Bharat Electronics: Advances lead cash chest; growth focus on R&D, JVs and diversifications:: Kotak Sec,

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Bharat Electronics (BHE)
Industrials
Advances lead cash chest; growth focus on R&D, JVs and diversifications.
Advances (25% of backlog) almost doubled on a spurt of new orders leading to Rs65
bn cash (Rs800/share). We are wary of valuing this fully as working capital is abnormally
negative (149 days). At a normative WCap of 100 days, cash would have been Rs29 bn
(360/share). The company’s growth strategy is pegged on R&D (7% of sales), JVs
(expected to contribute Rs20 bn revenues in 4/5 years) and diversification (UID project,
nuclear etc). We revise our estimates, retain ADD (TP1,875 versus Rs1,825 earlier).


Advances led working capital reduction and moderate capex lead to higher cash levels
BEL reported doubling of its advances (Rs64 bn from Rs35 bn last year) on higher inflows during
the year (advances as proportion of backlog in-line with historical average). The growth in
advances outpaced the increase in debtors, leading to negative working capital of Rs22 bn
(negative 149 days of sales. Stagnant capex levels (Rs1.1 bn in FY2011, flat yoy) led to free cash
flow of Rs32 bn (12 bn last year). We highlight the negative working capital (excluding cash) over
FY2004-07 and again in FY2011, implying a drain on cash from the system. At a normative
working capital of 100 days of sales, cash balance would have been Rs29 bn (Rs360/share).
R&D expense increases to 7% of sales; share of organic technologies to sales remains stagnant
R&D expenditure continued to increase as a percentage of sales (7% from 6% last year, 3.6% in
FY2007). This may have long-term benefits, in the near term however, turnover from in-house
technologies remained flat yoy at 57% in FY2011 (54% in FY2009). The company cited its threeyear
plan to augment its R& D capabilities (enhancing resources and budgets) and highlighted the
launch of more than 35 new products (defence, integrated communication systems).
Expects Rs20 bn in 4/5 years from new ventures; 20% headcount reduction even as sales trebled
BEL expects an additional Rs20 bn p.a. from new ventures (optical networking systems, offset
expansion, solar, radars). Other key takeaways (1) 20% headcount reduction over 10 years even as
sales have broadly trebled and (2) GE BE a 26% associate contributed (sales of Rs1.2 bn and PAT
of Rs0.15 bn (about Rs2/share), while BEL Optronics has sales of Rs0.52 bn with PAT of Rs40 mn.
Revise estimates on high cash levels (interest income) and marginally lower execution
We revise our estimates to Rs121, 135 from Rs117.5, Rs130 for FY2012E, FY2013E on (1)
increased interest income (higher cash levels) and (2) marginally lower execution assumptions.
We retain our ADD rating on (1) relatively immunity to capex, GDP and interest rate cycle and
(2) strong revenue visibility, (3) free cash and cash flows and (4) attractive valuations of 12XFY13E.

Setting the bar for new banks:: Business Line,

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The RBI, in its guidelines, has ensured that the core objective of improving financial inclusion is not compromised by the new entrants.

The banking sector has been in a consolidation phase over the last few years. This is evidenced by the fact that only two banks were issued licences in the last decade, while there have been around 19 bank mergers and acquisitions. New banks have not had it easy either since only seven of the 12 banks set up since 1993 are currently operational.

Given this backdrop, the Ministry of Finance's announcement of new bank licences in February 2010 came as a surprise. The Reserve Bank of India (RBI) has now gone ahead and prepared the draft guidelines for issuing bank licences. This time around, there is a significant dilution from the RBI's stubborn stance with respect to allowing big industrial houses to set up a bank. While preparing the guidelines, however, the central bank has managed to set the bar high so that only serious players can enter the system. It also made sure that the core objective of improving financial inclusion is not compromised by the new entrants.

However, this skews the cost-benefit equation of the new entrants towards the former (cost). We also expect non-banking finance companies (NBFC) to benefit more than un-related entrants.

DRAFT GUIDELINES

The RBI has made it clear that only private entities owned by resident Indians can own a bank. This rules out government-owned companies such as Power Finance Corporation and Rural Electrification Corporation. The companies that can spare cash to set up a bank would be big corporate houses such as such as the Tata, Birla, Bajaj, Mahindra, Larsen and Toubro and Reliance. The RBI intends to ring-fence the bank from the parent entity by setting up a non-operating holding company (NOHC) that will be governed by the RBI.

There are other quantitative and qualitative requirements that corporates have to adhere to beyond capital infusion. Diversified shareholding of corporates and more than 10 years of track record are also necessary.

The central bank may seek feedback from various regulators, investigation and enforcement agencies on applicants. Good corporate governance is the RBI's trump card which will allow it to ignore companies that have flouted rules historically.

The RBI has ruled out banking licences for groups with income or assets of more than 10 per cent of the total from real estate and/or capital market. This excludes capital market majors such as India Infoline Financial Services, Indiabulls group, Religare and Edelweiss from setting up a bank.

ISSUES WITH THE REGULATION 

The regulation stipulates that new banks should list two years from the date of receipt of licence. As the operation may commence two-three months after receipt of the licence, the bank may have very little operational history before listing. This will prevent it from demanding an attractive price in the offer. Also, post-listing, the bank will have an inflated capital which would prolong the improvement in profitability.

That the promoters have to bring down the proportion of ownership to 40 per cent by end of year two is also tricky. The banks can raise fresh equity from the capital market to meet this requirement, but that would bloat the capital unnecessarily. Alternately, they can divest stake from existing equity but this would mean no additional infusion of capital for another three years since the regulation stipulates so.

Weak equity markets can also derail such capital raising or divestment. The last time Yes Bank listed we were in a bull market which allowed it to demand a 2.25 times price-to-book valuation. It was the lone new private bank to list in that period. Prospective bank licences may crowd the primary market and capital raising might not be that easy.

Another drag on profitability is the requirement that 25 per cent of the total branches have to be set up in under-banked areas where cost of breaking-even for a branch may be high.

Since in the initial year of operations, access to low-cost deposits is low, higher cost of funds coupled with high wholesale borrowing, will impact the spreads and profitability adversely. For incumbent banks only a quarter of incremental branches have to set up in unbanked areas. This puts new banks in disadvantaged position.

New bank licencees are also required to adhere to 40 per cent priority lending sector norms from the outset. Also, they cannot use the NBFCs to meet most their priority sector lending targets post-RBI regulation.

The way out for new banks could be to look out for acquisition candidates immediately after getting a licence. They may, however, have to pay a premium for acquiring old private banks (which have been attractive acquisition candidates for long). This would lead mean sub-optimal allocation of capital. Additionally this wouldn't serve the Finance Minister's vision of having more banks.

THREAT TO EXISTING PLAYERS

Yes Bank and Kotak Mahindra Bank, the latest entrants, have garnered a market share in advance of 1.5 per cent over the last seven years. If one notices the market share patterns of banks, public sector banks have bigger market share in advances as compared to what they had six years ago. They had 71.4 per cent share of advances in June 2005 which currently is at 74.8 per cent. Private banks' share has remained unaltered in this period. This means that the new entrants dented old private banks' and foreign banks' share. It can, therefore, be surmised that the competition from new banks would hurt the newer players before posing a threat to incumbent players.

NBFCS BEST PLACED

As of March 2010, NBFCs assets were around 11 per cent of the total bank assets. So any transfer of assets from these companies to new banks would give them a head-start over other new entrants. The RBI has recently reduced the regulatory arbitrage for NBFCs through a series of regulations. These changes could provide the impetus to push some of them into converting into banks.

NBFCs have a choice to convert into a bank or transfer a part of their asset book to newly set up a bank. In both the cases, they are not allowed to duplicate lending done by newly set up bank. This augurs well for the NBFCs which have a rural presence as it will allow them to adhere to priority sector norms. Shriram Transport and Mahindra Finance stand to gain in this way as they have a strong rural presence.

