Morgan Stanley :India Strategy Weekly Earnings Tracker: Earnings Revisions Tick Up

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Summary of changes to consensus earnings estimates:
•
Over the past 3-months, the 2-year CAGR on MSCI India earnings has been revised down 1ppt while over the past 12- months, it has been raised by 1ppt.
•
At the sector level, over the past 3M, the 2-year CAGR for 5 out of ten sectors have seen downward revisions with Telecoms seeing the most downward revisions. Industrials, Tech, Healthcare, Consumer Staples and Energy have seen upward growth revisions.
•
The 1-year and 2-year forward earnings revisions breadth has been negative now for nine and four months in a row, respectively. At the end of the week, earnings revisions breadth for 1-year forward earnings is at -13% vs. the previous week's reading of -17% and the 2-year forward earnings breadth at -12% vs. -16%. This is the third consecutive week when downward revisions breadth has slowed down.

Macquarie Research, 1Q 2011 Oil and natural gas prices diverge

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Mark-to-market 1Q 2011
Oil and natural gas prices diverge
Oil markets break to new highs; Nat gas remains low
 Oil prices picked up momentum at the end of 4Q 2010, but broke upward in
February 2011 as several crises erupted in countries in Northern Africa and the
Middle East. Fears of supply disruption turned real as Libya broke out in Civil War.
We forecast that even with a cease fire, the country’s production will remain at
least 25% below prior levels of 1.6 mb/d for the remainder of 2011. Crude oil
fundamentals have provided a floor for prices, with demand increasing in nearly
all regions, and helping to draw global inventories down to normal levels—or even
below in many cases. Continued strengthening in OECD economies has kept
demand buoyed as many emerging markets attempt to control inflation through
tightening measures.

ACC: Interesting comments at AGM on market share, merger with ACEM ::JP Morgan

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ACC Limited Underweight
ACC.BO, ACC IN
Interesting comments at AGM on market share,
merger with ACEM


• ‘No plans for merger with ACEM as of now’: There has been constant
media (DNA) speculation of an impending merger between ACC and
ACEM. Holcim, the parent company, has been buying from the open
market in both these entities at varying points of time over the last year.
However, at the recent AGM (Annual General Meeting), ACC CEO Mr
Kuldip Kaura has been quoted by media reports (Businessline, ET),
that there are no merger plans with ACEM as of now. While the
comments in themselves would likely not end speculation of a merger
between ACC and ACEM (as some would highlight that the comment
only alludes to ‘now’ and things may change some months down the
line), we would highlight, that the above statement is the first public one
from either the company and that too by an individual of the level of a
CEO. ACC and ACEM have been trading at a significant premium to
peer group and on replacement costs primarily on expectations of a
merger which could potentially force parent Holcim to increase its stake
via open market purchases. ACC is trading at $150/MT.
• Plans to increase market share from 10.2% to 11%: In another
interesting comment, the CEO indicated that ACC plans to increase
market share from 10.2% last year to 11% this year. ACC recently
increased capacity to 30MT. We find the market share comment very
interesting given the ‘supply discipline’ that has been seen in the
market. FY11 saw JPA (N) increase market share sharply. Given our
expectations of a tepid industry growth in FY12E (we expect 7% growth
with domestic demand likely 218MT in FY12E), we believe that if both
ACC and JPA were to achieve their market share/growth targets,
the rest of the industry would need to cede market share (even as
they sit on excess capacity). A market share increase from 10.2% to
11% would imply that ACC’s dispatches increase by 16% in FY12E,
essentially at 2x the industry demand growth rate. Admittedly, ACC
reported a 10% increase in sales volumes in Q1CY11, however
achieving 11% market share for the full year, in our view, could
potentially lead to cement price pressure in markets like Central and
Eastern India.
• Earnings season- Cost pressure to be felt for the full quarter, while
price increase benefits for only half the quarter: While cement
companies have taken price increases more than the increase in costs, the
price increases came through only from Feb, while imported coal costs
were from Jan (though linkage coal price increases came in Feb). We
maintain our view that the long trade in cement is over given cement
price cuts that have started recently.

India Financials - From Macro to Micro: 4Q11E Preview : JP Morgan

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• We remain positive on India financials, despite a 15% sector rally since
late March. We do, however, recommend greater focus on stock picking
due to waning macro triggers and valuation support, and a few risks
(mainly oil) still hovering. Our top picks are ICICI and Yes.
• Curve steepening is done. We see little scope for short-term rates to fall
further - system liquidity is negative again and RBI hikes are now
imminent. Our rates team (Abhishek Panda) expects a short-term
“liquidity peak” in the week of 22 April, but sees the broad trend of
liquidity easing being over.
• 4Q results a non-event. We expect 33% y/y PAT growth (22%, ex-SBI)
for the sector in the results season beginning next week. These
backward-looking results are unlikely to drive stocks, given the decisive
change in the short–term rates since March. The key stocks - ICICI and
Yes (where margins will be closely watched).
• US investor feedback positive. Feedback from our recent marketing in
the US – a) the mood was positive and stocks, rather than macro, were
the focus b) a preference for private sector banks, very usual for the US,
remains and c) ICICI, Yes and NBFCs hogged most of the discussions –
surprisingly little interest in Axis.
• Oil remains a key risk. Crude prices are rising persistently and macro
risks are elevated with Brent at $122. Oil and Indian banks are usually
correlated, but strongly decouple for short periods. We think banks will
do well, despite high crude prices, if the economy remains resilient.
• ICICI and Yes the top picks. The drying up of macro triggers would
shift the focus to individual stocks. ICICI (with the scope to surprise on
NIMs and credit costs in the medium term) and Yes (which still trades at
a peer discount) remain our top picks in the space. We remain cautious
on PSUs, especially SBI.


