Oil PSUs – to gain in case of global economic weakness „:: BofA Merrill Lynch

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Oil PSUs – to gain in case of
global economic weakness
„Oil PSUs to do well in case of global economic weakness
There are concerns of recession in the US in 2012 (see Economic Commentary,
04 August 2011) and global economic weakness. Global economic weakness will
mean a decline in oil prices, which would mean a decline in the oil subsidy in
India. Stocks of Indian state-owned (PSUs) oil companies are therefore likely to
do well in case of global economic weakness. Another reason why oil PSU stocks
should do well is the significant progress in oil sector reforms since June 2010.
Subsidy cut of US$7bn for every US$10/bbl fall in oil price
Global economic weakness is likely to cause a fall in oil demand and therefore in
oil prices. Already, the IEA is forecasting 2Q-4Q 2011 oil demand growth at 0.7-
1.2m b/d, which is 45%-68% lower than 1Q 2011 growth of 2.2m b/d. A decline in
Brent price by US$10/bbl will cut FY12 oil subsidy by Rs300bn (US$6.7bn).
Reforms since Jun’10 cut FY12 subsidy by US$23bn (49%)
Fuel prices have been raised by 15-54% since June 2010. Excise and import duty
on petrol and diesel was also cut in June 2011. These fuel price hikes and tax
cuts have cut FY12 subsidy by Rs1.0trillion (US$23bn). Thus reforms have cut
FY12 subsidy by 49% from Rs2.1trillion (US$47bn) to Rs1.1trillion (US$24bn).
Gains from reforms ignored due to high oil prices
Fuel prices were hiked by 5-32% in June 2010. Oil PSU stocks were up 14-35%
over the next three months. However, since the price hike and tax cuts on June
24, 2011 these stocks are up just 3-11%. Investors thus appear to have ignored
gains to oil PSUs from reforms. This is due to high oil prices.  
At US$90/bbl FY13 subsidy US$10bn (lowest since FY06)
Gains to oil PSUs from reforms will get noticed especially when Brent price falls
below US$95/bbl (no diesel subsidy below US$95/bbl). At our FY13 Brent price
forecast of US$114/bbl subsidy will be Rs1.2trillion (US$27bn) despite reforms.
However, at Brent of US$90/bbl FY13 subsidy will be just Rs455bn (US$10bn),
which is the lowest since FY06.
Upstream better play on reforms; Buy OIL & HPCL
As discussed, reforms done have already cut subsidy substantially. More reforms
could follow like limiting the number of LPG cylinders at subsidized price, which
could cut LPG subsidy by 20-30%. Upstream companies are better placed than
R&M companies to gain if FY13 subsidy were to be just US$10bn. However,
stocks of R&M companies have usually reacted more positively to reforms than
upstream. Retain Buy on OIL and HPCL.

NTPC- Management tries to assuage concerns ::Deutsche bank,

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NTPC Limited
Reuters: NTPC.BO Bloomberg: NATP IN Exchange: BSE Ticker: NTPC
Management tries to assuage
concerns


Maintaining Hold as concerns remain
This report marks the transfer of coverage from Manish Saxena to Abhishek Puri.
Following a 5-6% stock correction after  Q1 results, NTPC's management in its
annual analyst meeting again attempted to assuage investor worries on capacity
addition, fuel linkage and progress on backward integration, (e.g. coal mining). In
our view, at current the valuation (1.8x FY13E BV) the stock is entering into a value
zone, but appears to lack catalyst(s) in the near term. We reiterate our Hold rating
and recommend investors to shift to Coal India


Management exudes confidence
As in all analyst meetings over the last few years, senior management was quite
vocal in setting 12-month targets, which include a run-rate of 12-14% volume
growth and an ability to obtain more than 60-70% of Coal India’s incremental
production in order to grow volume. Also, despite the earlier lack of slack in
capacity additions, management pointed to a 10-12% capacity addition per annum
over the next three years.
We believe the challenge for NTPC could be to demonstrate volume growth
With Coal India not yet taking the mantle to import coal, pooling coal continues to
be a challenge and it remains to be seen how NTPC could retain its status of
becoming a first priority on coal allocation, particularly under intense competition.
Our revised estimates factor in volume growth of 3% for the next three quarters
and continuance of tax arbitrage to give EPS CAGR of 10.6% over FY11-13.
In a value zone, but with the absence of near-term triggers; risks
After the 13% underperformance to the Sensex Index, our current valuation matrix
of price/book of 1.96x FY12E and 1.80x FY13E appears reasonable. However, with
no near-term catalysts and no strong generation yet, growth could result in
lacklustre 12-month stock performance. We reiterate our Hold rating. Upside risks
largely stem from better and cheaper coal procurement, driving incentives and
earnings. The key downside risk is generation volumes continuing to significantly
lag capacity additions.

India Strategy Weekly Earnings Tracker:: Morgan Stanley Research,

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India Strategy
Weekly Earnings Tracker


Summary of changes to earnings estimates:
•  This week, the F12 Sensex EPS by MS analysts stood
at 1311 vs. consensus expectations of 1298.
•  Over the past week, consensus revised up the F12
growth estimate by 0.3ppt while MS analysts revised
down growth by 0.4ppt. Over the past month, MS
analysts have revised down the F12 earnings growth by
1.5% vs. 0.9% by consensus.
•  At the sector level, consensus revised growth estimates
down in 7 out of ten sectors in the past month with
Materials seeing the most downward revisions and
Consumer Staples most upward revisions. Consensus
remains most negative on Telecoms and most positive
on Industrials in terms of F12 growth expectations.
•  During this week, the 1- and 2-year forward earnings
breadth fell to a 4-month low – at -17.3% and -16.4%,
respectively.

Jain Irrigation Systems F1Q12: Strong Operational Result; Beats Estimates :: Morgan Stanley Research,

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Jain Irrigation Systems
F1Q12: Strong Operational
Result; Beats Estimates
JI reported strong earnings (+40% YoY), driven by
strong growth in the MIS and agro processing
businesses. Improvement in working capital is a
step in the right direction, we believe.
Operating results above expectations: JI reported
growth of 31% in revenue, 38% in operating profit, and
40% in adjusted profit for F1Q12 compared to our
expectations of 28%, 24%, and 18% growth,
respectively (+12% above market expectations).
Key Positives: 1) MIS business reported 30% revenue
growth, driven by strong demand from cotton and
sugarcane farmers. We continue to believe that MIS is a
multi-year investment theme and that 20-25% revenue
CAGR is achievable over the next five years. 2) Agro
processing business reported 86% revenue growth YoY
(115% growth in Mango pulp and 28% growth in
dehydrated onion business). 3) Export growth for F1Q12
was strong at 23% (15% organic). 4) According to
management, order book position is strong (up 15-20%
YoY with MIS ~Rs5bn, Food processing ~Rs3bn and
Pipes ~Rs1bn). 5) Management remains laser focused
on working capital efficiencies, we believe. MIS gross
receivables reduced by 20 days qoq in F1Q12 (now at
349 days) and management expects to reduce it further
by 40-50 days over the next two quarters.
Key Negatives: 1) EBITDA margin in MIS business
declined by 100bp, driven by the increase in polymer
prices. We believe that the company has sufficient
pricing power to maintain margins within the historical
band. 2) Interest costs increased 58% yoy and 11% qoq
(8% above our expectations), driven by higher working
capital and increase in borrowing costs. According JI, a
combination of faster subsidy disbursements by state
governments, increased upfront payment from farmers,
and the proposed NBFC will likely help constrict overall
working capital for F12. 3) Pipes business revenue and
profit growth of +5% and -8% were lower than our
expectations of 15% and 2%, respectively.


Update on Proposed NBFC: 1) JI has approached the
regulator (The RBI) to seek permission to setup the NBFC and
expects NBFC to start operations by the end of F3Q12. 2)
According to management, shareholding for NBFC over the
next 18 months is likely to be ~40% with JI, 10% with IFC (part
of World Bank), 20% with promoters and 30% by financial
institutions. 3) NBFC roll out is likely to be in phased manner,
starting from the state of Maharashtra. 4) Management expects
to contribute Rs1bn into NBFC for JI’s equity stake (~40%) in a
phased manner, i.e., Rs0.5bn in F2011 and the balance in
F2012. 5) Management expects NBFC to fund JI’s receivables
worth Rs3-5bn by the end of F2012.
Other key takeaways from the results conference call: 1)
Gross debt remained flat sequentially (~Rs21-22bn). 2)
Management has planned capital expenditure of Rs3.5-4bn for
F2012.


Domestic MIS business: Overall growth of 30% YoY. Key
states contributing to the growth were Rajasthan (9x),
Himachal Pradesh (6x), Karnataka (4x) and Gujarat (+176%).
Agro processing: Agro-processing business had strong
revenue growth of 86% YoY, driven by both pricing and
volumes. Food processing margins (28.3%) were 400bp higher
than our expectations, driven by better absorption of fixed
costs and low-priced inventory. According to management,
Coke India’s off-take for fruit processing in F1Q12 was strong
(+114% YoY).
Plastic Pipes: Pipes revenue grew by 5% (MSe 15%) with
EBITDA margins at 8.2%, largely in line with our estimates.


Valuation –Methodology: We value JISL using our
residual income model in arriving at one-year forward intrinsic
value for Jain Irrigation at Rs250 per share, with a terminal RoE
of 18% and cost of equity of 13.1%.
Key Downside Risks: 1) Spike in polymer prices. 2) Lower-
than-expected growth in new states for MIS. 3) Faster-than-
expected increase in competitive activity. 4) Deterioration in
overall working capital management.

