16 March 2011

News Update: Antique: March 16, 2011

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Global News
􀂄 Federal Reserve policy makers said U.S. growth is becoming more durable and higher
energy prices will have a temporary effect on inflation as they affirmed plans to buy
USD600bn of Treasuries through June.
􀂄 U.S. stocks escaped the brunt of a global selloff that sent Tokyo shares to the worst twoday
drop since 1987, paring losses as Japanese officials made progress stabilizing
damaged nuclear reactors and the Federal Reserve

ASHOK LEYLAND: BUY, TP-Rs76 (40% upside) PINC Power Picks: March 2011

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What’s the theme?
The commercial vehicle (CV) segment took a hit for a couple of months to absorb pre-buying due to new
emission norms, effective October 1, 2010. The domestic truck segment picked up momentum in December
2010 on strong economic growth. Further, increased production at Ashok Leyland's Uttarakhand facility is
expected to boost margins.
What will move the stock?
1) Management targets 95k units during FY11 while we estimate volume of 89k units. We expect the
company to surpass our estimates by 4-5%. In FY12, we expect Ashok Leyland to record volume growth of
10% to 97k units with an upward bias. 2) Due to fiscal benefits available at the Pantnagar unit, we expect
Ashok Leyland to realize significant savings per vehicle produced at the facility. Production is expected to
ramp up to 15k units in Q4FY11 as against the YTD number of 5K units. We estimate margin expansion of
100bps in FY12 due to increased contribution from this facility. 3) Ashok Leyland entered into a JV with
Nissan, to capture the high growth in the LCV segment. The JV is likely to commence production by H2
CY11. However, in our earning estimates, we have not considered any volumes for this JV during FY12.
Commissioning of this JV would boost our FY12 earnings estimate.
Where are we stacked versus consensus?
Our earnings estimates for FY11 and FY12 are Rs4.3 and Rs5.5 respectively. Our FY12 earnings estimate
is 3.6% lower than consensus estimate of Rs5.7. We have a 'BUY' recommendation on the stock with a
target price of Rs76, which discounts FY12E earnings by 14x.
What will challenge our target price?
1) Increase in prices of raw materials such as steel and rubber affecting profitability; and 2) Significant rise
in interest rates increasing cost of ownership.

PTC FINANCIAL SERVICES IPO:: SMC Ranking : 3 star:: FAIR

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Issue Highlights
Industry Financial services
Total Issue 156,700,000
Fresh Issue 127,500,000
Offer for sale 29,200,000
Issue Size Cr. 407.42-438.76
Price Band (`) 26-28
Offer Date 16-Feb-11
Close Date 18-Feb-11
Face Value 10
Lot Size 250
IPO Grade CARE,ICRA IPO Grade 4
Indicating above
average fundamentals
CRISIL IPO Grade 3
Indicating average
fundamentals
Issue Composition
Net Issue 156,700,000
QIB 78,350,000
NIB 23,505,000
Retail 54,845,000


Business Overview
PTC Financial services is an Indian non-banking financial institution promoted by PTC
India Limited ("PTC") in September 2006 with the objective to make principal
investments in, and provide financing solutions for, companies with projects across the
energy value chain. It is one of the few financial institutions in India that provide both
equity and debt financing, including short-term and long-term debt, as well as structured
debt financing.
With a focus on infrastructure development, it offers an integrated suite of services
including provision of financing to, and make investments in, private sector Indian
companies in the power sector, including for power generation, equipment supply and
fuel source projects. The company is currently focused primarily on power generation
projects in India and also provides fee based syndication and advisory services as well as
carbon credit financing against certified emissions reduction (CER).
PTC holds 77.60% of its equity share capital and GS Strategic Investments Limited (an
affiliate of The Goldman Sachs Group, Inc.) and Macquarie India Holdings Limited (an
affiliate of The Macquarie Group) each hold 11.20% of its equity share capital.
Strengths
Composite financial services platform: The company is a one stop solution provider
offering a comprehensive range of financial products and services that add value
throughout the life cycle of projects across all areas of the energy value chain that enable
it as a preferred financing provider for power projects. As of December 31, 2010, of the
seven principal investments that involve power generation projects, aggregating
3,221.45 MW capacity, one project has commenced operations at full capacity while two
projects have commenced operations for part of their respective capacities,
representing, in the aggregate, approximately 175.6 MW capacity currently under
operation. The investments of the company in greenfield projects represents 79.24% of
total principal investments as of December 31, 2010 and most of these projects are in
advance stages of development.
Strong domain knowledge: The company benefits from the industry experience of its
promoter PTC. Its power sector knowledge and experience helps in identifying
investment opportunities with high potential and effectively manage risks associated
with such opportunities. Its management team has significant experience in the power
sector and the financial services industry that facilitates in identifying specific
requirements of power project developers and offer structured products and services
while effectively managing associated risks and maintaining competitive margins. Its
status as an NBFC and IFC provide greater flexibility than some of the competitors,
particularly banks, and helps to quickly and efficiently capitalize upon financing
opportunities that arise.
Robust balance sheet: The total assets, total income and profit after tax of the company
have grown at a CAGR of 191.54%, 312.86% and 293.86% respectively. As on December 31,
2010 the capital to risk-weighted asset ratio of the company was 60.57% and return on
average total assets in fiscal 2010 was 3.20%. Its long-term bank borrowings have been

