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Sebi imposes Rs 85 lakh fine on Orient Resorts, 2 individuals, for non-compliance with its directive

Markets regulator Sebi has imposed a penalty totalling Rs 85 lakh on Orient Resorts (India) and two individuals for not complying with the watchdog’s earlier directive to wind up its operations and refund investors’ money.
The fine has been imposed on Orient Resorts (India) Pvt Ltd (ORIPL), Dilpesh V Shah and Darshanbhai Arvindbhai Shah (noticees).

In November 2013, Sebi had passed an order directing Orient Resorts to wind up its operations and refund the money of the investors which it had collected through its illegal collective investment scheme.

According to the order, Orient Resorts had launched ‘Vanashree Teak Bumper Profits Scheme’ in 1993. It called for an investment of Rs 910 per unit for a period of 18 years from the investors and claimed that the investors would receive Rs 91,000 for every Rs 910 invested for one unit.

The money collected was pooled towards setting up a teak plantation. However, the regulator observed that the 18-year period stipulated in the scheme has expired and ORIPL has not yet made repayment of profit, income to investors as promised by it.

Also, there is no documentary proof on record to substantiate the claim of the noticees for having repaid the income or returns to the investors, the watchdog said. Besides, ORIPL and Dilpesh V Shah failed to submit any report to Sebi about compliance with the directions issued by Sebi earlier, it added.

“I find that ORIPL has illegally continued the scheme in contravention of the…..provisions of…Collective Investment Schemes (CIS) Regulations,” Sebi’s Adjudicating Officer Prasanta Mahapatra said in its order passed on Monday.
While imposing penalties the watchdog said, the hard earned money of the investors cannot be allowed to be duped by the illegal activities of the company.

Further it said, the activities of unauthorized pooling of funds from the investors by the company are illegal because it has launched CIS without obtaining registration from Sebi. For the violations, Sebi levied Rs 35 lakh fine on Orient Resorts (India) Pvt Ltd.

Besides, a fine of Rs 35 lakh and Rs 15 lakh has been imposed on Dilpesh V Shah and Darshanbhai Arvindbhai Shah, respectively.

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Radhakishan Damani’s DMart hits fresh highs, but analysts shy away from giving buy calls

Radhakishan Damani’s Avenue Supermarts saw its share price surge to a fresh all-time high of Rs 3,130 per share on Monday morning as investors reacted to the strong earning growth of the firm. Avenue Supermarts, which own and operates the supermarket chain DMart, on Saturday, reported a 16.3% on-year jump in net profit to Rs 446.95 crore for the October-December quarter of the current fiscal year. This strong growth in profits was aided by an 11% jump in revenue for the firm as consumption picked up with India moving away from lockdowns as it looked to control the spread of the coronavirus.

Results beat estimates

However, analysts do not seem to be interested in giving a ‘buy’ call to the stock despite its stellar performance. Domestic brokerage and research firm Kotak Securities said that the revenue growth was ahead of expectations driven by strong festive demand, near-normal store operations and steady recovery in general merchandise sales. It did raise earning estimates expecting stronger margins but gave a ‘sell’ recommendation with a fair value of Rs 1,885. “Sharp stock price performance bakes in consistent revenue growth (possible, in view of large growth opportunity) and margin expansion (difficult, in a competitive business which may see sizeable capital infusion from peers in the near-term),” they added.

Valuations stretched

Since October, the stock price of Avenue Supermarts has jumped more than 50% making the valuations stretched. Analysts at Yes Securities said that the stock is currently trading at 68x FY23E P/E and 45x EV/EBITDA. “We, therefore, expect a period of consolidation in the stock with investors waiting to see the impact of aggressive online competition in the grocery space,” they added.

Pickup in earnings does give a strong outlook for what is in store for the company but the recent run-up is believed to have left no room for further growth in stock price.HDFC Securities has increased its EPS estimates by 5-6% to account for marginally higher revenue/sq. ft, but has downgraded the stock to ‘sell’ saying that the recent run-up leaves no room for an investment case. “An extended slump in non-essential sales could mean that discounting in staples will be lower, thereby opening up the space for competition. This, coupled with punchy valuations, leaves no margin of safety/error for the investor and the business,” they added.

E-commerce push to watch out for

The renewed focus on Radhakishan Damani’s DMart on e-commerce is, however, finding a favourable response. “Factoring beat in performance, we revise up FY21/22E PAT 11%/8%. Also, increased e-com aggression and potential market share gains enhance growth sustenance visibility,” said Edelweiss Securities in a note. With a target price of Rs 2,864 per share, Edelweiss has a ‘Hold’ rating on the scrip.

