IPCA Laboratories: Buy:: Business Line

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Good results, promise of better performance and a stronghold in domestic as well as export markets make IPCA Laboratories a good long-term buy.

At current market price of Rs 339, the stock trades at about 13 times its likely FY12 per share earnings. This is at a discount to its peers and leaves ample scope for appreciation.

Regulatory approval for its new manufacturing facility at Indore, improving productivity of its field force and stabilising margins add to the stock's attractiveness. Besides, unlike most peers, it has a manageable debt and doesn't have any ongoing issues with the US FDA over its manufacturing facilities. This is a positive especially because of the export potential opening up in developed markets.

Investors, nonetheless, should consider accumulating the stock in lots, given its midcap categorisation and the volatility in the broad markets.

BURGEONING EXPORTS

Export opportunities for Indian generic players have improved considerably over the last couple of years, especially in the US. What's more, the opportunities are expected to get better as more countries open the doors to these low-cost drugs.

IPCA, with an established presence in most export markets — it exports to more than 110 countries and is among the top 10 pharma exporters from India —is well-placed to benefit from this growing demand trend.

For one, its regulatory-compliant manufacturing facilities, without any US FDA overhang, puts it in a position to make the best of the growth potential ahead of it. Second, its new facility at Indore SEZ that is awaiting US FDA approval (expected soon), will help it tap more opportunities.

The management expects the Indore SEZ plant to clock in revenue in the range of Rs 100 crore in FY12 and growing up to Rs 300-Rs 400 crore by FY13 once its fully operational.

Three, the company's in-house strength in API gives it an edge and can help it make deeper inroads in the exports market. Till date, the company has 22 filings in the US, with 11 pending approvals. It further plans to file 10-12 ANDAs every year for the next three years in the US, even as it explores contract development and manufacturing opportunities.

Exports, which make up more than half its total revenues (54 per cent), have grown at an impressive rate, clocking a three-year CAGR of 24 per cent. We expect the momentum to continue in the coming years as well.

STRONGHOLD IN DOMESTIC ARENA

IPCA's domestic formulation business, which has grown at 17 per cent CAGR over the last three years, too holds significant potential. This growth momentum could be maintained in the coming years, what with a likely improvement in the productivity of its field agents, shift in focus to high-margin product segments and product launches.

The company added over 600 agents last year, taking the field force count to 5,200 now. While the attrition rate was a bit high during the year, the management expects it to come down from this year. It also expects field agents' productivity to improve hereon.

The company's improved focus on the high-margin pain and CVS segments too will help, as anti-malarials and anti-infectives segments typically see pricing pressures.

Their prices are largely capped as they come under the government's price control ambit. Besides, anti-malarials business is seasonal and dependant on raw material sourcing from China.

IPCA launched 25 products for the year ended March 2011.The company is looking to launch 12-18 products per year from now on.

Over the last three years, IPCA has grown its sales and profits at a compounded rate of about 21 per cent each. In the year-ended March 2011, IPCA delivered 21 per cent sales growth while profits grew by 22 per cent to Rs 1,890 crore and Rs 255 crore respectively.

In terms of segmental growth, the formulation business registered a 28 per cent growth, with a 16 per cent growth in domestic formulations and 41 per cent growth in export formulation. The business makes up about 74 per cent of the total revenues. Its API business, however registered a tepid growth of 4 per cent, due to a considerable increase in captive consumption.

OPM was lower at about 20 per cent, led by higher employee costs (on account of field force addition) and rise in raw material costs. It is expected to expand to 21 per cent, helped by improving sales force productivity and increased capacity utilisation of its new facility at Indore following the US FDA approval.

For the coming year, the management expects to grow its revenues by 18-20 per cent. This seems achievable given the strong growth prospects in the export as well as domestic markets

9 companies that got listed in 2011 trading below issue price (Economic Times)

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MUMBAI: The majority of the companies that made their debut on the bourses in the year 2011 are trading well below their issue price, resulting in significant negative returns for investors. 

Out of the 15 companies that hit the secondary market in 2011, nine entities -- including PTC India Financial Services and Future Ventures India -- are attracting negative returns in the range of 16-75 per cent, according to data available with the Bombay Stock Exchange and the National Stock Exchange. 

The remaining six companies that got listed are trading above the issue price fixed after their initial public offers. 

Market analysts believe that the companies which got listed during the year are trading way below their issue price because of aggressive pricing issues. 

"After getting listed on the bourses, many of the companies are unable to sustain their issue price levels, because of aggressive pricing," CNI Research Head Kishor Ostwal said. 

Among the initial public offers (IPO) listed during the year, Acropetal Technologies resulted in the maximum negative returns for investors, as it has fallen by 75 per cent to Rs 22.7 vis-a-vis its issue price of Rs 90, followed by Shilpi Cable Technologies , which plunged 73 per cent below its issue price of Rs 69 to Rs 18.65. 

Further, Servalakshmi Paper fell 64 per cent from its issue price of Rs 29, Omkar Speciality Chemicals (46 per cent from Rs 98), Paramount Printpackaging (45 per cent from Rs 35), PTC India Financial Services (32 per cent from Rs 28), Sanghvi Forging and Engineering (22 per cent from Rs 85), Future Ventures India (19 per cent from Rs 10) and Innoventive Industries (16 per cent from Rs 29). 

According to market analysts, investors are still cautious and do not want to keep their funds invested in one place for a long-time and thus, shuffle their portfolios after making some profits, which is responsible for the poor performance of some of the firms. 

In contrast, six firms -- including Fineotex Chemical and Lovable Lingerie -- are generating positive returns of between 1.4 per cent and 277 per cent for investors. 

Among the initial public offers (IPO) that took place during the current year, Fineotex Chemical gave the maximum return to investors, as it surged by 277 per cent to Rs 264.35 vis-a-vis its issue price of Rs 70, followed by Midvalley Entertainment which went up by 79 per cent to Rs 125.40 against its issue price of Rs 70. 

The other firms which have attracted positive returns are Lovable Lingerie (58 per cent up from Rs 205), Aanjaneya Lifecare (52 per cent up from Rs 234), Sudar Garments (36 per cent from Rs 77) and Muthoot Finance (1.4 per cent from Rs 175). 

Interestingly, the IPO of specialty chemicals maker Galaxy Surfactants was withdrawn by its promoter because of the poor response. 