4Q11E Preview
Strong profit growth: We expect sector net profit growth of ~33% y/y (5% q/q).
PPOP growth would be lower at ~16% y/y but ~20% y/y fall in credit costs would
lead to higher PAT growth. We estimate SBI’s profits will jump ~75% y/y given low
base and margin improvement, adjusting for which sector PAT growth would be
~22%.
Margins to moderate but credit costs to improve: We expect margins to moderate
for the sector by 5-10bps q/q, with ~10bps q/q moderation for the PSU banks and
marginal moderation for the private names ex HDFCB/IIB (flat margins). We expect
credit costs will continue to remain robust for private banks but we expect mixed
trends for PSUs given coverage ramp-up for SBI and continuing slippages for PNB.
What to watch out for: Private banks- Margin pressure and sustenance of asset
quality trends will be key trends to monitor. Asset quality has been improving for
private banks and the market expects positive trend to continue. For PSU banks,
margin pressure could be back ended in 1HFY12 but asset quality would be the key
metric to watch out for in 4Q11, as expectations is for an improvement in slippages
trend for large PSUs ex-PNB.
Key results: ICICI Bank: Margins and loan growth – We expect ~5bps margin
moderation and ~18.5% y/y loan growth. Axis bank: Asset quality improved in
3Q11 but margins are expected to moderate- we factor in ~10bps in 4Q11.SBI: Asset
quality is expected to improve but teaser loan provisions and coverage build up could
impact profit growth.
Key Winners: ICICI: Loan growth momentum to continue and credit costs would
continue to remain low. IndusInd: PAT growth of 64% y/y driven by strong all
round performance. Key disappointments: PNB: Slippages expected to remain high
in 4Q11 v/s improvement expected for other PSUs.

UBS :: India Oil and Gas Low KG D6 volumes: government response

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UBS Investment Research
India Oil and Gas
Low KG D6 volumes: government response
􀂄 Falling production: steel, refineries and petrochemicals worst hit
Volumes from KG-D6 have been falling. Currently, the government’s response to
a shortfall in production is designed for a short-term drop in production, whereby
sales cuts will be on a pro-rata basis for all customers. The government has
proposed a new response for a lower steady state of production. This could
negatively impact Reliance Industries (Reliance) in two ways: 1) lower revenue
from the E&P business; and 2) no upside from cheaper KG-D6 gas for the refining
and petrochemicals business.
􀂄 Government issued an order proposing sector priorities for KG-D6 gas
If the order is implemented, then the government will ask Reliance to first meet all
the contracted demand for fertiliser units, plants extracting LPG from natural gas,
power firms and city gas distributing companies selling CNG to automobiles, in
that order. Within a sector, the gas sales cut will be on a pro-rata basis. The priority
sector allocation totals 47.59 mmscmd, close to current production levels, leaving
almost nothing for steel plants, refineries and petrochemical units.
􀂄 Reliance has already signed GSPAs for 55.03 mmscmd
So far, Reliance has signed gas sales purchase agreements (GSPA) with fertiliser
plants, power plants, sponge iron plants, the LPG sector, as well as Reliance’s
petrochemical plant, refinery and city gas distribution companies. Gas sales for the
first week of April were about 50 mmscmd, out of which about 11 mmscmd was
sold to fertiliser plants, and 26 mmscmd to power plants. The remaining 13
mmscmd of gas was consumed by other sectors such as sponge iron plants, LPG,
city gas distribution, petrochemical/refinery and the RGTIL line for system use
gas.

UBS :: Tata Chemicals Gabon Urea investment—a positive

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UBS Investment Research
Tata Chemicals
Gabon Urea investment—a positive
􀂄 Gabon Urea investment—an attractive option
Tata Chemicals has signed an agreement with Olam and the Republic of Gabon
(ROG) to acquire a 25.1% equity stake in 1.3 mio tpa urea project in ROG for
US$290m. The project is estimated to cost US$1.3bn (to be funded at a
debt:equity of 65:35). Tata Chemicals will also provide project management
consultancy services as well as operation and maintenance (O&M) services for the
project. The company mentioned that investments in ‘stream 2’ will be done at par
with Olam and ROG.
􀂄 Gabon acquisition to address concerns about ability to deploy capital
Our checks suggest investors are concerned about Tata Chemical’s ability to
deploy capital in new projects. We believe this investment addresses some of the
concerns.
􀂄 Tata Chemicals to sell investments—a positive, in our view
Tata Chemicals plans to fund the acquisition through debt and the sale of
investments as well as through a preferential placement to Tata Sons. We think this
could be positive for sentiment.
􀂄 Valuation
We retain our Buy rating, and our sum-of-the-parts based price target of Rs500.00.
At our price target, the stock is trading at 13% FY12E cash yield. Our estimates
and price target do not include any value creation from the Gabon Urea investment


Gabon investment—a positive
Tata Chemicals will invest US$290m in the urea project in the Republic of
Gabon (ROG). The project is part of a urea complex that is a JV between Olam
and ROG. The project details (from Tata Chemicals and Olam) are as follows.
􀁑 Overall project capacity—1.3mio tpa for the first stream (in which Tata
Chemicals is investing.
􀁑 Project costs—US$1.3bn. Proposed debt:equity ratio—65:35.
􀁑 Tata Chemicals will invest US$290m for a 25.1% stake in ‘stream 1’.
􀁑 ‘Stream 1’ is estimated to generate an annual EBITDA of US$300-350m.
The project will enjoy tax holidays for the first 10 years and a concessional
tax rate of 10% after that.
􀁑 Tata Chemicals will provide project consultancy and O&M services for the
project.
􀁑 According to Olam, the JV has obtained insurance against potentially
insufficient gas availability.
􀁑 Tata Chemicals will invest at par with Olam and ROG in ‘stream 2’ and will
hold a higher stake in ‘stream 2’ compared to ‘stream 1’.
We estimate the investment will generate 17% equity internal rate of return
(IRR) as shown in the following table. Assuming Tata Chemicals has a 25.1%
stake in ‘stream 2’ and invests in the project at par, the combined IRR for the
two streams will be 20%. Project management and O&M fees should also
enhance the IRR. Assuming Tata Chemicals gets 2% of capex as project
management consultancy fees and 2% of EBITDA as O&M fees (above their
costs); the project IRR would improve by 3%.


􀁑 Tata Chemicals
Part of the Tata Group, Tata Chemicals operates in two segments: inorganic
chemicals (70% of overall revenue) and fertilizers. Inorganic chemicals includes
soda ash, and Tata is the second largest producer in the world after the
acquisition of GCIP in March 2008. The fertilizer business includes urea (12%
of India's capacity) and phosphatic fertilizers. The company is the largest salt
manufacturer in India with c50% share of the branded iodized salt market. Khet-
Se Agriproduce, a 50:50 JV between Tata Chemicals and Total Produce, is a
fruit and vegetable sourcing, packaging and distribution company.
􀁑 Statement of Risk
Tata Chemicals is present in two areas—soda ash and fertilisers. We believe the
main risk in the soda ash business is low capacity utilisation and low realisations
due to economic slowdown. In fertilisers, it is exposed to regulatory risk.

