News Round-up 􀁠 Kotak Sec : June 2, 2011

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Economy News
4 Core sector grows slowest in 5 months at 5.2% in April. The output of
crude oil, petroleum refinery products, coal, electricity, cement, finished
(carbon) steel grew 5.2% in April, industry ministry data showed. The six
core industries, which have a combined weight of 26.7% in the IIP. (ET)
4 India's exports stood at $23,849 million, or Rs 1058.2 Bn, in April. In rupee
terms, they grew 34% Y/Y. Imports grew at a lesser pace of 14.1%t to
$32.8 Bn in April, while the trade deficit narrowed to $8.9 billion from
$11 billion a year ago. (BS)
4 Twelve out of 18 passenger vehicle makers, accounting for more than 90
per cent sales, collectively posted an increase of only 8% compared to
14% in April. The companies sold 190,838 units in May as compared to
176,432 units in the same month of 2010. The Society of Indian
Automobile Manufacturers (SIAM) has revised its yearly growth forecast
for passenger cars from 16-18% to 14-16%. (BS)
4 Finance ministry is considering a proposal to increase the excise duty on
diesel cars. This comes on account of a widening gap between retail prices
of diesel and petrol. (BS)
4 India's coffee exports jumped up by 42% in May this year to 80,367
tonnes. The total export realisation rose by more than two-fold to
$244.41 million in May 2011 as compared to $113.42 Y/Y. (BL)
Corporate News
4 Tata Power has launched an offering of perpetual debentures of Rs 15
Bn. The mandated joint lead arrangers for the issuance are Standard
Chartered Bank and Yes Bank Ltd. (BL)
4 Ceat Ltd may roll out another round of price hike this month (2-3%
towards June end), as high rubber prices continue to put the squeeze
margins. It had raised tyre prices by an average of 3-4% across different
categories last month. Ceat is simultaneously ramping up production at
its 150 tonnes per day Halol plant, which was commissioned in late March
this year. (BL)
4 Five firms, including one from South Korea , have bid for NTPC's Rs 90 bn
tender for supply of nine units of supercritical power equipment. BHEL,
L&T-Mitsubishi Heavy Industries, Thermax-Babcock & Wilcox, Alstom-
Bharat-Forge and BGR-Hitachi, and South Korea's Doosan Heavy
Industries had placed bids. NTPC would evaluate the five bids and call for
price bids in 1-2 months. (ET)
4 Jyothy Laboratories is close to raising about $150-$200 mn from private
equity funds, with a deal likely to be announced in 6-8 weeks, three
sources with direct knowledge of the matter told media. The Indian
maker of fabric whiteners and detergents is in talks with a clutch of
private-equity funds including the Carlyle Group , Actis, TPG Capital and
Apax Partners to sell a minority stake, sources said. (ET)
4 Claris Lifesciences Ltd said it has received an in-principle approval for
its anaesthetic drug Propofol in the EU, enabling the company to process
its registration across 25 countries in the Union. The market size for
Propofol is estimated to be at $750 million worldwide and $150 million in
the EU. (BL)
4 Godrej Consumer Products Ltd (GCPL) has entered into an
agreement with African hair care company Darling Group Holdings to
acquire 51 per cent stake in the firm. It will acquire the African hair
extensions company in three phases; acquisition to be funded through
internal accruals and debt. Darling operates in 14 countries in sub-
Saharan Africa. Its flagship brand shares the name of the firm, with a
second brand, Amigos, which operates in a few African markets. (BS)