Meanwhile, capital markets regulator Sebi has withheld the listing of sponge iron producer Vaswani Industries' initial public offer after it received complaints regarding irregularities in subscription

52-WEEK BLOCKBUSTER: NATCO PHARMA :: Business Line

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The Natco Pharma stock has outperformed the BSE Health Care Index by a huge margin last year. The company, which manufactures formulations, APIs and offers contract research and manufacturing services, is also a leading player in the oncology therapeutic segment, and derives a considerable portion of its revenues from it. Natco is also among the largest contract manufacturers in India, and has well-known pharma companies such as Ranbaxy and Dr Reddy's as its clients.

The US market (including US retail business) also makes a key segment for Natco. So far, Natco has filed 18 ANDAs, has received approvals for five drug applications and launched three products; three filings enjoy a Para IV certification. It has mitigated the risks of operating in this segment by opting for a partnership model. It has tied with US-based Mylan Inc for Glatiramer Acetate, a generic version of Teva's CopaxoneR, used to treat multiple sclerosis. It has also tied-up with Lupin (Lanthanum Carbonate tablets), Watson Pharma (Revlimid) and Dr Reddy's (for value-added generic oncology drugs). These add a lot of weight to its growth potential. In a first such move, Natco has also sought a voluntary license from Pfizer to make and sell copies of the latter's HIV medicine in India.

Kotak Sec:: Property: Some weakness though not a crash landing

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Property
India
Some weakness though not a crash landing. Analysis of Propequity data indicates
some softening in price increases and an mom decline in residential launches and sales.
4QFY11 results have raised concern on margins due to cost inflation with all companies
in our universe reporting a qoq decline. Our top picks are (1) Sobha (BUY, TP Rs380) –
Bengaluru residential, (2) Oberoi (BUY, TP Rs315) – visible NAV and net cash and
(3) Phoenix (BUY, TP Rs300) – three mall openings in FY2012E are potential triggers.

Reliance Capital: A mixed quarter:: Kotak Securities

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Reliance Capital (RCAPT)
Banks/Financial Institutions
A mixed quarter. Reliance Capital continued to focus on building its businesses during
4QFY11. The insurance business was subdued—the loss in the general insurance
business affected consolidated earnings; the life insurance business reported lower
margins and growth. The NBFC business reported strong qoq growth; while asset
management and broking reported a stable trend. We retain ADD with price target of
Rs600

IOCL: Weak 4QFY11 results:: Kotak Securities

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Indian Oil Corporation (IOCL)
Energy
Weak 4QFY11 results. IOCL reported 4QFY11 net income at `39.1 bn lower than our
estimate of `46 bn. The negative variance reflects (1) higher-than-expected employee
costs, (2) lower-than-expected other income and (3) higher-than expected interest cost.
This was partially mitigated by (1) better-than-expected performance of refining
segment and (2) lower-than-expected tax. We maintain our ADD rating on the stock
with a revised target price of `410 (`420 previously). Key downside risk stems from
higher-than-expected net under-recoveries.

Pratibha Industries: Buy :: Business Line

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The stock of Pratibha Industries, a construction contractor has suffered a sharp slide as slowing execution and order inflows plagued the construction sector.

However, order inflow which was tepid for much of last year has shown a strong pick up from January. Pratibha has a well-established presence in the higher-margin water segment. Price escalation clauses, and backward integration has helped prevent a sharp slide in operating margins as input costs rise. It's first project as a developer is slated to begin revenue generation later this year.

We reiterate a buy in this stock for investors with a two to three year perspective. At Rs 55, the stock is at 7.3 times trailing 12-month earnings and 4.02 times estimated earnings for FY13. However, given the company's small cap status, investors are advised to limit portfolio exposure to the stock.

INFLOWS PERK UP

Outstanding order book currently stands at Rs 4,335 crore, at 3.4 times revenues for FY-11. Though order book has been flat compared to June 2010, orders worth Rs 1,272 crore have come in from January ‘11. The company also has lowest bidder status on a further Rs 600 crore, suggesting that the tepid order inflow of last year is unlikely to persist

Pratibha's main strength is its expertise in higher-margin large-scale water projects. The segment forms 55 per cent of the order book. The remaining order book is taken up by construction of residential and commercial buildings, airports, roads and other urban infrastructure projects. This segment finds support from State as well as Central Government infrastructure spending programmes .

Geographically, too, projects are spread across the country. It's also recently moved into the West Asian market, with an order win from Dubai.

JOINT VENTURES

Another factor that bodes well for healthy growth is Pratibha's ability to partner other players to secure bigger or more complex projects. It has previously worked in joint ventures with players such as Gammon, Patel Engineering and others.

While such partnerships may constrain near-term revenue flow, it allows the company to build its expertise and ability to tackle large-scale projects. This will in turn help it move up the value chain to cement its transition from a contractor to a developer.

The company bagged Rs 467 crore project along with China First Rail for the construction of tunnels for the Delhi Metro Rail Corporation.

The company already has a couple of projects on a Build-Operate-Transfer (BOT) basis, the first of whichis expected by the company to begin revenue generation at end-2011.

MARGINS MAINTAINED

Revenues clocked a three-year compounded annual growth of 31 per cent to Rs 1,268 crore while net profits grew 28 per cent to Rs 71 crore in grew FY-11.

With over 90 per cent of the order book on price escalation clauses, the company has managed to limit the effects of rising cost of inputs such as steel and cement. Backward integration into the manufacture of SAW pipes used for water projects among others helped protect margins from rising costs . Operating margins for FY-11 stood at 13.9 per cent, down marginally from 14.1 per cent the year before.

Pratibha raised Rs 150 crore from private equity in the latter half of FY-11, using this amount to partly pay off debt and fund working capital. Debt-equitystands at a comfortable 0.77 times. Total debt dropped from Rs 434.8 crore to Rs 377.2 crore.

Interest costs, hitherto a drag on profits and margins, may thus ease up. Indeed, interest costs for the quarter ended March '11 declined 14 per cent. Net profit margins for FY-11 stood at 5.6 per cent, the same as that in FY-10.

Working capital cycle too has improved to 140 days in FY-11 from the 150 days in FY-10

Lanco Infratech: 4QFY11-construction margins disappoint:: Kotak Securities

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Lanco Infratech (LANCI)
Utilities
4QFY11—construction margins disappoint. Lanco Infratech’s (LITL) earnings from the
power segment (operating profit of Rs4.7 bn, 55% qoq) were dwarfed by weak margins and
eliminations from the construction business. During the quarter, LITL completed the acquisition
of Griffin Coal, Australia which contributed with operating profit of Rs487 mn for March 2011.
We maintain our rating with a revised target price of Rs54/share though seek further clarity on
eliminations and earnings from the construction business.