Accenture- Takeaways from Analyst Day - Upbeat Tone, In-Line Outlook: JP Morgan

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Accenture plc Overweight
ACN, ACN US
Takeaways from Analyst Day - Upbeat Tone, In-Line
Outlook


ACN held its investor conference today in NYC, which was very well attended
and included upbeat presentations from management and various business heads.
Key takeaway was that Accenture is well positioned to outperform the industry,
and we remain confident that ACN has made the right investments to take
advantage of several early-stage secular trends (e.g., globalization, mobility,
regulation, cloud) to fuel sustainable premium growth. ACN prudently guided
FY12 revenue growth at 7-10% and EPS growth of at least 12% on slight margin
expansion, which was in line with our views, but perhaps short of some bullish
expectations of a double-digit guide. We reiterate our Overweight rating on ACN
and believe the stock is set up well for potential positive earnings revisions over
the mid-term.
• In-line FY12 revenue growth guidance. FY12 local currency revenue
guidance of 7-10% (vs. our est. of 8.5% growth) compares with overall 5%
industry growth in FY12. ACN highlighted various near-term demand drivers
such as globalization (resulting in consolidation in client industries), regulation
compliance, clients looking for operational excellence (driving process reengineering
and application rationalization work), and innovation. The
company is also seeing growth from new technology trends such as cloud,
mobility, data analytics, and smart-grid. In terms of verticals, the company is
investing in healthcare, consumer goods, banking, telecom, and utilities.
• EPS guidance also in line, helped by slight margin expansion and buybacks.
The company guided for FY12 EPS growth of at least 12% (vs. our estimate of
13%). Accenture expects slight margin expansion (JPMe 9bps in FY12) driven
by improving productivity, delivery efficiency, and industrialization. ACN also
committed to returning $2.8B+ in cash to shareholders in FY12 in form of
dividends and buybacks (vs. our estimate of $2.7B). ACN also expects to lower
its share count by 2-3% through buybacks. Management also reiterated its
acquisition strategy of pursuing tactical tuck-in deals.

Color of Money: real rates approaching the sweet spot for equities:: JP Morgan

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India Equity Strategy
Color of Money: real rates approaching the sweet spot
for equities


• Liquidity eases: In line with expectations, liquidity has eased substantially
over the last fortnight. March has seasonally been the peak for liquidity
tightness. The improvement is reflected across a range of indicators – the
deficit in the daily LAF has come off markedly, call money and money
market rates have declined sharply, and the coporate yield curve has
steepened from an inverted position. Our upgrade of Financials to overweight
last month was premised on these developments. We reiterate our positive
stance.
• Special focus - real rates approaching the sweet spot for equities: With
normalization in monetary policy and stabilization in inflation over the last
few quarters, real interest rates have been inching up. Current real rates
though are low compared to the historical range and are expected to gradually
rise further over FY12. Real rates of ~ 1%-2% have historically been good for
sustained high returns from India equities. The current trend suggests that real
rates are headed toward this sweet spot during FY12. A pick-up in the
investment cycle is, however, a pre-requisite for sustained low inflation and
higher equity returns.
• Investor sentiment turning positive: Over the last month, FIIs turned buyers
(US$1.5 bn) after a two-month gap. Key indicators of investor sentiment have
also turned around. These include EMBI spreads, inflows into local mutual
funds, implied volatility and corporate fund raising. Our money flow monitor
suggests inflows into Financials, IT and Energy and outflows from Consumer
and Healthcare.
• Insider transactions: Insiders were net sellers over the month. The
breadth was positive too.
Net Buy: GMR Infra, HDF Bank, Axis Bank, HDFC, Lupin
Net Sell: Suzlon, ITC, Koyak Mahindra Bank, Indusind Bank, Piramal
Health Care, Jindal Steel & Power

3 questions: Fed policy shift, China Consumer and Korea cyclicals ::UBS

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UBS Investment Research
Asia Equity Strategy
3 questions: Fed policy shift, China
Consumer and Korea cyclicals
􀂄 3 frequently asked questions
We answer 3 frequent client questions in the last few weeks in this week’s note.
􀂄 What sectors under/outperform around the first Fed rate hike?
History suggests yield stocks such as Telco and Utilities, and interest rate-sensitive
stocks such as Property, underperformed. Growth-sensitive sectors such as Energy,
Materials, Autos and Software tended to outperform. In the current cycle, we see
the Singapore Banks as attractive ahead of a Fed policy shift, if it happens in June.
􀂄 Is it time to buy the China Consumer stocks?
The stocks have underperformed MSCI China by more than 10% since Nov, on the
back of: 1) high relative valuations, 2) margin concerns due to higher commodity
cost and government pressure against price increases; and 3) deteriorating earnings
momentum, partly as a result of 2). Whilst we think inflation is likely to ease
cyclically, and therefore margin pressure may not worsen, valuation continues to
look expensive. We prefer buying the banks to play moderating inflation in China.
􀂄 How far can the Korean cyclicals keep running?
Clients have asked when stocks such as Autos and Petrochemicals could start to
underperform, given they have run up with strong earnings momentum, but look
expensive on PB and have high profit margins. Our analysis suggests that they tend
to underperform when earnings upgrades stop. As we highlighted on 4 April, we
think the risk is rising with the Yen depreciating against the Won.

Top Movers:: Business Line

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cent respectively

The BSE Sensex was down 0.33 per cent and the Nifty by a similar extent in a truncated week of trading. With negative sentiments across global markets owing to three-year high inflation rates in China and an 8.9 per cent registered in India, the markets had nothing positive to drive them forward. .

The top-performing stock among the large-caps was Hero Honda Motors which, after a much-maligned deal to part with its Japanese partner, gained 10 per cent through the week after declaring a dividend of Rs 70 (share price Rs 1,830). Another notable gainer from the automobile segment was Mahindra and Mahindra, which gained 3.5 per cent on reports of the company hiking its tractor prices. The BSE Auto index edged marginally ahead of the broader indices, gaining 0.44 per cent through the week.

The fourth quarter results got off to a bad start with IT bellwether Infosys getting hammered by 9.4 per cent on posting a disappointing set of fourth quarter results. Not helping the cause was its EPS guidance for 2012, which was quite sedate, not to mention exits in its top management team. The BSE IT index shed 4.6 per cent with Wipro shedding 3.4 per cent.

A strong performer this week was the BSE FMCG index, which gained 2 per cent. The index, which is filled with traditionally defensive bets, saw constituents such as Colgate Palmolive and gaining 5 and 4 per cent each. United Spiritswas one of the losers in the pack shedding 4.3 per cent.

