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January, 2003 |
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Stock Taking |
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Discretionary
Allotment by
Atma Ram Ghimire Last month I had raised questions on some malpractices related to the distribution of right shares. This time I intend to bring to the fore some examples of similar malpractices that recently occurred while allotting public shares. One most recent case is that of LIC Nepal. From the total available shares set aside to be allotted to the general public they have allocated 12,500 units to the NCM Mutual Fund run by NIDC Capital Markets Ltd. Whenever a company is established under the prevailing Company Act of Nepal, a document is drawn up and registered with the authorities stating the names of the founder shareholders and number of shares to be allotted to each of them. Then at the time of application to ‘The Security Board’ the shareholding details of the founder shareholders are to be declared along with the details about institutional arrangement and number of shares reserved for the company employees and the number of shares set aside for the general public. These details are published also in the national dailies and they are clearly mentioned also in the share application form. Then how can LIC/N change such arrangement and agree to allocate 12,500 units of shares to NCM Mutual Fund? To put the same question in a different way: Can it be the right of NIDC Capital Markets as the issue manager to snatch away the right of public subscribers and to make the allotment on its own to the Mutual Fund operated by itself? Or one may also ask: How did the Securities Board allow such allotment? If this practice is continued, subscribers from the general public. Increasing Public Equity in MNCs There are very few multinational companies in Nepal. In manufacturing sector, there are three such companies, namely Nepal Lever Limited, Bottlers Nepal Terai Limited and Bottlers Nepal Ltd., which are listed in the share market. The other notable MNCs namely Dabur Nepal and Colgate Palmolive are totally privately held and another one, i.e. Standard Chartered Bank Nepal, has higher equity participation from the general Nepali public. Except the two Bottlers all of these ventures have been profitable and they are rewarding their shareholders amply. One of the fears the shareholders always have regarding the MNCs is whether they will continue their existence in the country. There have been a number of companies which have left Nepal due to various factors like the national policy constraint, their own business and corporate policy, market size, political instability in Nepal etc. Prominent examples are KODAK, Credit Indosuez, Grindlay’s and Bank of Ceylon. Last month when the local dailies quoted a PTI report which indicated that Nepal Lever was closing down, shareholders started panicking (though the report was later denied by NLL and its parent company Hindustan Lever Ltd. of India). To avoid such market panics, companies like NLL should go for increasing the shareholding of the Nepali general public. This is advisable for two main reasons. Higher the equity participation from the general public, higher the chance to sustain the company locally and hence lower the chances of investor panic in companies with significant local shareholding. Secondly, as these companies have not yet provided bonus shares and right shares, the general shareholders will be attracted to these companies in anticipation of distribution of bonus and right shares in the future. For example, if Nepal Lever Limited opts for increasing public equity to 40% from the present 20% and offers the additional shares at some premium, it will benefit both the company and shareholders. There will be no change in the management as the parent MNC with still maintain 60 per cent holding. This plan will also help the stock market. Currently, the shares of manufacturing companies are in short supply. One can see the transaction in Bottlers Nepal shares only once in a quarter of the year. The short supply has not helped to raise the price of Bottlers Nepal shares. Nor are these shares easily disposable. They yield only 10 per cent dividend on the paid up value and they are priced only Rs. 650 per share in the market. But will the multinationals care about such a proposal? Current Market Situation The downward journey of the share market is continuing. Between November 20 and December 20, the Nepse Index dropped 13.88 points from 220.43 to 206.57. This is the biggest fall in Nepse from the beginning of this fiscal year (i.e. since mid-July). The two giants of the stock exchange that lost their prices heavily during the period are Nepal Lever Limited (falling from Rs. 1150 to Rs. 915 per share) and Standard Chartered Bank Nepal (falling from Rs. 1680 to Rs. 1425). The other heavy loser was Mahalaxmi Finance, which lost Rs. 121 per share on 19th December alone. These were not the only losers, however. Almost every other scrip has lost the price, though marginally. The current scenario suggests that prices are likely to go down to the lowest level. The previous lowest of Nepse Index was 198. This time it is likely to go even lower. The current year has been most difficult period for most companies. Many of the companies have