Existing NBFCs that convert into banks have to stick to the norm of setting up branches in unbanked areas (with less than 9,900 population) for only the branches in Tier-1 and Tier-2 cities.

For branches in Tier-3 to 6 areas, these norms need not be applied. This places them at an advantage to other private banks that have to open a quarter of their branches in areas in unbanked areas.

Global headwinds blowing, India relatively well placed :: Angel Broking Picks for September 2011

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Top Picks
(click on company name below for details)

Axis Bank

ICICI Bank 

Infosys 

L&T 

Lupin 

Mphasis

RIL 

Mahindra Satyam

Tata Steel 

United Phosphorous

Finolex Cables 

Greenply Industries

Jagran Prakashan

Relaxo Footwears

Tata Sponge Iron 

(click on company name above for details)



Global headwinds blowing, India relatively well placed
Global equities have corrected sharply over the past one month on concerns of
slower global growth. The US economy continues to face risks of a double-dip
recession on tepid economic growth and high unemployment. Eurozone countries
also remain on a weaker footing due to concerns regarding sovereign debt crisis.
In the backdrop of these headwinds, we believe India is better placed to weather
the current scenario due to lower dependence on exports for driving economic
growth and benefits arising from lower commodity and energy prices due to slower
global growth.
Inflation expected to moderate on lower global commodity and energy prices :
The Reserve Bank of India (RBI) has continued its rate hike spree on account of
persistence of higher inflation. The RBI has raised the key policy rate - the repo
rate - on 11 occasions since March 2010, leading to a sharp 475bp rise in the
operative policy rate. The sticky nature of inflation at higher levels has been partly
on account of a sharp rise in global commodity and energy prices, as economic
recovery in developed economies picked pace. However, with the prospects of
slower-than-anticipated growth in these economies and moderating growth trends
in emerging economies, commodity and energy prices have come off considerably
from their recent peaks. With declining stimulus measures and slower global growth,
we expect prices to remain in check in the near term. Reduced prices are expected
to be materially positive for the Indian economy, as it will aid in a) reducing fiscal
deficit, b) cooling inflationary pressures and c) putting an end to the prolonged
monetary tightening cycle.
Slower domestic growth may also prompt an end to monetary tightening: Apart
from reduced inflationary pressures, the slowdown in domestic growth and
heightened risks in the global macro environment are expected to lead to an end to
the monetary policy tightening stance. Domestic growth has slowed considerably,
as evident from the slowing GDP growth rates, tepid IIP growth, moderating growth
in quarterly gross fixed capital formation and declining vehicle sales and cement
dispatches growth rates. Credit sanctions have also slackened substantially in the
recent months. India's manufacturing PMI has slipped to a 29-month low of
52.6 during August 2011. Although recent indications from the RBI suggest
another 25bp hike in the repo rate in the upcoming monetary policy review,
there is an increasing likelihood, due to the above-mentioned reasons, that the
RBI may pause after that hike.
Valuations attractive: Indian markets have fallen by ~20% in CY2011YTD and
have underperformed emerging market peers by ~8% and global peers by ~11%
due to concerns of higher inflation and interest rates. The earnings growth trajectory
for Indian corporates remains moderate despite higher raw-material costs and
interest rates hurting margins over the past few quarters. While FY2012 earnings
growth is likely to be modest, cooling inflation and interest rates should underpin
healthier growth in FY2013. Based on one-year forward earnings, the Sensex is
trading at attractive valuations of 13.5x vis-à-vis its last five-year average of 15.7x.
We value the Sensex at a conservative 14x target P/E multiple to arrive at a Sensex
target of 19,100. We maintain our positive stance on Indian equities considering
their relative better positioning globally, reasonable earnings growth trajectory and
attractive valuations vis-à-vis India’s structurally positive outlook.

Jagran Prakashan (CMP: `109/ TP: `148/ Upside:36%):: Angel Broking Picks for September 2011

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􀂄 Jagran Prakashan (JPL) continues to remain the leader in UP (India’s largest state)
and stands at No. 2 in Bihar (the second-largest state), with overall readership of
~5.4cr and covering ~70% of Hindi speaking readers. During 1QFY2012, the
company successfully launched Punjabi Jagran (now JPL caters to five different
languages). JPL also launched the 11th edition of The Inquilab, the largest read
Urdu newspaper in UP and New Delhi, through its subsidiary Mid-Day Infomedia Ltd
during 1QFY2012. Further, City Plus launched four more editions, now totaling 30 editions.
􀂄 We expect JPL to post a 9% CAGR in its top line over FY2011-13E, driven by the
~10% CAGR in advertising and a ~3% CAGR in circulation revenue. The other
businesses and MML are estimated to record a CAGR of ~11% and 13%,
respectively, over FY2011-13E on better traction. In terms of earnings, we expect
JPL to report a 10% CAGR over FY2011-13E, driven by top-line growth and various
cost-curtailment measures and improving profitability in its nascent businesses.
􀂄 The underperformance of the stock and attractive valuations (at the CMP, the stock
trades at 13.5x FY2013E EPS) provide a good entry point for investors. Hence,
we maintain our Buy view with a revised target price of `148, based on a
P/E multiple of 18x FY2013E (in-line with its historical valuations).

Relaxo Footwears (CMP: `319/ TP: `399/ Upside: 25%):: Angel Broking Picks for September 2011

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􀂄 Relaxo Footwears is estimated to report a 21.8% revenue CAGR, aided by a 16%
CAGR in volumes, leading to a 41.0% CAGR in net profit over FY2011-13E.
􀂄 We expect the company's operating profit margin to improve by 158bp from 10.5%
in FY2011 to 12.1% in FY2013E on the back of an estimated price rise of 8% yoy
in FY2011 and increased proportion of higher-value brands such as Flite and
Sparx in the revenue mix.
􀂄 Relaxo is now more focused on the branding of its high-value brands (Flite and
Sparx) and establishing its name in footwear other than Hawaii slippers. The
company has increased its advertisement expense by 55% to `20cr in FY2010
from `13cr in FY2009, which is expected to result in increased RoE of 24.2% in
FY2013E as compared to 19.8 in FY2011.
􀂄 At `319, the stock is trading at attractive valuations of 10.4x and 7.2x for FY2012E
and FY2013E earnings, respectively. We maintain our Buy view on the stock with a
target price to `399, based on a target PE of 9x FY2013E earnings.

Tata Sponge Iron (CMP: `303/ TP: `429/ Upside: 42%):: Angel Broking Picks for September 2011

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􀂄 Tata Sponge Iron Ltd. (TSIL) is an associate company of Tata Steel, which holds a
39.7% stake in the company. TSIL is a leading manufacturer of sponge iron, which
is used as a raw material in steel manufacturing, with an installed capacity of
3,90,000mtpa and a 26MW captive power plant.
􀂄 The company gets 100% supplies of iron ore from Tata Steel with a 20-25% discount
from market prices, thus leading to at least 5% higher margins from other
non-integrated sponge iron players.
􀂄 TSIL has a 45% stake in Talcher coal block in Orissa with estimated reserves of
120mn tonnes for captive consumption. The company has deposited money for
the first phase of land acquisition with the Government of Orissa. Forest clearance
for the block is pending.
􀂄 At the CMP of `303, the stock is trading at PE of 4.2x its FY2013E earnings and
P/B of 0.7x for FY2013E. The company is debt free with cash reserves of `299cr
and RoIC of 62.2% for FY2013E. We maintain our Buy view on the stock with a
target price of `429 and a target P/E of 6x for FY2013E.