The BSE Capital Goods index was also an outperformer, gaining 1.7 per cent through the week. Larsen and Toubro was reported to be searching for a buyer for its electrical equipment arm. The stock gained 3.1 per cent through the week. Crompton Greaves gained a similar 3.3 per cent on buying by mutual funds.

The BSE Metals index did not fare quite well, though one of its constituents, Bhushan Steel, the mid-sized steel producer, gained 9 per cent through the week. The Karnataka Government is reported to be fast-tracking land acquisition for steel projects, one of which is Bhushan Steel's six million tonne plant.

India Bulls Real Estate was another notable gainer this week, adding 6.7 per cent to its stock price on news that the promoters mopped up shares from the open market hiking their stake by 2.6 per cent. Higher interest rate concerns have been severe on the BSE Real Estate Index, which shed 2.2 per cent through the week with heavyweights, such as DLF and Unitechshedding 5.5 and 5 per cent respectively.

Despite concerns over softening margins, the BSE Bankex managed to gain 0.6 per cent with smaller banks such as UCO Bank, Federal Bank and Yes Bank gaining 5.8, 5.2 and 3.2 per 

Muthoot Finance IPO GMP (Grey Market Premium): : April 16th 2011

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Company Name	Offer Price	Premium
	(Rs.)	(Rs.)
Muthoot Finance	160-175	34 to 36

Muthoot Kostak Rs 3,000- Rs3,200

52-WEEK FLOP: ARSS INFRASTRUCTURE PROJECTS:: Business Line

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Hitting markets in March last year, the stock of ARSS Infra closed listing day with a gain of over 60 per cent. It proceeded to build on these gains for a good while longer, turning tail in the second half of 2010. ARSS Infra is a construction contractor for industrial projects, roads and railways.

ARSS Infra benefited in part from riding the first wave of the revival in initial public offers. The offer was also modestly priced. However, the collective rejection of the sector on slowing execution, delay in awarding of projects in roads and prolonged monsoons had a part to play in the nose-diving of the stock's price.

The stock had also commanded trailing valuations of over 20 times at its peak, high for a construction contractor, where valuations typically fall well short of even 16-17 times trailing earnings. The company did not also possess unique aspects that set it apart from other contractors which could have justified premium valuations.

Its order book was fragmented with a large number of small-sized orders, which does not support prospects of scaling up. Governance issues too popped their heads up as one of its promoters was facing criminal litigation proceedings at the time of the IPO. The December 2010 quarter saw net profits grow at just two per cent, against the tripling and doubling of profits in the two quarters before

52-WEEK FLOP: ARSS INFRASTRUCTURE PROJECTS:: Business Line

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Hitting markets in March last year, the stock of ARSS Infra closed listing day with a gain of over 60 per cent. It proceeded to build on these gains for a good while longer, turning tail in the second half of 2010. ARSS Infra is a construction contractor for industrial projects, roads and railways.

ARSS Infra benefited in part from riding the first wave of the revival in initial public offers. The offer was also modestly priced. However, the collective rejection of the sector on slowing execution, delay in awarding of projects in roads and prolonged monsoons had a part to play in the nose-diving of the stock's price.

The stock had also commanded trailing valuations of over 20 times at its peak, high for a construction contractor, where valuations typically fall well short of even 16-17 times trailing earnings. The company did not also possess unique aspects that set it apart from other contractors which could have justified premium valuations.

Its order book was fragmented with a large number of small-sized orders, which does not support prospects of scaling up. Governance issues too popped their heads up as one of its promoters was facing criminal litigation proceedings at the time of the IPO. The December 2010 quarter saw net profits grow at just two per cent, against the tripling and doubling of profits in the two quarters before

JP Morgan:: IT Takeaways from Our India Trip - A Long Runway for Offshore Growth

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Computer Services and IT
Consulting
Takeaways from Our India Trip - A Long Runway for
Offshore Growth


We recently returned from India where we met with 18 offshore IT and BPO services
participants. We came away from the trip believing demand for offshore ITS/BPO
remains strong, and likely has a long runway driven by a significant adoption by new
verticals/regions and offshoring of new services. However, the sector’s premium
valuation reflects high expectations (and risks), and we prefer stocks where we have
the most confidence in continued industry leading and high growth. We prefer CTSH
and TCS for these reasons, and also highlight ACN for its customer relationships and
best in class globally diversified business. We also view SYNT as our top small/mid
cap idea.
• Strong demand trend, with a long runway. We expect clients from newer
verticals/regions will increasingly look to offshore their IT and BPO operations, and
offshore firms will provide newer set of services. Near term, offshore demand
environment is likely strong with a potential of industry wide CY11 growth similar
(or potentially better in some case) to CY10’s (22% for IT services, according to
NASSCOM), although initial guidance of various firms will likely be lower. We
believe regulatory spending will be a net positive, a “refresh” cycle in clients’ IT
organization, and new technology trends will drive growth in CY11. We do not
expect significant growth headwinds in CY11 from pent up spending of CY10. We
heard demand remains strong in the financial services vertical, while healthcare,
manufacturing, and retail verticals will likely grow at above average rates.
• Supply should not constrain growth. We estimate the Indian education system
will generate enough technical and non-technical labor to meet the industry’s
demand. We calculate an industry-wide supply of 800k “industry-ready” engineers
over the next four years, compared to a demand of 600k people. Similarly, the
supply of non-technical labor (we estimate 1.3M) should also exceed demand of
400k people. We also expect a mid-to-high single digit increase in revenue per
employee for the industry over the next 4 years. We also believe wage inflation will
likely remain in double digits, but its margin impact is generally overemphasized
(we estimate ~130bps impact on CTSH from 15% wage inflation).
• Losing investment focus? We observed a higher focus on expanding/preserving
margins among many Indian firms (except CTSH), compared to the last year. We
believe there is a risk margin focus could come in at an expense of business
investments, specifically given that most firms are experiencing strong demand for
core services, which could reduce incentives to invest in new and emerging areas.
We believe these investments, although near term margin dilutive, are important and
could separate long term winners from losers in the offshore space. We believe ACN
is best positioned in terms of investing for diversified growth while CTSH’s aheadof-
the-curve investments in the offshore space should enable it to maintain its
growth leadership.