reduced their dividend rate and some of the usual providers of dividend have stopped distributing dividends. Except Standard Chartered Bank Nepal, all the bank companies have decreased their dividend amount. The coming year will have much more difficulty due to the worsening war economy of the country. The investors who are newcomers in the market will have some profitability if they plan the investment properly for the long-term. In that case they will have to have some holding capacity on their own (i.e. without going for bank loan financing) and the investment has to be on some selected shares like Standard Chartered, Nepal Lever Limited and others in which the dividend ratio is higher than the rate of interest on bank deposits. But in the present situation it is not advisable to make huge investment. (Ghimire
is a stock analyst) Marketing
notes As some recent developments and events indicate specialized marketing is gradually becoming a fad in Nepal. One such fad is the opening up of speciality showroom. And this trend has now reached such a stage that in some sectors, the companies have started to go for massive modernization of the speciality showrooms to keep these points of purchases as much contemporary as possible, from both technological as well as ambience point of view. The latest example in this trend is the new showroom in Tripureshwor by Morang Auto Works for Yamaha range of motorcycles. Another established feature of the marketing strategy among the Nepali companies is the sponsorship of sports and music, and some of the most prominent sponsors of sports and musical events are Gorkha Brewery (P) Ltd., Surya Nepal (P) Ltd. and Nepal Lever Ltd. Himalayan Snax and Noodles (P) Ltd. too has come up prominently to become one of the vanguards in this regard by sponsoring sports events for its brand Mayos. December 2002 saw some important activities in these fields by these companies. One was the Rock Yatra sponsored by Gorkha Brewery. And it was so successful that the audience it pulled far exceeded the audience gathered by the political parties in their rallies during the same week. Though some people may see it as an indicator of negative trend among the youth, it is also an eye-opener to the political parties. More than that the event also signifies what a well-planned promotional drive can do to promote a musical band and, by the same token, any other name. Surely the band 1974 AD was suddenly elevated to a very high pedestal after this event. Meanwhile, veteran singer Fatteman was also quoted in the press as expressing gratitude to Gorkha Brewery for his recent revival. According to the report, Fatteman has said that his recent reappearance in the musical scene was initiated by the Tuborg Excellence Award presentation ceremony in which he had the chance to sing a few numbers composed by Nati Kaji who was being presented the Award in the same ceremony. The next program in music now is Shikhar Music Beat Contest (4-5 January, 2003) being sponsored by Surya Nepal (P) Ltd. In sports, the month of December 2002 saw the Asian Youth (Under 14) Festival of Football Nepal – 2002 sponsored by Mayos instant noodles. And it was good that the Nepali team came out victorious in the tourney. A new event was also introduced in the Nepali sports itinerary in December 2002-Signature Swig and Swing Golf Tournament sponsored by Signature rare whisky launched just recently. The one day tournament was held on December 21 at the Royal Nepal Golf Course. Another important trend in Nepali marketing that has now almost established is to use celebrities to endorse the products. The celebrity to be used more nowadays is Navin Bhattarai, the idol of Nepali pop culture. He has now started appearing for Samsung sound system while he has also been appearing for some time in Mercantile PC’s ads. The
opening of Yamaha showroom too used one celebrity, Nepali cine artist
Karishma Manandhar, to give an aura of premiumness to the new facility. Jialing’s
Pneumatic Workshop Sugan
Trading Company (P) Ltd. has opened Pneumatica, an all-new Pneumatic
Workshop at Basundhara. Equipped with hydraulic lifters, battery-testers
and state-of-the-art pneumatic power tools, the workshop now caters an
array of hi-tech cutting-edge service options to all Jialing bike
owners, says the company. Ads
of the Month One very prominently noticeable ad campaign of the recent days is that from the Everest Bank Ltd. The three ads brought out by the company in a series for the EBL PropertyPlus scheme is praised by the advertisement watchers for a number of reasons. First is the credibility. It is a credible ad because the models look so familiar and the viewer easily identifies them with himself/herself. Similarly, there is good combination of gender as well as the professions – one of the models looks like a retired person, the other a housewife (probably a widow) and the third looks a young professional who may be a CA, a company manager, an engineer or the like. All these people are likely to have a house rented out so the ad seems to be well targeted. Also praised is the logo of the scheme EBL PropertyPlus, particularly the bricks and the golden colour of one of them. The creative is excellent also because the gold (which represents wealth) is very cleverly played in the ad – on the brick, the tooth casing, the tie and the chain on the