Choosing insurance riders:: Business Line

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After having chosen the right life insurance policy for securing your future, there is still something you can do to strengthen it and make it comprehensive.

We are talking about the ‘riders' that come with most life insurance policies that provide added cover for a wide range of unfortunate happenings. To use an insurer's version, a rider is a add-on cover ‘riding' on a policy

Here we explain the different riders that are available from insurance companies, the costs, regulations governing riders and finally the added tax benefits that accrue by taking them.

Of course, you may not need all of these riders, but you must consider one or two based on your needs.

DECIPHERING RIDERS

All types of life insurance such as term, endowment, whole-life and unit linked plans come with some type of rider(s) or the other.

These include riders for accidental death or disability, critical illness, surgical care, hospital care and waiver of premium among others.

At the time of taking your regular life insurance policy, you are expected to indicate the rider that you wish to have as an addition. Most of these riders are self explanatory and promise a certain sum in the case of an eventuality.

For example, if you take a term plan for Rs 10 lakh, by taking an accident rider, your nominee would get up to twice the sum insured (the total of basic policy and the rider amount) should you meet with an unfortunate fatal accident.

Most companies keep a rider sum insured as well. That is, there may be an upper ceiling in some cases in the payment made.

In the case of disability or injury due to accidents, for example, a fixed percentage of the rider sum insured is paid depending on the intensity of the eventuality.

In the case of critical illnesses (such as kidney failure or cancer and the like) the entire rider sum insured is given by the insurance company to the person and the rider as well as the main policy is closed in most cases.

The waiver of premium is an interesting feature.

In case a policyholder is unable to pay the premiums due to disability or critical illness, the insurance company would pay all the future premiums of the main policy as well and keep it alive

Since riders are an added feature to the main policy, the costs aren't generally very high, as they cover only incremental risk.

COSTS AND SUITABILITY

The insurance regulator has stipulated that the premium on the rider(s) should not exceed 30 percent of the premium paid for the main product. This limits any scope for overcharging you for taking added benefits.

Of course, it must be added that as with the main policy, taking the riders also should be done early to lower the premium rates. Most insurance companies ask you to specify the riders at the outset itself.

For example, the rider premium per thousand sum insured would be Rs 2.5-3 if you are 25. If you opt for a policy with the same rider at 35, that figure goes up to Rs 5.5-6.

You may not need all the riders associated with a main policy. But you may want to add riders on accident and waiver of premium, as there is uncertainty during commute to and from office every day.

For other benefits, you can probably take medical insurance instead.

Finally, there are tax benefits too for taking riders on insurance.

It is known that the premiums paid for the main insurance policy is allowed as deduction against your income under section 80C.

If you take riders for critical illness, surgical care etc, the premiums that you pay for these are allowed as added deduction under section 80D.

This section allows for deduction for premiums paid to medical insurance policies.

United Spirits (UNSP IN, INR 623, BUY)::Edelweiss

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United Spirits (UNSP IN, INR 623, BUY)
United Spirits’ (USL) posted a poor show in Q3FY12 due to sales being affected in major markets of
Tamil Nadu and West Bengal (net revenues remained flat YoY). Though volume growth slackened
to 1% YoY, premium brands grew at a faster clip. ENA cost pressure and one‐time promotional
spends impacted EBITDA. Interest expenses (up 34% YoY) continued to weigh heavily on profit
(declined 64% YoY). We believe FCCB issue approval to help address debt concerns. We believe in
USL’s stronghold and brand equity in the alcohol market and maintain ‘BUY’.
Volumes dip due to region specific issues
The company’s YoY volume surge was a mute 1% due to issues in states of Tamil Nadu (volume loss of
1.5mn cases in Q3FY12) and West Bengal (volume drop of 48% YoY for the industry). We expect
volume to return back to normalcy in coming quarters. Despite these issues 7% YoY volume growth
was recorded in premium brands, reflecting the company’s stronghold in the premium category.
Gross margin compressed 18bps YoY due to ENA pressure (prices up 15%). Adding to the margin pain
were ad spends (up 119bps YoY), staff costs (up 62bps YoY) and other expenses (up 87bps YoY) which
led to EBITDA margin contraction of whopping 452bps YoY to 9.6%.
Interest expense inches up as debt continues to mount
USL’s interest cost hurled by 34% YoY to INR1,392mn due to higher interest cost and increased debt
for capex and working capital requirements. Core profit (dipped by 76% YoY to mere INR494mn) felt
the pinch of the rising debt burden. FFCB approval of USD250mn (which includes green shoe option of
USD 50mn) is likely to provide some respite. Despite exceptional gain (forex gain of INR212mn)
reported profit dunked by 64% YoY to a measly INR471mn. Taxed rate surged by 964bps YoY to 47.6%
hurting profit margin which dipped to 1.3% (down 531bps YoY).
Outlook and valuations: Positive; maintain ‘BUY’
We believe in USL’s brand equity and stronghold in the alcohol industry but its high debt, rising cost of
debt, increased working capital, W&M overhang and higher raw material prices continue to remain
cause of concern. At CMP, the stock is trading at 16.9x FY12E and 13.4x FY13E. We maintain
‘BUY/Sector Performer’ recommendation/rating on the stock.