rated “LA+” (positive outlook)” by ICRA, while NCDs have been rated “LA+ (positive
outlook)” by ICRA and "BWR AA" (stable outlook) by Brickwork. Its short-term borrowings
have been rated "A1+" by ICRA, which is the highest credit quality rating assigned by ICRA
to short term debt instruments.
In a relatively short period of 11 years its loan portfolio has grown significantly and as on
December 31, 2010, the outstanding loan stands for Rs.595.11 cr to 13 companies with
projects representing 6,794 MW of aggregate power generation capacity. As of December
31, 2010, it had entered into definitive agreements for financing arrangements for an
aggregate amount of 1119.87 cr to 17 companies, with power projects representing
8,283 MW of power generation capacity. As of such date, it did not have any non
performing assets in the outstanding loan portfolio.
Strategy
To expand fee-based services and CER financing: The company intends to grow its
principal investment and debt financing businesses as well as expand fee based and other
services, to ensure effective sourcing and crosssell of its financing products and services.
It aims to increase focus on its current fee-based services that include primarily debt
facility agent and security agent services as well as various advisory services such as
techno-commercial appraisal services. It also intends to increasingly focus on debt
syndication activities in the future to effectively understand the risks and opportunities
in a project and structure financing solutions. It also aims to develop specific expertise in
carbon credits (CERs) segment to effectively capitalize on the growing carbon market
and develop capabilities to offer carbon credit advisory services.
To lower cost of funds: The company aims to lower its cost of funds through the issuance
of infrastructure bonds at comparatively lower yields, as holders of such bonds are
entitled to certain tax benefits. With the view that foreign credit markets offer more
cost-effective terms for long-term debt than the domestic credit market, it has entered
into a financing arrangement with DEG for an external commercial borrowing in an
aggregate amount of 116.51 cr for the financing of renewable energy projects. It has
also have entered into a letter agreement with International Finance Corporation on
January 20, 2011 for a proposed loan of 224.05 cr to support and expand its lending
program to renewable energy projects. It intends to develop and maintain an asset base
with an optimal mix of principal investments and debt financing and also increase the
proportion of long-term debt in its debt financing portfolio so as to further improve credit
ratings for its long-term borrowings resulting in lower cost of funds.
To focus on renewable energy and other emerging segments of the power sector: On
account of significant investment potential in the renewable energy sector in India, the
company continues to evaluate strategic initiatives focused on the renewable energy
value chain. As of December 31, 2010, the company's board had approved aggregate
equity commitment of 82.21 cr for four companies and aggregate debt commitment of
327.33 cr for 12 companies in the renewable energy sector. It has also sanctioned
financing against CERs to two renewable energy companies.


