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Social media stocks knocked as Facebook debuts

Social media stocks, led by Zynga Inc, dropped in volatile trading as traders used the securities to hedge or bet against the day's star of the sector, Facebook Inc, which went public in a somewhat disappointing debut on Friday.

Social media stocks, led by Zynga Inc, dropped in volatile trading as traders used the securities to hedge or bet against the day's star of the sector, Facebook Inc, which went public in a somewhat disappointing debut on Friday.

Facebook shares rose 8.5% to USD 41.25 in afternoon trading. Analysts blamed the poorer-than-expected first-day showing of Facebook on the vast number of shares floated and market weakness.

Shares of Zynga, the leading social gaming company which gets much of its revenue from Facebook, fell more than 14% at one point, and were halted twice. Zynga was down 5.7% at USD 7.80 a share in afternoon trading, having earlier hit a low of USD 7.08, which triggered an automatic halt due to the fluctuation in its price.

Other social media stocks, including LinkedIn, Groupon, Pandora Media and Yelp, were also lower on Friday, with Groupon and Yelp losing more than 5%.

GSV Capital, a listed investment vehicle that bought Facebook shares before the IPO, slumped 14% to USD 13.87.

Some traders who can't short Facebook shares early may be betting against other social media stocks instead, according to Max Wolff, a senior analyst at GreenCrest Capital.

Zynga accounts for more than 10% of Facebook revenue, so traders may be focusing most on Zynga shares and options as an alternative to Facebook.

"Zynga options have high skew right now. That's the pricing difference between out-of-the-money puts and out-of-the-money calls," said Ralph Edwards, director, derivatives strategy at ITG. "This typically means people are looking for Facebook to kind of spill over to Zynga. If Facebook catches a cold, then Zynga gets pneumonia."

"The government must have a role in land acquisition," Ramesh told a news conference. "We must recognize that we are not at a stage of development where government's role can be 'eliminated."

The minister said he did not support the idea that corporates only work for their own interests.

"The notion that private companies serve only private interests is something I do not believe in," he said. Terming the recommendations of the standing committee as "not binding", the minister said the government will continue with the provision that allows it to acquire land for PPP projects.

Ramesh, however, said he will be open to discussions on the probability of restricting government role in land acquisition for projects that are completely private owned. The original version of the Land Acquisition, Rehabilitation and Resettlement Bill, approved by the cabinet in October last year, allows the government to acquire land under eight conditions. These conditions include acquisition for PPP and private projects, which can establish a public purpose.

The rural development ministry will now hold another round of inter-ministerial discussion before approaching the cabinet with a revised bill, which Ramesh said he hopes to introduce in the monsoon session of parliament.

"At a time when investor sentiment is low and economic growth is under pressure, we need to have a new law quickly and end the uncertainty," he said. "I will ensure that whatever law we present in parliament facilitates economic growth and not hinder it."

On the standing committee's objection to the exemption given to 16 other central Acts from the compensation clause provided in the land acquisition bill, Ramesh said amendments in these Acts will be considered, although there might be opposition from some stakeholders. These Acts include the SEZ Act and the Railway Act.

Citing the five fundamental principles of the bill, the minister said recommendations of the standing committee will be incorporated into the new bill while keeping its basic tenements intact.

The five principles are making way for faster urbanization and industrialization while ensuring adequate compensation; a clear definition of public purpose; flexibility to state governments; timely and transparent procedure of acquisition reducing litigation; and government involvement in projects needed for public purposes.

Driven by higher prices of vegetable, edible oil and milk products, retail inflation rose to 10.4% in April, from 9.4% in March, data released on Friday showed. Reading for March was revised down to 9.38%, from 9.47% estimated initially.

"We expect food inflation to remain elevated due to a likely rise in minimum support prices for food crops and risk of a below-normal monsoon," Nomura economist Sonal Varma said in a note.

Core inflation, a measure of demand in the economy, moderated to 10.6% in April, from 10.8% in March. Core inflation excludes volatile fuel and food elements.

Consumer Price Index (CPI), a national measure of retail inflation, was launched in January last year. The lack of historical series for CPI leaves wholesale price inflation as the most widely followed measure of inflation.

Wholesale price index-based inflation rose to 7.32% in April, from 6.95% in March.

"The CPI is a new index, and given the absence of trends/seasonal effects, it's unlikely to be currently used as a key determinant of monetary policy," wrote Rohini Malkani of Citi in a note, adding that she expected one more rate cut this year because of the pressure on prices.

The higher consumer inflation is largely because of the larger weight for food items in the retail basket. Food items have a 47.6% weight in the retail basket.