Godrej Consumer Products :: Edelweiss

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Godrej Consumer Products (GCPL IN, INR 403, BUY)
Godrej Consumer’s (GCPL) net sales surged 35.9% YoY to INR 13.4bn (ahead of our estimates). Key
positives were robust 20% YoY growth in domestic business and 30% in international businesses.
EBITDA strengthens to 19.7%, an increase of 298 bps on YoY basis due to favorable category sales
mix, integration led cost savings initiatives, efficient commodities sourcing and competitive and
efficient advertising spends. PAT at INR 1671mn witnessed a 40.7% Y‐o‐Y growth (well ahead of our
estimate of INR 1304mn). Key negatives were mere 9% sales growth in domestic hair care business.
Maintain ‘BUY’.
Domestic business: Household Insecticide and soaps shine
Domestic business grew at a healthy rate of 20% Y‐o‐Y to INR 7790mn with EBITDA margin at 20.41%
(down 48bps Y‐o‐Y). Household insecticides (HI), and personal wash posted a handsome growth of
30% and 31% Y‐o‐Y respectively outperforming the category growth. However, hair care disappointed
with meager 9% sales growth.
Acquisitions, synergies reflect in international sales
International sales grew 68% YoY (organic growth at 30% YoY) backed by a strong growth of 35% YoY
in Indonesia and 251% YoY in Africa (primarily due to DGH merger). Revival is witnessed in LatAm
business with 29% sales growth and 9% EBITDA margin (160bps sequential expansion). Megasari
margin expanded further to 20.6% (Q1FY12: 14.4%; Q2FY12: 19.4%). International business witnessed
margins expansion of 954bps Y‐o‐Y to 19.9% aiding consolidated margins. GCPL has entered into an
agreement to acquire 60% stake in Cosmetica Nacional (sales: USD36mn), a market leading hair
colorant and cosmetics company in Chile. We believe Chile provides a good opportunity and fits 3x3
strategy however we will keep a close track on the valuation .
Our view and valuation; Bright outlook, maintain ‘BUY’
We believe that GCPL’s focus on innovation and brand equity will go a long way as it acquisitions
stabilize and synergies surface. We will come out with a detailed note post conference call at 12 noon
on 23rd January 2012.

Buy Dish TV; Target :Rs 71 :ICICI Securities,

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H i g h   c h u r n   r a t e   –   A   m a j o r   c o n c e r n…
Dish TV reported its Q3FY12 results, which were lower than our estimates
on the topline and EBITDA front.  The topline stood at | 490.5 crore
against our expectation of | 508.3 crore primarily on the back of lower
than expected ARPU. The ARPU stood flat at | 152 against our
expectation of | 154. The topline  grew by 1.7% QoQ and 31.4% YoY.
EBITDA disappointed at | 120.2 crore vs. our estimate of | 155.9 crore as
pre booking of ~ | 15 crore of commission in Q2FY12 did not help the
commission cost in this quarter as expected since the company wrote off
~ | 9.0 crore on account of churned subscribers. The EBITDA margin for
the quarter stood at 24.5%, which represents a contraction of 77 bps
QoQ. On the PAT front, the company reported a less-than-expected
number on account of disappointing operational performance and forex
losses of | 15.6 crore on foreign debt. The company reported a loss of |
43.0 crore against a loss of | 48.6 crore in Q2FY11.
Highlights of quarter
The subscriber addition for the quarter stood at 0.7 million, down from
1.1 million in Q3FY11. Though the subscriber addition was good in
October, backed by the festive season, it slowed down in the subsequent
months of the quarter on account of a price hike taken for an entry level
customer and a sluggish macro environment causing consumers to cut
down on their discretionary spending. The ARPU remained flat at | 152 in
Q3FY12. The subscriber acquisition cost, however, decreased from
| 2232 to | 2124 in Q3FY12 owing to a price hike taken in November.
V a l u a t i o n
Based on a lower subscriber addition outlook and a high churn rate, we
have revised our EPS estimates for FY12 and FY13 from | -0.5 and | 0.7
to | -1.4 and | 0.2, respectively. Assuming revenue CAGR of 16.7% over
FY11E–20E and terminal growth of 4.5% thereon, we have arrived at a
target price of | 71/share implying an upside of 17%. We maintain our
BUY rating on the stock.