Greenply Industries (CMP: `192/ TP: `311/ Upside: 62%):: Angel Broking Picks for September 2011

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􀂄 Greenply Industries (GIL) is a leading plywood and laminates brand, supported by
ad spend as high as 4.0% of sales (around 10% of laminates revenue). The company
also has the largest distribution network of over 15,000 dealers in the industry.
􀂄 GIL increased its laminates capacity by 88% in FY2010 and is witnessing strong
demand for its products. The company achieved 98% capacity utilisation in
1QFY2012 and ended FY2011 with 94% capacity utilisation. We expect utilisation
to further improve to 110% in FY2012, which will boost its revenue going ahead.
􀂄 GIL forayed into the lucrative, high-growth MDF market in FY2011, with the largest
MDF plant in India (1,80,000m3/year capacity). The MDF opportunity is especially
huge as it constitutes 20% of wood panel consumption in India, while plywood
constitutes 80% – the reverse holds true globally. In 4QFY2011, the segment reported
first-time revenue of around `32cr, which further improved to `46cr in 1QFY2012
due to higher utilisation, which increased to 49.3% for the quarter. We expect the
segment to achieve 45% capacity utilisation by FY2012, which would further bolster
the company’s revenue and improve its margin.
􀂄 Currently, the stock is trading at 4.9x FY2013E earnings, which is at the lower end
of its historical average of 4.3x-17.0x one-year forward EPS. We maintain our Buy
rating on the stock with a target price of `311.

Finolex Cables (CMP: `40/ TP: `59/ Upside:47%):: Angel Broking Picks for September 2011

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􀂄 Finolex Cables is poised for strong growth over the next few years, owing to entry
in the verticals of high tension (HT) and extra high voltage (EHV) cables and market
share expansion in the existing low tension (LT) cables segment.
􀂄 The rapid ramp-up of production at the Roorkee plant has already started delivering
results. The proximity to the growing North Indian markets and tax benefits from
this plant are expected to boost the turnaround of the company. We expect the
company’s profits to increase to `151cr in FY2013E from `87cr in FY2011.
􀂄 Finolex Cables has registered substantial derivative losses over FY2009-11. The
company’s derivative losses are expected to decline further going ahead.
By FY2013, these losses are estimated to decline to `13cr from `34cr in FY2011.
􀂄 At the CMP, the stock is trading at attractive valuations of 4.0x FY2013E EPS and
0.6x FY2013E BV. We have valued the stock at P/E of 6.0x FY2013E EPS and
arrived at a target price of `59. We have a Buy rating on the stock.

United Phosphorous (CMP: `144/ TP: `208/ Upside:44%):: Angel Broking Picks for September 2011

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􀂄 United Phosphorus (UPL) figures among the top-5 generic agrichemical players in
the world, with a presence across major markets such as the US, EU, Latin America
and India.
􀂄 Total off-patent market is worth US$29bn, of which a mere US$16bn is currently
being catered by generic players. Furthermore, 61% of the same is controlled by
the five largest generic players, including UPL. Moreover, entry of new players is
also restricted, given the high entry barriers by way of high investments. Thus,
amidst this scenario and on account of having a low-cost base, we believe UPL
enjoys an edge over competition and is placed in a sweet spot to leverage the
upcoming opportunities in the global generic space.
􀂄 Over FY2011-13E, we expect UPL to post a CAGR of 13% and 14% in sales and
PAT, respectively. At current valuations of 9.0x FY2013E EPS, the stock is attractively
valued vs. its global (10x) and domestic (17x) peers and historic average (15x).
We maintain our Buy view on the stock with a target price of `208.

Tata Steel (CMP: `495/ TP: `614/ Upside:24%):: Angel Broking Picks for September 2011

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􀂄 Tata Steel is expanding its capacity by 2.9mn tonnes in Jamshedpur through
brownfield expansion. The project is expected to be commissioned by the end of
FY2012E. From FY2013E, the proportion of sales volume from India, which is a
high-margin centre, is expected to increase substantially, thereby leading to
significant earnings accretion. We expect sales volume to register a 15.6% CAGR
over FY2011-13E.
􀂄 Tata Steel is in the process of developing a coking coal mine in Mozambique and an
iron ore mine in Canada to enhance Tata Steel Europe's (TSE) raw-material integration
levels. The projects are expected to be commissioned by October 2011 with lower
offtake initially; full benefit is expected to accrue in FY2013E. However, we have not
factored the savings in our estimates, indicating an upside to our target price.
􀂄 The company has undertaken various cost-reduction initiatives and restructuring
measures at TSE, which would lead to savings of US$375mn annually. We expect
the current normalised EBITDA/tonne of US$50 at TSE to increase to US$75 on the
back of these initiatives in FY2013E.
􀂄 The stock is currently trading at inexpensive valuations of 5.7x FY2012E and 4.8x
FY2013E EV/EBITDA. On a P/B basis, the stock trades at 1.0x FY2012E and 0.9x
FY2013E earnings. We maintain our Buy view with a taget price of `614 .

Mahindra Satyam (CMP: `76/ TP: `89/ Upside:18%):: Angel Broking Picks for September 2011

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􀂄 Mahindra Satyam (Satyam) has enterprise business solutions (EBS) (~40% of
revenue) and manufacturing (~32% of revenue) as its anchor service line and
vertical, respectively, which are showing strong traction. Hence, we expect Satyam
to grow at a revenue CAGR of 19.4%, in-line with its peers, over FY2011-13E.
􀂄 Satyam has adequate margin levers such as 1) employee pyramid rationalisation,
2) strong volume growth expected on the back of a strengthening deal pipeline
expected to improve utilisations to 75% by FY2013 from the current 74%, 3) better
pricing on the back of improvement in business mix and 4) current SGA at 20.5%
of sales, which can be brought down to 19.0% by FY2013.
􀂄 We expect Satyam to maintain its growth momentum as recorded over the past few
quarters and grow at rates comparable to its peers at a 19.4% CAGR in USD
revenue and a 32.5% CAGR in earnings over FY2011-13E. At the CMP of `76, the
stock is trading at 10.2x FY2013E EPS of `7.4 i.e., at a PEG of 0.31x. We value the
stock at 40% discount to Infosys' target FY2013 PE i.e., 12.0x. We recommend
Satyam as one of our top picks with a target price of `89.

RIL (CMP: `789/ TP: `1,099/ Upside:39%):: Angel Broking Picks for September 2011

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􀂄 RIL reported robust refining margin of US$9.8/bbl in 1QFY2012. With the start of
its FCCU, we expect the company to report robust refining margins in the coming
quarters. Similarly, on the petchem side, we do not expect margins to fall below the
current level consequent to higher demand from emerging economies and recovery
in OECD economies.
􀂄 The upstream segment still has a significant upside in store, considering the huge
untapped resources. Timely ramp-up in producing fields would bring into picture
other prospective basins also. Although RIL is producing natural gas below its
potential 80mmscmd from KG-D6 due to constraints over reservoir pressure,
we are confident that it will ramp up its production over the medium term with the
help of BP’s technical expertise.
􀂄 RIL has been eyeing inorganic routes for diversifying its asset portfolio by entering
into newer ventures on the back of significant cash pile and treasury stocks. Initiatives
such as shale gas acquisitions, with in-place reserves of ~12TCF, could prove to be
a potential trigger for the stock in the long term.
􀂄 The stock is currently trading at P/E of 11.6x FY2012E and 9.9x FY2013E. On a
P/B basis, the stock trades at 1.4x FY2012E and 1.2x FY2013E earnings.
We maintain our Buy view on the stock with a target price of `1,099.