Jyothy Laboratories: Disappointing 4QFY11:: Kotak Securities

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Jyothy Laboratories (JYL)
Consumer products
Disappointing 4QFY11. Results disappoint on all counts: Ujala and Exo sales declined
by 7% and Maxo sales declined by 36%. A 16% price hike in Ujala, intensified
competition in Exo and the withdrawal of trade promotions in Maxo hurt performance.
The slowdown in the core business is a worry (Ujala accounts for >80% profits). In
FY2012E, we look for (1) improving profitability of Ujala and return of volume growth
in all the three brands as operations will likely stabilize at higher price points
(2) integration of JYL with Henkel India and benefits of low hanging fruits (brands such
as Fa, with strong prospects from JYL’s distribution reach) and (3) scale up of the
Bangladesh venture and JFSL. We maintain our target price at Rs240 on FY2013E.

Kotak Sec:: Sun TV Network: Sun down, but not quite

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Sun TV Network (SUNTV)
Media
Sun down, but not quite. We retain our rating (ADD) and fair value (Rs480) on Sun
TV Network even as the stock price is likely trading based on news-flow beyond the
fundamentals of the company. The fundamentals of Sun TV broadcasting remain robust
as seen from strong ratings of its channels even beyond the politically sensitive Tamil
market (Telugu, Kannada and Malayalam). The news-flow pertains to the one-time
tenure of Mr. Dayanidhi Maran, brother to Mr. Kalanidhi Maran (Sun TV promoter), as
Telecom Minister. We discuss the allegations and response of the company.

BPCL: Upstream contribution and strong refining margins boost earnings:: Kotak Securities

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Bharat Petroleum (BPCL)
Energy
Upstream contribution and strong refining margins boost earnings. BPCL
reported strong 4QFY11 net income at `9.4 bn (+220% qoq and -25% yoy) versus our
estimate of `8.3 bn led by (1) higher discounts received from upstream companies and
(2) strong refining margins at US$6.9/bbl (helped by adventitious gains). However,
results were impacted by high employee costs at `12.4 bn (+118% qoq and 62% yoy).
BPCL reported healthy EPS of `45.7 for FY2011. We maintain our ADD rating on BPCL
given 17% potential upside to our revised target price of `735 (`740 previously).

Reliance Communications: Sharp margin decline mars a good quarter on revenue growth:: Kotak Securities

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Reliance Communications (RCOM)
Telecom
Sharp margin decline mars a good quarter on revenue growth. RCOM’s
consolidated EBITDA for 4QFY11 (adjusted for the accounting change in Global
segment) declined 5% qoq despite a healthy 6.4% qoq growth in revenues as margins
fell 340 bps qoq. Net income declined 65% qoq and 86% yoy to Rs1.7 bn, despite the
company not expensing 3G-related charges yet. We cut estimates and maintain our
SELL rating on the stock. TP moves up to Rs95/share on rollover to end-FY2013E

Oil & Natural Gas Corporation: Murphy's law strikes again:: Kotak Securities

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Oil & Natural Gas Corporation (ONGC)
Energy
Murphy’s law strikes again. ONGC reported 4QFY11 standalone net income at `27.9
bn (-61% qoq, -26% yoy) versus our estimate of `39.6 bn. The weak results reflect (1)
higher subsidy burden in line with government’s decision to increase the share of gross
under-recoveries of upstream companies to 38.7% for FY2011, (2) higher DD&A
charges at `47.9 bn (+31.5% qoq +7.6% yoy) and (3) higher other expenditure at
`41.6 bn (+43.2% qoq and +30% yoy). We maintain our BUY rating on the stock
noting (1) 22% potential upside to our revised target price of `340 (`360 previously)
and (2) attractive valuations with the stock trading at 4.7X FY2012E DACF (on net
crude oil price realization of US$45.1/bbl).

Wabco-TVS: Buy:: Business Line

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Although headwinds in the form of slower GDP growth, high inflation and interest rates pose a threat, the auto industry is expected to face only a moderation in growth and not a slowdown of the order of 2008-09. As against a 0.71 per cent growth registered in 2008-09, SIAM expects the auto industry growth to come in at 12-15 per cent in the current year. Besides, robust agricultural produce, good export-import growth and the picking up of the infrastructure and construction industry in the last few months suggests that there is still room for growth in the CV industry.

 

Investors with a perspective of two to three years can consider exposure to the Wabco-TVS stock. The company is the market leader in the air and air-assisted brake systems for commercial vehicles and counts Tata Motors, Ashok Leyland, Mahindra and Volvo among its major clients.

Given that after two successive years of 26 per cent growth the auto industry may face a slowdown, the investment does carry an element of risk. However, the company's superior margins, efforts to diversify into new technologies and systems to increase its content per vehicle, and prospects for higher exports to the parent company lend promise.

At the current market price of Rs 982, the stock trades at a PE of about 12.5 times its estimated current year earnings and 10 times its estimated earnings for FY13.

This apart, the company will benefit from the launches planned by OEMs.

Ashok Leyland, for example, is launching about 25 vehicles in its new ‘U-Truck' platform that assures fuel efficiency and ride quality improvement. Wabco-TVS had inked an agreement with Mahindra-Navistar last year for the supply of air compressor technology for their braking systems. The latter is also coming out with new trucks in the higher tonnage segment.

EDGE ON TECHNOLOGY

Rising fuel costs and increasing thrust on environment-friendly vehicles call for continuous improvements in technology. Having tied up with WABCO, which is the technology leader for braking, stability, and transmission automation systems, the company is on a strong wicket on this front. This favourable positioning also helps the company diversify its product offerings and increase its content supplied per vehicle.

In 2010, the company began supplying compressors to Cummins for engines that comply with the new emission norms introduced during the year. It also commenced supplies of new products like electronically controlled air suspension systems and clutch servos for few other OEMs. Ashok Leyland has also tied up with WABCO-TVS for development of transmission automation technology and the supply of automated manual transmission systems for its vehicles from 2010 to 2015.

Another product holding good potential is the higher-margin yielding Anti-lock Braking System (ABS) which is designed to prevent the wheels from locking while braking at turns and at high speeds. An expected change in regulatory norms, mandating all CVs to be fitted with ABS, would present a big opportunity for growth. The company currently derives only 6 per cent of its revenues from ABS supplies. Aside of this, increased sourcing by the parent company, WABCO, for its global clients from low cost countries, also lends promise on the export front.