Apollo Tyres: Sliding raw material costs to boost margins:: Kotak Sec

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Apollo Tyres (APTY)
Automobiles
Sliding raw material costs to boost margins. As per our estimates, lower raw
material costs should positively impact EBITDA margins for Apollo Tyres from 3QFY12
onwards (partially) and full benefits should flow in 4QFY12E. In our view, EBITDA
margins (standalone) in 4QFY12E should move upwards of ~10%. Double-digit margins
in 4QFY12E would mean that the confidence of the Street on FY2013E EPS of Rs9.2
would be high. The stock is quoting at 7X FY2013E EPS of Rs9.2, which is at a discount
to the average one-year forward P/E multiple of 8.5X in the past 10 years.

Zee Entertainment Enterprises (Z IN, INR 118, BUY) ::Edelweiss

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Zee Entertainment Enterprises (Z IN, INR 118, BUY)
After adjusting for the one time revenue gain of INR700mn in Q3FY11 due to premature
termination of sports rights, ZEE reported flat YoY growth in revenue in Q3FY12, in line with
expectations. Key positives were jump in subscription revenues by ~12% QoQ and reduction in
sports loss. Key concerns remain degrowth in advertising revenues by ~10% YoY and lack of
improvement in GEC ratings. Overall, we are positive on subscription revenues from a long term
perspective and recommend ‘BUY’ on the stock.
Ad revenues take a huge hit amidst slowdown
ZEE’s total revenues degrew by ~8.5% to INR7548mn in Q3FY12 from INR8249mn in Q3FY11.
However, operating revenues for Q3FY11 include one time revenue of INR700mn for premature
termination of sporting event rights. After making this adjustment, the revenue growth has been flat
on a YoY basis. EBITDA (not adjusted for the one off gain) has degrown by ~3.6% YoY to INR2160mn
from INR2241mn in Q3FY11. PAT stood at INR1393mn in Q3FY12 as compared to INR1600mn in
Q3FY11, a degrowth of ~13% (without adjusting for the one off gain).
Narrowing sports loss aids margins
As compared to total sports loss of INR792mn in H1FY12, sports loss reduced to INR100mn in Q3FY12.
This is in line with the company’s guidance of incurring a sports loss of INR1bn in FY12. Due to lack of
India specific cricket properties in the quarter, the content and programming costs dipped by ~17.6%
YoY, from INR4.1bn in Q3FY11 to INR3.4bn in Q3FY12. This resulted in a slight improvement of
140bps in EBITDA margin (not adjusted for the one off gain) from ~27.2% in Q3FY11 to ~28.6% in
Q3FY12.
Outlook and valuations: Positive; maintain ‘BUY’
We continue to remain positive on ZEE from a long term perspective as we expect subscription
revenues to get a boost from the digitization ordinance and the distribution JV with Star. However, in
the near term the drop in ratings and the ad slowdown will affect the topline. At CMP of INR 118, the
stock is trading at P/E of 18.4x and 15.4x, FY12E and FY13E respectively. We maintain our ‘BUY’ and
‘Sector Outperformer’ rating on this stock. The conference call is scheduled on Tuesday – 24th
January, 2012 at 2pm post which, we will release a detailed report.