"In terms of policy response, while core WPI inflation has moderated and growth continues to weaken, the Reserve Bank of India ( RBI) cannot ignore rising food inflation since it affects households' inflation expectations," Varma said.

The weaker rupee and the likely fuel price rise could harden inflation further.

The Reserve Bank of India had cut repo rate by 50 basis points in its mid-monetary policy review to revive growth, but may not be able to do more even as industrial production contracted 3.5% in March.

At 11.1%, urban retail inflation was higher than 9.9% rural inflation. The difference is largely because rural index does not include housing.

Inflation rates for urban and rural areas were 10.3% and 8.7%, respectively in March.

Consumer prices of vegetables were up 24.6% in April, while edible oils rose 17.6%, and milk was up 14.9% in April from a year ago.

Prices of egg, fish and meat shot up 10% while non-alcoholic beverages became costlier by 9.5%.

The company is yet to receive any directive or communication from the coal ministry for changing the fuel supply agreements to make it acceptable to power producers, Coal India chairman S Narsing Rao told ET.

Companies such as NTPC, Reliance Power and Tata Power, however, want to sign the old fuel supply agreement with 80% trigger level and have refrained from approaching CIL for signing FSAs.

The move assumes significance as power producers do not want to sign the agreement in the present form and have approached various government departments as well as the Prime Minister's Office requesting changes in new draft agreement.

Earlier, CIL had prepared a set of fuel supply agreements for plants that had come up between April 2009 and December 2011. The power generators are not keen on signing the agreement because they find it heavily skewed in favour of the coal producer.

Coal minister Sriprakash Jaiswal had reportedly said Coal India had been asked to examine the reference received from NTPC and representation from Association of Power Producers for taking appropriate steps.

The Jamshedpur-based steel company said its profit for the quarter fell to Rs 433.4 crore, as against Rs 4,175.60 crore in the corresponding period of last year.

The shares of Tata Steel fell 0,5% to close at 399.85 on the BSE on Friday, while the broader index was up 0.5%. The Tata Steel board has however recommended a dividend of 12 a share.

"The continuing eurozone crisis kept EU steel demand well below pre-crisis levels in the March quarter. In addition, operational difficulties that affected strip product output caused the European operations to perform worse than in the year-earlier period," Tata Steel Europe MD & CEO Dr Karl-Ulrich Kohler said in a statement.

However, Ulrich Kohler sounded a note of optimism when he added that "an improvement" in performance over the third quarter, when the cost-price squeeze caused by high raw materials volatility was at its "most extreme".

"This was more or less expected as the steel industry in Europe has been slowing since last year and prices have been weak. Also, last year was a better year for steel in Europe as prices had just begun to improve and the company had also earned an one-time gain through the sale of a plant," said Centrum Capital steel analyst Abhisar Jain.

The group's consolidated turnover of Rs 1,32,900 crore in FY12 was 11.9% higher than the turnover of Rs 1,18,753 crore in FY11. The consolidated turnover of Rs 33,999 crore in Q4 FY2 was up by 2.7% from Rs 33,103 crore in Q3 FY12 and by 0.5% from Rs 33,824 crore in Q4 FY11.

Net debt at the end of March 2012 increased to Rs 47,697 crore ($9.38 billion) compared to Rs 46,660 crore ($9.17 billion) at the end of March 2011. The turnover in FY12 increased by 15.4% to Rs 33,933 crore from Rs 29,396 crore in FY11. And, Q4 FY12 sales of Rs 9,479 crore was up 13.7% from the Rs 8,341 crore of Q4 FY11 and up 13.1% from the 8,382 crore of Q3 FY12.

Prices of hot rolled steel, a base grade steel product used in automobiles and consumer goods, have fallen 11% in the Jan-March period to about $704 a tonne.

New Delhi, May 18: The Telecom Regulatory Authority of India (Trai) has ordered operators to refrain from increasing call rates within six months of introducing a tariff plan.

However, there is no restriction on slashing the rates.

“A tariff plan once offered by an access provider shall be available to a subscriber for a minimum period of six months from the date of enrolment of the subscriber to that tariff plan,” Trai said in its consumers’ handbook, which contains the gist of all regulations, orders and directions issued by the regulator.

Analysts said the move was expected to protect users from frequent change in tariff plans, which were not even notified by the operators on many occasions.

“It is important that consumers are made aware of various regulatory measures so that they can effectively safeguard their rights and privileges,” said former Trai chairman J.S. Sarma, under whose guidance the handbook has been prepared.

“For any tariff plan, the service provider is free to reduce tariffs at any time. However, no tariff item in a plan can be increased by the service provider,” the regulator clarified.