Risks
Volatility in interest rates:
The company's business is significantly dependent on interest income from its lending and
treasury operations. In fiscal 2010 and in the nine months ended December 31, 2010,
interest income represented 51.44% and 70.19%, respectively, of its total income.
Changes in interest rates could affect the interest rates charged on interest-earning
assets and the interest rates paid on interest-bearing liabilities in different ways. Being a
non-deposit taking NBFC, it is exposed to greater interest rate risk compared to banks or
deposit taking NBFCs as a result of its relatively higher cost of funds. Thus, volatility in
interest rates can affects its lending and treasury operations that could cause its net
interest income to decline and adversely affect its return on assets and profitability.
Long gestation period of Power projects: Its business mainly consists of making
principal investments in, and lending to, companies engaged in energy sector projects in
India, particularly to power generation projects. Power sector projects have long
gestation periods before they become operational and carry project-specific as well as
general risks. The development of energy projects in India requires various
environmental clearances that may be difficult to obtain in a timely manner or at all. The
long-term profitability of power project investments, once they are constructed, is
partly dependent on the efficiency of their operation and maintenance of their assets.
Operational disruption, as well as supply disruption could adversely affect the cash flows
available from these projects.
Concentration on few borrowers: As of December 31, 2010, its Board had approved total
debt commitments aggregating 2256.73 crore of which documented, unfunded
outstanding loan sanctions were 524.75 cr and its ten largest debt commitments
approved by the Board represented 54.70% of its total debt commitments.
The single largest debt commitment as of December 31, 2010 was 139.40 cr for
Rukminirama Steel Rollings Private Limited, which also represented the single largest
debt commitment approved by the Board for any single borrower group. This represented
6.18% of the total debt commitments approved by the Board as of December 31, 2010,
and was also the largest unfunded debt commitment approved by the Board as of
December 31, 2010.If any of the loans to these borrowers become non-performing the
quality of its loan portfolio may be adversely affected.
`
`
`
Valuation
Considering the P/E valuation, the stock is priced at pre issue P/E of 27.15x on the lower
end and 29.23x on the higher end of its annualised FY11 EPS of `0.96. Post issue, at price
`26 and `28, the stock discounts its FY11 annualised earnings per share of `0.74 by 35.11x
and 37.81x respectively. Looking at to P/B ratio, the stock is priced at P/B ratio of 1.83x
and 1.54x on the upper end of its pre issue book value of `15.29 and post issue book value
of `18.17 respectively.
Outlook
The continued power deficit in the country and the government's thrust in the
development of power sector provide huge lending opportunities to the company.
Promoters' expertise and extensive focus on the sector gives the company a competitive
edge. However, short track record with relatively small balance sheet restricts its ability
to fund large size projects. Looking on the valuation part, the offer can be a good bet for
the investors with long term perspective.



RBI likely to hike rates on March 17 as February inflation remains stubbornly high : JPMorgan

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India: RBI likely to hike rates on March 17 as February inflation remains stubbornly high


  • Inflation shows no signs of abating with February inflation printing at 8.3 % oya, belying market expectations of a moderation to 7.8 % oya
  • While primary food inflation expectedly moderates, the monthly momentum of non-food manufacturing inflation increases sharply and is now running well into double-digits
  • Meanwhile, December inflation is revised up by a whopping 100 bps to 9.4 %; sharp retrospective revisions over the last 3 months suggest that February inflation will likely end up closer to 9% in the final analysis
  • With the current inflation trajectory significantly above the RBI’s comfort zone and showing no signs of abating, the RBI is expected to hike policy rates by 25 bps at its mid-quarter review on March 17

IRB INFRA: BUY, TP-Rs269 (45% upside) PINC Power Picks: March 2011

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What’s the theme?
IRB infra is a proxy play on the Indian road sector. It is among the largest BOT operators in India with inhouse
execution capabilities; it currently has 16 BOT projects, of which ten are operational, six are under
construction. IRB is well positioned to add projects worth $1bn - about 4-6 BOT projects per annum -
without any equity dilution.
What will move the stock?
1) Timely execution of projects under construction will act as a catalyst for stock price.
2) NHAI's order awarding this year was laggard, we expect awarding activity to pick up in FY12, as the new
Road Minister Mr C P Joshi has set out a target of awarding 11,151km for next year. Hence, we expect
IRB to be major beneficiary of awarding process as IRB is pre-qualified for projects worth Rs250bn.
3) After the recent stock price correction, the stock is available at a compelling P/BV of 2.5 & 2.1 for
FY11E and FY12E resp and is trading at a PE 11.3x FY12.
Where are we stacked versus consensus?
Our FY11E and FY12E earnings estimates are at Rs14.9 and Rs16.4, which are 3.6% higher and inline
for FY12 consensus estimates. We expect topline growth of 47.6% at Rs 25.2bn for FY11 and 40% at
Rs35.2bn for FY12 vs consensus estimate of 53.2% at Rs26.1bn and 49% at Rs38.9bn.
We believe recent stock price correction provides good entry point for long term investors with upside
potential of 45% on our SOTP based target price of Rs269 vs consensus target of Rs275.
What will challenge our target price?
1) Lower traffic growth; 2) Slowdown in execution of current orders; 3) Any change in government policy
that may adversely affect current tolling charges.