DishTV: Weak revenue drivers in 3QFY12 result in negative operating leverage :: Kotak Securities

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DishTV (DITV)
Media
Weak revenue drivers in 3QFY12 result in negative operating leverage. Dish TV
posted weak 3QFY12 EBITDA of Rs1.2 bn (+80% yoy, -1% qoq) against our
expectation of Rs1.45 bn. The negative variance was driven by weak revenue drivers:
(1) churn rate rose to ~18% annualized (~13% previously) and (2) ARPUs of Rs152/submonth
were flat qoq (Rs155 expected). Gross additions of 0.74 mn were lower than
expectations largely on increased scheme pricing. SAC declined qoq despite rising STB
prices (Rupee depreciation). Retain BUY; revised FY2013E FV of Rs80 (Rs90 previously).
Structural drivers are intact (core growth in rural markets, digitization benefit, HD-led
premiumization) but environment and execution need to improve.

Hold HDFC Bank; Target : Rs 532 :ICICI Securities,

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N o n   i n t e r e s t   i n c o m e  s p u r s   p r o f i t a b i l i t y…
It was another quarter with 31% YoY PAT growth but was boosted by
higher FX income component of non interest income leading to 20% YoY
and 14% sequential growth in the latter.
Deposits growth was flat QoQ, up 21% YoY to | 232508 crore as wholesale
term deposits worth ~| 6000 crore were shed on a sequential basis. CASA
stabilised at 47.6%. The loan book growth was healthy at 21% YoY and
2.3% QoQ to | 189917 crore supported by retail loan growth. Hence,
sequential NII growth was up 5.8% to | 3115 crore.
Asset quality remained stable with both the GNPA & NNPA ratios being flat
QoQ at 1% and 0.2% respectively, and PCR (excluding write-offs) at 80.3%
declining from 81.3%. However, in absolute value, GNPA and NNPA grew
7% and 12%, sequentially to | 2021 and | 398 crore, respectively.
Provisions remained lower at | 329 crore but we expect the same to rise.
Margins maintained at 4.1% QoQ as retail loan growth up 30% YoY…
Retail loans grew 30% YoY to | 100347 crore on account of a jump in
CV/CE loans growing 11% QoQ (44% YoY) and credit cards rising 10% QoQ
(42%YoY). Retail now forms 51.6% of total loan book. This along with some
rundown in low yielding corporate loan book led to NIM being maintained
sequentially at 4.1% and NII growth of 12.1% YoY and 5.8% QoQ. We
expect  loan  growth  at  21%  CAGR  over  FY11-13E  in  line  with  the
management’s guidance of 3-4% above industry growth.
FX income grows sharply pushing up non interest income…
Forex income grew 68% both YoY and QoQ this quarter to | 365.6 crore
surprisingly pushing overall non interest income growth to 26% YoY to |
1420 crore. About 20% of FX revenue was one-off and was trading and
proprietary related. Also, commission fee income was higher and increased
14% QoQ to | 1127.6 crore.
V a l u a t i o n
At the CMP of | 486, the bank is trading at 3.5x its FY13E ABV. We expect
some accretion in NPL, with rising retail book, and provisions to increase.
We expect 20% CAGR and 29% CAGR in PAT over FY11-13E. Return ratios
are expected to be healthy with RoA of 1.6%+ and RoE of 20%+ over
FY12- 13E. We have valued the bank at 3.8x FY13E ABV and maintained our
target price at | 532. With limited upsides left, we recommend HOLD rating
on the stock.

Fixed 11.80% - 12.01% p.a. (Pre-Tax) with "Indian Railways" Secured & Tax Free Bonds

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We are pleased to present you the details of Public Issue of “AAA” Rated, TAX Free, SECURED, REDEEMABLE Bonds issued by “Indian Railway Finance Corporation Ltd” (IRFC).This issue is opening on January 27, 2012. These bonds have been assigned a AAA rating by CRISIL, CARE & ICRA and also carry an attractive 8.15% (for 10 years) and 8.30% (for 15 years) tax-free returns. As the interest income is tax free, the pre-tax yield works out to around 11.80 – 12.01% (for individuals in the highest tax bracket).

Terms of the Issue :

               

Particulars	IRFC TAX FREE BONDS
Issue Size	Rs. 5000 Crores
Issue Opening Date	27TH  January 2012
Issue Closing Date	10th Feb 2012
Rating	“AAA” by CRISIL , CARE & ICRA
Minimum Application	Rs.10000
Tenure	10 Yrs (No Lock-In)	15 Yrs (No Lock-In)
App More than Rs. 5 Lakhs( QIB, HNI & Corp)	8.00% p.a.	8.10% p.a.
App Upto Rs. 5 Lakhs ( Retail & HUF)	8.15% p.a.	8.30% p.a.
Face Value of Bond	Rs.1000
Listing	Proposed to be listed both in NSE & BSE
Interest payment	PAYABLE Annually Only
Issuance	Demat as well as physical

Pre – Tax Yield Calculation :

Particulars	10 Years	15 Years
Tax-Free Yield	8.15%	8.30%
Pre-Tax Yield
Individuals (tax @ 30.90%)	11.80%	12.01%

This issues is opening on 27^th Jan for subscription & will be closed soon.