Mphasis (CMP: `358/ TP: `420/ Upside: 18%):: Angel Broking Picks for September 2011

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􀂄 Mphasis is witnessing modest growth from the non-HP channel business. The
company's ITO business is witnessing good growth, with open billable position
standing at 600 in 3QFY2011. In fact, this business segment has grown at a
scorching pace of 9.7% CQGR over 1QFY2010-3QFY2011 and is expected to
continue as a growth driver for the company.
􀂄 The company is looking at an inorganic strategy to supplement its growth further.
Recently, management acquired Wyde, an international software vendor and creator
of Wynsure - an insurance policy administration IP solution - to scale up its insurance
portfolio. This acquisition is expected to be EBITDA accretive, as Wyde enjoys EBITDA
margin of 18%, higher than the company's EBITDA margin.
􀂄 Going forward, management expects the direct channel (33% to revenue) and HP
non-enterprise solution business (which is currently ~5% of revenue from HP channel)
to drive growth, whereas the HP-ES business is expected to remain sluggish. We
expect the company to record a revenue CAGR of 10% over FY2011E-13E.
We value teh company at 11.5x FY2013E (October ending) EPS of `36.4, which
gives us a target price of `420 and recommend a Buy rating on the stock.

Lupin (CMP: `471/ TP: `593/ Upside: 26%):: Angel Broking Picks for September 2011

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􀂄 Lupin is amongst the highest filers in the Indian pharmaceuticals industry. As of
FY2011, the company’s cumulative filings stood at 148, of which 48 have been
approved. Lupin plans to launch 10 products in the US in FY2012 and another 80
products over the next three years. Overall, we expect the US market to post a
CAGR of 28.8% over FY2011-13E.
􀂄 In the oral contraceptive (OC) segment, Lupin has filed 22 ANDAs and expects to
get approvals from 2HFY2012. As per management, the OC segment is expected
to contribute US$100mn to the company's top line over the next 2-3 years.
􀂄 Lupin continues to make strides in the Indian market. Currently, Lupin ranks No.5,
climbing up from being No.11 six years ago. Lupin has been the fastest growing
company among the top-5 companies in the domestic formulation space, registering
a strong CAGR of 20% over the last three years.
􀂄 Management has given a revenue guidance of US$3bn by FY2013-14. We expect
Lupin's net sales to grow at a 20.4% CAGR to `8,272cr and earnings to grow at a
24.0% CAGR to `29.7/share over FY2011-13E. Currently, the stock is trading at
21.1x and 15.9x FY2012E and FY2013E earnings, respectively. Based on the
above-mentioned triggers, we maintain our positive outlook on the company and
recommend a Buy rating on the stock with a target price of `593.

L&T (CMP: `1,621/ TP: `1,903/ Upside:17%):: Angel Broking Picks for September 2011

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􀂄 Proxy to India's infra story: L&T has an order book of >`1.3tn, lending good
revenue visibility. L&T's strong balance sheet, a sound execution engine, wide array
of capabilities, integrated operations tailored to suit India's infrastructure growth
story and multiple, recurring value-unlocking triggers over the medium term lead
us to place faith in this default India infrastructure story.
􀂄 Well-capitalised balance sheet funding the expansion: L&T had a well-capitalised
balance sheet at a debt-equity ratio of 0.3x as of FY2011, despite having a strong
portfolio of assets and having invested in future growth areas. We believe the key
factors for the same are 1) high margins and 2) better working capital management.
􀂄 Buy L&T with an SOTP TP of `1,903: L&T has outperformed the BSE Sensex by
~10.2% over the last six months on the back of 1) strong quarterly performances;
and 2) robust guidance for FY2012 for both revenue and order booking. Further,
we have discounted margin pressure in our numbers. Ascribing separate values to
its parent business on a P/E basis and investments in subsidiaries on P/E, P/BV and
mcap basis, our target price works out to `1,903, which provides 17.4% upside
from current levels. Hence, we recommend Buy on the stock.

Infosys (CMP: `2,264/ TP: `3,200/ Upside: 41%):: Angel Broking Picks for September 2011

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􀂄 Infosys strongly focuses on consulting and package implementation services (~25%
of revenue). Globally, license sales for SAP and Oracle services are surging, leading
to higher implementation opportunities for offshore vendors such as Infosys. Further,
key IT spend-thrift verticals such as BFSI (35.4%), manufacturing (20.3%) and retail
and CPG (16%) would continue to be the primary growth drivers for the company.
􀂄 We expect Infosys to record a 21% CAGR in USD revenue over FY2011-13E, with
CAGR in INR revenue, EBITDA and PAT at 19.1%, 15.3% and 15.7%, respectively.
􀂄 The stock has corrected significantly YTD2011 just on concerns of management
restructuring, which are unwarranted given the company's strong domain focus
with superior clientele, robust business model with the highest margin in the Indian
IT industry and healthy balance sheet with cash of US$3.9bn (1QFY2012). Currently,
the stock is trading at cheap valuations of just 14.2x FY2013E EPS of `159.9 i.e.,
only at ~17% premium to BSE Sensex vs. its five and two-year historical premiums
of 20% and 27%, respectively. We value the company at 20x FY2013 EPS i.e., at
`3,200 and recommend it as one of our top picks with a Buy rating.

ICICI Bank (CMP: `881/ TP: `1,193/ Upside: 35%):: Angel Broking Picks for September 2011

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ICICI Bank's substantial branch expansion (from 955 branches at the end of
3QFY2008 to 2,533 branches as of 1QFY2012) and strong capital adequacy at
19.6% (Tier-I at 13.4%) have positioned it to gain CASA and credit market share,
respectively. During FY2011, the bank improved its market share of savings deposits
by 10bp over FY2010, capturing a substantial 5.8% incremental market share.
􀂄 The bank has been able to increase its CASA ratio to 45% as of FY2011 and,
contrary to the overall trend in the sector, we expect this favourable change in the
bank's liability mix to improve its NIM to ~2.7% by FY2013.
􀂄 The bank's asset quality continues to show further improvement, with a declining
trend in additions to gross as well as net NPAs. We expect the reduction in risk
profile of advances (and the consequent lower yield on advances) to result in a
~90bp decline in NPA provisioning costs by 2013E over FY2011.
􀂄 The stock is trading at attractive valuations of 1.6x FY2013E P/ABV. Hence,
we maintain our Buy view on the stock with a target price of `1,193, valuing the
core bank at 2.3x FY2013E P/ABV and assigning a value of `191 to its subsidiaries.

Axis Bank (CMP: `1,116/ TP: `1,555/ Upside: 39%) :: Angel Broking Picks for September 2011

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􀂄 Axis Bank has increased its CASA market share multi-fold over the last eight years
(4.2% as of FY2011) on the back of robust branch and ATM network expansion
(400 branches opened in FY2011 itself). Annual addition of 250+ branches hereon
is expected to lead to a 30-50bp increment in CASA market share every year.
􀂄 Fee income contribution across a spectrum of services has been a meaningful
2.0% of assets (almost twice the level in PSBs) over FY2009-11.
􀂄 We expect Axis Bank to raise capital in the next 12-18 months. (Axis Bank had last
raised capital in 2QFY2010, when its tier-I CAR was 9.4%). Dilution is likely to be
book-accretive and will aid in further enhancing the bank's credit market share
going forward.
􀂄 Axis Bank is trading at 1.8x FY2013E ABV (~43.4% discount to HDFC Bank). The
bank's ALM position vis-à-vis HDFC Bank is currently a disadvantage; however,
with the interest rate cycle close to its peak, in our view, the bank will also benefit
more once interest rates cool off a bit in CY2012. Hence, we maintain our Buy
view on the stock with a target price of `1,555.