India Market Recap - by Vishal March 16, 2011

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* INDICES: Sensex 18,358(+191), Nifty 5,511(+61), CNXMCAP 7,639(+105).
* VOLUMES: NSE $2.51bn(11,362), BSE $0.75bn(3,398cr), F&O $21.36bn(96,392cr)
* AVERAGE 10 DAYS MKT VOL: NSE $2.57bn (11,594) BSE $0.74bn (3,348)
                          F&O $25.89bn(1,16,814).
* SECTORS: REALTY +2.47%  METAL +0.75%   BANKEX +2.15%   POWER  +1.30%
           AUTO +1.41%  CAP.GOODS +0.85% PHARMA +1.42%  IT +0.86%.
* ADV-DEC RATIO : BSE500 Index 398 Advances & 99 Declines.
* INDEX GAINERS : RELINFRA +5%, SBI & I.BANK +3%, DLF, TCS, M&M, BHARTIARTL &
                  RCOM +2%, TATAMOTORS & NTPC +1.5%.
* INDEX LOSERS  : HLL -1%.

* TOP 5 VOLUMES : RIL, SBI, I.BANK, T.COFFEE & JSW STEEL.

* MAJOR BLOCKS  : 1) GLAXOSMITHLINE        1,83,898 @ 2045.00,
                  2) AMTEKAUTO             4,50,105 @  121.70,
                  3) GREAVES COTTON       12,86,000 @   85.10,
                  4) CAIRN IND             5,00,000 @  341.00,
                  5) PANTALOON RET        20,00,000 @  315.00,
                  6) JAGRAN PRAKASHAN      6,00,000 @  113.75

* BSE500 GAINERS: JM FINANCIALS +17%, SHREE GLOBAL TR +16%, PARSVNATH DEV &
                  BILT +11%, VIP IND +9%, CENTRAL BANK & GUJ FLORO +8%,
                  BF UTILITIES, TVS MOT & HEIDELBERG CEM +7%.
* BSE500 LOSERS : KGN IND -5%, BALKRISHNA IND -4%, MPHASIS & JAIN IRRIGATION
                  -3%, THERMAX, MCNALLY BHARAT, NESTLE INDIA & GLAXOSMITHLI -2%

* FII INVESTMENT FROM 1st JAN 2011 to 14th Mar 2011: $-1.72bn.

Accumulate PATEL ENGINEERING : Target Rs 196; Kotak Sec

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PATEL ENGINEERING
RECOMMENDATION: ACCUMULATE
TARGET  PRICE:  RS.196
FY12E P/E: 8.9X
q We spoke to the company about status of delayed projects as well as
order inflow scenario
q Order inflow scenario continues to remain weak in the hydro power segment
q Recent news flows suggest that company is actively bidding for road
project bids
q Based on delays in order inflow and project execution, we downgrade
our estimates for the company going forward.
q We continue to maintain ACCUMULATE on the stock with a revised price
target of Rs.196 (Rs.254 earlier). We believe that stock will continue to
underperform in the near term till order inflow and project execution
ramps up.

Kotak Sec: News Update: March 16, 2011

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Economy News
4 Japan raced to avert a catastrophe after fire broke out on Wednesday at
a nuclear plant that has sent low levels of radiation wafting into Tokyo,
prompting some people to flee the capital and triggering growing
international alarm at the escalating crisis. (ET)
4 Advance tax payments made by 100 firms based in the country’s financial
capital rose by one-fourth for the three months ending March, belying
fears of a tight quarter with shrinking margins for Indian companies.
(Mint)
4 The Union cabinet has approved the Constitutional Amendment Bill to
roll out the Goods and Services Tax (GST), hoping that a debate in
Parliament will help build consensus on this crucial reform. (ET)
4 The Reserve Bank of India should weed out the many measures it now
uses to convey monetary policy stance and stick to just the single 'repo
rate' as central banks in the developed markets do, a panel headed by
Deepak Mohanty, executive director at RBI, has recommended. (ET)
4 State – owned oil firms on Tuesday hiked jet fuel prices by 6%, the
eleventh increase in six months. (Mint)
4 The announcement of guidelines for new bank licences could be delayed
with the government likely to set up a panel to vet the draft entry rules
framed by the Reserve Bank. (ET)