Don't disturb your retirement portfolio ::Business Line

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I have been investing in mutual funds from 2008. I am 45 years old and work in LIC. I am planning to build a corpus for my retirement, which is 15 years away.  I hope to get my daughter married after five years. 

I am eligible for pension after retirement and will also receive provident fund from my employer.  I want to continue my SIPs till retirement.  I own the house I live in and own a plot of land too. I have life insurance and medi-claim policy.

I have been investing in the following mutual funds from 2008: Rs 1,000 each in ICICI Focussed Blue Chip Equity, Sundaram Select Focus, Sundaram Select Mid Cap and Quantum Long Term Equity (started recently). I also invest Rs 1,500 a month in HDFC Top 200 and Rs 2,000 each in Templeton India Growth and Goldman Sachs S&P CNX 500 index fund. I have online access to my mutual fund portfolio and invest during sudden market falls. Kindly advise whether my portfolio needs to be restructured for improving returns.

G Srinivasulu

Annakapalle, A.P

You have said that you would like to build your retirement portfolio. We, therefore, assume that you have provided for your daughter's wedding expenses. In case you have not, avoid dipping into your retirement kitty. Invest separately for it and use your plot of land to meet any shortfall, if you have no other plan for it.

PENSION NOT ENOUGH

Coming back to your retirement plan, you have stated you will receive pension. But more often than not, it will hardly suffice to meet monthly expenses.

Hence plan to build an adequate retirement nest and provide for medical expenses that may not be covered in your medi-claim policy.

With some rejig in your current portfolio you will be able to build about Rs 1.2 crore in 15 years, if your large-cap and diversified funds yield 15 per cent compounded annually and your mid-cap funds deliver 20 per cent.

Increase your monthly investments if you feel you need a larger corpus.

In the absence of details, we are assuming that you started investing sometime in mid-2008.

You can continue SIPs in ICICI Pru Focussed Blue Chip, HDFC Top 200, Templeton India Growth, Sundaram Select Midcap and Quantum Long Term Equity funds.

Switch your SIPs in Sundaram Select Focus to Quantum Long Term Equity, as it has lost steam and lagged quite a few large-cap funds. Besides, HDFC Top 200 and ICICI Pru Blue Chip should provide you sufficient exposure to large caps.

Remember to review Sundaram Select Midcap's performance every year. If it lags peers such as IDFC Premier Equity or HDFC Mid-Cap Opportunities by over 5 percentage points in returns, discontinue it and switch to IDFC Premier Equity. Stop your SIPs in CNX 500 and simply continue to hold it. You can instead divert this monthly SIP into IDFC Premier Equity, as in the Indian context, actively managed funds have fared better than indices, especially if you use the SIP route.

Since you have stated that you invest during market falls, consider buying small lots of Nifty ETFs or invest limited sums in the CNX 500 index fund during market falls of 5-10 per cent.

Reduce your equity exposure a year or two before retirement.

Invest the booked profits and provident fund proceeds in safe debt avenues such as bank deposits, bonds and corporate deposits of large companies with good credit standing.