Buy ONGC: Still a bargain ::CLSA

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Still a bargain
ONGC’s prospectus for the impending US$2.5bn offer-for-sale confirms that the
retail fuel subsidy sharing framework will remain uncertain. While this is not
surprising and earnings impact of an adverse change is limited for the upstream
SOEs, it is still disappointing. Nonetheless, based on our discussions and media
comments, we expect upstream to share a third of FY12 under-recoveries driving
ONGC’s net realisations to US$72/bbl and consol earnings at to Rs34/sh; indeed
monthly standalone earnings in July-11 annualised at Rs41/sh. We are cutting our
target to Rs340/sh but maintain our BUY reco given undemanding valuations.
Subsidy sharing to remain uncertain
The government’s proposal to divest a 5% stake in ONGC had raised hopes that the
subsidy sharing framework would be formalised allowing earnings for the upstream
SOEs to become predictable. Much like the earlier Mar-2004 ONGC FPO and the Sep-10
Oil India IPO, though, the RHP for the current stake sale indicates that the framework
will remain uncertain. This is not surprising given the peculiar nature of the framework
that straddles the Ministry of Finance (MOF) and the Ministry of Petroleum (MOPNG).
Not surprising given the lack of a coordinated policy response
In our opinion, a formal framework requires the MOF to prescribe the cash support for
the downstream SOEs upfront in the budget. It has been reluctant to do this unless
there is a formal tax on the upstream SOEs to garner additional revenues in lieu of the
current intra-MOPNG sharing between upstream and downstream SOEs. In turn, the
MOPNG appears to be reticent about additional taxation instead preferring the
flexibility (and influence) that the current ad-hoc policy allows to dictate SOE earnings
annually. Nonetheless, it is still disappointing and will remain a valuation headwind.
We model one-third upstream share; strong earnings pick up from July
Based our discussions and media comments, we model upstream SOEs sharing a third
of under-recoveries in FY12, similar to that in 1QFY12. Given the end-June policy
interventions, this will drive ONGC’s net realisations to US$75-80/bbl in the rest of
FY12 (US$49/bbl in 1Q) driving a 30% rise in standalone net profits to Rs29/sh. This
should start showing up from 2QFY12; indeed July-11 monthly standalone earnings
annualised at Rs41/sh. Further, while investors are right to be sceptical about the
validity of the framework, we note that every 1ppt change impacts EPS by just 0.5%.
Undemanding valuations; retain BUY
ONGC’s poor production trajectory precludes a secular investment case for the stock
but we expect the stock to re-rate given undemanding valuations (7x Mar12 PE, 3.2x
EV/Ebitda), the strong earnings pick-up from 2QFY12 and likely earnings upgrades
from the potential cap on subsidized LPG availability (+4-5% on EPS under a 4-
cylinder cap) and a change in the contract terms at Cairn’s Rajasthan block (+6-10%
on EPS). We are cutting our target to Rs340/sh to factor in lower global peer multiples

Idea Cellular: Annual report analysis::CLSA

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Annual report analysis
Idea Cellular’s annual report reveals 50% YoY rise in contingent liabilities
to Rs15bn and continuing pledge on 60% of its Indus Tower ownership.
Capex jumped 97% and capital work in progress sevenfold, and 3G fees
of Rs58bn caused intangibles to rise two fold. Debt increased 54%YoY to
3x net debt to Ebitda and ROIC is a low 6%. New 2G circles are dragging
on profitability while 3G ramp-up is sluggish. We expect the operator’s
FY12 profits to fall 25% YoY and free cashflow to remain elusive with the
risk of further investments for 2G/3G spectrum. Maintain Underperform.
High debt burden, Indus pledge.
Idea’s FY11 annual report reveals a negative working capital of Rs22bn and
that 3G caused debt to increase 54% YoY to Rs121bn/US$2.7bn (gearing at
3x net debt to Ebitda) and ROIC (down 12ppts from peak) of less than 6%. In
FY11, Idea capitalised Rs4.1bn of interest on 3G considering which debt cost
is 9% and 26% is the share of foreign currency loans. Depreciation for
network equipment at 10-20 years is liberal compared with Bharti Airtel at 3
to 20 years and regional peers at seven years and carries a risk of a step-up
or one-time write-off in future. The annual report also reveals contingent
liabilities of Rs15bn (2x profits), a 50% YoY increase and the Department of
Telecommunications has obtained ex-party stay from court against the
amalgamation of Spice Telecom with Idea. In other details, Idea’s pledge on
60% of its 13.2% effective ownership in Indus Towers has continued.
New 2G circles still dragging profitability.
Idea’s 13 established areas still contribute 89% of total revenue and though
revenue market share in nine new circles increased 150bpsYoY, Ebitda loss
here has increased 29%YoY to Rs5.4bn after 10 quarters of rollouts. With new
circles Ebitda margin still negative 36%, Idea’s consolidated margins in FY11
further slipped 300bps to 24% largely due to higher network operating
expenses and access charges. Network operating cost as a percentage of
revenue continues to be 3-6ppts higher than Bharti, also with the new circle
in the 1,800MHz band and allocations of only 4.4MHz spectrum.
Sluggish 3G ramp-up, risk of further investments.
In 3G, Idea’s 11 circle wins cover about 76% of the company’s revenue base
(mainly established circles) but despite having launched services in March
2011, and now offering coverage in 15 circles (with bilateral roaming
agreements in six) 3G subscribers are still only two million and value-added
services (VAS) as a percentage of Arpu has declined 90bps to 12%. Also with
the miss of 3G in crucial urban areas of Mumbai and Delhi, and eight of nine
new circles, Idea is facing the risk of affecting its competitive positioning.
Already the slowdown in net additions in new circles (without 3G) has been
sharper at 0.06m (for 1QFY12) against average 1.2m quarterly in FY11. Led
by 3G, capex in FY11 jumped 97% to Rs97bn/US$2.2bn and CWIP sevenfold
to Rs37bn including part licence fees of Rs58bn/US$1.3bn and intangibles
twofold to Rs72bn/US$1.6bn. Yet Idea faces the risk of further investments in
2G and 3G spectrum aggregating to a high Rs212bn/US$4.7bn (Rs64/share)
and even part of these will force free cashflow to remain negative. With the
stock trading at 9x EV/Ebitda, an 85% premium to regional peers is
expensive. We maintain our Underperform rating.