• Pure play BPO facing challenges. Outsourcing of BPO processes require much higher
due-diligence from clients with little or no payback in the first year. We believe high
initial costs could make many potential clients a bit reluctant to take the outsourcing
decision. Moreover, we view pure play BPO firms facing increasing competition from
IT services firms that can offer integrated ITS/BPO to their clients.
• Cloud. We believe cloud will be a net positive for offshore firms although it is unlikely
to move the needle for most firms (may be, except for TCS) over the near term. Indian
firms, in our view, will collaborate with other technology vendors (hardware/software
vendors), and will offer cloud based services. We did not see much interest for offering
and investing in SaaS solutions, but many firms will also likely offer advisory and
integration/implementation services around cloud migration.

52-WEEK BLOCKBUSTER: BAJAJ FINANCE:: Business Line

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Strong demand driven by consumption over the last couple of years has helped Bajaj Finance, a financier of a host of retail products and SME loans. It has come a long way from being a captive financier to Bajaj Auto vehicles. Its presence in semi-urban and rural areas helped it take advantage of the untapped business opportunities held in these regions. Bajaj Finance leveraged on these financing opportunities even as banks shied away from most of the non-mortgage retail segment.

Thanks to this, the stock of Bajaj Finance has continued merrily along its upward journey, clocking a 96 per cent gain over the past one year on top of the over 308 per cent the year prior. In addition to healthy growth in business, strong margins and improving asset quality of the book have aided the stock.

Bajaj Finance, over the last few years, increased focus on high-yielding businesses such as consumer durables, loan against shares and property and personal loans. As a result, net profits witnessed a triple-digit growth over the last few quarters. The return on assets improved from 1.3 per cent in FY-09 to 4.8 per cent (annualised) during the third quarter of FY-11. The net non-performing asset ratio came down from 5.5 per cent in March 2009 to 1.1 per cent in December 2010

Muthoot Finance - IPO: Invest:: Business Line

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Visit http://indiaer.blogspot.com/ for complete details �� ��The Initial Public Offer (IPO) from gold loan provider, Muthoot Finance (Muthoot), may be a suitable option for investors with a high-risk appetite.

The exceptional growth in gold loan disbursements (loans against gold jewellery) in recent years, the under-penetrated nature of this market and the high yields from these loans, despite being secured, make the gold lending business attractive within the banking/NBFC space.

Muthoot, market leader in gold lending with a 70 year record, may thus have bright growth prospects. However, the high margins and the rapidly-growing gold loan market may be vulnerable to risks from a reversal in gold prices, causing a dip in collateral value and a significant tightening of regulatory and capital adequacy norms.

At the upper end of the price band (Rs 160-175), the stock would trade at 2.46 times its estimated FY-12 book. At this valuation, it is at a premium to rival, Manappuram Gold, which trades at a price-to-book value multiple of 2.2 times. Valuations for most NBFC stocks have declined significantly from their highs of November 2010.

Muthoot has better reach than its competitors in terms of branch network. It also manages a bigger loan book, has better credit rating (LAA-) and higher return on net worth compared to Manappuram.

After this offer, Muthoot's capital adequacy ratio would improve to excess of 23 per cent from 15.06 per cent in November 2010, positioning it well to meet the 15 per cent requirement by April 2011. This may not only help Muthoot to maintain loan growth, but also aid net interest margins (NIM). Additionally, the company has been tapping Tier-II capital sources to augment its capital adequacy.

INDUSTRY AND COMPETITION

The gold loan market is pre-dominantly un-organised with pawn-brokers lending against this collateral at high rates. Muthoot, the market leader in the organised gold financing business, according to the data compiled by IMacs (ICRA management consultants), had close to a one-fifth market share, as of March 2010. In the period to November 2010, Muthoot's loan book has grown by 75 per cent .

Indian households are estimated to have a gold holding of anywhere between 18,000 and 20,000 tonnes. Given that gold is not an income-generating asset, the only means to monetise gold holdings is through loans. Theoretically, this translates into a Rs 30 lakh crore lending business opportunity (assuming a 75 per cent loan-to-value). According to ICRA IMacs industry report, the organised market size was only Rs 37,640 crore in March 2010.

Muthoot Finance, as of November 2010, holds 97.6 tonnes of gold as security. Given the size of the potential market, competition is a limited threat as many players can co-exist.

BUSINESS

The company generally gives small ticket loans with a tenor not exceeding one year, thereby limiting interest risk and asset-quality concerns. The loan-to-value (value of loan to value of gold pledged) varies from 60 per cent to 90 per cent.

However, there is an additional margin of safety, considering that it calculates value solely based on the weight of the gold content and excluding value of the stones, and so on. Therefore, the value of the collateral in its books is understated. Muthoot's average loan-to-value of gold, as of November 30, was close to 60 per cent.

The loan book of Muthoot (inclusive of securitised portfolio) grew at 82 per cent during the period 2007-08 to 2009-10. The average ticket size of loan is Rs 31,500 per account. The net interest margin of Muthoot was 10.4 per cent for the eight month period ended November 2010.

The high net interest margins may fall to some extent due to rising interest rates and cost of funds. The priority sector status for gold loans, classified as agriculture loans, has recently been removed by the RBI, which too may dent Muthoot's ability to raise funds at low cost. ICRA estimates that priority sector status made for a cost saving of 1-1.5 percentage points, which may now be lost.

However, the management is confident that given the shorter tenor of the loans, the rising rates can be easily passed on to the customers. The rising competition may also put pressure on the yields.

The company has a huge branch network, which is why the current cost-to-income ratio is high compared to other NBFCs. Over the years, as the branches start contributing fully to the business, the ratio may fall.

Fee income opportunities are aplenty, given the strong branch network. Muthoot has added 1,144 branches over the last one year, taking its branch network to 2,749 branches; it plans to expand into under-penetrated markets of North India. This would enable it to geographically diversify and maintain loan book growth.

RISKS

The buoyancy in the gold lending business in recent years is partly attributable to the steady uptrend in gold prices. With gold at a record high, a correction cannot be ruled out. For gold lenders, given that loan repayments are not in the form of EMIs, the principal will remain at risk if gold prices drop sharply.

The shorter tenor loans also require a high pace of customer additions to sustain high loan growth. Currently high growth in loan book is partly contributed by the rising value of gold pledged with the company. It is to be seen how this business works in a declining gold price environment.

Regulatory intervention in the interest rates, a la microfinance companies, too is a risk. There is a Supreme Court hearing awaited on inclusion of gold-financing companies in Kerala Money Lenders Act, which may cap the rate of interest.

According to the management, they have been excluded in other states from the Money Lenders Act. Increased focus of banks on gold loans may reduce the yields as they have access to lower cost funds. The existence of Muthoot Fincorp, a breakaway group, also in the gold financing business, may impede branding efforts.