CAIRN INDIA Bhagyam field gets Oil Min nod:: Edelweiss

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Cairn India and ONGC JV has commenced production from Rajasthan’s
Bhagyam field. Production is expected to ramp up to peak level of 40
kbpd by FY12 end, taking total production from Rajasthan fields to 165
kbpd; we have already assumed the same in our numbers. While the next
major trigger for the stock will be approval to increase Mangala
production from 125 kbpd to 150 kbpd, pipeline capacity of only 175 kbpd
will limit overall production. We value Cairn at INR320/share (March 2012
target) assuming Brent to average USD95/bbl in FY13. Maintain ‘HOLD’.
Oil Ministry nod to Bhagyam production of 40 kbpd
The Cairn‐ONGC Rajasthan JV (70:30) has obtained approval from the Oil Ministry to
start production from the Bhagyam field in the RJ‐ON‐90/1 block. The JV will increase
production to a peak of 40 kbpd by FY12 end. With Mangala field producing 125 kbpd,
Rajasthan block’s total gross production will rise to 165 kbpd; we have already assumed
the same in our numbers. Further increases in production will have to come from
Mangala and Aishwarya. Cairn is awaiting approval to increase Mangala output from
125 kbpd to 150 kbpd. While this will take its total production to 210 kbpd, pipeline
capacity of 175 kbpd is a bottleneck. Consequently, we estimate FY13 production of
175 kbpd (vs. FY12 full year average of 140 kbpd).
Asset life of ~13 years at peak production level
The Rajasthan block has 2P reserves of 656 mmbbls and 2P+contingent reserves of 964
mmbbls (FY11 AR data). We estimate peak production of 210 kbpd from all three fields
from FY14 (Mangala 150 kbpd, Bhagyam 40 kbpd, Aishwarya 20 kbpd), at which the
asset would have a life of 8.6 years on 2P and 12.6 years on 2P+contingent reserves.
Outlook and valuations: Stretched; maintain ‘HOLD’
We have a negative view on crude for FY13 and estimate Brent to average USD95/bbl
on back of weakening demand and rising supply (Libya and North America). Assuming
USDINR at 50 in FY13 and long term crude price of USD95/bbl, we value Cairn at
INR320/share (March 2012 target). Every USD1/bbl increase in long term crude prices
will increase our SOTP by INR3.2/share. Maintain ‘HOLD/Sector Performer’.

BAJAJ AUTO Exports to drive future growth:: Edelweiss

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As per the Q3 earnings, exports are likely to be the medium term growth
driver for both sales volume and margin expansion. The company expects
a strong 30+% growth in exports volume continuing in FY13 as well. It
implies a higher profitability and provides room for increasing promotion
costs to push sales in the sluggish domestic market. In our view, monthly
export numbers and new Pulsar launch in Q4FY12 are key near term
triggers. We have lowered our domestic sales volume, but have
increased exports. We have marginally lowered our FY13 EPS to INR132
(from INR134) which is 10% ahead of consensus. The stock is trading at a
historic low multiple of 11xFY13 PE and adequately captures domestic
slow‐down, but ignores growth potential of exports. Reiterate ‘BUY’ with
TP of INR1,920 (14x FY13E core EPS).
Steady exports to offset domestic weakness
The company has not seen any slow‐down in demand from Nigeria. It expects growth
momentum in exports to continue in FY13 as well and Africa to be the key market. It
should make up for poor domestic demand which is going through a soft patch due to
weak consumer sentiments. The company is pinning hopes on the launch of new Pulsar
in Q4FY12 to bring back the demand momentum. In our view, strong monthly export
sales numbers and new launches should act as a near term positive trigger.
Product mix improvement to aid margin expansion
Higher contribution from exports, three wheelers and premium bikes in total sales
should aid margin expansion of 120bps in FY13 despite building in a sharp jump in
promotion costs to aid new launches in a sluggish domestic environment.
Outlook and valuation: Favourable; maintain ‘BUY’
Robust exports demand, margin levers and new launches make the company’s outlook
favourable. Cut in domestic sales growth forecast (3% from 8% earlier) is compensated
for by an increase in exports growth in FY13 (25% vs earlier expectation of 15%). We
have marginally tweaked our FY13 EPS to INR132 from INR134. We retain Buy as we
believe the stock is trading at a historic low multiple of 11xFY13 PE. Our target price of
INR1920 implies 14x FY13 core EPS of INR122 plus discounted cash/share of INR210.