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Petrol, diesel prices hit a record high as crude oil prices rebound; inflation concerns grow

Petrol prices in Delhi touched an all-time high of Rs 84.2 per litre after rising by 23 paise today. Earlier, the petrol price touched an all-time high of Rs 84 on October 4, 2018, in Delhi. Diesel prices, today, were also raised by 26 paise a litre, taking the price to Rs 74.38 a litre. While the petrol pieces are at a lifetime high in Delhi, diesel prices are at a record high in Mumbai at Rs 81.07. In Mumbai, petrol is being sold at Rs 90.83 a litre. The rise in fuel prices is another threat to the already high inflation in the country.

Even as the retail fuel prices were not reduced when there was a sharp fall in the crude oil prices in the month of March 2020, the prices of petrol and diesel are on a rise as Brent crude prices are surging. Brent crude is trading above $54 a barrel on Thursday, which is its highest level since last February after OPEC+ members agreed to maintain production levels around their current amounts for both February and March. Another reason for a rise in crude prices is that Saudi Arabia voluntarily cut output below its quota, while Russia and Kazakhstan were allowed to raise production.

It is to be noted that the Brent crude prices had fallen below $20 per barrel in May 2020, which was less than half of the current level; however, the same was not reflected in the retail fuel prices. This is because the government had raised excise duty by Rs 13 per litre on petrol and by Rs 15 a litre on diesel in two instalments in March 2020 and May 2020. The government’s move was aimed at garnering an additional revenue of Rs 1.6 lakh crore when the other sources of revenue generation were not performing well amid the lockdown.

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Asian stocks grind lower as focus shifts to Georgia Senate runoff

Asian shares edged lower on Tuesday amid uncertainty about Senate runoffs in Georgia, which could have a big impact on incoming U.S. President Joe Biden’s ability to pursue his preferred economic policies.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.05%, pulling back from a record high. Australian stocks fell 0.26%. Chinese shares erased early losses and rose 0.52%. In Hong Kong, China Mobile, China Unicom, and China Telecom rallied by more than 6% after the New York Stock Exchange abandoned plans to delist the companies’ shares from its bourse.

Japanese shares lost 0.34% after a spokesman said the government will reach a decision on a state of emergency for Tokyo and surrounding cities on Thursday to curb coronavirus infections.

U.S. S&P 500 stock futures edged up 0.03%. Euro Stoxx 50 futures were down 0.39%. German DAX futures fell 0.34%, and FTSE futures fell 0.26%. Oil futures were little changed in cautious trade as investors awaited a meeting later on Tuesday where major crude producers are set to decide output levels for February.

In the United States, control of the Senate is at stake with Tuesday’s dual runoff elections in Georgia. A Democratic victory in both races could tip control of the Senate away from Republicans, but both contests are very tight and the results may not be immediately known, which could lead to a repeat of the chaotic vote re-counts after the U.S. presidential election last year. “2021 starts with a bang with pivotal political and economic news for markets to digest. The undisputed highlight will be the result of the Senate seat run-off elections in Georgia,” James Knightley, chief international economist at ING, wrote in a research memo.

“If the Democrats win both seats this should lead to the most substantial 2021 fiscal stimulus. Nonetheless, it could be the excuse for a near-term consolidation in risk markets after a strong post-election rally.”

Uncertainty about the Georgia vote and worries about rising coronavirus infections sent Wall Street sharply lower on Monday. The Dow Jones Industrial Average fell 1.27%, the S&P 500 lost 1.49%, while the tech-heavy Nasdaq dropped by 1.48%. Outgoing Republican President Donald Trump’s call to pressure Georgia’s top election official to “find” votes to overturn his loss to President-elect Biden in the state has also unnerved some investors.

The House and the Senate are scheduled to certify Biden’s election win on Wednesday, but some Republicans have pledged to vote against this and thousands of Trump supporters are expected to converge on the capital in protest.

The MSCI’s broadest gauge of global stocks was unchanged, sitting just below a record reached in the previous session. Increased risk aversion helped the dollar index rebound from a 2 1/2-year against a basket of major currencies, but moves were subdued at the start of the year.

The British pound bought $1.3591, recovering some of Monday’s losses after Prime Minister Boris Johnson ordered a lockdown to try and slow a fast-spreading coronavirus variant.

U.S. crude futures were little changed at $47.61 a barrel, while Brent futures edged down by 0.1% to $51.04 per barrel. Major oil producers will meet later on Tuesday to decide on output levels for February after talks broke down the previous day. Gold was slightly lower. Spot gold fell 0.16% to $1,939.25 per ounce.

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