Query Corner — DLF: TTK, Indiabulls real estate, Tata Sponge:: Business Line

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Indiabulls Real Estate (Rs 149.5): This stock is in a vicious downtrend since the January 2008 peak of Rs 848. The recovery from the March 2009 low could not retrace even one-third of this decline and the slipping and sliding began once again from the October 2009 peak formed at Rs 298.

The stock once again moved close to its 2009 trough this February and is currently attempting a recovery.

The stock will face resistance at Rs 177 and then Rs 225 in the months ahead. Investors with short- to medium-term perspective can exit the stock at either of these levels. The long-term outlook will turn positive only on a weekly close above Rs 375.

Big fund houses fail to impress:: Business Line

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If you are a mutual fund investor, you may often decide to buy or sell units based on the returns of individual schemes. But have you thought about how individual fund houses have performed across market conditions?

An analysis of the top 15 AMCs, together accounting for 95 per cent of the equity schemes' assets under management (AUM), shows that only a few have recorded a consistently good show across the many schemes they manage.

For instance, only three AMCs actually beat indices such as the Sensex, Nifty and BSE-100 across their equity funds, over one-, three- and five-year time-frames.

Index Outlook: Sailing in choppy waters :: Business Line

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SENSEX (19,386.8)

The holiday splattered week that has just gone by, stands out for chaos and unruliness. Sensex surged over 400 points higher in one session and then went hurtling down by over 300 points in the next, leaving investors bemused. These wild swings make it apparent that both bulls and the bears are currently very nervous and hence are causing exaggerated intra-day moves.

There was however no dearth of news flow in this short 3-day week. A sharp decline in crude prices triggered a bout of boisterous bargain hunting on Wednesday while spike in WPI numbers coupled with disappointing earnings forecast by Infosys caused nervous selling in later part of the week. This choppy movement is likely to continue next week too as stock prices react to the slew of earnings announcements from corporate biggies.

Tata Contra Fund: Hold:: Business Line

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Investors can continue to hold Tata Contra Fund. Marked improvement in performance over the last one year and a portfolio of contrarian yet promising stocks inspire confidence. The fund returned about 12.4 per cent over the last year, comfortably beating its benchmark CNX-500, which delivered 8 per cent.

What's more, the returns compare favourably with peers such as Religare Contra, L&T Contra and Magnum Contra. However, middle-of-the-order performance over a three and five-year period, means that the fund is yet to build itself a solid track record. Investors can watch for sustainability in current performance before buying more units.

Strategy: AlphaBet - Auto trades :: Kotak Sec,

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Strategy
AlphaBet
Auto trades. We initiate a Long Maruti, Short Hero Honda (HH) trade to benefit from
likely under-performance of HH due to the following factors—(1) cheaper valuations of
MSIL versus HH, (2) likely stronger growth in volumes and revenues of MSIL versus
those of HH and (3) likely pressure on HH’s margins relative to MSIL’s due to cost
increases in re-branding, R&D and infrastructure; also, aggressive growth targets by
several 2-wheeler players may result in price competition.

Realty Check India-- Perception vs. Realty:: JPMorgan,

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Realty Check India
Perception vs. Realty


Investment view – BSE Realty has gained by 24% from its Feb lows (vs. Sensex
return of 10%) underpinned by receding macro headwinds and cheap
valuations. Much talked about debt repayment pressure on companies over Mar-
11 seems to have passed away without much notice. Despite the run up, property
stocks are still trading ~40% below their Oct-10 levels (vs. this Sensex is ~8%
off Oct peaks) and valuations remain reasonably accommodative. We continue
to like IBREL/UT given sharp disconnect between asset value and market cap
and JPIN as a potential high cash flow yield (dividend play). In Bangalore we
like Prestige Estates given cheaper valuations, high level of residential pre-sales
and visibility on annuity portfolio.

Essar Oil : 4QFY11: Strong GRMs drive profit growth :: JP Morgan

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Essar Oil Ltd. Overweight
ESRO.BO, ESOIL IN
4QFY11: Strong GRMs drive profit growth


• GRMs drive 4Q growth: ESOIL reported 4Q profit of Rs3.21bn (up
78% y/y and 18% q/q) as ESOIL benefitted from strengthening product
cracks, particularly diesel.
• GRMs strengthen: ESOIL reported 4Q GRMs of $8.15/bbl (vs.
$7.21/bbl in 3Q; including $2.86/bbl sales tax benefit) as product cracks,
particularly diesel, continued to strengthen. With Asian demand
remaining strong, diesel spreads are likely to stay elevated in the coming
months. With the refinery expansion expected to be completed by
2QFY12, the rise in complexity is expected to enable ESOIL to earn
higher refining margins.
• Throughput remains robust: ESOIL achieved a throughput of
14.76MMT in FY11, a utilization rate of ~140%. The refinery expansion
project remains on track to be commissioned by 2QFY12, and will see
capacity rise to 18MMT, with further planned optimization taking
capacity to 20MMT by Sep-12. The expansion, along with the rise in
complexity will help ESOIL optimize its product slate and enable higher
margins, in our view.
• Raniganj closer to commercialization: The Raniganj gas field is closer
to commercialization, with the govt. approving a provisional gas price of
$6.75/mmbtu (includes ~$1/mmbtu transportation cost). The govt. is also
considering a policy for pricing/allocation of CBM gas. The pipeline to
Durgapur is PNGRB approved, and environmental clearances are
expected shortly.
• Price target, valuations and key risks: We maintain our Overweight
stance, and Mar-12 price target of Rs160, based on 8x EV/EBITDA for
the main refining business, and an NPV value for the Raniganj asset and
income/sales tax benefits. We do not ascribe any value to E&P potential,
retail upsides. Key risks to our call are a delay in the refinery expansion
project and an economic slowdown affecting the cyclical refining
business.

Reliance Industries: DGH versus RIL :: Kotak Sec,

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Reliance Industries (RIL)
Energy
DGH versus RIL. In a recent meeting of the management committee (MC) of the KG
D-6 block, the DGH has highlighted several shortfalls versus the field development plan
(FDP). These include (1) lower-than-agreed wells under production in D1 and D3 fields,
(2) delays in identifying drilling locations in laminated sand and channel area and
(3) RIL’s target of starting new development wells in mid-2014. RIL has reportedly
indicated production of 52-53 mcm/d in FY2012E and 46-47 mcm/d in FY2013E.
We retain REDUCE on RIL with a 12-month SOTP-based target price of `1,000.