For the year ended March 2011, net sales grew by 47 per cent to Rs 868 crore and net profits by 63 per cent to Rs 127 crore. Given its status as a tier-I supplier, its market leadership position and pricing power, the company has been able to maintain operating margins at a very healthy 22-24 per cent throughout the year

Kotak Sec:: Lupin: Lupin denied FTF status on Combivir

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Lupin (LPC)
Pharmaceuticals
Lupin denied FTF status on Combivir. Lupin’s citizen’s petition requesting FDA to
deny Teva its 180-day exclusivity for Combivir (US$315 mn sales in US) was turned
down on May 25. This resulted in Teva getting final approval for Combivir; however,
Teva has settled for a launch date in 4Q2011 as per its 2010 agreement with GSK. We
believe Teva will launch latest by November 15, 2011, as FDA is scheduled to approve
all pending ANDAs by May 15, 2012. However, the competitive scenario post the 180-
day exclusivity is not clear yet. In case Lupin is the only other filer, this may turn out to
be at least a US$10 mn product for Lupin in FY2013E, although that translates into only
2.8% of US generic sales for it. We await final approval of Fortamet ER (US$85 mn),
where Lupin is the sole FTF. Maintain ADD, PT at Rs500 (20X FY2013E EPS).

MPHASIS BFL -- RECOMMENDATION: REDUCE:: Kotak Sec

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MPHASIS BFL LTD
PRICE: RS.475 RECOMMENDATION: REDUCE
TARGET PRICE: RS.458 FY11E P/E: 12.4X
Await better price points to become positive
q Mphasis' 2QFY11 results were below expectations. Volumes grew by
2.6% only despite the low base of the previous quarter. In 1QFY11, the
company had faced lower billing days due to shut downs at HP and customer
sites, impacting revenues by 3.5% QoQ. Margins also came in
lower than estimates - impacted largely by currency and one off expenditure.
The company once again wrote back past provisions of about
Rs.540mn over and above the Rs.435mn written back in 1Q. To that extent,
reported PAT was higher than the actual number. According to the
management, these write backs have been happening but the company
has started reporting these recently. We find this surprising.
q Billing rates were steady during the quarter. The re-negotiations with HP
on the rate card should conclude by the end of 2Q and is an overhang.
While revenues from HP / HP channels fell marginally, the positive came
in the form of a 10.7% revenue growth in USD terms from non-HP channel.
Mphasis won a record 17 clients through independent channel. The
investments should yield further results in the quarters ahead.
q Thus, despite an encouraging macro scenario and expected growth in the
future quarters, we are cutting our FY11E EPS projections to Rs.38.4
(Rs.44.8) and price target to Rs.458 (Rs.509). Our DCF based price targets
leads us to a target FY11E PE of Rs.11.9x. We expect the stock to underperform
because of the lack of any triggers. We downgrade the stock to
REDUCE (ACCUMULATE) and will wait for better price points to turn positive
on the stock based on CY12 earnings. A potential buy-back offer /
de-listing from HP can provide upsides to the stock.
q A delayed recovery in user economies and a sharper-than-expected rupee
appreciation are key risks to our estimates.

Kotak Sec:: GAIL (India): Management bullish on Indian gas story

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GAIL (India) (GAIL)
Energy
Management bullish on Indian gas story. GAIL management presented an upbeat
picture of the domestic gas supply scenario and progress on its expansion plans in its
analyst meet. The key takeaways are—(1) management’s expectation of significant
ramp-up in gas supply in India, (2) guidance of 135 mcm/d of transmission volumes in
FY2012E, (3) significant capex of `286 bn to drive expansion plans in FY2012-14E and
(4) steady progress on ongoing pipeline and petrochemical projects. We maintain our
ADD rating on the stock with a target price of `525.

Query Corner: Sesa Goa and NTPC trending downwards :: Business Line

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I bought Sesa Goa around Rs 366. Please provide me the prospects for this stock.

R. Parthasarathy

Sesa Goa (Rs 288.4): We have been reiterating in our previous reviews that Sesa Goa has medium-term supports at Rs 274 and Rs 225. We had also advised long-term investors in January this year to hold the stock as long as it traded above Rs 225. The stock tested this support on March 7 as it recorded the intra-day low of Rs 220 but since it closed the session at Rs 271, we will consider this level as unviolated and continue to hold it as the critical long-term support.

The stock will face resistance at Rs 350 and Rs 400 in the months ahead and investors with short- to medium-term perspective can divest part of their holding on reversal from either of these levels. Target on a weekly close above Rs 400 is Rs 494.

When you analysed NTPC in the edition dated July 11, 2010, you had written that the stock was in long-term uptrend. But since then the stock is sliding with lower tops and bottom. Do you still stick with the same view?

T. Jayakumar

NTPC (Rs 174.4): You are right in pointing out that the stock is sliding lower with lower peaks and troughs since July 2010. The stock has breached the medium-term support at Rs 180 that we had expected to be the lower boundary for the stock.

However, despite the stock trading below its medium-term support, we continue to hold the long-term trend in the stock as up since our long-term trend decider has not been breached yet. We stay with the view that the structural uptrend will be under threat only if the stock moves below Rs 150.

A reversal from the support zone between Rs 155 and Rs 165 can result in the stock price moving higher to Rs 240 and then Rs 284 over the long-term. The zone around Rs 240 will continue to act as a strong medium-term resistance for the stock.

Please let me have your opinion on Praj Industries purchased at Rs 79.

Baldev Gulati

Praj Industries (Rs 72.8): Praj Industries is in a severe long-term downtrend. The stock was decimated in the 2008 fall and the subsequent recovery has done little to improve the stock's prospects. Critical long-term resistance is in the band between Rs 120 and Rs 135. Investors should consider buying the stock only on a close above this zone. Else it will remain in traders' domain.

The medium-term trend in the stock is also down and it is incessantly sliding lower since the peak of Rs 122 formed in June 2009. It has also breached the key medium-term support at Rs 75 opening the possibility of a decline to Rs 46. Investors should divest their holdings on a close below Rs 60.

The stock needs to close above Rs 90 before investors with a short-term perspective can consider buying the stock. Subsequent targets for the medium-term are at Rs 100 and Rs 120.

Let me know your outlook on Orissa Minerals Development Company.