Morgan Stanley Research, Utilities- Skimming Through Recent Sector Developments

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India Utilities
Skimming Through Recent
Sector Developments
Impact on our views: We maintain our Cautious view
of the industry primarily due to concerns on domestic
coal supplies and its resultant impact on plant
profitability. There have been various developments and
news reports on the sector since June 2011, which we
have assimilated in this note and provided our views on.
While there seems to be a growing need within the
government to take steps to improve the domestic coal
outlook, remove the impediments for granting
environment clearances and turn around the SEBs, we
believe these steps (once implemented) may only
change ground realities in the mid to long term. Hence,
for the next 12-18 months, profitability of power plants
will be impacted due to these issues. Further, lack of
debt funding, rising global coal prices and changes in
Indonesian coal pricing regulations could act as
additional negatives. We summarize all the sector
developments in the following pages with our views.
What are companies saying post Q1 results? JSW
Energy management mentioned on their Q1 earnings
call that SEBs have been backing down due to lower
demand caused by the early onset of monsoon. Hence,
PLFs have been lower than expected and their outlook
on F2012 merchant rates has been revised downward
from Rs 4.5-4.75/unit earlier to Rs 4-4.25/unit now.
Further, both JSW Energy and Sterlite Energy’s
managements indicated that they would go slow on new
power projects given increasing challenges.
Change in global coal price outlook: Our global team
has increased forecasts for thermal coal prices – C2011
remains unchanged at US$130/t however, C2012 has
been increased to US$135/t (from US$125/t earlier) and
C2013 to US$140/t (from US$130/t earlier). We believe
a rising coal price environment will not bode well for
profitability of power companies, especially those that
have a reasonable exposure to the imported spot market
(such as JSW Energy)

Some of the key developments/news flow since June 2011, along with our views are below:
Topic What Has Happened Our View
Environment clearance to coal
blocks
During end-June, the MoEF granted Stage I
approval to three coal blocks (Tara, Parsa
East and Kante Basan) and re-categorized
five coal blocks as “go” areas (Meenakshi B,
Meenakshi dipside, Manoharpur,
Manoharpur dipside and Dulanga).
With this, some blocks will now be eligible to
apply for Stage I clearance (once a mining
plan is submitted) while some with Stage I
clearance can apply for final clearance
(Stage II). The common reasons for granting
these approvals were: 1. There has been a
substantial change in the mining plan, thus
reducing the requirement of very dense and
medium dense forest land. 2. The Ministry of
Power and respective state governments
were persistently following up with the MoEF
on these approvals. 3. The ultimate power
projects are based on supercritical
technology, which is low on carbon
emissions. 4. All approvals come with the
usual conditions on monetary compensation,
afforestation and wildlife management.
We believe these clearances seem to have
at least got the ball rolling on pushing
through some of the key approvals that have
been holding back development activities on
various power projects. However, we need
many more such approvals to come through
to make a meaningful impact. Further, we
believe approvals will be granted on the
merits of each case as is evident from the
fact that the Mahan and Morga II coal blocks
were denied environment clearance.
Also, from this stage these blocks may still
take about 12-24 months to get all the final
clearances, acquire land and start coal
production.
See our note “Environmental Clearance for a
Few Coal Blocks” dated June 29, 2011
Change of the environment
minister and proposal to set up an
independent authority
In the recent Cabinet reshuffle, there has
been a change in the environment minister.
Further, the Prime Minister has announced
the intention of establishing an independent
regulator (the National Environment
Appraisal and Monitoring Authority) that will
evolve objective standards of scrutiny and
make recommendations to the ministry for
final approval.
It is still too early to take a view on how the
process of granting environment clearances
will change with the change in minister and
the proposal to set up an independent
authority.
However, any proposals to speed up
environment clearances and
commencement of competitive bidding of
coal blocks could be positives for the sector.
SEB conference The State Power Ministers’ Conference on
distribution sector reforms was held in New
Delhi this month and was attended by the
Minister of Power, Deputy Chairman of the
Planning Commission and various State
Power Ministers. The conference was
organized to take stock of the situation and
discuss measures to be undertaken to turn
around the financial health of SEBs. One of

the key messages from the Minister of Power
was that that while the Centre is always
ready to help States, it is their responsibility
to ensure implementation of reforms.
Some of the other key reform measures
discussed were that state governments
would consider converting loans due from
the state governments as state government
equity to ensure capital infusion and
improvement in net worth of SEB, states to
ensure that subsidies are released in
advance and state governments to ensure
automatic pass through in tariff for any
increase in fuel cost.

a. This was an annual conference wherein
of the many policy actions discussed,
most were activities that should have
been done in the normal course of
business.
b. The measures discussed need to be
ultimately implemented by the


respective state governments/SEBs.
c. A week after this conference, the Indian
Express reported that the power
minister of Tamil Nadu had indicated
that the state government was not
considering a hike in electricity tariff.
d. ICRA, a credit rating agency, has
revised Tamil Nadu Electricity Board’s
rating from [ICRA]BB+  to [ICRA]D
which implies that the bank lines are in
default or are expected to be in default
soon.
e. As per an article in the Financial
Express (dated Aug 1), it is believed that
Tamil Nadu, Rajasthan, Madhya
Pradesh and Uttar Pradesh have turned
to the Power Ministry and Planning
Commission, seeking their help to bail
out their discoms. The Centre, which is
believed to be open to the plea, has
however, made it clear that such issues
cannot be addressed in isolation, but
only under a broader policy framework.
See our note “Policy Measures Discussed to
Reinvigorate SEBs” dated July 14, 2011

Indonesian Coal Prices to go up
due to regulations
The Indonesian government proposes to link
the royalties to a benchmark price that is
indexed to Newcastle, Platts and Global
Coal, as well as the domestic price (ICI). This
is proposed to be effective from September
23, 2011. The important point to bear in mind
is that some Indian companies import
low-quality coal from Indonesia that may not
have global benchmark prices; however, we
believe these prices may be determined
based on calorific value.
The Indian Embassy at Jakarta has
confirmed that the new Indonesian
regulations stipulate that spot coal prices
should refer to a benchmark price in the
month in which coal shipments are
conducted and for term sales it should refer
to the three month average benchmark price
that occurred before coal price agreement
was made. The adjustments to the coal

contracts, finalized prior to these regulations,
need to be made within 12 months.


We believe an upward revision in Indonesian
coal prices could have the following impact:
• Indian power companies might invoke
the force majeure clause under the PPA
and ask for an upward revision in power
tariff to pass on the additional fuel cost.
• Renege on PPAs that have already
been signed and hence be liable for
liquidated damages.
• Incur substantial losses, which might
hinder their capability to service debt.
• There should, however, be no impact on
plants where fuel cost is a pass-through.
• Mine-owning companies might face a
decline in coal trading profits if they were
to fulfill the obligation of selling coal to

the power company at original
contracted prices.
Related to the issue of power plants asking
for an upward revision in tariffs to pass-on
the incremental cost, the Andhra Pradesh
government is likely to turn down the
suggestion for a tariff increase for the
Krishnapatnam UMPP (4,000 MW) of
Reliance Power as the provisions under the
PPA do not allow a rate revision due to
changes in policies by foreign governments.
See our note “Impact Due to Price Revision
of Indonesian Coal Contracts” dated June
21, 2011



Power sector exposure limit of
banks
The power ministry had sought a 5 ppt
increase in the single-borrower exposure
limit of banks and other financial institutions
to meet the sector's funding requirements in
the Twelfth Five-Year Plan.
However, the finance ministry is not keen to
let banks raise their exposure and has
instead suggested that the power sector
should tap other sources such as dedicated
finance firms and upcoming debt funds.
While there is a proposal to set up an
infrastructure fund, it is still not in place. Also,
foreign funding institutions are only ready to
fund operational plants as they do not wish to
take on construction risk.
We believe lack of domestic funding could
become an impediment to capacity growth
going forward.
Environment clearance to Adani
Power’s projects
The Environment Ministry granted
conditional clearance to Adani Power’s
Dahej project (2,640 MW).
The Dahej project is still in the pipeline as
coal sourcing needs to be tied up which will
then be succeeded by a PPA and finally by
financial closure. Equipment ordering and
construction activities can only begin
thereafter.
On a separate note, the company’s
Chhindwara project (1,320 MW), which is
also in the pipeline, is facing local protests.
Nonetheless, both these projects are
included in our Bull Case fair value.
Lawsuit filed against Lanco  Perdaman Industries, an Australian
company, has filed an A$3.5 bn lawsuit
against Lanco alleging non-compliance with
the coal supply agreement for their upcoming
urea plant in Western Australia.
The coal supply agreement is for about 2.75
mtpa of coal and the supply begins sometime
in 2015-16.


The hearing on this suit commenced on July
27 and we believe it will take time for it to be
finally concluded. In our view, this issue will
remain an overhang on the stock’s
performance till such time.

