The BSE Sensex plunged 348.2 points on the back of India Inc's acquisitions abroad.
Unimpressed by their victories abroad, the Indian stock market today hammered the stocks of Hindalco and Tata Steel by 14 per cent and 2.10 per cent, respectively, sending the BSE Sensex on a downward spiral of 348.20 points or 2.39 per cent. The broader Nifty-50 lost 129.10 points or 3.08 per cent to close at 4,058.30.
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| Tata Steel has lost 12.87 per cent since it announced the deal to acquire Anglo-Dutch steelmaker Corus on January 31.
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Suzlon, which announced its $1.33 billion bid for Germany’s Repower last week, lost 13.26 per cent to close at Rs 1,080.10.
| THE BIGGER THE DEAL, THE GREATER THE FALL |
| Companies |
Share price (In Rs) |
Difference |
Pre-deal
price |
Share price (12/2) |
| Hindalco |
171.90 |
149.45 |
-13.05% |
| Tata Steel |
515.00 |
448.67 |
-12.87% |
| Suzlon* |
1245.15 |
1080.10 |
-13.26% |
| RCom* |
475.55 |
455.00 |
- 4.32% |
| *In Suzlon, the share fell after it decided to bid for Repower Systems of Germany while RCom fell on the entry of Vodafone in India |
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| Analysts said the prices paid in these deals looked expensive when viewed in terms of near-term earnings impact.
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| “Indian companies are buying companies that are three to four times their size. The correction was triggered by concerns of whether Indian companies’ balance sheets had the strength to swallow deals of this size,” said Rajesh Baheti of Crosseas Capital Services.
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| Added Shankar Sharma of First Global, “Big deals are bad for the markets. We need to look at these acquisitions closely and see if there is a case of overvaluation.”
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| Commenting on the Suzlon bid for RePower, Edelweiss Securities, in a note, said, “On the valuations front, the offer looks expensive as compared to Suzlon’s valuations. Also, Suzlon currently has consolidated debt (including Rs 25 billion of Hansen’s debt) of Rs 32 billion on its books.”
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| Hindalco had its biggest plunge in at least 16 years on concern the company’s finances may be stretched by the planned acquisition of US-based metals major Novelis Inc.
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| Hindalco dropped Rs 23.8, or 14 per cent, to Rs 149.45 today, the biggest drop since at least January 1991, according to Bloomberg data.
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| While Tata Steel, Suzlon and Hindalco shares fell following successful takeovers, the Reliance Communications (RCom) scrip also fell, though it lost out in the race to acquire Hutchison-Essar. The stock plunged by 4.32 per cent to Rs 455.
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| Analysts said the stock suffered due to the emergence of Vodafone as a new competitor in the telecom sector.
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| Overall, metal stocks nose-dived on heavy selling, with Steel Authority (down 4.81 per cent to Rs 107.96), Hindustan Zinc (down 4.17 per cent to Rs 635.90), Jindal Stainless (down 3.74 per cent to Rs 442.10), National Aluminium (down 3.26 per cent to Rs 221.65) and Tata Steel (down 2.10 per cent to Rs 443.75) taking most of the damage.
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| The BSE Metals Index was the biggest loser on the sectoral indices with a decline of 5.46 per cent. The BSE Capital Goods Index, which shed 5.17 per cent, was another big loser amongst the sectoral indices.
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| The overall market breadth today showed a bleak picture with just 12.5 per cent (or 334 stocks) ending in positive territory, while 86.71 per cent (2,308 stocks) ended in the red.
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| All the indices also ended in negative territory, while only two of the 30 Sensex stocks ended higher than Friday.
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| Other stocks also fell after some investors judged the gains this month as excessive. ICICI Bank fell Rs 27.3, or 2.8 per cent, to Rs 964.80, Reliance Industries dropped Rs 32.35, or 2.3 per cent, to Rs 1,355.90. The two stocks account for about a fifth of the Sensex’s weight. |
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