JP Morgan:: Radico Khaitan - Leveraging on premiumisation

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Company Visit Note
Radico Khaitan - Leveraging on premiumisation


Radico Khaitan is the third largest branded spirits (IMFL) manufacturer in the
country with sales of 14.6mn cases (FY10).
• Leveraging on premiumisation. There has been substantial shift in product
mix of Radico Khaitan with volume share of premium brands rising from 8%
3 years ago to 18% now with its premium vodka brand, Magic Moments
registering volume CAGR of 40% over this period. Further product mix
enhancement will be aided by recently launched premium Morpheus brandy
and After Dark whisky. Given higher profitability for premium brands (nearly
3x that of regular brands), overall margins should benefit from this shift.
• Volume growth momentum likely to sustain at c15%. During 9MFY11
Radico registered 12% volume growth with mainline brands growing 17%.
Mgmnt expects volume growth rates to sustain at 15-16% over FY12 driven
by targeted 20% growth for the mainline brands. National launch of After
Dark whisky brand, increased distribution for Morpheus brandy, enhancing
bottling capacity in Tamil Nadu and introduction of more brands in CSD will
support growth rates.
• Improved mix and stable molasses costs to drive margin expansion.
Driven by faster growth for premium brands and price hikes (wtd avg price
hike of 2-3%), price/mix growth of 5-6% is easily achievable as per mgmt.
Radico will also be a key beneficiary of stable molasses prices. However glass
prices (c15% of COGS) are firm (up 10% since Mar’11). On better mix and
RM deflation gains, mgmnt expects 100-150bps improvement in operating
margins in FY12.
• Promoters shareholding increased significantly by 233bp q/q over Mar’11
quarter as per BSE filings.
• Balance Sheet concerns have eased now. Post the QIP issue of US$75mn
last year, net debt/equity ratio has come down from 3x in FY09 to 0.7x now
which should further support earnings growth.
• Radico is open for distribution tie up with premium international brands,
recent one being with Japan’s Suntory Liquors.
• Valuations. Stock is trading at 17x FY12E and 15x FY13E consensus EPS.
NOTE: THIS DOCUMENT IS INTENDED AS INFORMATION ONLY AND NOT AS A
RECOMMENDATION FOR ANY STOCK. IT CONTAINS FACTUAL INFORMATION,
OBTAINED BY THE ANALYST DURING MEETINGS WITH MANAGEMENT. JPMORGAN
DOES NOT COVER THIS COMPANY AND HAS NO RATING ON THE STOCHealthy volume growth momentum to sustain; More
introductions in CSD and national rollout for After Dark to
support growth
Radico Khaitan registered 12% volume growth in 9MFY11 with premium brands –
Magic Moments vodka and Morpheus brandy growing at much faster rates. Over past
three years product mix has shifted considerably in favor of high margin products.
Volume share of premium brands has increased from 8% three years ago to 18%
now.
Management expects volume growth for Magic Moments to be around 25-30% in
FY12 on increased penetration and higher growth for flavored vodka variants. There
is higher traction for white spirits, particularly vodka in India which currently forms
just 5-6% of overall spirits consumption in India and these low consumption levels
offer substantial headroom for growth for this category. Vodka sales are growing at
20-25% p.a. in the country and Magic Moments (dominating the semi-premium
vodka segment with c85% share) will be a key beneficiary of this trend. Further the
company is introducing two more variants of Magic Moments in Canteen Stores
(CSD).
Post the re-launch of 8 PM Whisky, there has been a healthy revival in its volumes
with 9MFY11 volume growth at 13% for this brand and management expects this
growth rate to sustain.
Radico’s another launch in premium space – Morpheus brandy has witnessed good
offtake and this brand garnered 0.17mn cases of sales in 9MFY11 as product reach is
extended to whole of South India.
Further upside to volume growth would come from widening distribution of After
Dark whisky brand, which was introduced last year. Initial consumer response to this
brand has been encouraging and management is quite hopeful about the success of
this premium whisky. It is currently sold in Northern and Western markets and by
June this year it will be likely rolled out to all key whisky consuming states as per
management.
In Tamil Nadu (largest liquor consuming state), Radico has tied up with two new
bottlers which will take the total number of bottlers (for Radico) to five in the state
and would further support sales of Morpheus, Magic Moments and After Dark brands
there.
Another important driver for volume sales would be introduction of Morpheus, After
Dark and two variants of flavored Magic Moments in CSD segment in FY12.
Overall Radico Khaitan expects volume growth of 15% for FY12E supported by
c20% volume growth for its mainline brands.

\Margins likely to benefit from improved mix
Radico Khaitan registered flat EBITDA margins over 9MFY11. While gross margins
expanded 300bp y/y during 9MFY11, higher brand spends and other expenses
eroded the gross margin gains. Aggressive media campaigns for 8PM, Magic
Moments, Morpheus and After Dark resulted in higher selling & distribution
expenses (+160bp y/y).
Management noted that molasses costs were stable q/q and are likely to remain stable
at these levels in Q4 and FY12. While there has been significant increase in sugar
and molasses production vs last year, offtake of molasses by ethanol industry has
kept the prices steady. Company’s current molasses procurement costs stand at
Rs450-460/quintal (flat q/q). Grain prices were also steady at Rs9000-9500 during
Q3FY11(vs Rs9500-10,000/tonne in Q2FY11).
Glass prices (which account for 13-15% of COGS) have moved up by 10% since
March 1st and this will weigh negatively (by 60-70bp) on margins as per
management.
Management noted that marketing spends will remain at current levels of 8-8.5% (as
% of sales) in coming quarters as it focuses on building its premium portfolio and
launching After Dark on a national basis.
Overall management is hopeful of increasing margins by 100-150bps in FY12 driven
primarily by 1) Improved product mix as high margin premium brands like Magic
Moments, Morpheus and After Dark grow at a much faster rate than regular brands,
2) Significant cost cutting initiatives including employee rationalization and 3) price
hikes (wtd average price hike of 2-3% likely during FY12) which may help negate
some impact of higher glass costs with molasses costs remaining stable.
Capex plans
Radico is looking to enahnce its ENA capacity at Rampur plant. It also plans to
increase its bottle printing capacity by c50%. Furthere they plan to automate the
bottling plants at Rampur completely. Overall management expects capex
investment of Rs500mn each in FY12 and FY13.
Debt levels
Radico has total debt of Rs5bn including US$34mn of FCCBs which are due for
conversion in July 2011 with an interest payment of 30%. Management noted that


interest charges have risen by 75-100bps for the company to c10% now. Company is
hopeful of reducing leverage via internal accruals.
Shareholding pattern
Promoters shareholding increased significantly by 233bp q/q over Mar’11 quarter as
per BSE filings.