Aban Offshore- Insurance costs hit bottom line ::Macquarie Research

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Aban Offshore
Insurance costs hit bottom line
Event
 Aban Offshore (ABAN) announced consolidated PAT of Rs886m, which was
significantly lower than estimates, due to a sharper-than-expected rise in
insurance costs and lower other income. With insurance expenses likely to
remain high in the medium term after the Macondo incident last year, we cut
our profit estimate by ~10% and our TP to Rs590 from Rs725. However, rig
rates have bottomed and are expected to rise slowly in tandem with
increasing utilizations, and ABAN has secured contracts for all except 2 of its
rigs. We rate ABAN a high risk/high gain leveraged play and maintain OP.
Impact
 Insurance costs rose to Rs297m (up 1.4x YoY, 54% QoQ): Insurance costs
for the company have risen due to higher premiums in conjunction with the
increased coverage required after the BP-Maconodo deepwater well incident
and the sinking of Aban Pearl last year, which together pushed up insurance
costs for the industry overall.
 Fleet utilization healthy, but older rigs are locked-in at low rates: ABAN
has contracted out all but 2 of its rigs, including the high earning drillship Aban
Abraham. The Aban III contract with ONGC (US$62k/day) is to start in
October 2011. However, the older rigs (Aban I–VII) are locked-in at low rates
(US$60-70/day), which are the new benchmark for that class of rigs.
 Exchange fluctuation loss of Rs55m and lower other income weakened
profits further. However, write-offs due to the bankruptcy of Petrojack ASA
(Norwegian subsidiary) are over, and none has spilled over to the quarter.
Earnings and target price revision
 FY12-14E PAT cut by ~10% due to increased insurance costs, which ABAN
management indicated would remain at current levels. TP cut by 19% to
Rs590 to factor in lowered earnings and increased risk perception.
Price catalyst
 12-month price target: Rs590.00 based on a DCF methodology.
 Catalyst: Debt refinancing/equity raising; fresh contracts.
Action and recommendation
 ABAN has locked-in most of its rigs for long-term contracts and, hence, is
assured of reasonable, uninterrupted cashflows. Industry rig rates are
expected to inch up, especially considering the increase in utilizations being
observed currently. However, the rates for the older rigs are relatively low,
and a lack of further rigs to contract out due to balance sheet constraints
against the expansion of its fleet raises a question about profit growth in the
near term. Debt repayment issues remain, as 10% of its loan payments need
to be refinanced/restructured due to a lack of sufficient cashflows. However,
given very low LIBOR, the company has in fact been managing to re-finance
at a lower rate of 5%. A drop in crude prices increases perceived risks to the
deep cyclical, leveraged nature of ABAN’s business.

Tata Motors July 2011 volume: CV growth on track, PVs disappoint ::Standard Chartered Research,

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Tata Motors
July 2011 volume: CV growth on track, PVs disappoint


 Total sales for the month declined 6% yoy to 63,573
units primarily due to lower sales from the PV segment.
 While MHCV sales rose 4% yoy to 17,068 units, LCV
sales grew 24% yoy to 28,572 units.
 Total PV sales in July ’11 declined 37% yoy (-21% m-om) to 17,933 units.
 Valuation concerns seem to be overdone; Maintain
OUTPERFORM.

Lower PV sales hurt overall volume. Tata Motors’ total
sales declined 6% yoy to 63,573 units in July 2011 primarily
on account of lower offtake from the PV segment (down
41% yoy).  
CV sales up 16% yoy to 45,640 units. Total CV sales grew
16% yoy in July 2011 to 45,640 units driven by sustained
ramp-up of LCV sales. While MHCV sales were up 4% yoy
at 17,068 units, LCV sales were up 24% yoy at 28,572
units.      
PV sales down 37% yoy. Total PV sales in July 2011
declined 37% yoy (down 21% m-o-m) to 17,933 units. While
car sales declined 41% yoy, UV sales declined 2% yoy.
Nano sales failed to ramp up and were down 64% yoy at
3,260 units. While Indica sales declined 32% yoy to 5,860
units, Indigo sales declined 30% yoy to 4,877 units.
Valuation. The stock has witnessed selling pressure off-late
primarily on concerns of a slowdown in Europe (JLR’s key
market) as well as in India. However, we believe these
concerns are overdone with the CV volume for Tata Motors
growing at 17% yoy YTD FY12 and JLR volume growing at
9% yoy in 1Q. The stock is attractively valued at 6.8x
FY12E earnings and at 3.9x EV/EBITDA. Maintain
OUTPERFORM.

Mahindra & Mahindra July 2011 volume: Momentum sustained ::Standard Chartered Research,

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Mahindra & Mahindra
July 2011 volume: Momentum sustained


 M&M continues to surprise, registering robust volume
growth of 28% yoy in July 2011.
 UV sales (including pick-ups) rose 62% yoy; 3W sales
was flat yoy at 5,395 units.
 Tractor sales increased 15% yoy to 16,718 units.  
 M&M appears fairly valued at current levels.
 Maintain IN-LINE.


Total sales up 28% yoy. M&M’s July 2011 sales grew
28% yoy to 56,351 units. While automotive sales were up
41% yoy to 39,633 units, tractor sales grew 51% yoy to
16,718 units.
Strong UV / pick-up sales drive automotive segment
sales – up 41% yoy. Total UVs (including pick-ups) grew
62% yoy (+12% m-o-m) to 29,154 units. While UVs grew
30% yoy to 15,682 units, 4W pick-ups (including Maxximo
and Gio) grew 91% yoy to 13,472 units. M&M’s 3W
segment sales remained flat yoy at 5,395 units. Verito
sales continued its steady uptrend and posted 8% growth
m-o-m (+117% yoy over a low base).
Tractor sales up 15% yoy. Total tractor sales in July
2011 grew 15% yoy to 16,718 units. While domestic
tractor sales were up 16% yoy at 15,699 units, exports
declined 4% yoy to 1,019 units.
Valuation. M&M has posted strong volume growth across
all product segments. Its recent entry into the low-cost
tractor category (launch of Yuvraaj), launch of 1.2 tonne
pick-up Genio and the PV variant of Maxximo are likely to
further boost volume going forward. The company is likely
to launch a new SUV in FY12, which would likely lead to
incremental volume growth going forward. Strong volume
offtake is likely to provide margin stability in a rising cost
scenario. Maintain IN-LINE with a price target of Rs700.

Maruti Suzuki July 2011 volume: Sales down ::Standard Chartered Research,

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Maruti Suzuki
July 2011 volume: Sales down


 Maruti’s July sales declined 25% yoy because it ceased
producing the old Swift and shifted Dzire’s production to
Gurgaon.
 Export sales declined 18% yoy.
 We expect new launches to drive incremental volume
growth; softening raw material prices and improved
localisation are likely to lead to margin expansion.
 Attractively valued at 12.2x FY12E earnings; Maintain
OUTPERFORM, with a price target of Rs1,485.


Total sales down 25% yoy in July 2011. Maruti Suzuki’s
sales declined 25% yoy in July 2011 to 75,300 units
primarily because it stopped producing the old Swift (new
Swift to be launched in August) and shifted Dzire production
to the Gurgaon facility.
Domestic sales down 26% yoy to 66,504 units. Domestic
sales fell 26% yoy in July 2011 to 66,504 units. As per the
new classification, the mini segment (comprising M800, Astar, Alto, WagonR) declined 16% yoy to 38,028 units. The
compact segment (comprising Swift, Estilo, Ritz) declined
56% yoy to 9,099 units. The decline was primarily on
account of the cessation of the production of the older Swift
- only 348 units dispatched in July 2011 against sales of
11,828 units in July 2010. The new Swift is likely to be
launched in mid-August. Furthermore, Swift Dzire sales
declined sharply by 64% yoy to 3,021 units on account of
shifting of Dzire’s production to the Gurgaon facility. SX4
sales continued to be strong with 24% yoy growth to 2,303
units. The Omni / Eeco segment sales declined 2% yoy to
13,379 units.
Exports down 18% yoy to 8,796 units. Export sales
declined 18% yoy to 8,796 units on account of lower
shipments in the month. It is likely to be corrected in the
subsequent month.
Valuation. Forthcoming festive season and new model
launches (refreshed variants of Swift, Swift Dzire and a new
model) are likely to drive incremental volume growth for
MSIL. Softening commodity prices and steady improvement
in localisation is likely to drive margin expansion going
forward. The stock is attractively valued at 12.2x FY12E
earnings and at 6.3x EV/EBITDA. We reiterate
OUTPERFORM with a price target of Rs1,485 (at 14x oneyear rolling forward earnings).

Ranbaxy Laboratories -Subdued Quarter- nearing settlement ::Macquarie Research,

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Ranbaxy Laboratories
Subdued Quarter- nearing settlement
Event
 Ranbaxy reported 2Q CY11 sales of Rs20.5bn (in line with our estimates) and
adjusted PAT of Rs1.5bn (lower than estimate). Lower margin (~ 9% EBITDA
margin) on account of product mix (lower US (Aricept) sales and higher tender
sales in Africa) drove the miss. Maintain OP with TP of Rs545.
 RBXY indicated the negotiations are progressing well on the demand they
received from DoJ. RBXY has given a settlement offer towards resolution of
all outstanding matters. This offer is conditional on negotiations and
administrative actions by the US FDA. We believe such a settlement, even
with a likely penalty payment (our base case estimate is US$250m), would be
a favourable outcome. Inability to resolve FDA and DoJ related issues, or an
exorbitantly high penalty payment remain the key risks to our OP rating.
Impact
 Lower Aricept sales – the key miss: US sales were lower at US$95m
(Macq est. US$108m) on account of lower Aricept sales (180 day exclusivity
ended in 2Q CY11). We estimate US sales ex-Aricept for 2Q CY11 at
US$75m. RBXY’s confidence on monetizing Lipitor FTF opportunity and being
a major player in Lipitor post 180-day exclusivity as well was encouraging.
 Emerging markets (EM) focus: EM recorded sales of US$261m (up 14%
YoY) and contributed ~57% to sales. India grew by 11% YoY (secondary
sales growth at 18% vs.14% Industry growth), with project Viraat starting to
bear fruits. Africa sales grew by 30%, largely aided by the ARV tender sales.
Developed market contributed ~ 34% to the top-line & API contributed ~ 9%.
 RBXY guiding improvement in the base business margin starting CY12:
Management indicated that significant improvement in the margin would come
from 1Q CY12 (1Q CY11 EBITDA margin ~ 9%). We anticipate an expansion
in margin given the likely operating leverage in EM markets, commencement
of supply of Nexium DF (2H CY11) and better manufacturing asset utilization
post FDA issue resolution (likely 2H CY11), as we believe the current cost
structures are not reflective of underlying potential margin.
Earnings and target price revision
 We slightly adjust our core earnings estimate for CY11/12/13 to Rs15/23.5/27
from Rs16/24/27. Maintain Outperform rating and target price of Rs545.
Price catalyst
 12-month price target: Rs545.00 based on a Sum of Parts methodology.
 Catalyst: Comprehensive settlement with FDA and DoJ
Action and recommendation
 We maintain our OP rating on the name but do acknowledge that FDA issue
resolution remains the biggest driver of the stock (our estimate 2H CY11).
After adjusting for the FTF exclusivity, RBXY trades at ~19x CY12E earnings.
Given the recent rally, we recommend adding on any major weakness.