Mohani Devi Damani

Orissa Minerals Development Company (Rs 51,745.7): OMDC almost halved in value from the peak of Rs 92,200 recorded in November last year when it recorded the low of Rs 41,500 in February. It has been volatile in the range between Rs 42,000 and Rs 65,000 since then. Key medium-term resistances for the stock are at Rs 67,250 and Rs 73,245. Inability to move beyond these levels will drag the stock down to Rs 52,000 or Rs 42,000 again.

Conversely, a strong close above Rs 73,245 will mean that the stock is on its way to a new high above Rs 92,200. Stop-loss for investors can be at Rs 41,000.

Please let me know the medium- and long-term outlook for Idea Cellular bought at Rs 108.

Achintya Kumar Basu

Idea Cellular (Rs 70.2): In our review of Idea Cellular in December last year, we had indicated that the stock faced strong long-term resistance in the band between Rs 50 and Rs 90. We had also written that unless there was a strong close above Rs 90, the stock could vacillate in the band between Rs 50 and Rs 90. The stock has moved in line with our expectation and has been trading within this band since then.

Long-term investors can hold the stock as long as it trades above Rs 45. If the stock manages to hold above this level, it can attempt to move to Rs 82, Rs 97 or Rs 113 over the next year.

I purchased shares of Mahindra Satyam at Rs 108. Please let me know the medium- and long-term outlook on this share.

Deepak, R.M. Kumarappan

Mahindra Satyam (Rs 89.8): Mahindra Satyam is sliding lower gently since September 2009 peak of Rs 128.3. This long-term correction has, however, not yet breached the key support at Rs 57. Investors with a long-term horizon should hold this stock only as long as it trades above this level. Breach of this support can pull the stock down to the 2009 trough of Rs 34 or even Rs 11.

Key resistances for the next few months are at Rs 100 and then at Rs 128. Investors with short- to medium-term horizon should divest their holding on inability to move beyond Rs 100. Fresh investment with long-term perspective should be considered only on a strong weekly close above Rs 128.

Please let me know the future prospect of Jain Irrigation bought at Rs 190 and K S Oils bought at Rs 25.

Fauzia Meherally

Jain Irrigation Systems (Rs 165.5): This stock hit a life-time high of Rs 264 in August last year and is slipping and sliding ever since. Critical support for the stock is at Rs 155 that coincides with the peaks formed in November 2007 and March 2008. It also occurs at 50 per cent retracement of the entire up move from December 2008 to August 2010.

The stock is currently attempting to stabilise above this level, Rs 155. Penetration of this buttress can pull the stock down to Rs 130. Long-term investors can hold the stock as long as it trades above Rs 130. Medium-term resistances would be at Rs 196 and Rs 220.

K S Oils (Rs 26.2): In our review of this stock in January we had advised investors to divest their holding on a decline below Rs 38, since that would indicate a possible decline below Rs 10.

The stock declined below this support in February and is currently sliding very sharply. Next support is at Rs 20. But the stock could head lower than that. It would be best for investors to switch out of the stock at this point.

I am holding Tilaknagar Industries purchased at Rs 55. What is the outlook for the company?

Suresh Kumar Yadav

Tilaknagar Industries (Rs 43.9): Tilaknagar Industries has strong long-term support around Rs 50. The stock breached this level recently.

Next support that investors can watch out for is around Rs 42. If this level is breached, decline to Rs 35 becomes possible. Investors should therefore divest their holding on decline below Rs 42.

Key medium-term resistance are at Rs 75 and Rs 90.

Economy News and Corporate News: Kotak Securities

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Economy News
4 The finance ministry is going ahead with its plans to set up a full-fledged
Debt Management Office (DMO) to manage the government debt
despite reservations expressed by the Reserve Bank of India (RBI) on the
same (BS).
4 Uttar Pradesh has announced a new land acquisition policy, which stresses
that approval of any development project in the private sector would
depend upon the consent of at least 70 percent of the affected farmers
(BS).
4 Housing finance companies (HFCs) are set to face higher provisioning
norms, with the National Housing Bank (NHB), the regulator for housing
finance companies planning to introduce standard asset provisioning of
0.4 percent on retail advances (BS).
4 An increase in petrol prices last month has pushed up fuel and power
inflation to a four-week high of 12.54 percent for the week ended May
21, even as the rate of price rise in food items declined marginally to 8.06
percent (BS).
4 The World Bank has approved a $975-million (~44 bn) loan for developing
the first phase of the eastern arm of the Rs 770 bn Dedicated Freight
Corridor (DFC) Project in India (BS).
Corporate News
4 Bosch Group would invest Rs 25 bn in India in the next two years to set
up plants and expand capacity (BS).
4 Coal India Ltd (CIL) has got 18 tenders from international companies
for long-term thermal coal off take agreements. The company will
shortlist and strike a deal from this, based on the price and quantity of
coal to be supplied within five months (BS).
4 Share price of Sun TV and SpiceJet went into a free fall after news of
the CBI conducting a "preliminary investigation" into corruption
allegations against the Union Textiles Minister, Mr. Dayanidhi Maran (BL).
4 Siemens has formed a joint venture with its Russian counterpart Sinara
Group to supply 240 train sets (1,200 cars), worth €2 billion to the Russian
Railways (RZD) (BL).
4 Areva T&D India's board has given a final approval to demerge its power
distribution business into a new company with effect from April 1. The
new company would be called Smart Automation Distribution and
Switchgear (BL).
4 As part of its diversification plans, National Aluminium Company
Limited (NALCO) would start a 50.4 MW Wind Power Project at
Gandikota in Kadapa district of Andhra Pradesh (ET).
4 Honda Motorcycle & Scooter India (HMSI) has reported a six percent
increase in total sales for May at 1,45,729 units against 1,37,842 units in
the corresponding month of the previous year (BL).
4 Panacea Biotec will foray into the healthcare sector and plans to set up
a super specialty hospital in Gurgaon at an investment of nearly Rs 1.45
bn which will be operational by 2012 (BL).
4 IndusInd Bank has signed an agreement with ElectraCard Services (ECS),
to extend technology and processing services for its credit card business
(BL).



