng Index dropped 178.15 points, or 0.77%, to 22820.78 points. The Hang Seng China Enterprises Index, benchmark measure of performance of mainland China enterprises, declined 79.90 points, or 0.83%, to 9507.09. Turnover increased to HK$62 billion from HK$60.8 billion on Tuesday.

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China Market falls as hopes for policy easing fade
Aug 24,2016

Mainland China stock market closed lower on Wednesday, 24 August 2016, dragged down by financial and property shares amid receding expectations of aggressive monetary easing. The CSI300 index, which tracks the largest listed companies trading in Shanghai and Shenzhen, fell 0.36% to 3329.86 points. The Shanghai Composite Index closed down 0.12% at 3085.88 points while the Shenzhen Composite index closed up 0.31% at 2030.28 points.

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Nikkei ups 0.6% as yen pause
Aug 24,2016

The Japan share market finished higher on Wednesday, 24 August 2016, recouping just enough to yesterday losses, thanks to buybacks of large-cap mainstay issues that reflected a pause in the yens advance against the dollar. The 225-issue Nikkei stock average advanced 99.94 points, or 0.61 percent, to end at 16597.30 on the Tokyo Stock Exchange. The Topix index of all first-section issues grew 9.15 points, or 0.71 percent, to close at 1306.71. Rising stocks outnumbered declining ones on the Tokyo Stock Exchange by 1287 to 617 and 153 ended unchanged. The Nikkei Volatility, which measures the implied volatility of Nikkei 225 options, was up 1.16% to 22.59.

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ASX200 clings to gain
Aug 24,2016

Australian share market finished session tad higher on Wednesday, 24 August 2016, as gain in materials, property trusts, and financials stocks were just enough to offset losses in a number of index heavyweights including Wesfarmers and Telstra. At close of trade, the benchmark S&P/ASX 200 index advanced 7.90 points, or 0.14%, to 5561.70. The broader All Ordinaries added 6.50 points, or 0.12%, to 5653.60.

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BEE announces new star rating methodology for Air conditioners
Aug 24,2016

The Bureau of Energy Efficiency (BEE) has introduced a new star rating methodology called Indian Seasonal Energy Efficiency Ratio (ISEER) for air conditioners. This evolved rating methodology factors in variance in higher temperature in India and rates air conditioners accordingly. Consumers can now purchase air conditioners with higher efficiency leading to lower electricity bills.

Keeping the performance of air conditioners during higher temperature in mind, ISEER will address the different climatic zones in India and higher temperature. ISEER measures energy efficiency of air conditioners based on a weighted average of the performance at outside temperatures between 24 and 43 degree C based on Indian weather data.

As per Indian Weather Data Handbook, 2014, weather profile of 54 major cities shows that 65% of the total number of hours in a year have a temperature above 24 deg C (5778 hours out of 8760). Air conditioners in India have hitherto been tested under the IS 1391 at a standard operating conditions of outside temperature of 35 degree C. Star rating is given to manufacturers based on the test results provided by them as tested on the above standard.

Talking about ISEER, Shri Sanjay Seth, Secretary, Bureau of Energy Efficiency said that the new methodology for rating system will bring in higher energy efficiency of appliances and reduce energy consumption. He further said that the standards have been developed while keeping changing Indian temperature in mind. Such innovations will help us achieve the objective sooner.n++

Ratings based on ISEER have been introduced on a voluntary basis for Variable Speed (Inverter) Air Conditioners since June 2015 and proposed to be merged with fixed speed air conditioners in the mandatory regime from January 2018. Some of the leading manufacturers have already adopted the rating for inverter air conditioners.

BACKGROUND

BEE has from the beginning worked out a plan of progressively improving the efficiency of Room AC from 2008 and to transform market towards better energy efficiency standards, BEE continuously tightens the standards such that, the Star-5 in 2010 became Star-3 in 2015 and will become Star-1 in 2018 as per new ISEER methodology. The weighted average Energy Efficiency Ratio (EER) of AC has increased from 2.6 in 2006 to 3.26 in 2015, which is an increase of 25% in efficiency due to tightening of standards.

Since 2010 Bureau of Energy Efficiency has mandated air conditioners as a mandatory-labelled appliance under Energy Conservation Act and since then air conditioners cannot be sold without star label. Now as per latest notification, from January 2016, Star-2 is the least efficiency level to be sold in the market, hence variation in power consumption is compared between Star-5 (most efficient) and Star-2 (least efficient) air conditioners.

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Strides Shasun gains amid high volumes after receiving USFDA approval for drug
Aug 24,2016

The announcement was made during market hours today, 24 August 2016.