News Round-up
􀁠 A decline in cement output and lower growth in finished steel production slowed the
growth of infrastructure industries to 5.2% annually in April. (BSTD)
􀁠 SAIL's (SAIL IN) follow on offer in mid-June has been delayed due to unfavourable
market conditions. (ECNT)
􀁠 Car sales slowdown on high fuel prices & hardening interest rates. Though two
wheeler sales remained healthy with Hero Honda (HH IN) & TVS clocking double digit
growth. (TTOI)
􀁠 ACC (ACC IN) reported a 13.7% increase in sales in May at 1.99 million tones (MT)
over 1.75 MT in the corresponding month last year. (FNLE)
􀁠 Vodafone has paid the first tranche of USD 1.9 bn to the Essar group to seal the deal
for buying the latter's stake in Vodafone Essar. (BSTD)
􀁠 Godrej Consumer Products Ltd (GCPL IN) has entered into an agreement with African
hair care company Darling Group Holdings to acquire 51% stake in the firm. (BSTD)
􀁠 Lupin (LPC IN) has signed a licensing agreement with NeuClone Private Ltd for cell
line technology to develop cancer treatment medicines. (BSTD)
􀁠 Tata Power (TPWR IN) came up with an offering of perpetual debenture worth USD
333 mn, with a coupon rate of 11.4% per annum. (BSTD)
􀁠 Netherlands-based Danieli Corus has won a USD 400 mn contract from NMDC
(NMDC IN) to design and supply the country's largest blast furnace. (BSTD)
􀁠 Chinese telecom company Huawei has won a USD 400 mn contract from Bharti Airtel
(BHARTI IN) for expansion and management of its network in Africa. (BSTD)
􀁠 Honda's 2-wheeler arm for India plans to invest USD 311 mn, inaugurates 2nd plant.
(BSTD)
􀁠 SCI (SCI IN) is planning to place orders for 24 ships this financial year. (BSTD)
􀁠 Adani Enterprises (ADE IN) may sell shares in a unit that holds mining rights in the
Asia-Pacific region to international investors and use the proceeds to add energy
assets. (FNLE)
Source: ECNT= Economic Times, BSTD = Business Standard, FNLE = Financial Express, THBL = Business Line

Global Economic Outlook Still shining lights in a gloomier world .:Macquarie Research

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Global Economic Outlook
Still shining lights in a gloomier world
Event
 We revise our outlook for the global economy.
Impact
 The global economy has slowed over the past month, with weaker-thanexpected
GDP results from the US, and indications of a temporary growth
slowdown elsewhere in the developed world as higher oil prices take their toll.
While in the developing world, policy-driven slowdowns and normalisation in
growth rates continue to unfold.
 Macquarie Economics' key macro calls are: above-consensus on US GDP
growth with the slowdown in US growth proving transitory, and exports and
business investment driving growth to 3.5% over 2011; that markets are
overestimating the likelihood of a rate rise in the UK, with it unlikely that the
Bank of England will move rates until 2012; and Chinese policymakers are
ahead of the curve on inflation, with existing policy tightening resulting in
growth softening over 2Q11. We also think that the consensus is far too
optimistic on the Australian growth outlook.
Outlook
 We retain our view on the strength of the US recovery. Despite weak 1Q11
GDP data that has seen widespread market downgrades to GDP forecasts,
we expect that the slowdown will be transitory, resulting in significantly above
consensus US growth of 3.5% over 2011. The weaker 1Q11 data hinged
on temporary weather effects and a surprise fall in defence spending, which
are unlikely to be repeated.
 Indeed, the US recovery should continue to gain momentum, driven by
exports and business investment. Exports should be encouraged by the
weaker US$ and high agricultural commodity export prices. Business
investment intentions also remain elevated, suggesting that companies should
start to lift spending, particularly given the good revenue growth evident in the
1Q US reporting season. Improvement in employment should also support
consumption growth.
 Given the expected strength of the economic recovery, a key issue for
investors is the likely timing of a monetary policy response from the Federal
Reserve. We continue to expect that policymakers will complete QE2 by end-
June, and hold the size of the Federal Reserve's balance sheet constant
following this, before changing tone on inflation and growth in the subsequent
months to signal the beginning of asset sales heading into 2012, with the first
rate hike forecast for 1Q12.
 With the growth outlook in the UK remaining subdued, markets are
overestimating the likelihood of a rate increase from the Bank of England. We
continue to expect that UK rates will remain on hold, at 0.50%, until 2012,
compared to consensus expectations of 2-3 rate hikes by the end of 2011.