The rules also give subscribers the freedom to change plans during the six-month period. The operator is mandated to accept the request and implement it.

“The subscriber shall be free to choose any other tariff plan, even during the six-month period. All requests for change of plan shall be accepted and implemented immediately or from the next billing cycle,” Trai said.

The regulator has fixed a maximum permissible per minute charge for roaming calls at Rs 1.40 for outgoing, Rs 2.40 for long-distance and Rs 1.75 for incoming calls. Receiving SMS is free while roaming.

The tariff for sending text messages while roaming has not been fixed by Trai.

The regulator has also banned all tariff plans with misleading titles. For example, title of a tariff plan, which suggests absence of rental, (such as “zero rental”) will be misleading if it has a monthly mandatory fixed charge in one form or the other.

Trai is also in the process of coming out with an amendment to the “tariff forbearance policy”, which may curb operators from increasing tariffs beyond a point.

Pratip Chaudhuri in Calcutta on Friday. Picture by Kishor Roy Chowdhury

Calcutta, May 18: The State Bank of India (SBI), the country’s largest lender, today reported a net profit of Rs 4,050 crore for the quarter ended March 2012, up from Rs 21 crore in the same period a year ago.

The bank’s net profit in 2011-12 increased nearly 42 per cent to Rs 11,707 crore from Rs 8,265 crore a year ago.

“It was a blockbuster result,” said SBI chairman Pratip Chaudhuri.

“Not only have we been able to retain the gains of the consolidation process that we had started a year ago but also have also been able to improve upon the asset quality in this particular quarter,” he said.

The SBI board has proposed a dividend of 350 per cent, or Rs 35 per share, for 2011-12.

War against sticky assets

While most other banks have reported an increase in their bad assets between the December and March quarter, the State Bank of India posted a decline in gross non-performing assets (NPA) at 4.44 per cent from 4.61 per cent at the end of December 2011.

Net NPA declined to 1.82 per cent from 2.22 per cent. “We also made additional provisioning to increase the loan coverage ratio to 68.10 per cent from 62.52 per cent at the end of December,” Chaudhuri said.

Fresh slippage during the quarter was restricted to Rs 4,393 crore, while loans worth Rs 26,936 crore turned bad during the full year.

The bank also restructured loans worth Rs 5,135 crore during the quarter.

“Till March 2012, we have restructured loans worth Rs 37,168 crore, of which loans of only Rs 6,010 crore turned non-performing,” the chairman said.

“Last year, we had declared war against bad assets and took various measures that have yielded results. Cash recovery for the full year was Rs 4,564 crore and we wrote off only Rs 1,049 crore of loans. Loan restructuring also helped in the upgradation of Rs 6,973 crore non-performing assets into standard assets during the year. Therefore, the net addition to NPAs was Rs 14,350 crore though fresh slippage was Rs 26,936 crore,” he said.

Net interest income

Like other banks, the net interest income of the SBI for the March quarter went up sharply by 43.84 per cent, thanks to a 0.80 percentage point increase in yield on advances over the cost of deposits compared with the same period last year.

Operating expenses in the reporting quarter grew only 8.5 per cent, resulting in a steep 57.85 per cent increase in operating profits to Rs 9,597 crore for the quarter ended March 2012.

Total provisions, including loan loss, was down in the fourth quarter at Rs 5,547 crore compared with Rs 6,059 crore in the previous corresponding quarter.

The increase in SBI’s net profit in the fourth quarter came on the back of a steep increase in its net interest margin (NIM).

While overall NIM, including the overseas business, improved to 3.85 per cent from 3.32 per cent at the end of March 2011, net interest margin from domestic operations rose to 4.17 per cent from 3.63 per cent during the same period.

According to Chaudhuri, a robust internal generation (of profit), optimisation of capital use, coupled with a capital infusion of Rs 7,900 crore by the government in March this year helped the bank to improve its capital adequacy to 13.86 per cent and shore up the tier I capital to 9.79 per cent against 7.77 per cent at the end of March 2011.

Credit rating

The bank plans to approach rating agency Moody’s for a review of its credit rating.

“We propose to go back to Moody’s to reassess and upgrade the credit rating of the bank,” Chaudhuri said.

Last year, when the tier I capital of the SBI fell to 7.65 per cent, Moody’s had downgraded the credit rating of a capital raising instrument while maintaining the bank’s overall credit rating on a par with the country’s sovereign rating.

“Now that the government’s equity contribution has come in and has been accounted for, we’ll go back to the credit rating agency for a reassessment of the SBI’s rating,” Chaudhuri said.