Conference Call Takeaways/ Other Highlights
 India : Sales grew 11% YoY to Rs4.8bn. Sales in the Consumer Healthcare business stood at
Rs759m. The slow growth (11% YoY) is partly on account of single digit growth of Anti-invectives
(RBXY strong player in Anti-invectives). Project Viraat has gained ground with secondary growth
rate 18% as compared to 15% for the Indian Pharma market (IMS YTD June 2011). Market share
of the Company also improved to 4.79% (IMS SSA Audit YTD June 2011), when compared with
4.63% (IMS SSA Audit YTD June 2010).
 US business:  Sales in US was ~US$95m with base business contributing ~US$70m. During the
Quarter, exclusivity on Aricept, launched in 4Q10 came to an end. RBXY said that the negotiations
with USFDA and the DoJ are progressing well and the management stands very positive on
monetizing Lipitor. RBXY has filed an ANDA with the USFDA seeking approval to market
Oxycodone Hydrochloride Extended-Release tablets in the 30, 40, 60 and 80 mg strengths.
 Europe: RBXY recorded sales of US$79m, a growth of 15% YoY. Romania, with sales of
US$30m was the key driver. RBXY launched Olanzapine Tablets, the generic version of Zyprexa,
on Day-1 in Spain.
 Asia Pacific: RBXY recorded sales of US$23m, a growth of 24% YoY, on account of higher sales
in most of the markets.
 CIS: RBXY registered sales of US$21m, a growth of 5% YoY. While the Russia business was
strong, Ukraine business remained a drag.
 Africa: RBXY recorded sales of US$51m, a growth of 33% YoY, helped by Tender sales
contribution.
 LATAM: RBXY recorded sales of US$17m (down 11% YoY) in 2QCY11 on account product
portfolio rationalisation (certain products were discontinued).
 API business recorded sales of US$40m as compared to previous year aided by sales of
Esomeprazole API to AstraZeneca.
 Margin Improvement in the base business to come from CY12: Management indicated that
significant improvement in the margin would come from 1Q CY12.
 Management guided for a FY12 Tax rate of 18-20%.
 Management guided for a significant higher base business EBITDA margin expansion from 1Q
CY12.
 Current Derivative position stands at ~US$756m; Gross debt: US$630m; Cash and cash
equivalents: US$380m; Net Debt: US$250m.
 Synergy projects with Daiichi Sankyo during the quarter included exploratory work on multiple
front-end, manufacturing and cost reduction projects.

Goldman Sachs:: SELL Cipla - In line with expectations: Domestic growth under pressure

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Cipla (CIPL.BO)
Sell  Equity Research
In line with expectations: Domestic growth under pressure; CL-Sell
What surprised us
Cipla reported 1QFY12 revenue of Rs15.91bn which was below GSe /
Bloomberg estimate by -4.8% / -6.0%. The revenue miss was largely on
weakness seen in the domesic businesses (yoy +10.1%) and exports which
saw a sequential decline of 14.8%. EBIT at Rs 2.99bn was higher than GSe by
8.8% (but below Bloomberg estimates, -10.8%) on: 1. Better product mix; 2.
Greater-than-anticipated utilization levels at Indore facility. Net income of Rs
2.53 bn which came 7.3% ahead of GSe (but below Street by -4.2%) was
helped by other income. We maintain our revenue growth forecast of 12.8%,
compared with management reaffirming guidance of 10% revenue growth for
FY 2012. We expect consensus numbers to come down for both sales and
margin after today’s -6.0% (top line) miss and -100bp contraction in margins.
Management indicated on the conference call a greater focus to consolidate
the domestic business which is lately seeing competitive pressure through a
combination of: 1. New product launches; 2. Optimization of Medical reps; 3.
Focus on Chronic therapeutic areas.
What to do with the stock
We reiterate our Conviction Sell on Cipla and maintain our 12-month Director’s
Cut-based TP of Rs244 . Cipla, currently trades at 22.1x on FY 2012 EPS implying
a premium of 31% vs. sector ,which,  in our view, is overvalued. We maintain
our 13% revenue growth for FY 2012 (above guidance of 10%) and make no
changes to our FY12E-FY14E EPS giving us a CAGR of 14%.  Risks: Partnership
with global pharma companies, recovery in domestic revenue growth.

Indian equities (-4.9% wow) in risk-off mode as global growth fears re-emerge Goldman Sachs

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Indian equities (-4.9% wow) in risk-off mode as global growth fears re-emerge
 All sectors ended in the red this week again with Infotech & Service sectors losing 6.7% and 5% respectively wow.
 Foreign outflows were around US$ 210mn, DIIs were net buyers (of US$ 291mn), as of close of Aug 03, 2011.
 Gold (+3.9%) and Silver (4.4%) gained the most wow in the flight to quality. Energy (-5.5%) fared the worst.
 65% of 1QFY12 earnings released so far have been below expectations and a mere 20% above expectations.
Overview
Respite from the uncertainty around the US debt
deal was short lived as Indian equities followed
global stocks in a sharp sell-off on US and global
growth concerns. The NIFTY touched a 52 week low
on Friday (-4.9% wow)  in a slide that spanned
across sectors. The week saw a string of
disappointing data releases with July PMI falling to
53.6 from 55.3 and a report from the PM’s economic
advisory council revising down FY12 growth to 8.2%
from 9%. INRUSD depreciated sharply to 44.74 on
concerns of an outflow of funds.
NIFTY price performance
NIFTY was down 4.9% wow & has lost 15.1% ytd
Source: NSE, DataStream, GS Global ECS Research.
Foreign and domestic flows
Foreign investors sold US$ 210mn wtd while DIIs
bought US$ 291 mn as of close of Aug 03, 2011
Earnings sentiment
MSCI India Financials had the weakest EPS
sentiment (-16%) wow. MSCI India is now trading
at 13.2X forward earnings.
Commodities
Energy (-5.5%) underperformed while Metals
(1.2%) outperformed wow.
Economic Events & Earnings Results
Industrial Production (Aug 12); 1QFY12 results:
Sobha Dev (Aug 9); Coal India, BPCL and Hindalco
Ind (Aug 12

Grasim Industries - Solid numbers but some worries::Macquarie Research,

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Grasim Industries
Solid numbers but some worries
Event
ƒ Results well above estimates: Grasim reported 1Q12 earnings above our
estimates, largely driven by good results in cement and in line results in the
VSF business. However, there has been some pressure on VSF prices due to
falling cotton prices, which was also reflected in low sales volume for the
quarter. We are reducing our VSF realisation estimate and EPS for FY12
marginally and reduce our target price slightly to Rs2,506/sh from Rs2,528/sh.
Maintain Outperform
Impact
ƒ Strong 1Q consolidated results: Net Sales at Rs58.72bn grew 16% YoY,
supported by an increase in both the VSF and cement divisions. EBITDA at
Rs15.8bn was up 21% YoY as cement business profitability increased by
Rs2.2bn and standalone increased by Rs517m. Net profit at Rs7.2bn,
recovered from Rs5.7bn reported last year.
ƒ VSF business – realisations offset volume decline: VSF business reported
EBITDA at Rs3.5bn, up 15% YoY. However, this was led by a sharp increase
in realisations, which have seen an increase of 29% in the past one year. As
cotton prices corrected sharply, VSF prices have also corrected which is
evident in lower sales volume, down 19% YoY. We have cut our price
estimate for VSF to Rs140/kg from Rs144/kg and expect a recovery in 2H.
ƒ Cement – good profits but could be the peak: Cement business earnings
did see an increase during the quarter despite low sales volume and muted
recovery in realisations mostly due to cost control. EBITDA margin in 1Q
came in at Rs1,200/t, against Rs985/t in 4Q. However, most of this is
temporary relief and 2Q will likely see increases again on account of the
recent hike in diesel prices as well as annual maintenance expenses. Also,
cement prices have started to correct and demand remains weak.
ƒ Focus on growth remains: Grasim is expanding its annual cement capacity
by 9.2mt (20%), which is expected to be online by 1Q FY14. However, it has
only spent 11.5% of the total capex earmarked for this expansion for FY12 in
1Q. For VSF, where capacity is being increased by 46%, it has only spent
11.7% of total capex required in FY12. This capacity is expected to be online
by end of FY13.
Earnings and target price revision
ƒ We have reduced our FY12/13/14 estimates by 4%/1%/1% respectively.
Target price lowered to Rs2,506/sh from Rs2,528/sh.
Price catalyst
ƒ 12-month price target: Rs2,506.00 based on a DCF methodology.
ƒ Catalyst: Rally in VSF prices, recovery in cement prices.
Action and recommendation
ƒ Maintain Outperform: Grasim appears to be the only hedged play among the
large cement companies. We hope that profitability will bottom out in 2Q for
both cement and VSF and provide a good entry point.