neck of the pet dog. The ad watchers suggest that the advertisers would have done better had they also made posters of these ads and placed them at some prominent places such as department stores, cinema halls and music centres. Another prominent ad of the month was the one announcing that the Kantipur TV is to start telecasting soon. Layout of the ad is nice, says one ad watcher while he points out that the use of the same logo to represent every media under Kantipur brand is not wise. Had each brand been represented by a different logo, it would have helped in such times at today when the Kantipur Group is being criticized of trying to control all the media. One ad watcher also pointed out that this ad campaign is less for the promotion of the product and more for the creation of an impression in the minds of the people that as Kantipur TV is going to start telecasting soon, the charge labeled on it by CIAA of corruption while getting the security bond (or bid bond) returned from the communication ministry is pointless. The launch of Signature whisky in Nepal from India’s liquor giant McDowell’s was expected to create something new in advertisement campaign, but the ad watchers say that they were disappointed. The company used the same ad that was produced in India with the Indian consumers in mind. Therefore, the headline of the ad has lost the power in Nepal. To be an MD in Nepal, you need not reach 36 years. The ad scores low in terms of credibility also because it does not give the name of the company prominently. Signature whisky may be well-known in India, but for Nepal it is a new product and, therefore, this information will be important in Nepal. Moreover, the ad also does not mention that the product is a premium whisky. The relevance of these information is higher also because there already used to be another whisky in Nepal under the brand Signature. So people may confuse the McDowell’s Signature with what was already here in the past. But if the ad is targeted to only those who already know Signature as a premium whiskey brand from McDowell's (and therefore they need not be reminded of these facts), the Nepali language dailies may not be the proper media. Motorcycle-marketing is getting more and more competitive with so many brands coming to the streets of Nepal from both north and south of the country. But the leaders manage to be ahead somehow and their leadership is reflected also in the creativity in their ads. However, shortcomings are there also in the ads from such leaders. The latest example is provided by Hero Honda for its most recently launched bike model “Ambition”. And the praise the ad has received is for its powerful headline, wide space used and unconventional layout of the ad orienting it as a landscape print. Also the colour combination is impressive – the yellow coloured bike matches well with the yellow coloured letters in the main points of the text. Moreover, it gives the idea about the price, thus making it easier for the buyer to make the purchase decision. But as any other bike ad, this ad too lacks in credibility at least in one count. The 79 kmpl of mileage claimed is presented in bold letters but the footnote is in fine prints stating that the mileage claimed is only under standard test conditions. “This is misleading to the buyer”, says one ad watcher challenging the company to make similar claim also on “standard road conditions”. Another shortcoming of the ad is that it does not mention the range of colours available. “Though the mention made about the price has helped the buyer with one very important information needed for the purchase decision, he still needs to call the company just for the colour.” The instant noodles market is finally getting out of the tradition of brands with disyllabic words. The example is the launch of the brand “2PM”, a name that stands distinctly out in the crowd of "Wai Wai", Rum Pum", "Mayos" or "Min Min". And the market watchers praise the advertisement campaign for this brand. First, it has played very beautifully with the words - ‘plate’ in English and ‘Pet’ in Nepali to make it Petfull, and ‘100 gms’ packet with the ‘100%’ contentment (here the 'pet' means the 'stomach'). Also the brand name is very good, easy to recall. Though it seems to be a copy of 8PM whisky that is available in India, still the copy is creative, says one ad watcher. The name of the brand is not repeated in the 2PM ad, a weakness found in most of other Nepali ads. Also the colour combination used in the ad is very good. The price also is mentioned prominently helping the buyer in his purchase decision. Also worth analyzing is the motor car ad for Mahindra’s Scorpio. “A very good ad and a very nice car”, was the immediate comment from one ad watcher when he was shown this ad. “The headlines are so good.” But he was quick to point out two shortcomings. One was the fact that the ad was originally created by some ad agency in India and it was executed in Nepal. So the claim made by the Nepali ad agency for the same (by printing its name at the place which is used to give the name of the creative maker) is unethical. Secondly, the print quality of the daily paper in which the ad appeared was pretty bad giving a bad image about so nice a car. Hence the media selection for the ad was wrong. |
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