Meanwhile, the S&P BSE Sensex was down 18.75 points or 0.07% at 27,971.46.

High volumes were witnessed on the counter. On BSE, so far 5.12 lakh shares were traded in the counter as against average daily volume of 39,803 shares in the past one quarter. The stock hit a high of Rs 981 and a low of Rs 957 so far during the day. The stock had hit record high of Rs 1,412.45 on 23 November 2015. The stock had hit a 52-week low of Rs 848 on 29 February 2016. The stock had underperformed the market over the past one month till 23 August 2016, sliding 18.05% compared with 0.67% rise in the Sensex. The scrip had also underperformed the market in past one quarter, falling 9.37% as against Sensexs 10.94% rise.

The large-cap company has an equity capital of Rs 89.37 crore. Face value per share is Rs 10.

Ranitidine Tablets USP, 150 mg and 300 mg is the first integrated product approval where the active pharmaceutical ingredients (API) and formulations will be manufactured at erstwhile Shashun Pharmaceuticals Cuddalore and Pondicherry facilities respectively. It may be recalled that Strides Arcolab had announced acquisition of Shasun Pharma on 29 September 2014 and the merged companys name was later changed to Strides Shasun.

According to IMS June 2016 data, annual sales for Ranitidine Tables USP, 150 mg and 300 mg is around $125 million in US market. The product will be launched and marketed immediately by Strides Pharma Inc. in the US market.

Strides Shasuns consolidated net profit rose 145.2% to Rs 26.04 crore on 44.6% rise in net sales to Rs 844.62 crore in Q1 June 2016 over Q1 June 2015.

Strides Shasun is a vertically integrated global pharmaceutical company headquartered in Bangalore. The company has four business verticals, viz., regulated markets, emerging markets, institutional business and pharmaceutical services & active ingredients.

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DHFL advances after bulk deal
Aug 24,2016

Meanwhile, the S&P BSE Sensex was up 17.31 points, or 0.06%, to 28,007.52

Bulk deal boosted volume on the scrip. On BSE, so far 13.33 lakh shares were traded in the counter, compared with average daily volume of 2.45 lakh shares in the past one quarter. The stock hit a high of Rs 279.35 in intraday trade so far, which is 52-week high for the counter. The stock hit a low of Rs 270 so far during the day. The stock hit a 52-week low of Rs 140.55 on 12 February 2016.

The mid-cap company has an equity capital of Rs 291.80 crore. Face value per share is Rs 10.

Dewan Housing Finance Corporation (DHFL)s net profit rose 16.23% to Rs 201.40 crore on 18.52% rise in total income to Rs 1,959.32 crore in Q1 June 2016 over Q1 June 2015.

DHFL provides loans for purchase or construction of residential houses.

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Fitch Affirms Bharat Petroleum at BBB-; Outlook Stable
Aug 24,2016

Fitch Ratings has affirmed India-based Bharat Petroleum Corporations (BPCL) Long-Term Foreign-Currency Issuer Default Rating (IDR), its senior unsecured rating, and ratings on its outstanding senior unsecured debt at BBB-. The Outlook is Stable.

KEY RATING DRIVERS

Strong Linkages with State: Fitch equalises BPCLs rating with that of its largest shareholder, the state of India (BBB-/Stable) (54.9% shareholding), due to their strong operational and strategic linkages. Fitch believes the linkages remain strong despite the deregulation of diesel prices in 2014 and introduction of the direct benefit transfer scheme - which transfers subsidies directly to the consumers - for household liquefied petroleum gas (LPG). BPCL continues to retail kerosene at government-prescribed prices that are lower than market prices. Government covers the under-recoveries (the difference between market prices and state-controlled selling prices) from the sale of kerosene through subsidies and discounts from upstream companies, whereas downstream companies had borne part of the under-recoveries in the past.

Fitch may reassess BPCLs linkages with the state if the state-owned oil marketing companies policy role weakens due to further deregulation of prices for petroleum products. Fitch will also take into consideration governments commitment to maintaining market-based prices for already-deregulated products when oil prices rise. The lower oil prices and deregulation of diesel have improved BPCLs finances significantly. Fitch assesses the standalone credit profile at BB+.

Falling Subsidies: The oil sector reforms by way of deregulation of diesel prices in 2014, along with low crude oil prices, has resulted in a zero subsidy for BPCL during the financial year ending 31 March 2016 (FY16) (FY15: INR4.9bn). We expect no subsidy burden for BPCL over the next two years, given Fitchs assumptions of oil prices at USD42 per barrel (bbl) in 2016 and USD45 per bbl in 2017. Furthermore, government hiked the subsidised LPG prices by INR1.98 in July 2016 and by INR1.93 in August 2016. Similarly, government increased kerosene prices by INR0.25 per litre in July 2016.