IDBI-- Multiple stresses::Macquarie Research,

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IDBI
Multiple stresses
Event
 IDBI reported 1Q12 PAT of Rs3.4bn, much below our estimate of Rs5.1bn.
The shortfall, we believe, was mainly due to high provisions. Earning continue
to face headwinds and we have reduced our earnings estimates for FY12-14
by 2–6% and TP to Rs115 from Rs130 earlier. Maintain Underperform.
Impact
 Asset quality continues to be disappointing. Delinquencies remain high at
1.6% of loans. The NPLs were spread across sectors, with no large one-offs.
IDBI’s low provisioning coverage excluding technical write-offs at 41% means
that provision expense remains high. Credit cost of Rs3.6bn was higher than
our expectation. The stresses on the portfolio remain; in 1Q12, there were
some large restructurings amounting to Rs4bn.
 CASA falls sharply. NIM, aided by interest on income tax refund, was flat
QoQ at 2.1%. Adjusted for income tax refund interest income, it was down
~10bp QoQ. While this was better than our expectation, the underlying
movement in low-cost deposits is worrying, in our view. The bank’s CASA
ratio declined 360bp to 17.3%, easily the lowest in our coverage. The last few
quarters saw significant accretion in savings accounts, as the bank made a
focussed attempt to attract such accounts. However, we believe, the efforts
have been offset by the attraction of high term deposit rates in 1Q12. Thus
deposits in savings accounts actually reduced 2% QoQ even as term deposits
were up 7%QoQ.
 Loan growth was sluggish at 14.5% YoY, contracting 1%QoQ.  Large
corporate lending, forming two-thirds of loans, grew only 7% YoY. Growth was
mainly driven by retail, which was up 49%YoY.
 Poor fee growth. Core fee was down 16% YoY. We believe this is largely
due to slowing loan growth, particularly project finance, and likely would
remain under pressure. The company also booked a trading loss of Rs350m
in 1Q12.
Earnings and target price revision
 We have cut our EPS estimates for FY12-14E by 2-6%, to factor in lower loan
growth and higher provisions partially offset by higher NIMs. Our TP reduces
to Rs115 from Rs130, driven by lower ROE even as we roll-over to FY13E
valuations.
Price catalyst
 12-month price target: Rs115.00 based on a Sum of Parts methodology.
 Catalyst: Pressure on NIMs and asset quality in 2Q12E
Action and recommendation
 Return ratios remain poor, and are likely to remain under pressure. We
maintain Underperform.

Power finance corporation - 1Q: Momentum continues; Concerns overdone::BofA Merrill Lynch,

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Power finance corporation Ltd
   
1Q: Momentum continues;
Concerns overdone, Buy
„1Q earnings growth in-line; momentum continues
PFC reported earnings of Rs6.9bn, a yoy growth of 5% (in-line); adj. for int. on IT
refund, etc. earnings grew 14% yoy. Topline (NII) grew 10% yoy, but moreover,
the pace of B/s growth has continued to be strong (22% loan growth) and margins
although down ~25bps yoy owing to rise in funding costs, have expanded qoq (by
37bps). Disbursement growth was a tad weaker (down 23% yoy), but off a very
high base of 1Q and 4Q last year. Sanctions grew 17% yoy in 1Q. Asset quality
continues to be manageable, with gross at 23bps and net at 20bps, stable qoq.
Cut growth (loan) est., but net profit to still grow at +20%
We have cut our net profit est. by +4/5% for FY12/13, as we cut loan growth est.
to +20-21% vs. historical average of +24-25%. But our net profit est. build in +20-
25bps of credit costs, post which we expect sustainable net profit growth of
+19/23% through FY12/13.  Moreover, operating profit growth is still est. to be
very robust at ~27/23% yoy in FY12/13. Margins are expected to rise by at least
+15-20bps in FY12 (yoy) driven by 1) ability to raise tax free bonds (spread
differential of +100bps) and 2) equity leverage post recent FPO.
Cut PO to factor in earnings cut and rising macro headwinds
We cut our PO to Rs240 to 1) factor in cut in earnings by +4/5% and 2) rising
macro headwinds. But we maintain Buy, as we believe asset quality issues are
overdone (working capital loans to SEBs and merchant power project loans <4-
5% of loans) and risk-return is attractive, with stock trading at +1.4-1.5x FY12
book (1.2x FY13 book), with RoAs at +2.7% / RoEs at +17%. Moreover, PFC has
U/p +30% (YTD; vs. markets) and captures the downside risks and also PFC
trades at a +10-20% discount to its peers (REC, IDFC) despite better risk-profile.


Price objective basis & risk
Power finance corporation Ltd (PWFEF)
We rate PFC as a Buy with PO of Rs240. But we maintain Buy as we believe
asset quality issues are overdone (working capital loans to SEBs and merchant
power project loans together constitute <+4-5% of loans) and risk-return is
attractive, with stock trading at +1.4-1.5x FY12 book (1.2x FY13 book), with RoAs
sustaining at 2.7% and RoEs at 17% and stock U/p vs. markets (30% YTD)
captures the downside risks.  Moreover, PFC is trading at a 10-20% discount to
its peers (REC, IDFC) despite better risk-profile. Growth (volume) is likely to
sustain at +20% especially as PFC remains a direct play on financing of power
projects in India (key govt. focus area). Risks are higher defualts that could lead
to asset quality issues.

Glaxo SmithKline Consumer Healthcare - Sales growth improves ::Standard Chartered Research,

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Glaxo SmithKline Consumer Healthcare
Sales growth improves


 GSKCH’s 2Q CY11 net sales grew a robust 21.6% yoy,
compared with 9.5% in the previous quarter.
 Higher input costs (up 31%) and ad spend (up 34%)
resulted in lower EBITDA growth of 14%.
 Nevertheless, better cost management kept EBITDA
margin healthy at 18%. Net profit grew 15% yoy.
 We raise CY11/12E EPS by 2/3% supported by strong
sales growth and increase price target to Rs2,461
(Rs2,292 earlier). At one-year forward P/E of 25.5x we
find valuations rich and recommend investors to wait for
a better entry point. Maintain IN-LINE.

Volume growth rebounds. Post muted sales growth of
9.5% in 1Q CY11, GSKCH’s sales rebounded with growth of
21.6% yoy in 2Q CY11 to Rs6.5bn. This was driven by
estimated volume growth of 14-15% in core business and
strong performance in newly launched products.
Raw material costs higher-than-expected. Like various
FMCG companies that declared results, GSKCH’s gross
margin was also under pressure. The rise in prices of its key
inputs like milk and barley led to an increase in raw material
cost-to-sales by 300bps yoy and 250bps qoq to 40.6% in
1Q CY12.
Ad spend high, but EBITDA margin remains healthy.
GSKCH continues to support its new products launched in
the past 2-3 years with higher advertising. Ad spend-tosales was up 140bps yoy to 15.3%. However, 220bps yoy
decline in other expenses-to-sales limited EBITDA margin
decline to 130bps yoy at 17.7%. Adjusted net profit was up
14.9% yoy.
We raise CY12/13 earnings. We raise CY11/12E EPS by
2.5/3.5% on the back of rebound in core business volume
growth and possible margin improvement through better
cost management.
Maintain IN-LINE. We expect steady volume growth and
margin improvement to result in sales and EPS CAGR of
16.6% and 19.5% over CY10-13E, respectively. However,
one-year forward P/E of 25.5x offers limited upside. We
recommend investors to wait for a better entry point and roll
forward to Jun ’13 EPS with a revised price target of
Rs2,461 (earlier Rs2,292) based on a forward P/E of 22x.
Re-iterate IN-LINE.

Prestige Estates Projects- Lowering estimates and price target::Standard Chartered Research,

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Prestige Estates Projects
Lowering estimates and price target


 Q1 FY12 earnings were disappointing at Rs364m, with
sales dropping 4% yoy and 47% qoq to Rs2.5bn.
 New sales slackened – Prestige sold 0.46m sq ft at
lower realisation due to change in product mix leading to
16% qoq drop in sales to Rs2bn.
 Nevertheless, we expect healthy lease momentum,
recent launches in mid-income residential and strong
execution to sustain earnings momentum.
 We lower FY12 and FY13 earnings estimates by 25%
and 15%, respectively. We also reduce price target to
Rs151/sh (from Rs157), but maintain OUTPERFORM.