FII DERIVATIVES STATISTICS FOR 16-Mar-2011

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FII DERIVATIVES STATISTICS FOR 16-Mar-2011


BUY
SELL
OPEN INTEREST AT THE END OF THE DAY


No. of contracts
Amt in Crores
No. of contracts
Amt in Crores
No. of contracts
Amt in Crores

INDEX FUTURES
79236
2189.21
53730
1482.26
437066
12065.87
706.95
INDEX OPTIONS
183831
5029.38
181775
4923.80
1893350
52172.22
105.58
STOCK FUTURES
45388
1187.24
34343
898.98
1136812
28051.99
288.26
STOCK OPTIONS
8654
234.02
8174
224.17
40777
1087.11
9.86






Total
1110.65



BSE, Bulk deals, 16/3/2011

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Company
Client Name
Deal Type *
Quantity
Price **
ABC India-$
SEAGULL ENTERPRISE
B
45000
127.60
ABC India-$
SEARCH INVATRADE PVT LTD
S
65000
127.60
ACROPET TEC
FINANCECORP CAPITAL INDIA PRIVATE LIMITED
B
339914
103.63
ACROPET TEC
GROOVE FINANCE AND INVESTMENT PRIVATE LIMITED
B
241000
104.86
ACROPET TEC
CROSSEAS CAPITAL SERVICES PRIVATE LIMITED
B
523137
103.29
ACROPET TEC
S V ENTERPRISES
B
200000
105.00
ACROPET TEC
JIGYASA PROPERTIES PRIVATELIMITED
B
208000
104.46
ACROPET TEC
FINANCECORP CAPITAL INDIA PRIVATE LIMITED
S
339914
103.91
ACROPET TEC
GROOVE FINANCE AND INVESTMENT PRIVATE LIMITED
S
261000
104.53
ACROPET TEC
CROSSEAS CAPITAL SERVICES PRIVATE LIMITED
S
523137
103.40
ACROPET TEC
JIGYASA PROPERTIES PRIVATELIMITED
S
208000
101.65
Akar Tools
AKAR ALLOYS PRIVATE LIMITED
S
50000
75.02
Alpha Graphic
NALINI GIRISH CHHEDA
B
27000
12.00
Alpha Graphic
GIRISH JADHAVJI CHHEDA
B
29153
12.00
Alpha Graphic
DISHA BHARAT TAKWANI
S
29200
12.00
Anjani Fabrics
SAMEEP EXIM PRIVATE LIMITED
S
50000
51.41
Arman Fin Serv
PRABHAVATHI DEVI
B
24500
15.62
Arman Fin Serv
RAJGOPAL GILDA
S
24500
15.62
ARO Granite-$
AMIT SHANTILAL MOTLA
B
69408
40.06
ARO Granite-$
BHAVNA AMIT MOTLA
S
69408
40.05
ASSAMCO
LINK HOLDINGS P LTD
B
1600000
17.50
ASSAMCO
CROMWELL SECURITIES LIMITED
S
1600000
17.50
Bampsl Sec
KAUSHALAYA GARG
B
574100
3.25
Bampsl Sec
KAUSHALAYA GARG
S
568065
3.26
BGIL Films
DEVRAJ P RATHOD
B
41000
4.54
BGIL Films
ARPIT BHATNAGAR
S
51948
4.49
Chandni Tex
AARYA AGRO BIO AND HERBALS PVT LTD
B
1000000
68.74
Chandni Tex
AMRAPALI CAPITAL AND FINANCE SERVICES LIMITED
S
808271
65.56
Chandni Tex
VICKY RAJESH JHAVERI
S
92510
68.80
Chemcel Bio
GLOBAL CONCEPTS
B
204277
5.93