News Round-up
􀁠 SEBI okays market making in F&O, decision may revive action in the segment on BSE.
(TTOI)
􀁠 An increases in petrol prices last month pushed up fuel and power inflation to a fourweek
high of 12.54% for the week ended May 21, even as the rate of price rise in
food items declined marginally to 8.06%. (BSTD)
􀁠 Coal India Ltd (COAL IN) has got 18 tenders from international companies for longterm
thermal coal offtake agreements. The Maharatna company will shortlist and
strike a deal from this - based on the price and quantity of coal to be supplied -
within five months. (BSTD)
􀁠 Coal India Ltd (COAL IN) has offered to supply 347 million tonnes of coal to power
utilities during 2011-12, higher than 319 million tonnes it had indicated earlier.
(THBL)
􀁠 JSW Steel (JSTL IN) & Essar Steel have hiked prices for flat products by up to INR 1000
per tonne in wake of rising raw material costs. (ECNT)
􀁠 After termination of the joint venture with Honda Motor Corporation, Hero Honda
has begun scouting for partners globally to source technology and designing
expertise. (BSTD)
􀁠 Wipro (WPRO IN) has bagged a contract from Chaucer Syndicates. The company did
not disclose the contract size. However, according to industry sources, the contract is
estimated to be in the range of USD 5 - 6 mn. (BSTD)
􀁠 BOC India (BOC IN) is eyeing the petroleum and petrochemicals sectors for growth.
(BSTD)
􀁠 BHEL (BHEL IN) secured an order worth USD 14 mn to set up a solar power project
for Karnataka Power Corporation Ltd at Belakavadi village in Karnataka. (BSTD)
􀁠 Bosch Group would invest USD 555 mn in India in the next two years to set up plants
and expand capacity. (BSTD)
􀁠 Areva T&D (ATD IN) is demerging its distribution business to a wholly owned
subsidiary called Smartgrid Automation Distribution and Switchgear. (BSTD)
􀁠 Siemens (SIEM IN) has formed a joint venture with its Russian counterpart Sinara
Group to supply 240 train sets (1,200 cars), worth Euro 2 bn to the Russian Railways.
(THBL)
Source: ECNT= Economic Times, BSTD = Business Standard, FNLE = Financial Express, THBL = Business Line.

Stocks with lower ‘FII risk' :: Business Line

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Is the high volatility caused by FII investments keeping you away from the market? You don't have to stay out for fear of FII dumping the stocks that you hold. Here are some sectors that are either under-owned by FIIs or where their stakes are not high enough for them to upset prices.

In general, FII stakes are not high (relative to the total holding) in sectors that are highly regulated or those held by the government with less free-float. Stocks in the chemicals and fertilisers sector top this list. These sectors together accounted for only 0.5 per cent of FIIs' total allocation in the BSE-500 stocks as of March 2011, marginally higher than their holding in 2007.

Natural resource/mining companies such as Coal India or NMDC are examples of government-owned assets that have limited FII holding. Notably, all these sectors, mining, fertiliser and chemicals have all done well, beating the market by a significant margin in the last 4 years.

FIIs do hold the current favourites such as FMCG or consumer durables as well as the pharma space.

While they are not really under-owned the allocation given by FIIs to these sectors are lower than the weights to these sectors in BSE 500. The allocation to the FMCG space for instance was between 2-4 per cent in the last four years.

Such consistency was visible in the pharma space as well. FIIs' diversified nature of holdings and consistency in holdings make these sectors relatively less prone to FII activities.

Aside of sectors, investors can also look out for stocks with quality fundamentals, which, by way of sheer consistency in FII holdings and their large size, may be less prone to FII-triggered volatility.

This includes stocks such as ITC, Tata Power, Axis Bank, CRISIL and Cairn India, in which FII holding changed by hardly 1 percentage point in the last four years and which have delivered well over 20 per cent compounded annually

Dissector: Silver loses its glitter :: Business Line

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Silver spot price registered a high of 49.4 and peaked out in 1980, after a frenzied rally. Thereafter, it tumbled sharply and was on a downtrend until it found support around 3.5 in 1993.

The metal formed a significant long-term support in the range between 3.5 and 4, before it started to trend upwards taking support in late 2001.

Since then, silver has been on a longer term bull run, forming higher peaks and troughs.

In late 2008, the metal took support from its long-term base between 8 and 8.5 and resumed its structural uptrend. Silver penetrated its important long-term resistance level of Rs 20 in September 2010 and accelerated higher. This bullish momentum prolonged until it encountered resistance around its previous peak of 49.4.

After marking a high at 49.8 on April 25 this year, silver lost its bullish momentum. It failed to surpass the psychological resistance of 50 and began to decline.

This trend reversal was triggered by its daily and weekly relative strength index reaching deep overbought levels.

The daily as well as weekly moving average convergence divergence indicators also touched overbought levels signalling potential trend reversal.

Further, the monthly MACD too had reached the overbought levels which it had previously entered in the year 1980. Silver began to decline and found support in May 2011 at 32, retracing 38.2 per cent Fibonacci retracement of its up move from 2001 low to recent peak.

Long-term support below 32 for Silver is at 27 which is the 50 per cent retracement level. If this support fails to hold silver while trending down, it can decline further down to its next support in the band between 20 and 21. This is also a critical longer-term support and crucial trend deciding level. Strong fall below this level will mitigate the uptrend and can drag the silver down to 15 and then to 10 in the long-term.

However, in the long-term silver can vacillate between 27 and 50, if the support at 27 holds. An emphatic upward break through of 50 will take the silver higher to 60 in the longer-term.

Silver has been on a medium-term downtrend since its peak of 49.8 recorded in April this year. In early May, silver breached its 21 and 50-day moving average conclusively.

Recently, silver failed to surpass its immediate resistance level at 39.5 and appears to have resumed its downtrend. Silver can test its immediate key support around 32. Strong fall below this level can pull it down to 30 in the months ahead. Subsequent significant support for silver is pegged in the band between 25 and 26.5.

Conversely, decisive move above 39.5 will take the commodity higher to 45.4 and then to 48.5 levels in the medium-term.

Index Outlook: Stocks fighting uphill battle :: Business Line

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Sensex (18,326.4)

Sensex revived slightly in the early part of the week as progressing monsoon sent a breath of fresh air through equity markets. But harsh readings from economy coupled with re-stirring of the 2G-hornet's nest made stocks wilt once again and close the week with marginal gains.

The mood among investors and traders continues to be lackadaisical and this is reflected in plummeting volumes, especially in the derivative segment. Market participants perhaps found it more amusing to watch the drama surrounding the latest anti-corruption fast.

FIIs turned net buyers again. Open interest is however creeping up and so is the proportion of puts in the OI implying that more traders are betting on market declining from these levels.

The decision on diesel price hike scheduled for next week could cause some reaction.

Economic data will continue to be scanned with great interest for more signs of slowdown in the economy.

The surge in the early part of the week helped the 10-day rate of change oscillator climb in to positive territory. But the slide that followed has pulled this indicator lower to the zero line again, implying that the near-term view continues to be ambivalent.