Weak revenue and earnings. Prestige Q1 was weak, with
net profit of Rs364m, mainly due to lower revenue booked
on percentage-completion-basis, which was down 4% yoy
and 47% qoq to Rs2.5bn. Though it has Rs17bn of unbooked sales (1.4x FY12 revenue estimate) we believe a
large part of these projects will not be able reach the
minimum revenue booking threshold in FY12.
Sales momentum slightly lower. Prestige sold 0.46m sq ft
at average realisation of Rs4,065/sq ft. While the run-rate
was in line with the FY11 average of 0.45m sq ft/qtr,
realisation was significantly lower, signifying shift in product
mix towards lower margin mid-income housing projects.
Note that we expect margin improvement going forward as
rental contribution increases; furthermore, Rs13bn of the
Rs17bn un-booked sales are from the luxury segment.
Other highlights. The company launched two residential
projects in Bangalore in July 2011: Tranquility (2,300 units)
and Parkview (240 units) and had an encouraging 30-50%
sales worth Rs3.7bn. Further in FY12, it plans to launch four
residential projects, three in Bangalore (Sunnyside,
Mayberry and Summerfield) and one in Chennai (Bella
Vista). In addition, the company expects to lease the 1m sq
ft Forum Vijaya mall at Rs70/sq ft. The company expects to
spend Rs10-12bn on construction across projects in FY12.
Lowering earnings. We lower revenue estimate due to
lower booking on percentage-completion-basis and we have
reduced margin to 30-32% due to the change in product mix
in the near term. Also, we build in higher interest costs due
to slower debt reduction. Net debt stood at Rs12bn as at
end Q1. This reduces our FY12 and FY13 earnings by 25%
and 15%, respectively, to Rs2.2bn and Rs2.9bn. Due to the
increase in FY12 net debt, we reduce our price target to
Rs151/sh (from Rs157/sh); maintain OUTPERFORM.

TVS Motor July’11 volume: Scooters and motorcycles drive growth ::Standard Chartered Research,

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TVS Motor
July’11 volume: Scooters and motorcycles drive growth


 TVS’ total sales rose 16% yoy to 192,000 units, driven
by 16% yoy growth in 2W and 13% yoy growth in 3W
sales.
 Scooters continue to be the key growth driver – sales up
24% yoy; motorcycles also post strong 19% yoy growth.
 Given the rising competitive environment, TVS appears
the most vulnerable to lose market share.
 Maintain IN-LINE.


Sales up 16% yoy to 192,000 units. TVS Motor’s July
2011 sales were up 16% yoy (+4% m-o-m) at 192,000 units.
While domestic sales rose 13% yoy to 164,500 units,
exports grew 48% yoy to 27,500 units.
Scooters boost 2W growth. TVS Motor’s July two-wheeler
sales grew 16% yoy to 188,500 units. Growth was led by
24% yoy growth (+13% m-o-m) from the scooters segment
to 50,000 units and 19% yoy growth (4% m-o-m) in the
motorcycles segment to 72,500 units. Mopeds, however,
posted slower 7% yoy growth to 66,000 units.
3W sales up 13% yoy to 3,500 units. Three-wheeler
volume grew 13% yoy (down 8% m-o-m) in July to 3,500
units. Growth was driven primarily by strong export off-take
– exports more than doubled yoy to 2,500 units. Domestic
3W sales declined 47% yoy in July to 1,000 units.
Exports momentum continues. TVS Motor’s total exports
grew 29% yoy to 27,500 units. While two-wheeler exports
were up 25% yoy to 25,000 units, 3W exports more than
doubled to 2,500 units.
Valuation. In a rising competitive environment and the
paucity of new launches in most of FY12E, we believe TVS
appears the most vulnerable amongst the top three 2W
players in India. While scooters and mopeds are driving
volume growth, TVS has been unable to ramp up its
motorcycle volume. Also, although 3W exports are doing
well currently, TVS has failed to gain any meaningful
presence in the domestic market. At 10.1x FY12E earnings
and at 5x EV/EBITDA, the stock appears fairly valued.
Maintain IN-LINE.

Hero Honda Motors July’11 volume: Steady volume growth ::Standard Chartered Research,

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Hero Honda Motors
July’11 volume: Steady volume growth


 HH’s July sales rose 15% yoy to 491,036 units.
 HH crosses the 2m mark in the first four months of the
fiscal; YTD sales up 22% yoy.
 Volume outlook strong, but cost pressure (re-branding,
R&D investments, ad-spend, etc) to likely to limit margin
expansion.
 We believe HH is fully valued at 12.7x FY13E earnings
and at 8.1x EV/EBITDA. Maintain IN-LINE.


Total sales up 15% yoy. HH’s total sales in July 2011 were
up 15% yoy to 491,036 units.  
Crosses the 2m mark in the first four months of the
fiscal. Led by sustained robust volume momentum, HH has
crossed the 2m mark in the first four months of the fiscal.
YTD total sales were up 22% yoy to 2.02m.
Valuation. We expect 2W demand momentum to continue
with HH targeting the 6m mark this year. However, while
commodity cost pressure is declining, the increase in other
operating expenses (re-branding, R&D, ad spend, etc) are
likely to limit margin expansion going forward. The Hero
group will continue to be in investment phase over the next
couple of years to develop products on its own, establish its
brand without Honda, spend on capacity addition and
establish its presence in export markets, which are likely to
hurt return ratios. Even after factoring in 100bps margin
expansion from current levels for FY12, the stock is trading
at 12.7x FY13E earnings and at 8.1x EV/EBITDA and
appears fully valued. Maintain IN-LINE with a price target of
Rs1,780.

Indraprastha Gas 1Q FY12: Strong volumes + margin performance::Standard Chartered Research,

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Indraprastha Gas
1Q FY12: Strong volumes + margin performance


 Strong volume growth and improving margins drive 1Q
earnings up 40% yoy.
 Price hikes and incremental 0.3mmscmd allocation of
APM gas has increased EBITDA/scm to a better-thanexpected Rs5.6/scm (from Rs4.6/scm in 4Q).
 PNG volume growth healthy at 140% yoy while CNG
volume was up 14% yoy.
 Raise earnings and reiterate OUTPERFORM.



Strong 1Q performance. IGL reported strong 1Q results
with EBITDA/PAT growth of 47/40% yoy led by strong
volume momentum, price hikes and allocation of cheaper
APM gas. Volume growth was robust at 34% yoy to
282mmscm (our FY12 estimate at 24% yoy).
EBITDA/scm at Rs5.6/scm. For 1Q, EBITDA/scm was
healthy at Rs5.6/scm. This was supported by price hikes in
April and June (Rs0.80/kgs) and the allocation of
0.3mmscmd of cheaper Administered Pricing Mechanism
(APM) gas, though the full impact will be reflected in 2Q.
To reflect better-than-expected margin profile, we have
conservatively upped our EBITDA/scm to 1Q levels;
however, soaring LNG (24% of FY12 volume) prices could
act as a constraint. We raise FY12E EBITDA by 4%;
FY13/14E upgrade is negligible.
Volume momentum remains strong. IGL reported strong
volume growth momentum at 34% yoy in 1Q. While CNG
grew 14% yoy to 161mnkgs, PNG volume expanded at
140% yoy to 65mmscm. CNG momentum was on the back
of higher vehicle population base post Commonwealth
Games in October 2010 and PNG volume was driven by
commercial and industrial customers. We maintain our
FY12 volume growth estimate of 24% as high base effect of
CWG kicks in in H2.
Near-term earnings momentum drives upgrades. We
have increased our FY12/13/14E earnings by 8/4/2%
respectively to reflect higher margins and impact of lower
depreciation rates (positive impact of Rs41.5m for 1Q). Our
DCF based price target remains unchanged at Rs446 as we
retain our long-term assumptions of volume growth and
margins (Rs5.2/scm in FY15E). Maintain OUTPERFORM.

Siemens India : Little room left for further margin disappointment  HSBC Research

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Siemens India
N: Little room left for further margin disappointment
 Q3 earnings disappoint, driven by weak margins; new order
growth also remains modest in spite of weak comp
 While Industry margins bear the brunt of rising costs, the
normalization in transmission margins seems structural
 We lower our FY11-12e EPS by c10-11%; maintain Neutral
rating with a target price of INR985


Q3 earnings: Weak margins with muted order intake. Siemens reported a weak set of
Q3 FY11 earnings, missing our EPS estimate by c33% and consensus by c36%. The
weakness was driven primarily by a decline in EBITDA margins, c180bps y-o-y and
c570bps q-o-q, as revenue of INR27.8bn was broadly in line with expectations. The order
intake also remained relatively muted, and the company reported a modest increase in new
orders of c14% and order book of c10%, in spite of a weak comp last year.
Cost pressures broad-based, but decline in transmission margins seems structural.
The weakness in margins not only was acute in Q3 but also broad-based, with eight of 10
business units witnessing declines in margins, both sequentially and yearly. In our
opinion, while margin in the Industry segment is largely bearing the brunt of rising input
costs, which is a cyclical phenomenon, margin in the Power Transmission business, which
accounts for c44% of Siemens’s profits, is witnessing a structural decline in the face of
competition and pricing pressure. This is also evident in the results of Siemens competitor
Crompton Greaves (CROM.BO, INR160, Neutral), which has reported a similar decline
in margins. The product mix also might be hurting transmission margins, as Siemens now
is doing more of 220/400kV equipment vs. 765kV equipment.
We lower our FY11-12e EPS by c10-11%; maintain Neutral rating. While it remains
difficult to forecast quarterly margins due to the inherent volatility, we believe they are likely
to revert to c12.5% in Q4 and remain around that level going into FY12. Hence, we are
lowering our EBITDA margin estimates by c130bps to c12.4% for FY11e and by c100bps to
c12.3% for FY12e. This drives our FY11-12e EPS down by c10-11%. On our new estimates,
Siemens is trading at c33.8x FY11e PE and c29.5x FY12e PE vs the historical trading average
of c26x (12m fwd PE for the past five years). We maintain our assumptions of through-cycle
margins and target growth in our preferred EVA valuation methodology, and hence we keep
our target price unchanged at INR985. Our target price implies that 12 months from now, the
stock should be trading at a 12m fwd multiple of c27x PE on FY13e (Sept YE) EPS of
INR36.5. Our target price implies a potential return of c7.3% (ex-dividend) from the current
level, and hence, we maintain our Neutral rating on the stock.