Bajaj Auto - Easing momentum ::RBS

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Bajaj Auto
Easing momentum
Bajaj's EBITDA for 4Q was in line, but PAT surprised on lower depreciation and
higher other income. We raise our EPS slightly on better currency hedging rates.
We expect Bajaj's market share to remain under pressure given Hero Honda's
aggression since its split with Honda, leading to pressure on profitability. Sell.

Buy ASIAN PAINTS: Can money

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Fundamental Reasons:-
Asian Paints is an India based global paints & decorative pigments giant having its dominance in the field of all
forms of pigments coating having the vast usages in ancillaries, Automotive, decorative & Industrial arena. Company
was incorporated seven decades before and since then, company has penetrated deep into the various vital aspects of
paints & coating industry of India. Growing in leaps & bounds, from a very humble beginning, Asian Paints becomes
the 10th largest decorative paint company in the world. Asian Paints is more than twice the size of its nearest
competitor. Asian Paints aims to become one of the top five Decorative coatings companies world-wide by leveraging
its expertise in the higher growth emerging markets. Simultaneously, the company intends to build long term value
in the Industrial coatings business through alliances with established global partners. Asian paints is present in 22
countries with 27 manufacturing locations, over 2500 SKU's, Integrated SAP - ERP & i2 - SCM solution.
Asian Paints has reported a better than expected Q-3;2011 result. Mainly on account of the all round performance
by its all verticals and higher exports. Asian paints has reported an excellent surge in the topline and bottom-line.
Based on the improving economic conditions, higher export and good margins, company have registered a good
performance after countering the net impact of surging raw material cost. Total revenue of the company rose to
Rs.1754.22 Crore as compared to Rs.1277.71 Crore in DEC’09, showing a YoY growth of 37.29%, while total profit
during the said period recorded at Rs 206.60 Crore against a figure of Rs 178.69 Crore on Y/Y basis a rise of 15.62%.
During the said period , Earning per share of the company also has improved significantly and recorded to Rs
21.54 from a average value of Rs 18.63 as on 31st DEC; 2009. Apart from higher realization, effective cost
management helped the company in recording this good performance.
Asian Paints is expected to garner good revenue and profit in coming quarters because of following facts: - 1. On the
recommendations of Booz, Allen and Hamilton, Asian Paints restructured itself into Growth, Decorative and
International business units. 2. Demand for Interior and Exterior Emulsions has been good and owing to
Government thrust to infra and construction activities, this demand may witness positive trends in future as well . 3.
Rohtak plant commissioned in April 2010 with an initial capacity of 1,50,000 KL, operating as per plans and has
achieved rated output.4. The Environmental Clearance from MoEF and Consent to establish from MPCB obtained for
the Khandala Paint Plant project. 5. Deep international penetration, Company is having own subsidiaries in African,
European, Asian and American countries, which may provide business opportunity for the company.6. Automotive
business in India may continue to grow in line with market.7. EBIT of overseas business has increased by 5% in the
period April – Dec 2010 compared to 9 Months of previous year. All these indicate about the possible steps,
instrumental to augment the value of shareholders.
Paint & Pigment sector is associated with other industrial verticals in our Country. Though, Asian paints owing to its
number one tag is highest beneficiary of any uptrend in the sector. Yet Civil unrest in Egypt disrupts operations from
January end and rise in the crude may result into substantial rise in the raw material cost for the company.
Inflation continues to be a concern & Rupee likely to be volatile with FII inflows expected to determine the medium
term movements. Recovery issues in US and Euro Zone economies and in case of any abrupt withdrawal by FIIs,
Asian Paints may witness some temporary corrections before moving up.