Fitch believes that under-recoveries could be reduced significantly if the price hikes continue on a regular basis. Nevertheless, it remains uncertain as to how government will approach subsidies at higher crude prices, especially prices above USD60 per bbl.

Significant Operator: BPCL is the third-largest refiner in the country, with a capacity of 30.5 million tonnes per annum (mtpa) - representing 13% share of Indias refining capacity - and the second-largest marketer of petroleum products, with around a one-quarter market share. BPCL marketed 36.8 mtpa of petroleum products in FY16 (FY15: 35 mtpa) and refined 29.8 mtpa (FY15: 29.3mtpa). We expect BPCL to maintain its leading position over the medium to long term, given its capex plans for enhancing capacity.

Comfortable Financial Profile: We expect BPCLs net leverage (net adjusted debt/operating EBITDAR) to remain below 3x and EBITDA interest cover above 4.5x over the next three years. This is despite the large capex and investment. Credit metrics improved during FY16, with net leverage of 1.3x (FY15: 1.7x) supported by strong gross refining margins (GRM) of USD6.59 per barrel (bbl) (FY15:USD3.62 per bbl).

We expect the GRMs to moderate over the next two years in line with the industry. This, together with the large investment plans, is likely to result in a marginal weakening of credit metrics during FY17 and FY18. However, we expect the benefits from the expanded Kochi refinery and continuing strong performance of the Bina refinery (GRM FY16 USD11.7/ bbl; FY15 USD6.1/bbl) to support improvement in operational cash flows from FY18.

Large Capex: We expect BPCLs capex to remain high at over INR600bn over the next five years (FY16: INR113.6bn). In addition, the company (through its subsidiary) is acquiring a stake in Rosnefts Taas-Yuriah and Vankor fields in Russia for a consideration of around USD1.1bn (around INR75bn). The large investments are likely to result in BPCLs FCF remaining negative over the medium term. The largest portion of the capex is for the expansion of the Kochi refinery to 15.5mtpa from the current 9.5mtpa, at a cost of around INR165bn. The company expects to complete expansion of the Kochi refinery by end-2016, and to start operations in early 2017.

Upstream Discoveries: BPCL has 17 upstream blocks (seven in India and 10 abroad), from which some successful discoveries have been made, and is in the process of acquiring a stake in two blocks owned by Rosneft. Other than the current acquisitions which are producing fields, the most notable is BPCLs 10% participating interest in the Rovuma Basin in Mozambique (discovery of 75 trillion cubic feet of natural gas resources). The other noteworthy discoveries are in its Brazilian assets (20% participating interest), and West Australian onshore assets in Perth (27.8% stake). We expect BPCL to start benefiting from its upstream investments in the medium to long term.

KEY ASSUMPTIONS

Fitchs key assumptions within the rating case for BPCL include:

- Industry refining margins to moderate during FY17 and FY18

- No net under-recoveries for FY17 and FY18

- Oil prices of USD42 per bbl for FY17, USD45 for FY18 and USD55 for FY19 in line with Fitchs base-case price deck, as outlined in Corporate Oil Price Assumption Raised for 2016; Slow Recovery From Here, dated 27 July 2016

- Total consolidated capex of around INR600bn over the next five years

RATING SENSITIVITIES

Positive: Developments that may, individually or collectively, lead to positive rating action include:

-An upgrade of the sovereign rating, provided the rating linkages with the state remain intact.

Negative: Developments that may, individually or collectively, lead to negative rating action include:

- A downgrade of the sovereign rating

- Weakening of linkages between BPCL and the state.

For Indias sovereign rating, the following sensitivities were outlined by Fitch in its Rating Action Commentary of 18 July 2016.

The main factors that, individually or collectively, could lead to positive rating action are:

- Fiscal initiatives that would cause the general government debt burden to fall more rapidly than expected in the medium term

- An improved business environment resulting from implemented reforms and persistently contained inflation, which would support higher private investment and real GDP growth.

The main factors that, individually or collectively, could lead to negative rating action are:

- Further deviation of the already-high public-debt burden from the peer median, which may be caused by stalling fiscal consolidation or greater-than-expected deterioration in the banking sectors asset quality that would prompt large-scale sovereign financial support

- Loose macroeconomic policy settings that cause a return of persistently high inflation levels and a widening current-account deficit, which would increase the risk of external funding stress.

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