Tata Teleservices (TTLS IN) UW: Tariff hikes confirmed, challenges remain  HSBC Research

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Tata Teleservices (TTLS IN)
UW: Tariff hikes confirmed, challenges remain
 TTML confirms increases in tariffs but adopts a gradual
approach
 VAS as a percentage of revenues at 29.8% (up 11.3% y-o-y),
data cards growth support CDMA  
 Maintain Underweight (remove the V Flag) and raise target
price to INR18 (from INR15)


1QFY12 results were mixed, management confirmed tariff hikes: Revenues in the quarter
were flat; EBITDA was down 9.5% and net loss for the quarter at INR1.2bn, was 26% higher
than our estimates. However, the highlight of the results was confirmation from Tata
Teleservices (TTML) that it has raised SMS tariffs from July by c67%, while post-one-year
STD voice tariffs will rise from 1p/second to 2p/second. Furthermore management suggested
that it had tweaked some of the existing products in a manner that would result in better voice
realisation. TTML views the tariff hike as sustainable and suggested that availability of
incremental GSM spectrum will reduce its capex but not necessarily have any impact on the
new tariffs. We view the tariff hikes by TTML as positive for the sector and believe that its
participation in the tariff hikes, even though not with similar vigour, supports our view that the
recent tariff hikes by Idea (IDEA IN, INR94.8, N),  Bharti (BHARTI IN, INR432, OW) and
Vodafone India (Not listed) are sustainable.
Operating parameters during the quarter were strong: ARPU increased 2.8% to INR184,
while MoU’s increased by 2.2% to 416 minutes for the quarter. The key positive was a 0.6%
increase in RPM to 44.2 paisa from 43.9 paisa in the previous quarter. VAS as a % of revenues
for TTML increased to 29.8% compared to 18.5% in the same quarter last year (see figure 3).
A key concern for the company is the high percentage of inactive subscriber base; as per the
TRAI, c55% of TTML’s subscribers are inactive.
Valuation and rating: We retain our Underweight rating (remove the volatility flag) but raise
our 12-month target price to INR 18 (from INR15), which reflects our higher estimates
following the tariff hikes by the company. We raise our FY13 estimates for profit-after-tax by
17% and EBITDA by 8%. Our UW rating reflects TTML’s late entry in GSM, poor subscriber
quality, significant capex requirements in GSM given limited spectrum of c4.4MHz and lack
of 3G spectrum in Mumbai. Upside risks include the ability to churn high-end subscribers from
GSM incumbents and receipt of additional spectrum on GSM.

Jsw Steel : Conference call takeaways; cutting estimates HSBC

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Jsw Steel Ltd (JSTL)
N(V): Conference call takeaways; cutting estimates
 Operating rates down to c65-70%; We expect some mining
relief on next Supreme Court hearing scheduled on 5 August
 Cut EBITDA estimates by c28% and 13% for FY12/13e as
lower production and higher iron ore costs will likely hurt
earnings
 Maintain N(V) rating with revised TP of INR720 (from INR950)


Production rates down to c65-70%; we look for relief in next Supreme Court hearing
 Following the Supreme Court ban on mining in Bellary region in Karnataka, JSTL’s plant
utilization has fallen to c65-70% as ore availability is limited (ore inventory of c3-4mt, or
for two weeks). JSTL has currently shut Blast Furnace (BF)#1 and BF#2 (cumulative
c2.2mt or c20% of capacity) and is currently operating BF#3 and fully ramped up BF#4.
 Next Supreme Court hearing is scheduled on 5th August; we expect that legitimate
mining operations may be given go ahead to start mining given that it is a contractual
right and employment depends on it.
 JSTL sources c65% iron ore requirements from spot markets (besides c2.2mt from
VMPL and c2mt from NMDC), which, if replaced by ore from Orissa could increase
transportation costs by cUSD20-25/t (distance c1,600kms). We have ruled out Goa
ore as grades are too low to be used at JSTL’s operations.
Denies wrongdoing as alleged by the Lokayukta report
 The Lokayukta reported alleged that JSTL overpaid for a piece of land that it bought from
CM’s family and donated to Prerna Education Trust – which is run by CM’s family.
 JSTL wrote to stock exchanges that it has done all transactions in a legally compliant
manner and will respond to authorities after detailed examination of the said report.
Cut EBITDA estimates by 28%/13% in FY12e/13e; cut TP to INR720 and retain N(V)
 We now assume production to be lower by 20% in FY12e and 8% in FY13e.
 We assume iron ore costs for the spot iron ore purchases to be higher by US$23/t in FY12.
 We cut EBITDA by 28%/13% by FY12/13e and reduce TP to INR720/sh (vs INR950
earlier) based on FY13e EV/EBITDA (earlier FY12e) of 5.5x; retain Neutral and await
clarity on a) iron ore sourcing arrangements and b) sustainable production levels. Higher
(lower) than expected steel prices & lower (higher) than expected raw material prices
form upside (downside) risks to our earnings estimates. Other key risks include timely
commissioning of raw material projects and turnaround of ISPAT.

Nestlé India - Danone to enter baby foods market ::JPMorgan

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Nestlé India Limited
Neutral
NEST.BO, NEST IN
Danone to enter baby foods market


 Danone  to move into  the  India baby  foods market. Danone (covered
by JPM analyst Polly Barclay) has signed an agreement with Wockhardt
Group to acquire its nutrition business and thus enter the baby nutrition
and  medical  nutrition  markets  in  India.  Under  the  agreement,  Danone
will  acquire  Wockhardt’s  nutrition  business  and  brands  as  well  as  its
related  industrial  operations  (located  in  Punjab)  for  ~€250  mn.
Wockhardt’s  baby  nutrition  brands  include  Dexolac,  Farex  and
Nusobee, which together account  for ~7%  share of the  India baby  food
market, as per Euromonitor. In addition, the nutritional supplement brand
Protinex is likely to give Danone a  strong  foundation  for developing its
medical nutrition business.
 Rationale  for  Danone’s  acquisition.  Danone  is  trying  to  enhance  its
presence (both in terms of product categories and geographical reach) in
India. It started testing Indian waters with the launch of yoghurt (regular
and flavored) in Indian markets about a year back and is in the process of
scaling that up. This acquisition is likely to provide Danone with access
to a wider distribution network (chemists particularly).
 More  competition  for  Nestlé long  term? Nestlé India  is  the  market
leader  in  the  baby  foods  category  in  India  with  a  share  of  over  75%.
Baby foods cannot be advertised in India (by regulation), which acts as a
significant  entry  barrier  for  a  new  brand. With  the acquisition, Danone
has tried to leverage on Wockhardt’s existing brand franchise to  expand
its product reach. Clearly this move will be  keenly monitored to see any
incremental impact on Nestlé’s baby food brands over the medium term;
these brands have  had  a  fairly  stable  market  share  over  the  past  few
years.
 India baby foods market. The Indian baby foods market is estimated to
be  ~Rs17.5bn  (as  per Euromonitor). Nestlé is the  dominant  player with
~75% share. In India, per capita consumption of baby foods is quite low
(refer  Fig  3)  which  highlights  potential  for  growth  in  this  category.
Furthermore over  25mn  children  are  born in  India  each  year, making it
one of the fastest growing infant nutrition markets globally.
 Global  infant  nutrition  market. The  global  infant  nutrition  market  is
consolidated.  The  three  largest  players  – Nestlé,  Danone  and  Mead
Johnson – account for approximately half the market and the  six largest
players  – Nestlé,  Danone,  Mead  Johnson,  Abbot,  Pfizer  and  Heinz  –
account for roughly two-thirds of the market (ref. Fig 2). Asia Pacific is
the largest infant formula milk market by region accounting for 45%
of the global infant formula milk market.

Suzlon Energy: Turning the corner, but some uncertainties remain  HSBC

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Suzlon Energy (SUEL)
N(V): Turning the corner, but some uncertainties remain
 Suzlon has finalised the squeeze-out of minorities in REpower
and the sale of its stake in Hansen
 We estimate the company will return to profitability this year
and has sufficient liquidity to make loan repayments in FY13
 Remain N(V), but raise target price to INR60 from INR50

Corporate transformation nearing completion. Suzlon, India’s biggest maker of wind
turbines, is finalising the buyout of minority shareholders in its German unit REpower as well
as the sale of its 26% stake in Belgium-based Hansen Transmissions to ZF Friedrichshafen.
If confirmed, the two transactions will result in a net inflow to Suzlon of around INR4.2bn
(USD95m). This comes as Suzlon has reported surprisingly strong Q1 FY12 numbers,
driven primarily by improved gross margins and increased sales volume. We believe these
developments are in the share price, which has moved up c7% over the past 10 days (20 July
to 1 August; Sensex down 1% over the same period).
Balance sheet issues persist, but can be managed. Suzlon remains highly leveraged and
has loan repayments of INR25bn due in FY13, including up to cINR17bn in foreign currency
convertible bond (FCCB) repayments. Therefore, free cash flow during the current year is
important. According to our estimates, Suzlon should be able to meet its loan repayments.
However, achieving either a further renegotiation of the FCCB conversion price or the
repatriation of cash from REpower upon full integration on favourable terms would provide
more certainty on cash flows. These are achievable milestones but, while uncertainty persists,
we remain somewhat cautious.
Valuation. We change our valuation methodology from blended Economic Value Added
and PB-based relative valuation to DCF. Using a WACC of 12%, we derive fair values of
INR67.5 and INR71.9 per share, using our two different DCF methodologies – the HSBC
four-stage ROIC-based DCF and a ‘classic’ FCF-based DCF. This gives us an average
price of INR70, to which we apply a 15% discount to get our new target price of INR60
(rounded). Our discount highlights the above-mentioned risks related to the financial
credibility of the company; removing the discount would provide another c17% potential
return. For FY12, our net profit forecast is 19% below consensus, and we are below the
company’s guidance on revenue. For FY13e net profit, we are 23% lower than consensus.
Potential catalysts. We believe continued new order flow momentum in 2011 and a margin
recovery from improving financial performance over the next few quarters will drive a
share price recovery. As we note above, this recovery is likely to be driven by measures to
repair the balance sheet and strong FCF.