News Headlines- Sept ::Deutsche Bank,

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News Headlines
Sept qtr GDP growth seen not better than June qtr: Ahluwalia (Reuters)
India's September quarter economic growth is not expected to be better than its previous quarterly growth, Deputy Chairman of the Planning Commission Montek Singh Ahluwalia said on Thursday.
India’s Food Inflation Rate Remains More Than 9% for a Fifth Straight Week (Bloomberg Finance LP)
India’s food inflation rate stayed above 9 percent for a fifth straight week, maintaining pressure on the central bank to raise interest rates.
Monsoon rains 39 pct above normal in past week (Reuters)
India's monsoon rains were 39 percent above normal in the week to Sept. 7, strengthening from 18 percent above average in the previous week, two sources at the weather office said on Thursday.
Gross direct tax collection up 26 percent (ET)
Gross direct tax collection increased by 25.89 percent at Rs.154,360 crore during the first five months of 2011-12.
July industrial output growth seen at 6.2 pct (Reuters)
India's industrial output rose 6.2 percent in July from a year earlier, slower than June's 8.8 percent growth, moderated by successive interest rate rises, the median forecast in a Reuters poll showed.
Govt allows unrestricted exports of rice, wheat (Reuters)
India will allow unrestricted exports of two million tonnes each of wheat and common rice, as bulging stocks offer political room for overseas sales which could depress global rice prices but make little dent in wheat supplies.
2G Spectrum Scam: Definition of ‘associate’ depends on context, MCA tells telecom dept (ET)
In a September 1 communication to the telecoms department, the ministry said that the definition of an ‘associate’ varies according to situations.
RBI tells Axis Bank that the proposed acquisition of Enam’s broking & investment banking businesses has to be an all-cash deal (ET)
Axis would now issue shares, acquire the businesses from Enam and “momentarily” hold the assets before transferring them to a subsidiary.
CAG faults Reliance Industries, govt over KG basin (Reuters)
The Comptroller and Auditor General of India (CAG) criticised Reliance Industries and the government over development of the country's key natural gas field in the KG basin and called for revamping profit sharing arrangements from oil and gas blocks.
Reliance Comm wins order worth $303 million (Reuters)
Reliance Communications, India's No 2 mobile phone carrier by subscribers, said on Thursday it received an order worth 14 billion rupees ($303 million) for building and maintaining a data centre for HDFC Bank.
Bharti airtel gets 2G, 3G licences in Rwanda; to invest $100mn in 3yrs (ET)
"We will work with the Government to bring affordable and best in class mobile services in Rwanda," Sunil Mittal, MD, Bharti airtel said.
Andhra Pradesh government seeks to build LNG terminal (ET)
AP govt has requested the Centre to build a LNG terminal to meet natural gas requirements of critical industrial sectors.
SAIL's expansion drive expected to be completed by 2012-2013 (ET)
State-run SAIL's massive expansion drive to increase its steel production capacity to 21.40 million tonnes per annum (MTPA)at an investment of Rs 61,870 crore.
NALCO sells aluminium at nearly $102 premium over LME (ET)
State-run National Aluminium Co. Ltd sold 7,500 tonnes of aluminium ingots at nearly $102 per tonne premium over the average LME cash price.
HDFC doubles issue size to 10 bln rupees (Reuters)
The Housing Development Finance Corp (HDFC) has upsized its issue to 10 billion rupees, double its initial size, as it received strong investor demand.
Trichet Opens Path for Further Steps as Euro Region’s Growth Forecasts Cut (Bloomberg Finance LP)
European Central Bank President Jean-Claude Trichet said threats to the euro region have worsened and inflation risks have eased.
Asian Central Banks Hold Interest Rates Amid Threat of Slowdown in Exports (Bloomberg Finance LP)
Four central banks in Asia held off from raising borrowing costs today even as the region contends with elevated inflation rates, forced into inaction by the threat of a slump in exports as the global outlook dims.

Tata Motors::Takeaways Motilal Oswal Annual Global Investor Conferences

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Key Takeaways
Core essence: For the CV industry, CY10 marks an inflection point, with markets
poised for recovery after recession. The Indian passenger car industry is likely to witness
strong growth over the next 10 years.
Industry insights
 The growth drivers supporting automobile demand, namely (a) increasing
urbanization, (b) growing working population, (c) growth in GDP and rise in disposable
incomes, (d) improvement in road infrastructure, remain in place and should sustain.
 For the CV industry, even if economic conditions worsen, an FY09-10-like volume
decline is unlikely. This is because unlike FY09-10, availability of finance is good
despite increase in interest rates, which is critical for CV demand.
 Improvement in road infrastructure and establishment of hub-and-spoke model would
ensure strong demand for M&HCVs and LCVs.
Commercial vehicles
 The CV industry in India is likely to continue its strong growth in the high volume
segments, with a CAGR of 11% over FY10-15.
 There would be a shift towards higher tonnage tractors and multi-axle trucks; tippers
would continue to contribute significantly towards total sales.
 The small CV industry should see volume CAGR of 8% over FY11-15 to 0.29m units,
with the contribution of micro-trucks increasing from 17% in FY11 to 40% in FY15.
Passenger cars
 The Indian passenger car market is likely to grow faster than the top-5 global
markets, at a CAGR of 12-15% to 7m-9m units.
 Hatchbacks will continue to dominate the market in 2020. Volumes in this segment
are likely to grow, driven by increased offerings by international OEMs complemented
by a growing middle-class population.
 SUV sales are likely to increase from 0.2m units in FY10 to 0.57m-0.62m units by
FY21 and MPV sales from 0.17m to 0.8m-0.9m units, driven by the mid-end segments
for UVs and MPVs.Entry UVs currently cater to rural customers; however, there is
growing demand for smaller trendy SUVs for the urban youth.
 While the entry-level MPVs are the biggest segment (expected to reach ~0.4m units
by FY21), the mid-price MPVs are likely to grow faster due to higher urban demand.
 The rural market is likely to grow at a CAGR of 16% primarily due to increase in the
number of households and 2.5x growth in consumption levels. While tier 2-3 cities
are would grow at 12% CAGR, the metros and tier-I cities would grow at 11% CAGR
over FY10-21.


Mr Prakash Telang is Managing
Director of Tata Motors' India
operations. He was Executive
Director (Commercial Vehicles) since
May 2007, and he assumed his
current role on 2 June 2009.
He joined the Tatas through the
prestigious TAS (Tata Administrative
Service) cadre, after spending the
first three years of his career with
Larsen & Toubro. Ever since, he has
been with the group. He is
responsible for product
development, manufacturing, sales
and marketing of the strategic
business unit of light and small
commercial vehicles.
Mr Telang holds a Bachelor's in
Mechanical Engineering and is an
MBA from IIM, Ahmedabad. He has
over three decades of functional
expertise in the automobile industry
and machinery manufacturing.

Bharti gets licenses to offer 2G and 3G services in Rwanda ::Angel Broking,

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Bharti gets licenses to offer 2G and 3G services in Rwanda
Bharti Airtel (Bharti), expanding its footprint in Africa, has got licenses to operate 2G and
3G mobile services in Rwanda for which it has announced an investment of US$100mn in
the next three years. Rwanda is amongst the fastest growing telecom markets in Africa.
According to the National Statistics Institute of Rwanda, mobile penetration in the country
was 38.4% as of July 2011. Bharti already had its presence in 16 countries of Africa, which
include Burkina Faso, Chad, Democratic Republic of the Congo, Republic of the Congo,
Gabon, Ghana, Kenya, Malawi, Madagascar, Niger, Nigeria, Seychelles, Sierra Leone,
Tanzania, Uganda and Zambia. Bharti reported to have 46.3mn mobile customers on its
network in Africa by 1QFY2012. The company added 2.1mn customers and had average
revenue per user of US$7.3 per month during 1QFY2012. We maintain our Accumulate
recommendation on the stock with a target price of `451.

Havells India::Takeaways Motilal Oswal Annual Global Investor Conferences

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Key Takeaways
Revenue to grow at 10-11%; new products to contribute significantly
 The management maintained its consolidated revenue growth guidance of 10-11%
for FY12. We expect consolidated revenue to grow 13% in FY12 and 12% in FY13.
For 1QFY12, Havells India (HAVL) reported standalone revenue of INR8b (up 16%
YoY), driven by strong growth in all segments except switchgear. Switchgear revenue
was impacted by an overhang of a drop in exports of MCP to the UK.
 Sylvania reported flattish revenue in 1QFY12 impacted by unfavorable currency
movement in the American region. Europe continues to de-grow (-3% YoY in
1QFY12). The management expects significant growth from LATAM region. We expect
Sylvania to post 6% revenue growth in Euro terms in FY12.
 HAVL is in the process of broadening its product portfolio of consumer durables. It
introduced water heaters in 1QFY12, which boosted consumer durables sales
(INR400m of sales of water heaters in 1QFY12 v/s nil in 1QFY11). Launch of further
new products such as geysers, motors, juicers, etc is in the pipeline. Management
expects significant growth from new products in FY12 onwards. In the domestic
market (Standalone business) we expect revenues to grow by 17% YoY in FY12.
Targets exponential growth in switchgear business
 The company is targeting to double its revenue from the switchgear business with
its foray into the global market. It is in the process of launching its switchgear in the
UK market and is planning to set its footprint in Chinese markets, as well.
 HAVL has a strong foothold in the domestic market, where it competes with
multinationals like Schneider and Legrand. It currently commands 20% market share.
We believe that HAVL is well positioned to extend its strong branding and long
experience in the low voltage switchgear segment to newer geographies.
Current level of margins sustainable in domestic business; turnaround of
Sylvania to provide significant boost to profitability at consolidated level
 The management reiterated its earlier expectation of sustaining margins at FY11
levels of 11-12% in the domestic business.
 The management expects ~8% EBITDA margin for Sylvania in FY12. Sylvania turned
around from a loss-making unit to a profit-making business in FY11. In 1QFY12
EBITDA margin jumped 190bp YoY to 7.3% and was broadly at 4QFY11 levels.
Valuation and view
 Our EPS estimates are INR29.2 (up 33%) for FY12 and INR35.2 (up 21%) for FY13.
We estimate consolidated revenue CAGR at 13% and PAT CAGR at 26% over FY11-
13. The stock trades at 11x FY12E and 9x FY13E consolidated EPS. Buy with a
target price of INR491 (14x FY13E EPS).