Financial performance
Radico reported net revenue of Rs7.4bn (+20% y/y), EBITDA of Rs1.16bn (+19%
y/y) and Net Profit of Rs554mn (+73% y/y) during 9MFY11.Net profit margins (up
230 bps YoY) were helped significantly due to interest expense reduction post debt
reduction in Q4FY10

Accumulate: THERMAX; TARGET PRICE: RS.773: Kotak Sec

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THERMAX LTD
RECOMMENDATION: ACCUMULATE
TARGET PRICE: RS.773
FY12E P/E: 18.2X
q Order intake has continued to remain weak in Q4 FY11 with management
signaling at a significant moderation in order backlog as the company
enters FY12. In view of this, we are revising our FY12 earnings
downwards.
q The company has indicated that order enquiries continue to be healthy,
but a decelerating economic growth amidst higher borrowing costs is
making project investors cautious, thereby resulting longer order finalization.
q Stock has rallied 22% from its low. In view of the earnings downgrade
and limited upside to our target price, we revise rating from BUY to Accumulate
with a target price of Rs 773 (Rs 784 earlier). Premium valuation
is justified on account of strong balance sheet, clean corporate governance
track record and robust cash generation.

April 15, 2011: News Round-up �� Kotak Sec

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Economy News
4 International Monetary Fund (IMF) has cautioned emerging market
economies that increased capital inflows could complicate the efforts of a
tight monetary policy. (BS)
4 The government will introduce amendments to the Benami Transactions
(Prohibition) Act, which will give it the power to confiscate any property
that is declared benami. (ET)
Corporate News
4 Infosys Tech is aiming for a larger share of revenues from retail,
banking and healthcare customers by shifting roles of leaders handling
multiple business units. (ET)
4 Reliance Industries has refused to sell natural gas to power and
fertilizer plants by cutting supplies to non-priority sectors like steel and
refineries. (ET)
4 HPCL has installed a new Rs 9 bn processing unit at its Mumbai refinery
to boost refining margins by raising output of high-value products such as
petrol and cooking gas. (ET)
4 In a bid to tap $452 million fexofenadine drug market, Dr Reddy's
Laboratories has announced the launch of generic version of Allegra
fexofenadine HCl tablets in the US market. (ET)
4 The board of Fortis Healthcare took an in principle decision to acquire
86% shares of diagnostic services chain Super Religare Laboratories (SRL)
for an undisclosed sum. (BS)
4 NTPC Ltd has decided to go ahead with Rs 26 bn tender for expansion of
its gas-based Kawas project in Gujarat. Once the tender is finalized, it will
strengthen the corporation's case for getting a gas allocation from the
government. (BS)
4 Ashok Leyland is gearing up to launch its construction vehicles in July or
August this year, and plans to enter the light commercial vehicle segment
jointly with Nissan in the next quarter. It plans to invest Rs 2 bn in product
development this financial year. (BS)
4 Coal India (CIL) plans to invest up to $3 billlion in a coking coal mine, a
steel plant and a sea port on Indonesia's Kalimantan island, Central
Kalimantan Governor, Agustin Teras Narang. (BS)
4 Titan Industries has opened its first Helios outlet in Ahmedabad. It plans
to come up with 100 such outlets across the country within the next three
years. Helios is the company's premium multi-brand watch retail store.
(BS)

Sun Pharmaceutical – Poised for growth in Emerging Markets: RBS

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After achieving significant scale and size in US and India, Sun is now strengthening its presence
in EMs through its JV with Merck. Given the timelines required for product development and
registration in multiple markets, we expect significant synergies to flow in from 2014-15 onwards.
Sun and Merck enter into a JV targeting innovative branded generics in EMs
􀀟 Sun Pharma and Merck & Co have entered into a JV to develop, manufacture and
commercialize new combinations and formulations of incrementally innovative, branded
generics in the Emerging Markets (EMs). Each entity (Sun and Merck) would retain its
existing relationships and business (including India). The company indicates that the current
portfolio of products under consideration is less than 12 with the addressable market being
about 100 countries. However the focus would be on the top 10 countries which are expected
to generate about 80% of the JV's revenues.

Automobiles – Volumes continue to surprise:RBS

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Strong demand momentum despite rising cost of ownership (fuel, interest cost, vehicle price, etc)
continues as companies across the segment scaled historical peak volumes in March. However,
rising input costs are likely to dampen margins slightly. Sustained oil price increase remains a
concern for demand outlook.

Commodities - Latest LME OI data suggest new longs :: Macquarie Research,

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Commodities Comment
Latest LME OI data suggest new longs
 The LME’s latest open interest data suggest that new long positions have
been added over the last week. However, the latest rise in prices (in part
reversed today) appears to have taken its cue from foreign exchange markets
in the absence of fundamental short-term conviction in metals markets.

Power Grid : The ‘go-to guy’ in trying times:: Macquarie Research,

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Power Grid Corporation of India
The ‘go-to guy’ in trying times
Event
􀂃 Buying PWGR is a consensus call at the moment as concerns gather over
equity erosion of IPPs. This appears to be largely a relative call for the sector,
with PWGR looking fairly priced in our view. We’re expecting a relatively
strong result with little surprise heading into 4Q11 results, although as the
stock gets closer to Rs.110 vs. our share price target of Rs.100 we would opt
to take profits into strong FY11 results. Currently the stock is trading at 16.5x
FY12E NPAT vs. medium term EPS CAGR of 15%.
􀂃 Pair traders may consider going long-NTPC, short-PWGR, which may play
out post results. The ratio of PWGR/NTPC share price is at historical highs
between the highly correlated stocks.

Buy Infosys Technologies; Below expectations Qtr; Target price Rs3750.:: RBS

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Infosys Technologies
Below expectations
Infosys reported a weak set of 4Q11 results - US$ revenues up 1.1% qoq (RBS est
3.4%) and EBIT margin decline of 122bp. FY12 US$ revenue guidance of 18-20%
growth was line with our expectations, though the EPS guidance of Rs126-128
falls far short of our expectations.
Muted 4Q11 revenues due to qoq decline in volumes
! Infosys reported revenues of US$1.60bn, a qoq growth of 1.1% as compared to guidance of
1.0-2.0% revenue growth. Excluding the impact of cross-currency benefit versus guidance,
Infosys has missed the lower end of the guidance. Revenues were 2.2% below our estimate
of US$1.64bn.