JINDAL STEEL & POWER Power punch:: Edelweiss

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Consolidated EBITDA and PAT of Jindal Steel and Power (JSPL) were 4%
and 15.7% respectively, above estimates (despite lower steel volume)
due to a strong performance by the power business (both JPL and
standalone). In the standalone entity, while steel and pellet sales volume
dipped 1.2% and 11.8%QoQ respectively, power sales and power EBIT
surged 57.7% and 32%QoQ to 350 MU and INR1,413mn respectively. JPL’s
power sales volume was up 10.4%QoQ at 2.06 bn units along with a
10.2%QoQ increase in blended tariff at INR3.9/unit. We maintain
‘BUY/SO’ with a price target of INR661 per share.
Stand‐alone steel business: Volume disappoints
Steel and pellet sales volume declined 1.2% and 11.8% QoQ to 591kt and 464kt (vs our
assumption of steel: 643kt, pellet: 563kt). However, metallics, steel and pellet
production volume increased 2.4%, 20.2% and 4.5%QoQ respectively, leading to
inventory accumulation. Yet with costs at 9% lower than our expectation, EBITDA was
8.8% above our estimates. PAT was 12.2% above our estimates due to lower capital
charges.
Stand‐alone power business: Generation, EBIT up
Power sales at 350 MU (our assumption: 222MU) and EBIT surged 57.7% and 32% QoQ
to 350MU and INR1,413mn respectively. This improved performance signifies a
profitable ramp up of the 3 x 135MW power units. JSPL has commissioned three units
of 135MW each in January 2012, taking the total units commissioned so far to six.
Performance better than our estimates
Jindal Power (JPL) sold 2.06bn units at a blended tariff of INR3.9/unit (up 10.2% QoQ)
against our estimate of 2.04 bn units and INR 3.75/unit. As a result, revenue and PAT at
INR 8bn and INR 4.8bn were 4.4% and 14.1% higher than our estimate respectively.
Outlook and valuations: Maintain ‘BUY/SO’
While our FY13E EBITDA remains unchanged, we upgrade our PAT estimate by 9% due
to lower interest cost. Also introducing our FY14 earnings estimates with PAT growth of
~6% YoY. We continue to maintain BUY/SO with a target price of INR661.

Mutual Fund talk - Jan 25::Business Line

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I am 29 years old with a take-home salary of Rs 50,000. My household expenses come to Rs 22,000. I pay Rs 6,000 towards medical and life insurance premium. I keep Rs 15,000 as bank savings and would like to start monthly SIPs with the balance of Rs 7,000. I am looking for long-term investment of 20 years and my target is Rs 60 lakh. Please suggest funds in which I should invest to meet my financial goal, keeping the number of funds to a maximum of five.

Kaushik Bhattacharjee

It is good to note that you have given yourself a long timeframe to achieve your goal.

But there are some observations that need to be made on the way you are apportioning your surplus to various financial products.

It may not be optimal to keep as much as Rs 15,000 in the bank's savings account every month, when it can be ploughed into productive avenues to generate better returns.

In case you are saving this amount for any contingency, do so until you build a comfortable corpus and reduce it. Any medical contingency may anyway be met by your health policy.

The target of Rs 60 lakh may not be too difficult to achieve in a 20-year time span.

So, if you invest Rs 7,000 in funds that deliver about 11 per cent annually, you would easily achieve the corpus. Chances are, a good portfolio will deliver more than the 11 per cent return you need.

While we do not know how you intend to use your Rs 60-lakh target, ensure that you have taken into account factors such as inflation to arrive at this sum. Discuss with a financial planner, if you are not sure. A goal like buying a home or retirement, for instance, may need a higher sum, 20 years hence.

Ensure that you build a corpus with a variety of financial products such as debt and gold (preferably through ETFs) based on your risk appetite and earnings.

Ideally you can have a 60:30:10 proportion invested in equity funds, debt and gold, respectively. You can reduce the equity portion as you age and increase debt investments.

We suggest that you add Rs 5,000 more (by cutting back on your savings account surplus) and invest Rs 12,000 monthly in SIPs. Even at a conservative 12 per cent annual returns, you would end up with a sum of about Rs 1.2 crore.

You can invest Rs 3,000 each in HDFC Top 200, IDFC Premier Equity, ICICI Pru Focussed Bluechip Equity and Fidelity Equity or Quantum Long-term equity.

These would provide you a blend of funds that invest in stocks across market capitalisation.

But if you can invest only Rs 7,000, consider just HDFC Top 200 and IDFC Premier Equity (Rs 2,500 each). The balance Rs 2,000 can be used to buy units of Fidelity Equity.

Review your portfolio at least once a year to ensure your equity, debt ratio is balanced.

* * *I am 34 years of age and investing Rs 5,000 a month in each of the following funds: HDFC TOP 200, Fidelity Equity Fund, IDFC Premier Equity. I would like to increase my SIP by another Rs 5,000 and would like to know which fund I should choose. I want to limit this SIP to only one fund.

 Rajesh Kumar

Your choice of funds is quite good. These are funds that have delivered returns across market cycles and have proven to be steady performers.

You have stated that you want to add another fund where you would like to invest Rs 5,000. But before that, it is important for you to assess your risk appetite and set yourself a goal towards which you are investing.