The weekly oscillators are also hovering in the neutral region, on the verge of moving in to bearish zone.

Interestingly, oscillators in the monthly chart are also poised in neutral zone following a decline. This implies that the zone around 17,800 where Sensex is currently halting is a critical trend-decider for the medium and long-term as well.

Decline below this zone would mean that the down move can accelerate turning the medium-term view to negative.

When the first leg of the current decline took place between last November and February, the other global equity markets were in robust shape and hitting new peaks. The developed markets including the US are only just beginning to crumble under profit-booking.

Once those markets begin correcting, India could also join in, making the third leg of this decline reach even the second target of 16,493.

According to Fibonacci retracement also we get two critical supports at 16,758 and 16,118. So the entire zone between 16,000 and 17,000 should be an area where the brave-hearted start cherry-picking.

In the short-term, Sensex faces a strong resistance in the zone around 18,700. Inability to move above this level will mean that the index can head lower to 18,124 or 17,786. Halt around 17,800 again will result in the index moving in the range between 17,800 and 18,600 for few more sessions. Such a move will retain the bearish short-term bias.

Strong move below 17,800 will pull the index down to 17,420 or 16,647 over the ensuing weeks. Conversely, targets on a close above 18,700 are 18,915 and 19,126. The uptrend can be taken seriously only on a close above 19,126.

Nifty (5,516.7)

Nifty too turned volatile after recording the peak 5,597, just below the resistance at 5,608.

As explained in our last column, there is a convergence of resistances around this level. Failure to get past this level in the early part of the week can cause a decline to 5,434 and 5,328 in the days ahead. If the index stabilizes around the support at 5,330, there can be a range-bound move between 5330 and 5600 for few weeks. Such a move will retain a bearish short-term bias. Breach of 5330 support will usher in a decline to 5224 or 4989 over the ensuing weeks. Targets on a strong close above 5,600 are 5,640 and 5,710.

Global Cues

Global stocks were jittery as the crisis in Greece worsened. Moody's Investors Service' downgrading of Greek government's credit rating and the deposit and senior debt ratings of eight Greek banks stoked the nervousness. Most benchmarks closed 1-2 per cent lower.

CBOE VIX closed higher at 17.9 after hitting the intra-week peak of 19.8. DJ Euro STOXX 50 is once more close to its medium-term support at 2800.

Bounce from these levels will maintain a positive outlook for the medium term. But the double-top formation in the weekly chart is a little disconcerting.

The Dow recorded a sharp 290 points decline last week. This is the fifth consecutive week when the index has ended in the red. Immediate support for the index is at 12,070. If this level is breached, the index can decline to 11,555.

As explained earlier, medium-term trend will turn negative only on a close below 11,640.

Asian benchmarks were relatively resilient and closed with minor profits.

Sharp decline in dollar over the week made commodities including gold and crude to spike higher.

Jagran Prakashan: Buy :: Business Line

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Stocks that ride on domestic consumption have witnessed a significant run-up in recent weeks. This makes it a good reason for investors with a two-year horizon to consider buying the shares of Jagran Prakashan, language newspaper publisher.

The publisher of Dainik Jagran has seen sound growth in its advertising revenues and has a strong regional focus. At Rs 127, the share trades at 16 times its estimated per share earnings for FY12. This is at a discount to print players such as Hindustan Media Ventures and HT Media.

In FY11, the company saw its revenues increase by 17.5 per cent to Rs 1,090 crore, while net profits expanded 17 per cent to Rs 205.8 crore, without reckoning Mid-day Multimedia's print business, which Jagran Prakashan acquired in May 2010. In FY11, Jagran Prakashan's revenues from advertising have shown an over 20 per cent growth, due to increased focus on colour ads. Its circulation revenues though grew at 7.1 per cent as it faced competition fromDainik Bhaskar and Hindustan in the Hindi speaking States.

A fair degree of momentum in advertising volumes witnessed in sectors such as education, financial services, real estate apart from banking and insurance aided growth. As companies increase their focus on Tier-2 and Tier-3 towns and cities where consumption upswing is expected, volumes are expected to expand significantly on this front, as Jagran Prakashan seeks to leverage its top readership position in Hindi.

Jagran can also hope to improve its ad revenues from a further increase in ad rates for language newspapers. The advertising rate premia for English newspapers vis-à-vis Hindi and other languages is reducing. A recent FICCI-KPMG report states that advertising premium has contracted from 10x in 2007-09 to 8x currently. The report also states that Hindi print advertising is expected to grow at 15 per cent annually till 2015 (to Rs 7,300 crore), a clear 5 percentage points more than English print advertising market's growth rate.

The print business of Mid-day Multimedia that includes Mid-Day, Sunday Mid-Day and Gujarati Mid-Day newspapers will allow Jagran to focus on lucrative markets such as Mumbai, Bangalore and Pune. This would enable improvement in realisations as these editions garner more colour ads. The company's newsprint consumption costs have gone up by over 20 per cent in FY11. It envisages another 10 per cent increase in the cost of raw materials consumed as it seeks to make new launches of Urdu newspapers in a few of the States where it operates

Deutsche Bank:: India Equity Strategy: Mar-Q review Strong top line but cost pressures abound