Gldman Sachs:: Buy Bharti Airtel ::Consensus likely bottomed post 1Q; tariff hikes to drive upside

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Bharti Airtel (BRTI.BO)
Buy  Equity Research
Consensus likely bottomed post 1Q; tariff hikes to drive upside, Buy
What's changed
We reiterate our Buy rating on Bharti with a revised price target of Rs460
(from Rs470) after factoring in high interest expenses and taxes. Key
takeaways from 1Q call: 1) Mgmt noted it has readjusted/increased tariffs
in 19 circles where it believes it was in a relatively strong position, and
does not expect regulatory backlash as it is in compliance with regulations
and will answer any potential queries from regulators. 2) Mgmt believes
3G handset penetration is increasing rapidly and should bode well for 3G
growth. Data declined marginally qoq to 14.6% of revenue mainly due to
seasonality. 3) Mgmt stated that capex was more front-loaded (1Q capex:
US$972 mn) given 3G investments in India and improvements to network
quality in Africa. Mgmt therefore has maintained capex guidance (US$1.5
bn/US$400 mn/US$1-1.2 bn for India/towers/Africa). 4) Mgmt believes it is
gaining mkt share in all African markets and expects EBITDA margin to
improve going forward. However, network opex may remain high for the
next two to three quarters as it is improving coverage.  
Implications
We reduce our FY12E/FY13E/14E EPS estimates by 6.1%/5.0%/4.8% as we
factor in higher net interest expenses and tax. Our 12-m SOTP-based TP
falls by 2% to Rs460 as we roll forward our price target by three months.  
Valuation
We believe Bloomberg consensus estimates have bottomed out post weak
results (at EPS level) and should show an upward trend as tariff hikes are
factored in going forward. While we think Bharti is not expensive at FY13E
EV/EBITDA and P/E of 6.7X/15.0X (vs. Asian telcos avg of 6.1X/15.0X) in the
context of its growth (FY11-14 EPS CAGR: 28%), we prefer Idea (IDEA.BO,
Buy) given better execution, attractive valuations, and a better growth
outlook.
Key risks
Price wars in India; weaker-than-expected KPIs from African operations.
INVESTMENT LIST MEMBERSHIP
Asia Pacific Buy List
 
 
Coverage View:  Neutral

Sell - Hindustan Unilever - Sustaining high volume growth increasingly challenging;Goldman Sachs

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Hindustan Unilever (HLL.BO)
Sell  Equity Research
Sustaining high volume growth increasingly challenging; Sell
What's changed
Hindustan Unilever reported sales broadly in line with our estimates, but
gross margins were below estimates by 311 bp reflecting cost pressure.
EBITDA before A&P declined by 3%, the only decline in the last 20
quarters, and a severe 417 bp yoy cut in A&P spends resulted in EBITDA
slightly below our estimates. Key takeaways from the conference call
include: 1) A rebalance in growth split between volume and pricing, 2)
lower volume growth in soaps & detergents but robust for personal
products, 3) reduced A&P spends in commodity-based categories like
soaps & detergents and beverages but continued spends in personal
products and packaged foods, 4) rural growth faster than urban, driven by
better store reach.
Implications
We believe volume growth will trend downwards as: 1) the company will
need to raise prices to sustain margins, 2) a sustained cut in A&P spends
could result in a weakening market position for some brands, 3) high base
from robust double-digit volumes seen in the last three quarters of FY11
will impact growth in the current year (HUL faced issues in hair business in
1QFY11), 4) competitive intensity remains elevated in personal products,
and 5) the impact of inflation and higher interest rate will likely affect
customer sentiment. Any softening of raw material prices will be balanced
by higher competitive intensity, in our opinion. For FY12E, we model
revenue growth of 14%, with equal contribution from volume and pricing.
Valuation
We raise our FY12E EPS by 2.6% to account for higher other income
reported in 1QFY12. We retain our Sell rating and our 12-month target
price of Rs274. Our target price is based on 22X FY13E EPS.
Key risks
(1) Lower competitive intensity and sharp rebound in margins for laundry
segment, (2) higher-than-expected volume growth led by up-trading.
INVESTMENT LIST MEMBERSHIP
Asia Pacific Sell List
 
 
Coverage View:  Neutral

Sell Adani Power (ADAN.BO) Research Tactical Idea :: Morgan Stanley Research,

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Adani Power (ADAN.BO)
Research Tactical Idea
We believe the share price will fall relative to the country index over the next 15 days.
The company is due to announce its F1Q12 results tomorrow and we expect them to be weaker than our estimate as
power generation during the quarter was about 12% lower than our estimate based on CEA data. The key reason for the
weak generation is lower PLF in June, which was only 51.7% as against 90.5% in April and 88% in May. We believe the
key reasons for lower PLF were shutdown of Unit 1 of Mundra I & II for scheduled maintenance and possibly lower
demand in the merchant market due to early onset of monsoon. Based on the lower generation number and keeping
everything else constant, there could be about 13% downside to our F1Q12 EBITDA estimate of Rs 7bn and 19%
downside to our profit estimate of Rs 3.8 bn.
We estimate that there is about a 60% to 70% or "likely" probability for the scenario.
Estimated probabilities are illustrative and assigned subjectively based on our assessment of the likelihood of the
scenario.
Stock Rating: Underweight
Industry View: Cautious

Buy Balrampur Chini Mills (BACH.BO) Research Tactical Idea::Morgan Stanley Research,

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Balrampur Chini Mills (BACH.BO)
Research Tactical Idea
We believe the share price will rise relative to the country index over the next 60 days.
This is because the stock has traded off recently, making short term valuation much more compelling.
We estimate that there is about a 70% to 80% or "very likely" probability for the scenario.
Estimated probabilities are illustrative and assigned subjectively based on our assessment of the likelihood of the
scenario.
Stock Rating: Overweight
Industry View: Attractive

Piramal Healthcare - Unrelated diversification-The key risk!:: Macquarie Research,

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Piramal Healthcare
Unrelated diversification-The key risk!
Event
 PIHC announced its 1Q FY12 numbers, with net sales at Rs4.4b (up 24% YoY
for continuing business) and PAT of Rs893m boosted by Rs710m investment
income. The result was below our estimates. EBITDA margin remained weak at
1.6% for 1Q adjusting for the Rs764m forex gain. We maintain Underperform.
Impact
 Margins muted – PLSL consolidation in 2H to further put pressure:
EBITDA margin for the quarter was a mere 1.6% adjusting for the forex gain.
The pending transfer of PLSL’s NCE unit into PIHC in 2H may increase
annual expenses by ~Rs1.5bn, affecting margins of the remaining business.
 CRAMS (~ 66% of top line): Revenues grew by 40% YoY to Rs2.9 bn in 1Q
FY12. Management continues to guide strong traction in this business going
forward, given the visibility of the order book. PIHC aspires to a Rs50b top line
in 2016 for this segment, with planned investment of Rs27b going forward.
 Critical Care (~ 21% of top line): Revenues decreased16% YoY to Rs911 m
in 1Q FY12 due to deferment of sales in the Middle East, given political
unrest. PIHC aspires looks to a Rs20b top line in 2016 for this segment, with
planned investment of Rs15b going forward.
 OTC & Ophthalmology (~13% of top line) business reported net sales of
Rs557m (up 48% YoY). PIHC is making a major investment in advertisement
to establish the brands. PIHC aspires for a Rs10b top line in 2016 for this
segment, with planned investment of Rs25b going forward.
 Unchartered territory – financial services foray: PIHC is setting up an
NBFC for lending to infrastructure and other sectors. Fund management for
the real estate and infrastructure sectors is being pursued through the recent
acquisition of promoter group company Indiareit Fund. PIHC plans further
investment of ~ Rs25b into its financial service foray.
 2016 aspiration: PHL to have revenues of Rs100b with an EBITDA margin of
~ 18-20% by then, with plans to have a specialized financial service business.
Earnings and target price revision
 Introducing FY14 estimates. Now valuing remaining business Rs85/sh (@ 15x
FY13EBITDA vs. 1FY11A Sales earlier).TP revised to Rs360 (earlier Rs370).
Price catalyst
 12-month price target: Rs360.00 based on a Sum of Parts methodology.
 Catalyst: Value destructive acquisition
Action and recommendation
 Given the uncertainty regarding the use of cash for risky ventures, we believe
there will be pressure on the stock and that clarity is unlikely in the medium
term. We now value cash at a 50% discount (@ Rs275/sh) and the remaining
part of the business at Rs85/sh (at 15x FY13E EBITDA of Rs990m).