While your choice of funds suggests that you have chosen the best performers, we are unable to assess your risk appetite.

Between HDFC Top 200, IDFC Premier Equity and Fidelity Equity, you have exposure to large-, mid- and multi-cap funds.

In case you have a very low risk appetite, you can consider HDFC Prudence, a balanced fund with an excellent track record.

If you can take on pure equities, you can consider large-cap funds such as ICICI Pru Focussed Bluechip or Franklin India Bluechip.

We assume that you have invested in other instruments such as debt and gold.

Please note that SIPs need to be run for long-periods of time, of at least 5-7 years, for you to have inflation beating returns.

Hold NIIT Technologies; Target :Rs 200 :ICICI Securities,

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S t a b l e   q u a r t e r   b u t   u n c e r t a i n t y   p e r s i s t s …
NIIT Tech reported numbers, which were ahead of our estimates.
Reported revenues grew 16.6% QoQ and 44% YoY to | 433 crore vs. our
| 412.9 crore estimate (11.3% QoQ  growth estimate). Revenue growth
was aided by Proyecta and Morris, which contributed | 24.3 crore and |
15.1 crore, respectively while currency had a positive impact of 8.9%. The
12-month executable order book increased to $245 million from $232
million at the end of Q2FY12. Despite reporting better-than-expected
numbers, the management alluded to weakness in banking finance &
insurance (BFI) clients spending led by either vendor rationalisation,
impact of natural calamities on insurers or uncertainty in Europe. This
was the rationale for our HOLD rating and continues to be so.
ƒ Result analysis
Reported revenues grew 16.6% QoQ to | 433 crore compared to our
| 412.9 crore estimate. EBITDA margins increased 319 bps QoQ led
by rupee depreciation (up 183 bps) and absence of one-time cost of
| 11.9 crore booked in Q2. Reported PAT of | 64 crore was also
above our | 47.8 crore estimate aided by other income of | 17.4
crore, higher relative to our estimate.
ƒ Vertical revenue growth trends
Geographically, the US grew 16.7% QoQ vs. 12.9% QoQ growth in
Q2 while Europe grew 19.8% QoQ vs. 15.9% QoQ in Q2. APAC and
India grew 16.7% and 7%, respectively. BFI contribution declined 3
percentage points (pp) in Q3 and grew 7.7% QoQ. Noticeably, fiscal
year-to-date BFI contribution is down 6 pps from 42% in Q1.
Transportation contribution increased 2 pps to 38% and grew 23.2%
QoQ. Together, BFI & transportation account for 74% of revenues.  
V a l u a t i o n
We are raising our estimates and expect revenues/EPS to grow at
30.7%/12.9% YoY in FY12E and 23.6%/7.09% YoY in FY13E, respectively.
This translates to 29.6%/20% CAGR growth in revenue/EPS during FY10-
FY13E. We have valued NIIT Tech at  5.4x (4.9x earlier) our FY13E EPS
estimate of | 37.2 to arrive at our  target price of | 200 (| 170 earlier).
However we maintain our HOLD rating.

Bajaj Auto: 3QFY12 beats estimates on better realizations :: Kotak Securities

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Bajaj Auto (BJAUT)
Automobiles
3QFY12 beats estimates on better realizations. Bajaj Auto’s 3QFY12 profit of
Rs7,952 mn (+19% yoy, 10% qoq) was 2% higher than our estimates. The main
variance with our estimates was 2% higher than forecasted realizations due to higher
share of premium bikes in the product mix and sharp depreciation of Rupee versus
Dollar. We maintain ADD rating on the stock and prefer it over Hero Motocorp in the
two-wheeler space, as strong growth in exports will offset the slowdown in domestic
volumes for Bajaj Auto.

Strategy: GST may get going finally:: Kotak Sec

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Strategy
Indian Economy
GST may get going finally. A recent consensus among state finance ministers for a
negative list approach to service tax may (1) increase the number of services to be taxed
in FY2013 and more important, (2) have finally set the stage for GST implementation.
This may also drive investor confidence in India given perceived ‘policy inaction’ at a
time of a deteriorating fiscal situation, weak BOP and an economic slowdown. We
expect the Indian market to return 15-20% in CY2012 if governance and macroeconomic
factors improve; valuations are supportive and earnings appear reasonably
resilient. However, the market may languish without improvement in governance.