BGR Energy Systems::Takeaways Motilal Oswal Annual Global Investor Conferences

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Key Takeaways
Outlook for order intake improving though external environment remains
challenging
 BGR Energy Systems (BGRL) expects order inflow to improve in the medium term.
There is significant progress in awards of BoP orders from IPPs (INR2-3b). Visibility
of finalization of the orders from Rajasthan SEB (two projects of 2x660MW each,
which got delayed due to in-sufficiency of coal linkages) has improved. These should
be finalized by the end of 2QFY12.
Price bids for NTPC 2 in September; success in NTPC tenders to improve outlook
for BTG JVs
 The management believes that price bids for the NTPC bulk tender 2 (9x800MW),
for which BGRL is pre-qualified will be invited in September 2011.
 BGRL is also in the fray for boiler packages of NTPC's 11x660MW bulk tender along
with BHEL and L&T. It expects the price bids to be opened after the Supreme Court
hears Gammon's plea over its disqualification in the next few days.
 Construction work in both the JVs (BGRL is spending INR44b over 3.5 years to set up
a boiler and turbine manufacturing facility, with supercritical capability in 660, 700,
800 and 1,000MW ranges through a JV with Hitachi, Japan) is well on schedule and
the boiler JV is likely to commence production by 3QFY13 and the turbine JV in
1QFY14.
 Success in NTPC's boiler package for an 11x660MW bulk tender (under arbitration;
price bids due) and NTPC 2 (price bids expected in September 2011) will improve
outlook for the growth of BGRL's manufacturing JVs.
Margins to improve in FY12, driven by better sales mix
 In 1QFY12, EBITDA margin expanded due to favorable mix, driven by higher (YoY)
contribution from BoP contracts (40% of power segment sales) relative to EPC
contracts (60% of power segment sales). The trend is likely to continue in FY12 due
to higher weight of BoP contracts in the order book. We expect EBITDA margin to be
12% (up 50bp) in FY12.
Valuation and view
 Success in forthcoming tenders is critical for BGRL's growth in FY13. BGRL needs to
book orders worth INR80b-100b in FY12 to grow by 15% in FY13. Our EPS estimates
are INR49.4 (up 10%) for FY12 and INR52.7 (up 7%) for FY13. We expect BGRL to
post revenue CAGR of 12% and earnings CAGR of 9% over FY11-13.
 The stock trades at 6x FY12E earnings; valuations are favorable. We recommend
Buy, with a target price of INR527 (10x FY13E EPS).

India Insights::Takeaways Motilal Oswal Annual Global Investor Conferences

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Key Takeaways
Core essence: There are two Indias within India (i.e. the one that is more commonly
visible, and the other, which is behind the scenes, but has equal if not more powerful
influence on the Indian psyche).
Insights
 Mr Prakash Jha mainly drew a parallel between his movies and the socio-politicocultural
trends and aspirations in India.
 Damul (meaning 'bonded to death') - Released in 1984, this was Mr Jha's first
socio-political film (and his second after Hip Hip Hurray, 1983). The story is
about a bonded laborer who is forced to steal for his landlord, to whom he is
bonded until death. Set in rural Bihar of 1984, the film focuses on caste-based
politics and the oppression of the lower castes in the region through bonded
labor.
 Mrityudand (meaning 'death penalty') - Released in 1997, the movie captures
(1) the decline of the zamindar (landlord) the emergence of the thekedar
(contractor), and (2) religious fanaticism.
 Gangaajal (meaning water of river Ganga, a euphemism in the movie for acid
used to gouge criminals' eyes) - Released in 2003, the movie (1) highlights
rising criminalization in society, and (2) explores the relationship of society and
police.
 Apaharan (meaning 'kidnapping') - Released in 2005, the film reflects how
kidnapping almost gained the status of an industry in certain parts of India,
mainly the Hindi heartland. It also captured manipulation of democracy, and
how the rich and the powerful exploited the aspirations of the young to become
successful.
 Rajneeti (meaning 'politics') - Released in June 2010, Rajneeti is a largerthan-
life portrayal of political aspirations of India's youth.
 Aarakshan (meaning 'reservation') - This recently released film talks openly
about India's caste system where almost half the seats for higher education
and jobs are reserved for certain backward castes and classes. It also dwells
on the commercialization of education, which is of high concern today.
 Mr Jha himself was born in a Brahmin family in Champaran, Bihar. His movies capture
themes which he has personally witness to since childhood.
 He concluded by stating how growth in Bihar had been neglected due to historic
reasons, and how under the reign of Chief Minister Mr Nitish Kumar, the scene has
dramatically improved after a long time.


Mr Prakash Jha, an award winning
filmmaker, runs a production
company, Prakash Jha Productions.
He has produced and directed 15
feature films, over 25
documentaries, two television
features and four television serials.
He has won eight national awards.
Mr Jha is most known for his political
and socio-political films such as Damul
(1984), Mrityudand (1997),
Gangaajal (2003), Apaharan (2005),
Rajneeti (2010) and the recentlyreleased
Aarakshan. He has also
made Dil Kya Kare, Rahul and Hip
Hip Hurray.
Mr Jha joined Ramjas College, Delhi
University to do a BSc (Hons) in
Physics. He quit a year later and
decided to go to Mumbai and become
a painter, but while preparing to join
JJ School of Arts, he saw the
shooting of a film, Dharma, and got
hooked to filmmaking.
In 1973, he joined the Film and
Television Institute of India (FTII),
Pune to do a course in film editing
and he made his debut as feature
film director of Hip Hip Hurray in 1983,
scripted by Gulzar, and starring Raj
Kiran and Deepti Naval

India Insights::Takeaways Motilal Oswal Annual Global Investor Conferences

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Key Takeaways
Core essence: There are two Indias within India (i.e. the one that is more commonly
visible, and the other, which is behind the scenes, but has equal if not more powerful
influence on the Indian psyche).
Insights
 Mr Prakash Jha mainly drew a parallel between his movies and the socio-politicocultural
trends and aspirations in India.
 Damul (meaning 'bonded to death') - Released in 1984, this was Mr Jha's first
socio-political film (and his second after Hip Hip Hurray, 1983). The story is
about a bonded laborer who is forced to steal for his landlord, to whom he is
bonded until death. Set in rural Bihar of 1984, the film focuses on caste-based
politics and the oppression of the lower castes in the region through bonded
labor.
 Mrityudand (meaning 'death penalty') - Released in 1997, the movie captures
(1) the decline of the zamindar (landlord) the emergence of the thekedar
(contractor), and (2) religious fanaticism.
 Gangaajal (meaning water of river Ganga, a euphemism in the movie for acid
used to gouge criminals' eyes) - Released in 2003, the movie (1) highlights
rising criminalization in society, and (2) explores the relationship of society and
police.
 Apaharan (meaning 'kidnapping') - Released in 2005, the film reflects how
kidnapping almost gained the status of an industry in certain parts of India,
mainly the Hindi heartland. It also captured manipulation of democracy, and
how the rich and the powerful exploited the aspirations of the young to become
successful.
 Rajneeti (meaning 'politics') - Released in June 2010, Rajneeti is a largerthan-
life portrayal of political aspirations of India's youth.
 Aarakshan (meaning 'reservation') - This recently released film talks openly
about India's caste system where almost half the seats for higher education
and jobs are reserved for certain backward castes and classes. It also dwells
on the commercialization of education, which is of high concern today.
 Mr Jha himself was born in a Brahmin family in Champaran, Bihar. His movies capture
themes which he has personally witness to since childhood.
 He concluded by stating how growth in Bihar had been neglected due to historic
reasons, and how under the reign of Chief Minister Mr Nitish Kumar, the scene has
dramatically improved after a long time.