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Strong revenue growth offset by cost pressures
In line with the underlying economic momentum and our expectations, Sensex
revenue growth continued to remain robust at 23.4% in Mar-Q. However,
intensifying cost pressures across the board expectedly pulled down Sensex EBITDA growth to just +12% yoy, leading to shrinkage in EBITDA margin by 250bps yoy and 300 bps qoq. PAT margins also shrunk by a similar quantum.
Sensex PAT growth slows down led by SBI and ONGC
After three strong quarters, Sensex companies witnessed a slowdown in PAT
growth in Mar-Q at -2%yoy (for Deutsche Bank India universe the PAT growth was at 13% yoy). However, this was disproportionately skewed by unanticipated high provisioning by SBI and greater subsidy sharing devolving on ONGC. Hence, ex-
SBI’s and ONGC’s Mar-Q numbers, PAT growth moves into positive territory (at
+6% yoy), implying full-year FY11 Sensex PAT growth of 19% yoy (~24% on free
float basis). Overall, Sensex PAT was below our estimate (-15%, though ex-
SBI/ONGC it was 2% ahead of our estimate). Positive surprises and negative surprises were evenly distributed both at PAT and EBITDA levels.
Capital Goods and FMCG lead PAT growth, Telecom and Banks drag
Capital goods posted highest PAT growth (32% yoy) driven by BHEL’s strong
revenue growth flowing to PAT growth of 47%. FMCG posted PAT growth of 21% yoy as ITC continued to demonstrate strong pricing power. Telecom was the biggest laggard (PAT -51%yoy) driven primarily by: (i) RComm’s (-87%) weak
operational performance and higher-than-expected taxes and (ii) high interest and taxes for Bharti (-28%). Financials’ PAT was down -20%yoy as SBI’s provisioning
more than offset robust growth of ICICI Bank (+44%) and HDFC Bank (+33%).
Earnings cuts dominate raises; Banks, Oil & Gas, Autos see maximum cuts During the earnings season, earnings cuts outnumbered raises by a ratio of 2:1.
Banks, Autos and Oil & Gas witnessed the maximum number of earnings cuts.
Few key earnings cuts were: (i) ONGC (-21%) as our analysts factored in the
higher subsidy sharing (38.8% vs. 33% previously), (ii) Oil India (-13%): again due to higher upstream subsidy-sharing assumption, (iii) Aban Offshore (-30%) as we removed the Deep Venture JV contribution from our estimates, (iv) TVS Motor (-
12%): to account for higher guidance on tax rate. Within Financials all the cuts
were marginal barring SBI (-8%) and REC (-7%). Key raises were seen in: (i) Coal India (+7%), as we increased our assumption on volumes by 2% and realizations by 3%, (ii) Ranbaxy (+12%), factoring in more gainful product mix and cost focus.
We remain constructive on market with year-end Sensex target of 21,000
While overall Mar-Q numbers have come below our estimates, we are still maintaining our constructive view on the Indian market due to: (i) an expected
softening in global commodity prices, (ii) abatement of policy inertia, (iii) expectation of declining food inflation and (iv) a sharp YTD underperformance of India vs. EM peers. We maintain our year-end Sensex target of 21,000.

GAIL - Analyst meet takeaways - Adding capacity, but short of gas:: Deutsche bank

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GAIL held its analyst meet today. The key takeaways from the same include:
** Capex: GAIL has planned capex of INR286bn (US$6.4bn) over the next
3 years - INR77bn in FY12, INR113bn in FY13 and INR96bn in FY14. Of this,
c40% would be spent on pipelines and c30% on petrochemicals.
** Pipeline projects: About 2000km of the pipeline expansion projects (DV-
PL, Vijaipur-Dadri, Dadri-Bawana, Chainsa-Jhajjar-Hissar) have been either
partially or fully commissioned in the last one year and another c4600km of
pipelines (Jagdishpur-Haldia, Dabhol-Bangalore, Kochi-Bangalore-Mangalore)
would be commissioned in a phased manner over the next three years.
** Petrochemical capacity expansion: GAIL commissioned its 6 th furnace
in Pata in Q4FY11 leading to increase in capacity to more than 450k tpa. It
plans to further increase this capacity to 900k tpa by CY14. It also said that
it plans to source additional gas for this capacity expansion from ONGC and
Petronet LNG's Dahej terminal.
** Dabhol LNG terminal (5mmtpa): GAIL expects it to be commissioned by
Feb 2012. However, breakwater facility will take another two years to com-
plete, without which it will have only a 40% utilisation rate. If this happens,
it will imply c8mmscmd upside to our India gas supply model for FY13, as
we have not considered this in our forecasts.
** Gas supply: GAIL expects additional gas supply of 45mmscmd (mainly
from KG D6) over the next two years. However, we believe that this is highly
unlikely given that we do not expect RIL to increase production from current
levels of c50mmscd for the next 2 years. Moreover, even ONGC has indicated
that production from its large KG-DWN-98/2 discovery is unlikely to
start before FY18.
** LNG imports: GAIL will be importing 1 LNG cargo every month in FY12.
It had imported 5 LNG cargoes in FY11. This implies c1.6mmscmd of incremental
LNG imports over last year.
Maintain Hold with INR480 TP
We rate GAIL a Hold as we expect gas supplies in India (including imports)
to grow at only a 4% CAGR over FY11-13. This will adversely impact GAIL's
pipeline utilisation and RoEs.

JPMorgan:: Reliance Communications :: Profitability low; Leverage high: Q4'FY11 Wrap

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Reliance Communications Neutral
RLCM.BO, RCOM IN
Profitability low; Leverage high: Q4'FY11 Wrap


The ~7% revenue growth in Q4 was welcome but higher operating and
interest and tax expenses kept profitability low. EBITDA margin declined
~3.5pp Q/Q while EPS was 65% lower Q/Q. We have increased our 3G
revenue estimates but we don’t expect to see a meaningful operational
recovery in the existing business in the near term. Furthermore we note that
3G related expenses will start impacting the P&L from FY12 and leverage
remains high at ~5x net debt/EBITDA.
• Wireless: ARPM stability but margin pressure: RCOM reported a fifth
quarter of stable ARPMs at 44 paisa and management commented that
competitive intensity is easing. Importantly, wireless margin declined 1.6pp
to 27.4% (higher SG&A and network opex). We expect wireless margin to
remain under pressure in FY12 but with 3G data helping toward year-end.
• Capex cut sharply: Capex guidance for FY12 is INR 15bn, ~50% lower
than the FY11 underlying capex. We have reduced JPMe FY12/FY13 capex
by 56%/50% and capex/sales is now 7.7%/7.3% vs. 20.9% in FY11.
• Leverage concerns persist: Debt at end-FY11 was INR339bn (~US$7.5bn)
and net debt/EBITDA ratio was 4.9x vs. 2.6x in FY10. We estimate this
can will fall to ~4x by FY12 however this would still be higher than peers.
• Forecast changes: We have increased our estimates for 3G revenue (4%/
10% of wireless revenue in FY12/FY13 vs. 3%/6% earlier). This is the
primary driver of the INR 0.6/1.0 increase in our FY11/FY12 EPS to INR
6.6/12.1. Without the 3G rev change, our EPS would be 2%/15% lower.
• Our Mar-12 price target (PT) is INR 95 (vs. Dec-11 of INR 82 earlier).
Our PT is adjusted downward for INR38/share for the regulatory risk. Our
underlying valuation of RCOM’s businesses increases primarily due to
higher 3G revenue, lower capex estimates and the PT time-frame shift. We
don’t see any near-term positive triggers for RCOM however de-leveraging
of the balance sheet would make us more positive. Downside risks include
sharper decline in minutes and also in ARPM; longer-than-expected
regulatory uncertainty.