Mr Prakash Jha, an award winning
filmmaker, runs a production
company, Prakash Jha Productions.
He has produced and directed 15
feature films, over 25
documentaries, two television
features and four television serials.
He has won eight national awards.
Mr Jha is most known for his political
and socio-political films such as Damul
(1984), Mrityudand (1997),
Gangaajal (2003), Apaharan (2005),
Rajneeti (2010) and the recentlyreleased
Aarakshan. He has also
made Dil Kya Kare, Rahul and Hip
Hip Hurray.
Mr Jha joined Ramjas College, Delhi
University to do a BSc (Hons) in
Physics. He quit a year later and
decided to go to Mumbai and become
a painter, but while preparing to join
JJ School of Arts, he saw the
shooting of a film, Dharma, and got
hooked to filmmaking.
In 1973, he joined the Film and
Television Institute of India (FTII),
Pune to do a course in film editing
and he made his debut as feature
film director of Hip Hip Hurray in 1983,
scripted by Gulzar, and starring Raj
Kiran and Deepti Naval

AIA Engineering::Takeaways Motilal Oswal Annual Global Investor Conferences

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Key Takeaways
A strong footprint in mining segment; Volume ramp up to drive margins
 The AIA Engineering (AIAE) management stated that the global mining segment
has a huge untapped addressable market. The cement and mining segments use
traditionally forged grinding media which is now moving towards new technology of
high cast chrome driven by cost efficiency and better product reliability. Currently
the internal mill consumables market in the mining segment is estimated at 2mmt
and the management expects that out of this 1mmt will move from forged grinding
to high cast chrome media in 4-5 years, providing huge growth potential. AIAE and
Magotteaux are two major players in the high cast chrome media. AIAE expects
volumes of 40,000mt by FY12, 60,000mt by FY13 and 80,000mt by FY14.
 However due to a location disadvantage, smaller volumes and entry pricing strategy,
margins are under pressure. Mill internals are consumables and uninterrupted supply
is of utmost importance for customers. Setting up warehouses across geographies
remains AIAE's biggest challenge. In the management's view margins in the next
few quarters will face headwinds due to pricing but the management expects margins
to improve as volumes catch up over the next few quarters.
Cement industry maturing, but margins healthy due to customer preference
 The cement industry is showing signs of maturity as markets are flattening. Except
for a few pockets, the management sees limited growth opportunity in the sector.
New capacity in North America and Western Europe has saturated demand, which
is being driven mainly by replacement sales. In the domestic market demand from
new projects is good from new projects and strong from the replacement market.
Foray into new product areas, geographies; Promising growth opportunities
 AIAE entered the crushing market, which is a promising area of growth. The
management expects the sector to contribute to revenue by 3QFY12.
 AIAE entered vertical mill products in China, which is growing significantly. In FY11
the company sold about 2,500mt and in FY12 AIAE expects to meet the target of
5,000mt. The company expects volumes to grow to about 10-20mt over 3-4 years.
Valuation and view
 AIAE has nearly tripled its manufacturing capacity over the past three years, from
65,000 tons a year in FY07. Production was stagnant in FY09 and FY10, before
rising 20% YoY. In the current environment of a global slowdown, the growth outlook
is uncertain. Success in the mining sector is critical for AIAE's long-term growth
sustainability. The stock trades at 16x FY12E consensus EPS of INR23. We do not
have a rating on the stock.

News headlines :: Sept 11 ::RBS

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News headlines


Automobiles
􀀟 Maruti board to decide on Gujarat plant by October (Economic Times)
􀀟 Toyota Kirloskar, Mahindra & Mahindra to raise prices up to 2% next month (Economic
Times)
􀀟 Manesar labour problem a political issue, no compromise: Maruti Suzuki (Economic Times)
􀀟 Tata Motors moved Nano plant despite all arrangements: Government (Economic Times)
􀀟 Mahindra & Mahindra rolls out Bolero variant at Rs633k (Economic Times)
􀀟 Indian automobile industry to clock up to Rs2.1tn turnover in FY'12 (Economic Times)
􀀟 Mahindra & Mahindra tractor JV commences construction of new plant in China (Economic
Times)
􀀟 Tata Motors cuts production to meet market demand (Business Standard)
􀀟 August car sales down, expected to skid further (Business Standard)
􀀟 Tyre industry to invest up to Rs100bn by 2013 (Business Standard)


Oil & Gas
􀀟 CAG for autonomy to DGH; arm's length relation with Oil Ministry (Economic Times)
􀀟 CAG wants Cairn field cost increase to be audited as well (Economic Times)
􀀟 CAG critical of RIL, Oil Ministry on KG D-6 contract (Economic Times)
􀀟 Complying with PSC and good industry practice in KG-D6: RIL (Economic Times)
􀀟 Indian Oil bars Swiss-based Vitol from tenders: Sources (Economic Times)
􀀟 CAG report indicts Reliance, calls for in-depth review of 10 contracts (Economic Times)
􀀟 MRPL to shut reformer in end Sept-Oct for 20 days (Economic Times)
􀀟 Britain's BG keen to buy stake in ONGC's KG block (Economic Times)
􀀟 Petronet to finalise eastern LNG terminal location by year end (Business Standard)
􀀟 ONGC contests viability of Asansol-Howrah coal-bed methane gas grid (Business Line)
􀀟 HPCL trains personnel for a dynamic petrol pricing model (Live Mint)
Banks
􀀟 Banks find it tough to hike loan term (Economic Times)
􀀟 RBI seeks one-time tax relief to arm MNC banks (Economic Times)
􀀟 Axis Bank's acquisition of Enam's broking & investment banking businesses must be all-cash
deal: RBI (Economic Times)
􀀟 SBI Group's share of loans, deposits slightly down (Business Standard)
Pharma
􀀟 Ranbaxy set to launch generic Lipitor in US in November (Business Line)
Commodity
􀀟 SAIL's expansion drive expected to be completed by 2012-2013 (Economic Times)
􀀟 NALCO sells aluminium at nearly $102 premium over LME (Economic Times)
IT & Telecom
􀀟 Delhi blast will have no impact on IT companies: Krish Gopalakrishnan (Economic Times)
􀀟 Infosys has not seen clients reducing their budget plan on IT due to slowdown in the US and
Europe this year: Kris Gopalakrishnan (Economic Times)
􀀟 HCL gives more details in UK phone-hacking case (Economic Times)
􀀟 PC shipments growth to slow to 3.8% in 2011: Gartner (Economic Times)
􀀟 Draft IT policy stresses on social media, tablets (Economic Times)
􀀟 Infosys on hiring mode still, says Kris Gopalakrishnan (Business Line)
􀀟 Bharti airtel gets 2G, 3G licences in Rwanda, to invest $100mn in 3yrs (Economic Times)
􀀟 No violation of norms by Reliance Communication in Gateway Net case: MCA (Economic
Times)
􀀟 Reliance Communications bags HDFC's Rs14bn order (Economic Times)
Power, engineering & infrastructure
􀀟 GVK Power bid for Australia's Hancock delayed over valuation (Economic Times)
􀀟 U.N. Singh takes over as GM in-charge at BHEL's Industrial Systems Group (Business Line)